Good day and thank you for standing by. Welcome to The Joint Corp Q3 2021 Financial Results Conference Call. At this time all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. I'd now like to hand the conference over to David Barnard, LHA Investor Relations. Sir, please go ahead.

Thank you, Lee. Good morning, everyone. This is David Barnard of LHA investor relations. On the call today President and CEO Peter Holt, will review our third quarter 2021 performance metrics and provide an update on the business. CFO Jake Singleton will detail our financial results and guidance, and Peter will close with a summary and open the call for questions. Please note we're using a slide presentation it can be found at https://ir.thejoint.com/events. Today after the close of market, The Joint Corporation issued its financial results for the quarter ended September 30 2021. 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. As provided on Slide 2, please be advised today's discussion includes forward-looking statements, including statements concerning our strategy, future operations, future financial position and plans and objectives of management. 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 made based on our current predictions, expectations, estimates and assumptions, and are also subject to risks and uncertainties that may cause actual results to differ materially from the statements we make today. Factors that could contribute to these differences include, but are not limited to the continuing impact of the COVID-19 outbreak on the economy and our operations, including temporary clinic closures, shortened business hours and reduced patient demand. Our failure to develop or acquire a company owned or managed clinics as rapidly as we intend, our failure to profitably operate company owned or managed clinics, our inability to identify and recruit enough qualified chiropractors and other personnel to staff our clinics, due in part to nationwide labor shortage. Short selling strategies and negative opinions posted on the…

Thank you, David. And I welcome everybody to the call. During the third quarter, we continue to execute our long standing strategy to build a joint brand by opening franchised and corporate owned or managed clinics and retail setting. Additionally, we looked to opportunistically acquire creative franchise clinics and build new greenfield clinics that complement our corporate portfolio. As a result, we've advanced our revenue growth momentum. We continue to be on track with our goal of 1000 clinics in operation by the end of 2023. And we'll position our business for longer term expansion well into the future. Recently, we received a great deal of interest from new investors. I'd like to welcome them and summaries our investments rationale. The Joint is revolutionizing access to chiropractic care. Located in convenient retail settings, our clinics provide concerto style, membership based services. Patients benefit from attractive pricing and convenient hours without the need of insurance or appointments. Our growth strategies to build our brand, increase awareness of the efficacy of chiropractic care, deliver on exceptional patient experience and open more clinics. We're already the largest and most recognizable provider of chiropractic care in the country and yet we only account for approximately 2% of this highly fragmented nearly $18 billion chiropractic care market. As such, we have a significant opportunity to continue increasing our market share as we further refine and expand the market itself. Turning to Slide 4, I'll review a few highlights of our third quarter 2021 results. Later, Jake will discuss our financial results in detail. In Q3 2021, compared to Q3 2020, system wide sales grew to $93.4 million increasing 37%. Our comp sales for clinics have been open for at least 13 full months grew to 27%. Revenue grew 36%. Adjusted EBITDA increased to $3.3 million…

Thank you, Peter. I'll review Q3 2021 compared to Q3 2020. Please remember, while the second quarter of 2020 was impacted by the pandemic, our swift actions enabled the joint to rebound in the third and fourth quarters of 2020. As a result, full-year 2020 delivered our strongest financial performance for any year-to-date. We're very pleased that 2021 continues our growth momentum. For Q3 2021 compared to Q3 2020 system wide sales for all clinics open for any amount of time increased to $93.4 million up 37%. System wide comp sales for all clinics open 13 months or more were 27%. System wide comp sales for mature clinics open 48 months or more were 21%. Revenue was $21 million up $5.6 million or 36%. Company owned or managed clinic revenue increased 38% contributing 11.6 $2 million. Franchised operations increased 34% contributing $9.4 million. Cost of revenues was $2.3 million, up 34% over the same period last year, reflecting the increase in franchise clinics, and the associated higher regional developer royalties and commissions, as well as higher website hosting costs related to the new IT platform. Selling and marketing expenses were $2.9 million, up 56% over the same period last year. This reflects the larger number of franchised and company under managed clinics. Grand opening expenses for our new Greenfield and the timing of the national marketing fund spend. Depreciation and amortization expenses increased for the third quarter of 2021 as compared to the prior-year period, primarily due to the amortization of reacquired development rights in December 2020 in January 2021. The amortization of intangibles related to the 2021 clinic acquisition and depreciation expenses associated with our Axis IT platform and Greenfield development. G&A expenses were $12.8 million, compared to $9.4 million, up 36%. The increase was primarily due to an…

Thanks, Jake. Turning to Slide 12, I'm so very proud of our corporate staff and our entire community of franchisees, doctors and wellness coordinators. We've worked hard to foster culture that is truly committed to our mission of improving quality of life. We continue to prioritize staff recruitment and retention. This is important now more than ever given the macroeconomic labor shortage in the United States. And like others, we've experienced some challenges with attracting and retaining employees. But we've implemented a number of initiatives in this regard, including increasing the average salary for our doctors. Regarding our clinic expansion, we've already increased our 2021 clinic opening guidance twice this year. And we're on pace to meet the higher target as well as our 2023 year-end goal to open 1,000 new clinics, which is just a stepping stone to future development. Using only the demographics of our existing patient base and a current MSA data, we've identified a minimum of 1,800 targeted clinic sites. The keyword to remember is minimum, as we have significant opportunity to exceed beyond these projections. One example of our expansion is on the Army & Air Force Exchange Service. Just last quarter, we announced our partnership with the exchange to bring chiropractic care on base to better serve members of the military community. Our initial plan included three clinics on Air Force bases in Arizona, Florida and New Jersey. The exchange is so pleased with initial progress in the early interest from service members that we've already started expansion plans for additional bases. And this is just one element of the opportunity to have nearly $18 billion market. Today our annualized revenue represents approximately 2% of market share, and we're optimistic about capturing additional share for the following reason. First, chiropractic is still a fragmented…

Thank you. [Operator Instructions] And your first question comes from the line of Jeff Van Sinderen from B. Riley. Your line is open.

Hi, everyone. First, let me say terrific results. I guess one thing that I wanted to see if you would touch on, I know that you're still sort of in debugging mode or maybe the end of debugging mode on the new software platform. And maybe you can speak a little bit more about kind of the next steps, functionality components and time frame to layer on some of the capabilities that you're planning on that new platform?

Absolutely. Jeff, thanks for the kind words. Always a pleasure. And it's absolutely the right question. We truly believe that the increased technologies is really the foundation for our future. Everything is being more and more inspired by the technology that drives our business and how we make consumer choices. That -- right now, as you've heard us talk a lot is this the lift and shift, we're just trying to get the bugs worked out. We're trying to move from our homegrown platform to this new much more secure platform with licensing CRM. But just some of the things that we're talking about is from a patient's perspective is the creation of a mobile check-in, the creation of a patient portal, the idea to do marketing on to the singular individual, because of the data that we have about them. This is chiropractic care, which is the medical service, which means that we have an enormous amount of information on every one of our patients, and that we can use that information to understand consumer habits, how to be more effective in our marketing to him, that ultimately, we see the creation of a data warehouse that really allows us to utilize this extraordinary value of the data that we're collecting. But this is going to take time. These are not Q1 initiatives. This is where we see going right now. We are continuing focus on the stability of this new platform, and laying out the future with a technology roadmap.

Okay, great. And then I'm just curious as a follow up, if you can just touch any changes to your marketing and advertising promotional plans around holiday 2021 versus what you did in holiday 2020?

I think that what we have been finding is a greater and greater response from our patients to these two promotions. As you know, we don't have a lot of promotions each year. These are our two major promotions, which really drive our fourth quarter performance. Jason and his team has taken best practices across the network. They're ensuring that we have 100% participation in the program themselves. They have increased some of the tools that we're using to market the program. We have dedicated additional dollars from a media side to support these two initiatives. And so we're going in with an expectation that we will see a consolidated performance of these promotions, compared to what we did last year.

Excellent. Thanks for taking my questions and continued success.

Thank you.

And your next question comes from the line of Brooks O'Neil from Lake Street Capital. Your line is now open.

Hi, guys. This is Charles Spangler [ph] filling in for Brooks, and thanks for taking my question. One question I have is, are you seeing any issues with opening new clinics, like any supply chain issues, or staffing shortages, or anything of that nature?

Yes, as it relates to supply chain, as you know, the clinics are relatively simple built out. So we haven't experienced anything as it relates to the supply side. As we look at the real estate side, we continue to target very high trafficked areas, those retail leases that we target are still in demand. So we're working through that. So outside of those two things, as Peter mentioned, in our remarks to a tight labor market for everybody out there. So that's why we're dedicating such amount of time and resources to the recruitment and retention of our doctors. But outside of that, we haven't seen too much disruption.

Thank you. And one follow-up I have is you spoke about expansion plans to military bases, and with the promising responses you've been getting, what can we expect for the rest of the year and next year in regards to expansion?

Well, we've originally -- we announced this last quarter that we signed an agreement with the army and air force exchange to put three clinics on base. They have 3,500 bases around the world, not that we would be putting a clinic on every one of those bases. But what we're seeing is more and more interests in both the military personnel themselves and administration in the power and efficacy of chiropractic. So there's a growing demand of utilizing chiropractic services by the military. And so that we've already got the agreement for the three bases that we're in to kind of discussions, as I mentioned, to increase that to a number of bases going forward. We haven't given a final amount, but we would expect probably to have at least one or two of those bases open by year-end of the three that we've already contracted to open and will continue to accelerate growth as we work with an army to get these open.

Thank you. And congrats on the great quarter.

Thank you very much.

Thank you. Your next question comes from the line of Ryan Kimbrel from Craig-Hallum. Your line is now open.

Hey guys, I'm [indiscernible]. And I also want to extend my congratulations on great performance this quarter. I want to ask what have you seen in terms of customer behavior? The Joint has clearly been a great outlet for consumers during the pandemic. But now that people are more or less thinking beyond the pandemic. Have you seen any change in behavior have discretionary dollars shifted elsewhere at all?

Yes, Ryan, great question. And thanks for the remarks. As far as consumer behavior, as I look at some of our KPIs. We're seeing great strength in our new patient attraction. We continue to have one of the strongest years we've seen as it relates to attracting those new patients. On top of that, we're seeing strength in our conversion metrics, meaning that we're converting them on to the subscription, or wellness package side. So those are two really strong indicators. As we look at patient interest in our model, I think we continue to be incredibly well positioned, as it relates to being in the health and wellness space, attracting the interest from millennials, which is our highest demographic base. So we're seeing great strength there. I don't know, Peter, if you'd add anything?

No absolutely. And, Ryan, listen, look at the comps. I mean, that is a greatest exercise to look at what impact you're having in terms of what growth. And you know that to be posting 27% cons. Okay, now, compare that to 53% in Q2 2020 and feels like, oh my gosh, what's going on. But, I mean, any retail concept that is consistently posting in 20% or more comps, suggest to you that you've got a lot of happy customers. And so what we have is our existing patient base, who's coming in and using us more often. And as Jake was saying, we're seeing more and more new patients open that door for the very first time.

Okay, and then if I can touch on what you just commented on, Peter. You guys lapped up 15% comp fairly easily in Q1. And the same could be said from the 12% here in Q3. Can you tell us how you're thinking to Q4 and maybe the first half of the next year, if you tell that far ahead?

Well, we don't guide on comps. So I don't have an exact number to give you. What I would say is really kind of conversation we've been having is that we really have seen your momentum pick up, we were impacted by the pandemic. If you kind of look at it in 2020 obviously, we did have the 15% in Q1. And that really was two and a half months of our almost 25% comps per quarter that was really punctured by that two weeks of COVID. Then when we went to Q2, that was our worst quarter, I think what's the rest of the world it was the nadir of the pandemic, when no one knew what to expect and that our comps for the first time negative is 6%. Then we saw him come back up to 12% in Q3, 16% in Q4, Q1 comps were 21%. Now Q2 2021 was of course impacted by the low level of last year. But still 33% comp says to you that the momentum is back. And then okay, we're settling down a little bit to that 27% comps for this quarter. Could I project that going forward quarter-after-quarter? I think that's probably high. But I would say that we're continuing to see the momentum that's driving the growth of this organization.

All right, thank you. Congrats again, guys.

Thanks a lot.

Thank you. Your next question comes from Matt Bullock from Maxim Group. Your line is now open.

Hi, thanks for taking my questions and congrats on the great quarter. I think you mentioned that right now you maintain the 12% corporate clinics and then 88% franchise clinics. I was hoping you could comment on whether or not you expect this mix to shift as you accelerate some of these Greenfield openings or if the franchise openings are just happening too rapidly. And then maybe if you could just comment on what you see as your ideal ratio, once you reach that 1,000 clinics mark and beyond?

Yes, Matt, that's a great question. You're right. And I think you had both sides of it, we are going to continue to accelerate our corporate openings. But as I think about the overall mix, it's going to be hard to keep pace with those franchise openings. We continue to set the bar that relates to continued interest in this model, our franchise sales has set another record for this year because I look at that strength, and I look at how am I going to shift that mix. As we accelerate, you might see a short-term up tick. But at the end of the day, the franchisees are going to be opening them is just as fast. So we'd love to see that momentum. As to where we see an ideal mix, we haven't provided that forward guidance. What we know is that based on the unit economics, it makes sense for us to continue to develop these units alongside of our franchisees. So we'll continue to stay true to our dual model where we're going to continue to increase our corporate portfolio. We're going to continue to expand through the franchise model. So we'll see where that goes in the future but both are continued strategies for us.

Excellent, thank you. I'll hop back into queue.

Thank you. [Operator Instructions] And there are no question at this time. Presenters, please go ahead.

Thank you, Lee. Thank you all for your time today. We're honored to be recognized last week by Fortune 100 Fastest Growing Companies ranking us as number three, and through the end of the year, we'll present at Craig-Hallum Virtual Alpha Select Conference, the D.A. Davidson Annual Holiday Beauty and Wellness Bus Tour, and the Roth Deer Valley Conference. Given how much we talked about our doctors of chiropractic today, I want to share a story relayed to me by a D.C. who has recently joined our ranks. And I'll paraphrase what he said. I've been a Doctor of Chiropractic for 10 years, I found my independent clinic in Pennsylvania dedicated myself to my patients and my business. It took me seven years to build my practice to a comfortable level. And I was very proud of what I built, but is the hard work and took a lot of time which knocked my work balance out of alignment, pun intended. Recently, my wife was offered a great opportunity to Atlanta, and we decided to move. I love being a Chiropractor, but I didn't want to make the same sacrifices that it takes to build a successful practice. I interviewed at many clinics and chose The Joint due to the great care and the support they provide for both the patients and the doctors. I'm now the lead doctor at The Joint clinic which enables me to do my best work and also have a home life and vacation. I'm grateful for the opportunity that the Joint has given to me and my family. Thank you and stay well adjusted.

Ladies and gentlemen, that concludes The Joint Corp Q3 2021 financial results conference call. You may now disconnect. Thank you for your participation.