Joint Corp (JYNT) 2016 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to The Joint Corp. first-quarter 2016 earnings conference call. (Operator Instructions). As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Peter Vosso of Westwicke Partners Investor Relations, for The Joint Corp. You may begin, sir.

Thank you Ranya. Good afternoon, everyone, and welcome to The Joint Corp. first-quarter 2016 financial results conference call.

Before we begin, if you do not already have a copy of the 2016 first-quarter financial results press release, the financial statements can be found in the Investor Relations section of our website at www.Joint.com.

Please be advised that 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 which 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. I 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 are 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, I'll turn the call over to John.

Thank you, Peter, and thanks, everyone, for joining us on today's call to discuss our 2016 first-quarter results. Joining me to present on the call is Frank Joyce, Chief Financial Officer. I will provide details on clinic expansion and operational performance and Frank will discuss the first-quarter financial results. But first I'd like to mention that, last week, we announced the appointment of Peter Holt as Chief Operating Officer of The Joint Corporation. Peter joins The Joint with (technical difficulty) years experience in domestic and international franchising, franchise development, and operations. He has held executive leadership roles with well-known national brands such as Tasti D-Lite and Planet Smoothie, Mail Boxes Etc., and I Can't Believe It's Yogurt. His appointment clearly confirms our commitment to the continued strengthening of our operations, the continued cultivation and management of our franchise community, as well as a strong commitment to future clinic development, both domestically and internationally. So, welcome to Peter.

Turning back to the first quarter, our first-quarter results marked a strong start to the year and a continuation of our growth and operating strategy. Revenue growth of 70% in the quarter was driven by continued strong performance of our acquired Company-owned or managed clinics and the addition of greenfield clinics over the last 12 months.

During the first quarter of 2016, we continued to execute on our strategy of building a leading national provider of chiropractic services. We added seven newly developed greenfield clinics and 14 franchise clinics during the quarter, increasing the number of total clinics to 331 as of March 31, 2016, an increase of 78 clinics, or 31%, from March 31, 2015. This is also a net increase of 19 clinics since December 31, 2015.

During the first quarter, 14 franchise clinics were opened in Denver, Dallas, North Carolina, among others. Of seven newly developed greenfield clinics added in the first quarter, four were added in the Los Angeles Orange County, California area, two in the Chicago market and one in Rochester, New York. This is consistent with our stated strategy to build in existing markets and to locate in concentrated clusters with the goal of achieving critical mass that optimizes our marketing and operational leverage.

The greenfield clinics added in the first quarter bring the number of Company-owned or managed clinics to 54, which stands in comparison to zero just five quarters ago just following our IPO. Consistent with our stated strategy, we have evolved the portfolio from one that is 100% comprised of franchised clinics to one that is not comprised of 54 (technical difficulty) [60%] of Company-owned and managed clinics.

I am pleased to announce that our operational influence on sales performance in the first quarter of 2016 across our portfolio of acquired Company-owned or managed clinics remains strong. Our progress in acquiring and upgrading operations is on target for 2016.

While operational performance of our newly acquired clinics has been strong, the performance of our mature clinics has continued to be strong as well. For instance, those clinics acquired in 2015 that we owned or managed for at least nine months saw their revenues increase on average by 28% in the first nine months under our management.

System-wide comp sales in the first quarter of 2016 were 32% with the performance of our most mature clinics, those that have operated for more than 48 months or greater, continuing their strong comp clinic revenue growth, growing by 17% over the prior year. Comp sales, remember, are only sales from clinics that have been opened at least 13 full months and exclude any clinics that have closed.

It is worth noting that system-wide sales in the first quarter of 2016 totaled $21.9 million, an increase of approximately $6.7 million, or 44%, over the prior year.

Regarding adjusted EBITDA during the first quarter, our 54 Company-owned or managed clinics generated an adjusted EBITDA loss of $1.2 million. In order to put this loss in perspective, we group our clinic results into the following five age groups -- those that are 0 to 12 months old, those 13 to 24 months old, 25 to 36 months, 37 to 48 months, and 48 months and older. As expected, those clinics in the 0 to 12 month category as a group generated adjusted EBITDA losses during the quarter due to the fact that this group includes all 28 of the Company's brand-new greenfield clinics. In fact, the average age of these clinics in the 0 to 12 month category is approximately only five months old. However, it's important to note that the totals for each of the other four age classes generated positive adjusted EBITDA during the quarter. Said differently, the total for all clinics grouped in the 13 to 24 month category, the 25 to 36 month category, the 37 to 48 month category and the 48 month plus categories each generated positive adjusted EBITDA.

In addition, the adjusted EBITDA margins grew in line with age classes such that the lowest margins were in the 13 to 24 month category, then grew steadily through to the 48 month plus category, which had the highest adjusted EBITDA margins. These results were not surprising to us but rather in line with our model assumptions. This profit growth of course is driven by the strong comp store sales our clinics experience as they mature with clinics in the first year of comp store sales, that is those in the 13 to 24 month category, growing at an astounding rate of over 60% and those clinics over four years old still growing at a rate of 17%, as mentioned earlier, all on a very stable cost structure.

Overall, the pace and distribution of clinics since the beginning of 2016 is consistent with our strategy we discussed earlier this year to optimize the performance of our newly developed greenfields while selectively adding and acquiring clinics that contribute to our revenue base and are consistent with our strategy of adding to our operating and marketing leverage. Our intention is to productively manage this growth, allow it to mature during 2016. And I'm happy to report we are on target steadily with these goals.

We plan to open Company-owned or managed clinics in 2016 at a more measured pace, as I just mentioned, in comparison to the rapid pace which we opened them right at the end of 2015. We expect this approach will improve short-term Company-wide operational performance while allowing a relatively large number of greenfield clinics that we opened in 2015, many of which were open in the fourth quarter of 2015, time to mature.

It's important to keep in mind that Company-owned or managed clinics are projected on average to turn cash flow positive within approximately 12 to 18 months of operation, and therefore progress to generate EBITDA margins in the range of 25% to 35% as they approach maturity.

Clinics greenfielded in established, smaller, less seasonal markets such as Tucson will ramp more quickly than historical averages while clinics in new, large, more seasonal markets such as Chicago are expected to typically experience a more extended ramp. Accordingly, we will be adjusting our full-year 2016 adjusted EBITDA guidance range to take into account the early growth stage of our newly built greenfield clinics and be more consistent with the build to profitability we expect will occur with this high concentration new clinics at their stage of growth. Frank will expand on this in his comments.

As I mentioned, we expect to add more franchise clinics in 2016 than we did in 2015. This will be important as the royalty stream from franchise clinics is a relatively predictable source of revenue and will continue to drive our growth to profitability.

During 2015, we invested heavily in operational and development support of the franchise system, including three new franchise support managers and upgraded development oversight, all contributing to our improved pipeline. And of, course the addition of Peter Holt as our new Chief Operating Officer confirms our commitment to the continued strengthening of these operations and the cultivation and certainly management of our franchise community.

We will continue our clustering strategy, not only to our Company clinics but also to our franchise clinics across the entirety of our system as we continue to seek leverage and improve system-wide operational and marketing efficiencies. We will continue to add clinics in 2016, and we will allow the new class of 2015 greenfields an opportunity to cure while managing our capital and growth accordingly.

With a total of $10.4 million in cash and investments at March 31, 2016, we remain in good position to execute our strategy of measured clinic expansion, both Company and franchise, and certainly while growing sales and increasing operational performance.

Turning now to the regional developer aspect of our portfolio, with the regional -- with the reacquisition of regional developer rights in the inland empire of California during the first quarter of 2016, the total number of regional developer licenses retired or reacquired since 2014 totals nine and includes acquisitions in California, Louisiana, Florida, New York, and New Jersey. This too is consistent with our stated strategy to facilitate the unencumbered growth of both franchise and Company-owned or managed clinics across the system by acquiring or retiring regional developer license where opportune.

I'd now like to turn the call over to Frank Joyce, our Chief Financial Officer, to discuss the 2016 first-quarter results and general outlook for the full year of 2016. Frank?

Thanks John. We have provided detail to our financial performance for the quarter in March 31, 2016 in the press release issued earlier today. I will now take a few moments and discuss some of the highlights.

As mentioned, we had 331 clinics open in March 31, 2016, an increase of 78 clinics since March 31, 2015. As a result, revenues increased 7% in the first quarter of 2016 to $4.3 million compared to the prior year. Revenue growth was driven primarily by the addition of 42 Company-owned or managed clinics since March 31, 2015 and also by a more than 35% increase in franchise royalties over the same period due to the addition of 36 franchise clinics in the last year and coupled with continued sales growth in existing franchise clinics over that period.

Net loss in the first quarter of 2016 was $3.5 million, or $0.28 a share, as compared to a net loss of $1.9 million, or $0.20 per share, in the first quarter of 2015. Looking at the $1.6 million increase in net loss by segment, virtually all of the increase in net loss is due to a $1.7 million -- $1.7 million rather in higher losses at our Company-owned or managed clinics where the Company had 28 greenfield clinics in operation during the first quarter of 2016 versus none in the same period a year ago. As John mentioned earlier, all of our greenfield clinics were in the 0 to 12 month age class and given that we don't expect our clinics to become EBITDA profitable on average until after the first 12 to 18 months in operation, having 28 greenfields in this important 0 to 12 month age class was a significant drag on profitably in the quarter.

Franchise operations, which consist of franchise royalties, franchise fees, and related overhead, had net income in the quarter of $1.1 million, up $0.4 million from the year-ago quarter. Corporate overhead in Q1 2016 rose by only $0.3 million to $2.9 million due to slightly higher payroll and stock comp expenses.

Beginning with the first quarter of 2016, the Company is providing segment financial data for two segments, corporate clinics and franchise operations, and will also report unallocated corporate overhead. This segment data will be available in our report 10-Q which will be filed later in the week.

Turning to consolidated expenses, total G&A expenses increased by $2.9 million in Q1 2016 versus the prior period. The largest contributors to the G&A variance were at the clinic level where payroll and related expenses increased by $1.2 million and rent and facilities increased by $0.9 million, both due to having 54 Company units in operation during Q1 2016 versus 12 in the first quarter of 2015.

Selling and marketing expenses declined by $0.2 million in the first quarter due largely to timing of national marketing fund expenditures. We expect national marketing fund expenditures to increase during the remainder of the year and be in line with marketing contributions from our franchisees. We also expect higher marketing expenditures at the clinic level for the remainder of the year, partly due to having more clinics in operation as the year progresses.

Adjusted EBITDA for the first quarter of 2016 was a loss of $2.7 million, an increase of $1.2 million over the prior-year quarter. The corporate clinics segment contributed $1.1 million of this increase and as mentioned earlier, this was due to having 28 early-stage greenfield clinics in operation during the quarter versus none in the prior year. Each of these greenfields were in the 0 to 12 month age class and as John described earlier, each age class of owned or managed clinics with the exception of those clinics in the less than 12 month category generated positive adjusted EBITDA during the quarter.

Total system-wide sales increased to $21.9 million in the first quarter of 2016, an increase from approximately $15.2 million in the same quarter of 2015. That's up 44%.

Approximately 12.6 million weighted average common shares were outstanding in the first quarter of 2016 as compared to 9.7 million weighted average shares for the same period last year. The increase in weighted average shares is due primarily to the Company's underwritten offering of approximately [2.] million shares of common stock in the fourth quarter of 2015.

As of March 31, 2016, cash and cash equivalents were $10.4 million compared to $16.8 million as of December 31, 2015. During the quarter, the Company funded initial working capital advances for the 17 greenfields opened in Q4 2015 along with the additional seven greenfields that opened in Q1 2016. In addition, the Company made significant payments to construction vendors for these same greenfield units during the quarter, making Q1 2016 an abnormally high quarter for cash consumption.

Now, turning to 2016 guidance, today we are reiterating our previously issued full-year 2016 guidance for total revenue and net new clinic openings, and we are adjusting the guidance for adjusted EBITDA. This adjustment to 2016 adjusted EBITDA more accurately takes into account the high concentration of new greenfield units in the 0 to 12 month age class and their expected losses, as John mentioned earlier. The clinics in the 0 to 12 month age class are, on average, approximately five months old. This adjustment to full-year 2000 (sic -- "2015") adjusted EBITDA does not change our view of the ultimate performance of these units and their expected ultimate contribution to the enterprise. Therefore, I'd like to mention what our guidance elements are for full-year 2016.

Starting with the number franchise openings, that has not changed and that's between 58 to 60. We have adjusted the range of the number of Company-owned clinics. It will now be between 16 to 20 we anticipate versus a prior range of 18 to 20. The number of net new clinic openings, as I mentioned, has not changed and that is 68 to 72. The revenue guidance for that range has not changed and that stands at $19 million to $21 million and we've adjusted our adjusted EBITDA range to an $8.9 million EBITDA loss to $8.2 million EBITDA loss and that previously was an EBITDA loss of $6.6 million to $6.4 million.

And with that, I would like to turn it back to John.

Thank you Frank. Overall, our first-quarter results showed a strong start to the year and a continuation of our prudent growth and operating strategy. Our operational influence on sales performance across the portfolio of acquired Company-owned or managed clinics is on target as evidenced by strong revenue growth from clinics recently acquired and from performance of clinics that we have operated for 48 months or greater.

I also want to take a moment to thank each and every one of our employees and team members and our franchisees for their continued hard work and dedication to this business. We indeed are very passionate about what we do and are excited about the opportunities ahead. Our strategy to become the leader in the national market for core chiropractic adjustment services through the strategic expansion of Company-owned or managed clinics and the continued expansion of franchise-owned or franchise managed clinics is solidly underway.

And with those comments, we'd like to open the floor for questions. Thank you.

(Operator Instructions). Brent Rystrom, Feltl.

Could you guys repeat -- did you say the EBITDA loss for all stores combined was about $1.2 million, the adjusted EBITDA for the Company-owned?

Yes, that's about right. It's about $1.2 million and you'll be able to see that in our -- you'll be able to drive that in our segment data.

Okay. And would it be reasonable to assume then, given kind of the context you've laid out, that the stores that are greenfield less than 12 months are a number greater than that if everything else -- every other class year, you identified the 13 to 24, the 25 to 36. If those were all positive adjusted EBITDA, then the greenfield would make up a number bigger than that. The 0 to 12 would make up a number bigger than that $1.2 million, right?

Yes, that is correct. We didn't say the number was but I think the point we were making was that the only age class that had losses was the 0 to 12 in terms of EBITDA losses. All others were -- had positive EBITDA and the EBITDA margins increased with the age class.

So they expanded sequentially. When we think about the store economic model, the range of adjusted EBITDA returns is a little bit -- or the EBITDA margin is a little bit lower than we talked before. So I have noticed the last couple of calls you guys talked about 25% to 30%. And I'm just curious. What have you seen that has caused you to bring that down a little bit? We used to talk above 30% and now the number seems to be a little bit lower. And I'm just curious. What are you seeing that's caused you to do that?

We are not -- our target EBITDA margins are still 25% to 35% and nothing has changed in that regard. I think it's fair to say that, depending on the market that the clinic is in, it could develop faster than another market. I think John mentioned in his remarks, Tucson, a very quick and fast developing set of greenfields down there versus Chicago perhaps at the other end of the spectrum, not as fast, a bigger market, new market, that type of thing. But overall we do expect 25% to 35% EBITDA margin.

Have you updated or changed all your store level investments? Are you still looking at a leasehold build out, you know, fixtures and equipment in that $150 million range or has that changed?

That's pretty much -- that's pretty much correct. $150 million, $155 million somewhere in that range. That really hasn't changed.

Thanks. If I could, keeping on the same theme, when you mentioned the EBITDA margins of 25% to 35%, are you talking -- is that a fifth-year target? What year do you think is the year that you achieve that range?

You know, it depends on the clinic, but I think it would be maybe like a four-year off the top of my head, year four and higher.

And if you could, John, could you give us a little color on Chicago? I know there was a little bit of worry from some of us that Chicago had opened -- not necessarily that it opened poorly but it didn't open as well as you opened in other markets. I know you mentioned the seasonality and some of the other factors. Can you give us a little more color? Did the typical store in Chicago open on plan compared to what you've talked about in your thoughts before, or was it below plan? Give us a little sense of how that looked.

Just to give you a little bit of background, when we went into this, we knew a couple of things were likely to be the case. Larger markets, particularly brand-new markets, based on our historical averages, tend to perform below historical averages. And markets that are seasonal, which Chicago certainly is, and given when we open also has an impact. So we expected and thought we would probably be a couple of months behind the normal seasonal ramps simply because of those factors. And as I say, because we've seen that elsewhere and, frankly, I've seen it in other situations I've been in historically, that's essentially what we experience.

Now that the weather has turned, we are able to put the full deployment of marketing against it and we certainly expect this to kind of snap back to what we think will be the historical averages for clinics in this type of market. But, it usually takes six, seven months to catch up because you are starting out essentially in a low period and then you just have to build it faster.

Also, we modulated our investment against those businesses because, as you will recall, the bulk of them opened right in December, which is not a time when you want to put a lot of marketing money against a business. I mean there simply isn't any attention to it. So we had that circumstance. That probably would've been different if we had, say, opened in June or something like that. So now we are playing a little bit of catch-up.

But I have to say, to add some more color to this, categorically, the execution around the openings and the quality of the personnel there are as good as we have anywhere in the system. And we have some perspective on that because we've been doing a lot of work in this area. And the statistical evidence of that is that the conversion rate of new patients to a multi-treatment plan has been some of the highest in the entire Company. This is in the 70% range, which is astounding. You know, our targets are typically in the 50% range. So that's a great credit to the operations people who opened all these things kind of lickety-split right at the end of the year in a freezing cold climate, kind of got everything set up and then had to wait around a little bit while we waited for the weather to clear so we could begin the rest of the marketing. So we feel very good about how we are set up there. And in fact, Peter Holt and I had a chance to tour the market a couple of weeks ago and really felt very good about where we stand there.

Chicago is a big competitive market and it's going to take a little longer to do. But my experience, having done this in some other businesses, most notably Starbucks is probably somewhat comparable. It takes a little longer to ramp there and we pretty much expected that to be the case. Having said that, you know, you had a trade-off as a manager. You could say, well, we can take less risk, open fewer units in Chicago because we know it will probably take a little more money and a little longer to do it but then you don't really have the right level of scale there to get the job done and to make an impact on the market. So, we had that trade-off to look at and we determined that it made more sense to go in with some concentrated effort so that we are actually relevant there, can do all the things operationally in a marketing way that we'd like to. And as Frank mentioned, in general, I mean we feel very good about the prospects for the model and how Chicago participates in that.

Thank you. Could you give us a sense of the annualized run rate, what the best corporate store -- and I'm assuming it's an acquisition -- what the best revenue run rate is for the corporate stores you now have?

You mean on an annualized basis?

Yes.

Actually, it's probably better -- it's better to -- it's better to separate it out between acquisitions and greenfields, which I can do for you because acquisitions, you know, the total group of acquisitions on average, and remember our age class discussion earlier, you know, they are in the -- on a consolidated average are approximately 35 months old. So, they are kind of midstream maturity and they are obviously going to have higher performance rates.

The best of class of our acquisitions to date is Tempe Shops in Arizona here, which we acquired a little less than a year ago. And it improved -- we had a dramatic improvement there. You know, that business, and believe me I'm telling the truth here, we acquired that at approximately $30,000, $35,000 on a monthly basis. It's now just under $60,000, $59,775 to be exact, in less than a year. So it has doubled in sales. That's a star performer. That's in the top three or four clinics in the Company regardless of performance.

There's another one. We are not giving away clinic data. There's another one in Arizona as well too that just comes to mind. Both of those have EBITDA margins that are higher than our target range in the first quarter. So you know --

Any of these clinics that run north of you know $40,000 a month, particularly in these kind of shall we say middle tier markets that are not hugely expensive or complicated, generate very, very positive EBITDA margins when they get at that level.

On the greenfield side, remember our average greenfield is on average five months old. And, but the oldest one, the one that coincidentally came out of the ground first, is Grant and Swan in Tucson. That unit is going to be, after about 10 months in operation, probably about $32,000 in monthly sales. So it's already well into positive EBITDA territory.

I think that was in about seven months, if my recollection is correct.

Yes, it kind of broke clear --

Outside the range.

-- in the seven-month period. So, as we said in our remarks, the markets that -- where we have some degree of familiarity, a little smaller, a little less complicated, tend to ramp faster, and that's certainly been the case. And obviously the bigger markets like Chicago take more work, which is no surprise there.

I will say this, the -- for those that are familiar with Chicago, the two -- there are several higher performance in that group that are, again, very new. A unit out in Schaumburg which a lot of people are familiar with, is really performing very much according to what we consider normal -- normal expectations despite the fact that we had the seasonal variation there.

State and Lake or State and Randolph depending upon which corner you want to pick, which is right downtown and a bit of a test for us in terms of downtown urban density sort of because typically our clinics are more suburban in nature, that's also running at about the same level. Those two clinics already generate the same amount of patient visits and between the two of them, their average age is six months, five months, five and a half. They already generate the same level of patient visitation after five months that a mature independent chiropractor would generate annually on a monthly basis. The typical mature chiropractic practitioner tends to do somewhere in the range of 400 patient visits a month on average. You can go to the national statistics and find that number. These clinics, which are brand-new babies, are already at that level. So, you know, it really gives us confidence that the model is working. And while our expectations are very high and we expect these guys to ultimately be probably triple this amount if not higher on a monthly basis, we certainly like what we see there. So, that's just a little bit -- a little color of Chicago. We have a nice mix of units there and when we decided to shrink our development scheme a little bit to take a little less risk this year, we essentially have a -- more of a downtown-oriented cluster which gives us operational efficiencies in the downtown, kind of near downtown area in Chicago for people that are familiar with it, and then we have another group that's shall we say more suburban-oriented that is kind of grouped out there in the kind of Wheaton area. So we kind of have two kind of clusters within the larger Chicago market.

A quick follow-up to that. On the franchise side, what is the largest monthly run rate?

You mean on a monthly basis?

Yes.

Yes, I'll give you the frame of reference here. The Tempe Shops, which I mentioned, which is the big star in the corporate world, is doing about $60,000 a month. We have two clinics in Texas that do just a little bit better than that on average. They are a good bit older, one in Houston at about $65,000 a month and another one in Austin which has been around for a good, long time. It is just about the same number. So, they are comparable basically. And a third up in Salt Lake City that's often the star performer in the system is, again, at that same level. So, the big clinics that are really executing well are in the $60,000s on a monthly basis, or the high $50,000s, and that means they are typically employing two doctors full-time and a third to spell them for the extra hours and they are open seven days a week essentially. So that's kind of the target that we look for with these high-performing clinics.

And then two quick questions. Frank, just so I understood something you said earlier, when you mentioned the Tucson Shops store when John said it was at $60,000 I think you said that store is exceeding your EBITDA expectations. Would that be exceeding the range of 25% to 35%, or would that be exceeding your expectation for --?

That's correct.

And the final question (multiple speakers)

I'm sorry. Please go. It's exceeding the 25% to 35% range. Sorry for the lag.

No problem. So then the final question, Frank, would be thinking about when the store system turns EBITDA positive, a simple way to think about it would be, when you get more greenfield stores in operation that are over a year old than you have greenfield stores under a year, because if everything else is positive, that would be the net point system would turn positive I would assume. Is that a reasonable way to look at it?

Yes, it is. That's how we look at it. This is -- Brent this is very much a game of managing age classes because we have a very large base of statistics to look at that help us understand how these units, these clinics, typically perform. The comp store base now for this system is over 250 units, 200, 250 clinics distributed across these age classes. And so we have really good data about how these things perform within the age class over a fairly broad sample in a lot of different places and that really helps us understand kind of what we are up against here.

And Brent, in fairness, we say EBITDA profitability on average from 12 to 18 months, but you said it exactly as the way that we look at it. As those clinics move to the right, to the older age classes, that's when and how the Company will become EBITDA profitable.

All right. Thank you guys.

(Operator Instructions). I'm not showing any further questions. I would now like to turn the call back to Mr. John Richards for any further remarks.

Thank you. I just want to take a moment to thank everyone for participating in our call today. And you know, we are really very, very pleased with the development of the business so far this year. We also I think feel very good about the way we are addressing the substantial run up in the number of clinics we've had and the management of risk associated with it. We think that this is going to pay big dividends as the system matures, and we're certainly looking forward to all that comes with it.

Once again, I want to welcome Peter Holt to the team and thank everybody, particularly our franchisees and our team members, for helping us get this far and perform as well as we are. So, we look forward to talking to all again at the end of the second quarter and have a great day everybody. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a wonderful day.