Good day, ladies and gentlemen, and welcome to The Joint Corporation's Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be provided at that time. [Operator Instructions]. And as a reminder, this conference is being recorded. And I'd now like to turn the conference over to Ms. Becky Herrick with LHA.

Thank you, James. Good afternoon, everyone. This is Becky Herrick of LHA, Investor Relations. On the call today, CEO, Peter Holt, will provide quarterly highlights, CFO, John Meloun, will review the financial details and then Peter will provide the company vision and open the call for questions. Today after the close of market The Joint Corp. issued its financial results for the quarter ended September 30, 2017. If you do not already have a copy of this press release, it can be found in the Investor Relations section of the company's website at www.thejoint.com. Please be advised today's discussion includes forward-looking statements, including predictions, expectations, estimates, and other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business that could affect these forward-looking statements. The forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements we make today. As a result, we caution you against placing undue reliance on these forward-looking statements and would encourage you to review our filings with the SEC for a discussion of these factors and other risks that may affect our future results or the market price of our stock. Finally, we're not obligating ourselves to revise our results or publicly release any updates to these forward-looking statements in light of new information or future events. With that, it's now my pleasure to turn the call over to Peter Holt, Chief Executive Officer. Peter?

Thank you, Becky, and thank you for all joining us today. We've had an another quarter of strong growth. We're excited to review our continued improving progress, our successful franchise convention last month, and share our long-term vision of our company. Before we get into the details, for those of you who are new listeners today, our purpose at The Joint is to improve the quality of life for our patients we provide by providing routine and affordable chiropractic care. We do it through our network of nearly 400 clinics utilizing 850 fully licensed chiropractic doctors who performed more than 4.1 million adjustments last year. Our doctors provide patient care focused on pain relief and ongoing wellness to promote a healthy lifestyle. Our dual strategy model, franchise and company-owned or managed clinics is powerful because it provides us uniquely predictable revenue stream which is capital light and reflective of a small box retail business model. As we focus on pain relief and ongoing wellness, we serve a dynamic and growing market. Today, pain cost us nation more than $650 billion annually. If we only look at back pain, Americans spend more than $90 billion a year with $15 billion of that spent in chiropractic care. And the chiropractic care continues to move to the main stream, 62 million Americans are chiropractor in the last five years, 35.5 million in the last 12 months. This is especially notable as our nation is grappling with an opioid crisis that has been recently declared a public health emergency. Increasingly the medical community is acknowledging that prescription drugs are not necessarily the most effective solution for back pain management, and in fact, the American College of Physicians and National Organization of Internus which is the largest medical specialty organization and a second largest physician…

Thank you, Peter. We have provided detail on our financial performance for the third quarter of 2017 compared to the third quarter of 2016. I will now take a few moments to discuss some of the highlights broken down by the two operating segments, corporate clinics and franchise operations as well as our unallocated corporate overhead. This segment data will be available in our 10-Q which we'll file on Monday, November 13. As a reminder, for our retail concept two of the most important health measures of the business are overall revenue growth and system-wide comp sales. As Peter mentioned system-wide comp sales in the third quarter of 2017 increased by 17% over the same period last year. Our most mature clinics those that have operated for 48 months or more continue their strong comp clinic sale increasing by 9% over the prior year quarter further reflecting the growth of our business. A point of clarification on our corporate clinic segment, 31 of the 47 clinics were bought from existing franchisees which we refer to as buyback and 16 of the clinics were built from the ground up which we refer to as Greenfield. Our company-owned or managed clinic buybacks as a portfolio continue to be adjusted EBITDA positive at the clinical level. Gross sales of these clinics since a month prior to when they were acquired have increased on average by 57% through September 2017. Buyback sales are up 13% in Q3 2017 versus Q3 2016 and have an average age of 53 months as of September 2017. Greenfield sales are up 51% in Q3 2017 versus Q3 2016 reflecting continued progress towards profitability. Their average age is 22 months as of September 2017. While this is a significant increase, it also reflects the smaller base of patients in…

Thanks John. We continue to execute on our long-term vision which is to one, be the premier provider of chiropractor care in wellness and health plans; two, accelerate our footprints to corporate our franchise strategies; three, be the career path of choice for chiropractors; four, build a world class organizational structure; five, faster robust regional developer community; and six, build and maintain a world-class IT platform. I'd like to repeat our progress would not be possible without the commitment and the hard work of our franchise community and our employees. It was a pleasure to see everybody at the convention and I want to thank each and every one of them again for their efforts as we continue to improve the quality of life for our patients by providing affordable and routine chiropractor care. Before I open up to Q&A, I'd like to note that we will be at the following Investor Conferences over the next two months: Craig-Hallum, Alpha Select in New York City next week, LD Micro Annual Invitational, Los Angeles, and Annual ROTH Utah Active & Healthy Lifestyle Corporate Access Event in Park City. If you have any questions or would like a meeting please reach out to LHA Investor Relations. James, I'm ready to take Q&A.

Thank you, sir. [Operator Instructions]. Our first question comes from David Bain with ROTH Capital. Your line is open.

Great thank you. First, congratulations on strategically repositioning the company back towards profitability. First the clinics beat the revenue per clinic number again they are up 8% quarter-over-quarter that they owned clinics outside of sort of a continued acclamation of the concept by pay trends. Maybe you can give us an idea 3Q seasonality versus 2Q and any specific changes you've done that have been enhancing results at those particular locations. And I did hop on about four or five slides, if you went through that, I apologize.

Hey, David no problem at all. Thanks for the congratulations and that it's interesting and I've been involved in a lot of different retail concepts that have significant seasonality in my frozen desserts, even like a shipping business, or you see us during the holidays, if there's much higher revenue in that quarter, in that month, and you see overall. And I say what's so interesting about The Joint is that while that we have some slight seasonality by month when we look at it on a quarter-to-quarter basis it's pretty even.

Okay.

And so if you look at for example with our same-store sales Q1 was -- for those up and more than 13 months, Q1 was 19% same-store sales, Q2 was 19% same-store sales, Q3 was 17% same-store sales. And I really think that that drop is reflective of we have quite a number of clinics particularly in the Houston market which were flooded and closed for between seven and 10 days. And so I think when we come out with a 17% in Q3 it's truly reflection of not just Houston but then of course the East Coast as well because we have a number of clinics just right up from Florida up to the Carolinas and into Georgia. So I think that's a -- is the reason why you see that one difference between the 17% and the 19% for the first half of the year. To answer your question as why do we see discontinued performance on, particularly on the operational side. I really believe it's much of what we discussed on the last call is that the changes that our VP of Operations made in the way in which that we were managing our corporate clinics is that Jorge Armenteros came on board in January. He spent three months out in the field, he talked to our best franchisees about their best practices, took that information, and literally deconstructed the operation team, met -- eliminated one level of supervision, added another level, so that he has, I think a much more robust team in place with a smaller scope of control over the corporate clinics that we have. And that we're starting to see the results of that effort.

Great. And I mean looking at that and now that you're EBITDA positive and the same-store number that you just articulated continues at that kind of pace proving out a model of faster profitability per store. Then the concepts proving up pretty quickly are you investigating opportunity to increase the ownership mix and are you seeing any opportunities out there in general as other strategy that's still something kind of under review for the time period off into the future.

Well, and again it's a great question. And if you recall as of last year we came out and we said no new corporate clinics until we get our overall clinic per portfolio profit. And obviously that we are achieving that goal and that we're working very closely with our board and just strategically to think about okay, what is the best way. We've said all along that we believe in this dual model both corporate clinics and franchise clinics as a way of expanding this business and now we've not moved from that position. You know, we're just working closely with the board to determine, what's the most effective way to do that, what's the best timing of that, is that more buybacks is that more Greenfields, they all have different implications in capital requirement but it's very much a part of our overall strategy.

Okay and then just final one promise. You mentioned faster trends towards profitability for new store openings. Can you provide any sort of numbers behind that anything you can share with us?

Sure. I'm what I would say is that historically our same-store -- our time to breakeven is we've been talking about is that 12 to 18 months and it's been closer to the 18 months and the 12 months. And as we've not opened any new corporate clinics so I can't measure that against any of our corporate clinics. But as we look at the programs the 29 units that we've opened in 2017 that our goal has always been to try to move that to a to six to nine months breakeven point and that we are getting very close to that. So we will completely restructure our grand opening process, we've implemented new program, and we're starting to see the results of that. As we get further into this I think we can talk more specifically about the results but what we're saying is we're moving closer and closer to that goal of about six to nine months as a breakeven.

Very nice. Congrats guys.

Thank you.

Thank you very much.

Thank you. [Operator Instructions]. Our next question comes from Mike Malouf of Craig-Hallum. Your line is open.

Hey guys. This is Eric Des Lauriers on for Mike. Congrats on the great quarter.

Hi, Eric.

Hi, Eric.

If I could just press in a little bit more of that previous question of expanding the managed clinic portfolio. As you said I know it's kind of been the goal to wait and see until this is profitable to decide whether to expand or not. Does that provide guidance of 40 to 50 openings this year? Does that include the possibility of any managed clinics or does that at least for -- for this just this next quarter does that look like it's going to be still 100% franchised clinics or I would be able to see some company on once in the coming quarter. Thanks.

No, that we've said all along that we will not be opening any corporate clinics to until we're profitable through 2017 so that number of 40 to 50 is a 100% franchised clinics.

Okay, got it. And then going into that hurricane impact a little bit more I was wondering if you guys were able to quantify that for us at all, how many openings might have been without the hurricanes and if you're not able to quantify that just wondering if any of those that may have been impacted this quarter those to be pushed out to 2018 or you're kind of looking at new areas altogether.

Right, no, it's a great question and I don't want to talk too much about the impact of the hurricane because as I said really I think why we're more than anything else why we're lowering the guidance on new clinics. I think are we a little too aggressive last year with the range of 50 to 60 versus the 40 to 50? And that what I would tell you is all of the clinics that have been impacted by the hurricane and it's not just the hurricane comes in the dam but then they have to it's the construction teams they are now doing all this other stuff it's getting premium in place I mean there's a lot of factors that continue to affect that that part of the country as they try to recover and that certainly has implications on our openings because we've got number of clinics in that Texas and the Florida area and the Carolinas. And so if we're trying to quantify the total number that I would attribute to the hurricane is I'd be able to answer him by the end of the quarter because some of this may push into Q1 they all will open, so that none of them are like oh my gosh something happened they won’t open but I think you are to put a number to it, it'd probably be like three to five.

Okay. And then just final question, so your same-store sales continue to be strong even with that maybe 2% attributable to couple Houston and perhaps Florida clinics that have been closed. But just given the strong continued strength I'm wondering if you guys are seeing any difference in whether that's driven more from increasing number of customers to the clinics or if you guys are succeeding in being able to extract more value out of the same number of customers. Thanks.

I think it's a combination of both, that as we are measuring our new patients, those numbers have been I think since earlier this year been continuing to increase. So we are seeing new patients in the door and we absolutely are seeing our existing patients use this more often. So I think it's a real combination of those two elements that are driving that number and that number is absolutely pure number about those two elements. Last year, we did have a price increase, so when we had that 28% same-store sales a portion of that increase was you could attribute to the price increase. But in this case everything you've seen so far for the last -- for the last three quarters of this year is purely growth on that unit level.

Great. Thanks guys.

Thank you. [Operator Instructions]. I'm showing no further questions on the phones. So I would like to turn the conference back over to Mr. Holt.

Thanks, James. In closing, I want to thank you again for your interest in our company. We're passion about delivering quality assessable, affordable chiropractic care and we renewed our commitment to our franchisees, adopted a proven developer model, and improved our ability to scale we're accelerating growth. Already we've closed 400 clinics we're approaching the Top 10% of franchise brands and have set an aggressive target of 1,700 clinics. We are making chiropractic services accessible to communities that never had them before and impact on our patients is life-changing, it's big, it's important, it’s noble. And I would like to finish by telling a story that illustrates our impact. Lonnie White is a U.S. Army veteran who as a result of his service was suffering from the degenerative disk in his back, bone spurs, and a pinch nerve in his neck, he couldn't bend or stretch and even walking was painful. He started visiting The Joint in Richmond, Virginia and although it has taken a few sessions to get him pain free, he considers his chiropractic care to be a game changer for him. He states regarding visits of The Joint, it was amazing; you have nothing to lose and everything to gain. We're proud to help our members of the military through our military approach appreciation program and offering discounted visits to our members of the Armed Forces and their immediate family members. I look forward to reporting more in the coming quarters. Thank you very much for your time and attention.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for your participation. You may all disconnect. Have a wonderful day.