Good day, and welcome to The Joint Corp. Third Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on your telephone keypad. To withdraw your question, please press Star then two. Please note, this event is being recorded. I would now like to turn the conference over to Kirsten Chapman of LHA Investor Relations. Please go ahead. Thank you, Harmony, and thank you everyone for joining us this afternoon. This is Kirsten Chapman of LHA Investor Relations. Joining us on the call today are President and CEO, Peter Holt, and CFO, Jake Singleton. Please note that we are using a slide presentation that can be found at ir.thejoint.com/events. Today, after the close of the market, The Joint issued its operating metrics and financial results for the quarter ended September 30, 2023. If you do not 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 that today's discussion includes forward-looking statements within the meaning of the Safe Harbor Provisions and the Private Securities Litigation Reform Act of 1995. All statements other than the statements of historical facts may be considered forward-looking statements. Although the company believes the expectations and assumptions reflected in these forward-looking statements are reasonable, it can make no assurances that such expectations or assumptions will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to risks, various risks and uncertainties. As a result, we caution you against placing any undue reliance on these forward-looking statements. For a discussion of these risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please review the risk factors detailed in the company's reports on Forms 10-K and 10-Q, as well as other reports that the company files from time to time with the SEC. Finally, any forward-looking statements included in this conference call are made only as of the date of this call, and we do not undertake any obligation to revise our results or publicly re-release any updates to these forward-looking statements in light of new information or future results. Management also includes commonly discussed performance metrics. System-wide sales includes revenue at all clinics, whether operated by the company or by franchisees. While franchise sales are not recorded as revenues by the company, management believes the information is important in understanding the company's financial performance. Because these sales are the basis on which the company calculates and records royalty fees and are indicative of the financial health of the franchise base. System-wide comp sales used in revenues from both the company and company-owned, managed, and franchise clinics are those, in each case, have been open for at least 13 months and exclude any, clinics that have been closed. The company also uses adjusted EBITDA and provides a reconciliation to GAAP in its press release and presentation. Turning to slide 3. It's my pleasure to turn the call over to Peter Holt. Please go ahead, sir. Thank you, Kirsten, and I welcome everybody to the call. During Q3 2023, we continued to execute our mission to improve quality of life through routine and affordable chiropractic care. The strength of our franchise concept remains strong as we continue to revolutionize access to chiropractic care by providing affordable, concierge-style, membership-based services in convenient retail settings. However, ongoing economic uncertainty and continued cost pressures have impacted our corporate clinic portfolio performance. After evaluating options for improvement, the board has authorized management to initiate a plan to re-franchise or sell the majority of our company-owned or managed clinics. Management intends to retain a portion of highly performing corporate clinics. This refined strategy will leverage our greatest strength, our capacity to build a franchise, to drive long-term growth, both for our franchisees and The Joint as a public company. We intend to use the clinic sales proceeds to support marketing and patient acquisition, and to reinvest in our company through a possible acquisition of regional developer territories and potential stock repurchases. The reduction of corporate clinic portfolio will also facilitate our unallocated cost reduction efforts. Jake and I will elaborate more on these initiatives and our progress in a moment. Turning to slide 4, I'll review our operating financial highlights for the third quarter of 2023. System-wide sales grew to $119.3 million, increasing 8% compared to Q3 2022. Comp sales for clinics that have been open for at least 13 full months were flat at 0%. Revenue increased 11% compared to Q3 2022. Adjusted EBITDA was $2.9 million for Q3 2023. At September 30, 2023, our unrestricted cash grew to $16 million, compared to $9.7 million on December 31, 2022. Turning to slide 5, I'll discuss our clinic metrics. During Q3 2023, we opened 26 clinics, 24 franchised and 2 greenfields. This compares to 38 clinics opened in Q3 2022, 33 franchised and 5 greenfields. During both Q3 2023 and Q3 2022, we closed 2 franchise clinics. With today's foundation of over 900 clinics, our closure rate is less than 1% and remains one of the lowest in the franchise community. At September 30, 2023, we had 914 clinics in operation, consisting of 778 franchise clinics and 136 corporate owner-managed clinics. The portfolio mix remains 85% franchise clinics and 15% company-owned or managed clinics. Regarding our corporate portfolio strategy, in September, we announced that we had earmarked about 10% of our underperforming clinics for sale, relocation, or closure. Our team is executing well. Already, 8 clinics are in various stages of sales negotiations, 2 were sold in October, and in addition, 2 corporate clinics are about to be sold. As I mentioned at the beginning of the call, we've increased our goal to refranchise the majority of our corporate clinics. We expect to sell the lion's shares of them to existing franchisees, but we'll also consider qualified franchisees new to The Joint. It's important to note that we'll be selling valuable assets and will not be in rush negotiations to accelerate the process. We'll retain some corporate clinics due to their maturity and their strong performance, which we believe will yield benefits. For example, they'll continue to be strong financial contributors. We can use them to test price adjustments, new membership plans, and various ancillary products and services that we're assessing for wider rollout of our network. Regarding our remaining greenfield pipeline, we have 4 greenfields in the process of being opened, and we'll uphold our various obligations related to the leases and build-out. In some cases, we may complete the clinic's grand opening and sell the clinic after a patient base is established. In others, we'll transfer permits and contracts to a franchisee prior to the opening. Our regional developer strategy remains consistent. We have demonstrated over the past several years that the natural progression of our territory development can lead to the reacquisition of certain RD regions, and we'll continue to execute as the criteria is met. We do not plan to establish any additional RD territories, and as such, over time, we expect the RD share of re-franchise royalty fees to decrease as we reacquire RD rights. We ended Q3 with an RD count of 17, and an aggregate 10-year minimum development schedule for RD territories established since 2017 is 590 clinics. Looking ahead, and most importantly, we maintain unwavering dedication to our franchise community. We're focused on improving franchise clinic performance and unit economics. We continue to invest in tools to drive franchise growth and support our nationwide expansion. At the quarter end, we had a solid pipeline for future franchise clinic openings, with 202 franchise licenses in active development. Turning to Slide 6, in Q3 2023, we sold 12 franchise licenses, the same number as we sold in Q3 2022. This reflects the continued impact of higher interest rates, inflation, and strong employment rates negatively influencing franchise sales. That said, existing franchisees who've enjoyed the advantages of The Joint clinics continue to reinvest, year-to-date, comprising 58% of franchise license sales this year. Turning to Slide 7, we'll review our marketing efforts. This quarter, we welcomed our new Chief Marketing Officer, Lori Abou Habib. She's an expert in digital marketing and building customer loyalty with extensive franchise experience. Lori's initial focus area has been to leverage the power of our data to understand our existing and prospective patients. We're using our patient journey research and the wealth of patient data to craft distinct journeys for patients who have never seen a chiropractor before, patients who are familiar with the chiropractic care, and patients we have not seen recently. This research and strategy will inform message optimization and the customer experience from that initial search for a chiropractor through becoming and remaining a patient. In Q4, we will begin to apply these insights on our media buys and content on Meta, highlighting key themes that are most important to each of these patient segments. Additionally, Lori is focused on three main areas. Number one, grow new leads and patients. We're working diligently to increase the flow of new patients to our clinics by introducing new functionality, improving current processes, and mining our local trade areas for new patient growth. We're working on projects to decrease friction for our new patients by improving the intake process, creating a sense of urgency by introducing first-visit bookings, and optimizing our local clinic marketing. Number two, increasing lifetime patient value. In addition to getting new patients, we're also taking a more nuanced approach to generating more revenue from our existing patient base. To enable this, we are working on projects like creating a year-ago promotional calendar to drive same-store sales, increase content, and leverage marketing automation to deliver the right message to the right audience at the right time. Number three, growing brand equity. We have a strong brand with a rich story. By deepening the brand's unique essence and meaning of leveraging our footprint, we can become synonymous with chiropractic care in a way that our competitors cannot. We're working on our brand architecture to evolve our brand positioning and define brand essence to deepen our competitive advantage. Before I turn the call over to Jake, I'm delighted to welcome Jeff Gramm, who will join the board in January of 2024. He's a long-term supporter. We've enjoyed productive conversations with Jeff and look forward to his contribution on how to make this company more effective. With that, I'll turn it over to you, Jake. Thanks, Peter. Turning to Slide 8, our view, our clinic comps for Q3 2023 compared to Q3 2022. System-wide sales for all clinics open for any amount of time increased to $119.3 million, up 8%. System-wide comp sales for all clinics open 13 months were flat at 0%. System-wide comp sales for mature clinics open 48 months or more decreased 5%. This comp reflects fewer than anticipated new patients at some of our more mature clinics.... Revenue was $29.5 million, up $3 million or 11%. Revenue from franchised operations increased 9%, contributing $11.6 million. Company-owned or managed clinic revenue increased 13%, contributing $17.9 million. The increases represent continued year-over-year growth in both the franchise base and the corporate portfolio. Cost of revenues was $2.6 million, up 11% over the same period last year, reflecting the associated higher regional developer royalties and commissions. Selling and marketing expenses were $4.3 million, up 22% over the same period last year, driven by an increase in advertising fund expenditures from a larger franchise and corporate base, an increase in local marketing expenditures by the company-owned or managed clinics, and the timing of our national marketing fund spend. Depreciation and amortization expenses increased $569,000, up 32% compared to the prior year period, primarily due to the increase in the number of Greenfield developments and acquired clinics. G&A expenses were $20.2 million, compared to $17.8 million. The change reflects the cost to support the increased clinic count. However, the year-over-year rate of increase slowed. It was 14% for Q3 2023 over Q3 2022, down from 39% from Q3 2022 compared to Q3 2021. Also, we've continued certain cost control initiatives, such as hiring freezes, travel reductions, and the elimination of non-core projects. Loss on disposition or impairment was $905,000, compared to $264,000 in the third quarter of 2022. The increase includes those corporate clinics that were announced to be held for sale in September of 2023. Operating loss was $898,000, compared to operating income of $732,000 in the third quarter of 2022, reflecting the previously mentioned impairment charges. Income tax benefit was $188,000, compared to the benefit of $24,000 in the third quarter of 2022. Net loss was $716,000, or $0.05 per share, compared to net income of $731,000, or $0.05 per diluted share in the third quarter of 2022. Adjusted EBITDA was $2.9 million, compared to $3.1 million for the same period last year. Franchise clinic adjusted EBITDA was almost flat at $5.3 million. Company-owned or managed clinic adjusted EBITDA increased 20% to $2 million. Corporate expense as a component of adjusted EBITDA was $4.5 million, approximately $0.5 million higher than Q3 2022, reflecting accounting and professional service costs related to the restatement. On to slide 9. For the 9 months ended September 30, 2023, compared to the same period in 2022, revenue was $87.1 million, up $13.5 million or 18%. Net income, including net employee retention credits and loss on disposition of impairment, was $1.3 million, or $0.09 per diluted share, compared to a net loss of $137,000, or a loss of $0.01 per share in the first 9 months of 2022. Adjusted EBITDA was $8.2 million, up $618,000 or 8%. On to a review of our balance sheet and cash flow. At September 30, 2023, our unrestricted cash was $16.1 million, compared to $9.7 million at December 31, 2022. This reflects $11.3 million in cash flow from operations, including the receipt of the employee retention credits of $4.8 million, and the net of $4.9 million of investment in clinic acquisitions, development of greenfield clinics, and improvements of existing clinics and corporate assets. Also, we continue to have access to additional cash through our line of credit with JPMorgan Chase. To date, we've drawn $2 million dollars and have an additional $18 million dollars available. On to Slide 10 for a review of our guidance. We are reaffirming all elements of our 2023 guidance. Revenue is expected to be between $115 million and $118 million, compared to $101.9 million in 2022. Adjusted EBITDA is expected to be between $11 million and $12.5 million, compared to $11.5 million in 2022. We continue to expect to open between 100 and 120 franchise clinics, compared to 121 in 2022, and between 8 to 12 greenfield clinics, compared to 16 in 2022. Looking ahead, as discussed, we will initiate our plan to refranchise the majority of our corporate portfolio clinics and retain a portion of high-performing clinics. We will implement this plan with a sense of priority and importance to improve the overall financial performance of the company with an emphasis on profitability. Notably, this is a quality group of clinics that represents assets of value. We will negotiate determinedly and maintain the autonomy to sell at a suitable price. As such, predicting the timing of events will be difficult. As we think about the financial impacts of the refranchising efforts, please note the following: We continue to expect the gross sales for our entire system to grow. However, GAAP revenue will decrease as the corporate portfolio shifts from being recognized as 100% owned or managed to being recorded as 7% franchise royalty fees. As our cost of sales is primarily related to regional developer fees, we expect it to remain fairly static. We expect our sales and marketing expenses to decrease as we reduce the scale of our corporate portfolio. Currently, our corporate clinics spend approximately $3,000 per month per clinic in local advertising. Regarding general and administrative expenses, we expect to see significant reductions in our clinic-level four-wall operating expenses, our outside the four-wall expenses, and our unallocated corporate overhead. These expenses will be reduced proportionately as we reduce the scale of our corporate portfolio. As such, the timing of these G&A reductions will be gradual and incremental. Overall, while we reduce our top line revenue, we expect our reduction in G&A to expand our operating margins and increase profitability in the long run. Finally, it's important to note that some of our underperforming clinic valuations may result in non-cash impairment charges. Conversely, the better a clinic performs, it will create higher sales proceeds and the opportunity for gain on sale. With that, I'll turn the call back over to you, Peter. Thanks, Jake. We're excited to execute our new strategic focus. By converting the majority of our corporate portfolio to franchise clinics, we're taking clear action to strengthen the health of our franchise network, to increase our cash flow, to reinvest in the business, and to innovate additional products and services on the clinic level, and to improve clinic-level performance across the company. We believe these changes will enhance the value and performance of the company, whether from the perspective of a franchisee or a stockholder, for the following reasons. Number one, the market opportunity continues to be large. According to IBIS, people in the U.S. spend $19.5 billion a year on chiropractic care, and our franchise system barely scratched the surface, capturing only 2% market, that's to date. Two, the market is expanding. The drivers for chiropractic care, pain, opioid, and obesity epidemics continue to persist. According to Kentley Insights, the industry 5-year compounded annual growth rate is greater than 5%, and The Joint gross sales have consistently outperformed that, delivering 12-year CAGR of 62%. 3, The Joint continues to expand the market. For example, in 2022, of the 845,000 people who opened the door to The Joint for the very first time that year, 35% had never seen a chiropractor before. 4, we have a clear first-to-market advantage. With over 900 clinics, we have greater presence than all other franchise chiropractic systems combined. Our national brand presence creates economies of scale, which sets the flywheel in motion that drives even greater brand recognition. 5, our digital footprint leads the internet. Today, The Joint is the largest online publisher for information about chiropractic care in the industry, and we intend to leverage it even more to drive increased patient acquisition. Finally, our concept leads franchises and chiropractic care businesses, making The Joint a top choice for entrepreneurs. Our success in franchise is frequently recognized with accolades from Franchise Times, Franchise Business Review, Entrepreneur Magazine, FRANdata, and more. And with that, I'd like to thank our community of doctors of chiropractic, wellness coordinators, franchisees, regional developers, employees for their passion and dedication to The Joint. We could not be achieving the success that we are without their dedicated efforts. And with that, Harmony, I'm ready to open up for Q&A. Thank you. We will now begin the question- and- answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this moment, we'll pause a moment to assemble our roster. Thank you. Your first question comes from Jeff Van Sinderen, from B. Riley FBR. Please go ahead. Hello, this is Richard Magnusen in for Jeff Van Sinderen. Thank you for taking our call. To start off, you gave us some detail regarding sort of about different cohorts and the comps, but what further detail can you give us about the trends among the different cohorts? And specifically, what are you seeing with the latest cohorts that might stand out? Yeah, Richard, I don't think we'll give any further, you know, disaggregated information. You know, I think what we can say is, you know, obviously, flat comps for the quarter is not where we wanna be. We've seen some positive momentum as we start Q4. But the issue is, especially as it's relating to our mature clinic portfolio, continue to be centered around our new patient headwinds. And that's why, you know, we've dedicated a lot of our efforts in support of Lori and the initiatives that Peter spoke about on the call. Okay. And then, what metrics are you seeing in retention and new member adds? Sure. What we're seeing is, you know, of course, you know, the key three metrics that we focus on is new patient counts, attrition, excuse me, conversion, so they join as a member, and then attrition. And that, we historically have been doing great with our, conversion numbers. And so, as we talked about before, pre-COVID number, our total conversion was running 44%-45%. So far this year, it's running over 50% system-wide. When we look at our attrition rate, is again, pre-COVID, that was probably running around 11% or around 13%. And today, that's system-wide, running around 11% with a corporate portfolio, even less than that. So the one metric that's really been hit is that new patient count. And so if you look at that new patient count from our highs of 2021 to 2022, it was down by 14%. And then if we look in 2023 year to date, where we're probably another 4% down quarter to quarter, if we just compare quarter 2023 to quarter 2022. So we are seeing it kind of bottom out and are anticipating that we're moving to the other side of that new patient count. But that's the key metric that we really wanna focus on. The other thing that I mentioned is that we definitely recognize that we can take a much more nuanced approach to our existing patient base to make sure they stay with us longer, and when they do drop, to be sure that we're getting them back in earlier. Because we know that on average, those patients who leave us, 25% of them will come back within the next six months. So that's an important element that we're really gonna focus on. ... Okay, and then my last question is that, as the new CMO focuses on leveraging patient data, are you layering on new capabilities with your software system at the clinics? And then, aside from the new marketing demands on the software, have you achieved most of what you believe you can or what the software can provide in its current form? Well, I'm going to answer that last question, and no, I don't think that we've anywhere near touched on the real capacity of our new IT platform to help drive clinic performance. As we've talked about on some of the earlier calls, it's been, you know, slower than we anticipated getting some of these bugs cleaned out and the challenges that's created. But I think that we've made enormous inroads this year, and we really are now starting to focus on what, how do we leverage that resource or that asset, and so that we're focusing on the creation of a patient portal and mobile check-in. All the elements of being able to do that automated marketing to your patient base, so that you can make sure they're receiving the right message at the right time and where they are in their patient journey. So I think we really have a lot of room to grow, to continue to really leverage that asset of our IT platform. And the first part of that question was? I got it. Oh, yeah, as a CMO focuses on leveraging the patient data, are you having to layer on new capabilities to that software, you know, to... Yeah. accommodate that demand? The short answer is yes. There's a program that we're using that Iterable that does our automated marketing, and we've done that now on an email basis. We're moving it to text, and that she as we have actually done quite a bit of research on the patient journey earlier this year, that Lori's able to really leverage and use that as a model or guide as she refines our new patient marketing strategy going forward. All right. Well, thank you very much. Thank you. Thank you. Your next question comes from JP Wollam, from Roth MKM. Please go ahead. Hi, good afternoon, guys. I appreciate you taking my questions. If we could maybe just start in terms of maybe really dialing in on some of the problems we've had with the new member growth. One, you know, is there anything you can point to that maybe says this is a problem for the industry rather than maybe a problem related to new member acquisition at The Joint? You know, just something to make sure that we know it's not losing customers to other chiro brands, but rather maybe something going on with consumer health. And then as part of that, just anything to point out in terms of consumer spending and maybe trade down to more two times a month visits and less membership or less four-plus kind of visiting customers. Anything to point out on just spending and health? Thank you. Sure. That's a great question, and the way I would answer that is, if you look at our, you know, ideal patient, is that the ideal family income is running between $50,000-$105,000. And so when we look at, you know, if you think about last year, what were we talking about? Oh, my gosh, the pending recession, the recession. Of course, we know that we're not in a recession, but you still have 49% of the American people who are saying that they are in a recession. And so I think if you look at our patient base and you look at, you know, what's going on for them, as it relates to inflation, as it relates to higher interest rates, as it relates to higher mortgages or rents, is that they have in fact been impacted by some of these economic issues. And I think that that is very much the core of our patient base. One of the key attributes of The Joint is absolutely affordability. And so I think that while we are not in a recession, let's be very clear about that, but I think that our patient base is more impacted because that growth that we've been experiencing in the economy has not been evenly spread across the economy. So I think that's a part of it. We're not really seeing any kind of indication that, and our new patient count is being drawn away by competitors. Quite frankly, where I sit here with the 919 clinics open, I'm surprised by how little competition that we really have. Yes, there are some very, you know, small, direct competitors who are absolutely mimicking or modeling our model, but, they're kind of localized in certain markets, and so I don't think it's been a competitive issue that's impacted our new patient counts. Understood. Very helpful. And then maybe if we could just talk about the corporate-owned portfolio for a minute. I understand the not wanting to kind of put a timeline or cadence on it, but is there anything, you know, just as we really start the process, any kind of number you have circled that in terms of size of the corporate portfolio you'd hold on to? And then just the other part of that is, can you expand on how the sale negotiations are going? Is it existing franchisees that are looking to take on an additional unit, or what kind of buyers are out there? Thank you. Sure. Now, to answer the first part of that question is that, you know, we made it very clear that we will be selling off the majority of our corporate portfolio. At the end of the quarter, we had 136 clinics. In September, we started, you know, we made an announcement that we were gonna look at kind of our bottom 10%, and that we would address either by closing those clinics, re-franchising those clinics, or relocating, and that we're well in that process. And so as we said, we've sold two, we have two that are about to sell, that we've closed two units. And so... What I would say is that, and so far, in terms of who the buyers have been of that, that segment that we talked about in September, has been existing franchisees. And when we go forward and think about who would be the typical buyer of the majority of clinics that we are going to be selling, again, we would absolutely expect it to be existing franchisees who've already expressed interest to us, that they're interested in expanding their, their market area or into other markets, just because they believe so much in the business. That doesn't mean that we wouldn't also be open to selling to qualified new, or franchisees new to The Joint. But again, the key is you wanna make sure that you are selling your franchise to, you know, quality businessmen and women who really know and effectively can run clinics. So that's gonna be the criteria for us. As you said, this is not a fire sale. This isn't, "Okay, we have to have these off our books by X date." These are valuable assets that we believe that given the market conditions that we're in, some of the challenges on the margins with increased labor is that this is an effective strategy for this organization. Got it. Thank you, and best of luck moving forward. Thank you. Thank you. Your next question comes from Jeremy Hamblin, from Craig-Hallum Capital Group. Please go ahead. Thanks for taking the questions. So first, just in terms of, you know, the multiples, just, sorry if you've covered this already. But in terms of the, you know, kind of value that you are looking to achieve, is it a multiple of the four-wall cash flow that's being generated, or is it a multiple of the revenue of the clinic? How are you, you know, how are you determining what the appropriate valuations are, you know, especially given that, you know, financing is tougher to come by and more expensive for, you know, potential franchisees that might be looking to acquire? Sure, Jeremy, great question. You know, we've really gone on a clinic-by-clinic basis across a range of valuation methodologies. So looking at, you know, the performance on a clinic-by-clinic basis, you know, running individual DCF models, looking at a range of different valuation multiple techniques, whether it's sales, earnings, cash flow, et cetera. And it's certainly given us an idea and some negotiating ranges on a per-clinic basis. You know, there is a range of performance across the portfolio, so we do have high-performing clinics that will command higher sales proceeds, you know, in demand areas that might tick up from a multiples perspective. And then, you know, that ranges all the way to, you know, a small subset of underperformers. And then we've got, you know, young clinics that are still ramping. So each of those, you know, has a unique way to view valuation, and for competitive reasons, we probably won't put out metrics on what those multiple targets are or anything of that nature. But we have done a very detailed analysis to give us, you know, a basis for what they think they're worth, and then we'll continue those negotiations with the related, you know, prospective buyers. So in terms of the prospective buyer, can you give us a sense for... Are you looking for, like, mid-tier franchisee types, or are you looking for, you know, clinicians maybe that already have, you know, maybe competing, you know, chiropractic clinics? What type of, you know, kind of what's your type that you're looking for? Jeremy, that's a great question, and I would say that it's probably all of the above. If you look at the network today, is roughly 35% of our franchise community, the doctor of chiropractic is, in fact, a franchisee, and then the majority of them, obviously, are business men and women who are hiring the doctor. And so I think that absolutely there's opportunities for doctors to be able to buy a clinic or clinics. And then, again, they especially if they're in the business, and understand the business, and can be effective in running it, that's very... Those are all positive attributes that would help us, you know, in that process to continue to make sure those clinics perform. I think that what I've learned over the years in franchising is, you know, better than your operators, and so that you're looking for quality business people who know how to run a business. Yes, this is The Joint, and it's always better if they come directly from The Joint experience, 'cause then you don't have that same learning curve. But you've got some very successful franchisees in other concepts that have also shown that they can run The Joints very effectively. So we're gonna be looking very much at that quality to be able to run a business as a criteria for the sale. Got it. And then, just coming back to this process, and, you know, it can be challenging to go through a re-franchising effort, you know, and really to be matching the lost revenue versus, you know, the embedded corporate costs in particular. You know, can you give us a sense for, you know, what's a reasonable timeframe if the majority... In In terms of the number of, you know, company-operated clinics, I think, what, 136 at the end of the quarter, you know, is it feasible to do, you know, 25% of those in one year, or is that just too aggressive in terms of the timing? Is there a range you might be able to provide us with in terms of what you think can happen in year 1, year 2? ... Yeah, you know, I can appreciate the desire to wanna hone that in. You know, I think it's important to reiterate that, you know, these are clinics of value, right? This is not a fire sale. We're not gonna be rushed through this process. So it's really hard to put a defined timeline on that, Jeremy. So, we probably won't, you know, state anything publicly as it relates to that. You know, we've got- Until we get further into the process. Absolutely. I mean, you know, as Jeremy, as we get further into this, we'll be much more able to talk about kind of timelines and timeframes. But, you know, at this stage, it's a little harder to give you, okay, it's gonna take X amount of time or, you know, X percentage will be sold by a certain time frame. It's a priority. It's important to us that this is absolutely a adjustment in our strategic focus, where we are absolutely, we're focusing on the franchisees and selling off the majority of our corporate portfolio. But again, these are important assets that we are, we will be putting in the hands of great franchisees who can continue to run them effectively. Great. Thanks for taking my questions. Best, best of luck. Thank you. Thank you. Your next question comes from Aaron Wukmir from Lake Street Capital Markets. Please go ahead. Hey, good afternoon, guys. This is Aaron on the line for Brooks. Are you able to hear me okay? Yeah, no problem at all, Aaron. Cool. So just recognizing that the majority of your revenue and earnings come from the corporate side, you know, how do you think moving to a primarily franchise concepts, excuse me, will affect your public investors? You know, just in a general sense, trying to get a bit more color on your thoughts there. Sure. I think that, you know, what I would say is that when we went down this path of... And first, we went public to create a portfolio of corporate units, okay? We've obviously accelerated that growth as we went into 2021 and 2022. And I think as I reflect on kind of where we are and some of the challenges we face, both externally in terms of some of these market economic trends that have impacted our business, and at the same time, we've seen some increase in the cost, particularly labor. And so I think that environment has changed enough that it makes sense for us to rethink that strategy of that corporate portfolio. You certainly see franchise systems from time to time, you know, go back and forth on whether they wanna have a lot of corporate units or they wanna pull back on the corporate units. And I think that we too are just looking at that environment. If I reflect on where we are in terms of the price of our stock, it is that I don't think that we're getting credit for the management of our corporate portfolio. And so this is another reason to consider as we're going down this path. Yeah, and I think it's important to remember that, you know, we're selling the majority, but we are gonna maintain a portion of corporate portfolios, and we'll be targeting those, those high-performing clinics that are in, you know, tight, kind of concentric geographic areas that will allow us to really scale back that corporate overhead. So, with the strategy, we should be able to maintain a significant chunk of the earnings potential from a smaller number of units, and then allow us to continue that hybrid strategy. Gotcha, very helpful. And then just a quick follow-up. You know, you mentioned a little bit in your prepared remarks, but have you identified tangible, and I guess, practical ways to improve the, the new patient starts in this current environment? You know, just trying to get a better sense of, of what that would look like and your thoughts there. Yeah, no, we have. We've been doing a lot of work. We've been, you know, using different forums. So for example, we're doing a lot with Meta these days. We are also with TikTok, is what I meant to say. We are increasing our spend on Meta. We're doing a whole audit of our marketing spend to understand the efficacy of that and where those resources are best spent. That's one of the projects that Lori's first taking on. From that, we'll also do an RFP of really looking at that whole local store or that whole digital marketing spend. If you look at our new patient count right now, roughly 35% or 30% comes from referral. So that's just a patient having a great experience with a doctor and telling their friend. We have been able to track, for example, last year, that 63% of our new patients touched us at some point digitally. Now, it's always hard to answer, you know, true patient attribution or new patient attribution, but we know that's only increasingly important, and so we know we need to be more and more effective on that spend and making sure that we're able to close that gap of generating those leads, whether it's through paid or organic search, and then making sure that we are closing them and bringing them into the clinic. And so there's some new programs we're putting in place, a call center, for example, that we're experimenting with a program, where a new patient is being offered an appointment, you know, to be able to create a sense of urgency or willingness to cross over and enter the clinic. So there's a number of activities. More to come on that, but we feel that we are definitely moving in the right direction to address the new patient count. Great. Appreciate that color, and congrats on the momentum. Appreciate it. Thank you. Thank you. Once again, to ask a question, please press star then one. Your next question comes from Anthony Vendetti from Maxim Group. Please go ahead. Sure. Thank you. Just looking at some of the trends, can you point to either some regions or general KPIs that you're seeing, any positive trends that you're seeing? And then, specifically on the comps, what would you attribute the relative flatness there? Is that more macro or- ... You know, I'm just trying to figure out what, what you're seeing and, and what you're attributing some of the trends to. Sure. I think some of the positive trends we absolutely continue to see, and as I’ve mentioned on those three key metrics, you know, our conversion rate absolutely stays strong. You know, it’s, you know, like I said, it was pre-COVID running around a total conversion between 44-45%. Today, it’s over 50%. During the COVID, it was up to 60%, but I think that was reflective of kind of the time we were in, and if you were leaving your house, you know, to get an adjustment, you were in pretty serious pain. And so I think that’s reflective of that higher conversion rate. But so even post-COVID, if we can talk about that, we are seeing a really, you know, continuing strong conversion rate, and that’s very positive for the business. You know, 84% of our sales comes from our subscription, from our wellness plan, so that's an important element of this business. We're also seeing that attrition improve. Again, I talked about attrition was 13% pre-COVID. Today, it's running closer to 11%. Corporate portfolio is less than that. And so obviously, our patients are staying longer. You know, the real patient or KPI that's been impacted is that new patient count. And I think there's a number of things that are impacting that, that we've talked a little bit about. There's no question it ties to our comps. You know, the new patient comp, the new patient comp is down, and that does impact our comps for the quarter or for the year. And I think some of that, the reasons that's down is, as we've talked about, is these macroeconomic issues based on who is our patient profile. We know that there's an element there, and if you look at some of the younger generations, and we are—we have a very young patient base, they have been more impacted by some of the economic uncertainty than, let's say, baby boomers, for example. And I think that there is, perhaps in a couple of our markets, where we're more mature, is that, you know, that new patient count, when we have a lot of clinics around it, that new patient count is being absorbed by that greater number of clinics. So it's getting spread between a greater number of clinics, which is also impacting the individual clinic new patient count. Okay, and then on the franchise side, and then I'll hop back in the queue. With just the higher interest rates, are they a little bit more hesitant? Are they waiting for rates to come down, or is it not really having much of an impact? No, it's, it's having an impact. And it's not... And, and talking with other franchisors, they, they, they all agree is that there's no question there's a lot of research out there as well, is that it is impacting new franchise sales, and part of that is absolutely increasing interest rates. Part of that is uncertainty about the economy, part of that is inflation. And so I, I, I do think that there is impact, and it's reflected in our franchise sales. If you go back to 2021, for example, we had 156 sales that year. Last year, we had 75. Year to date, we're here at 50, and so we're a little below where we were last year. But I think that's a direct relationship or direct impact on some of these macroeconomic issues that are influencing whether somebody is going to make that leap to buy a franchise, whether it's The Joint or anybody else. As we've talked about, if you look at the franchises sold in 2023, is that 58% of them were existing franchisees. And as a franchise system, there's no better validation than somebody who's already in the business, who understands it and says, "You know what? Even in its conditions, I want more." If you are new to The Joint, maybe not new to franchising, and you don't have that same certainty of how this operates, it makes sense to me to see, you know, because historically, we had been running around a 50/50 split. 50% of our new franchises were new to The Joint, and the other 50 were existing franchisees. So it makes sense to me in this environment to see that percentage of sales being driven by our existing franchisees, given that uncertainty that's out there. Makes sense. Okay, that's helpful. Thanks very much. I'll hop into the queue. Thank you very much. Thank you. Once again, to ask a question, please press star then one. We'll pause for any further questions to register. Thank you. That concludes our question- and- answer session. I would now like to turn the conference back to Mr. Peter Holt. Thank you, Harmony. Before I close, I'd like to note that we'll be at the ROTH Deer Valley Conference in December. Today, about 30% of our franchisees are doctors of chiropractic, and I'd like to tell you a story about one of our doctors in our system. When Dr. P moved to Las Vegas, he was looking for a chiropractic practice that afforded him the ability to maintain a few business ventures in his prior location. The Joint provided that flexibility, no pun intended, and Dr. P said, and I quote, "I quickly fell in love with the brand and everything The Joint represents." Two years later, he realized his hometown in yet another state didn't have any Joint clinics. Dr. P reported: "I saw this as an ideal opportunity to embrace the challenge of marrying my passion for the brand, my experience as a chiropractor, and my entrepreneurial spirit. It almost felt like it was an opportunity that was meant to be, so we took the leap," and he hasn't looked back since. Thank you, and stay well, Justin. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.