Joint Corp (JYNT) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Joint Corporation second-quarter 2018 earnings conference call. (Operator Instructions). As a reminder today's conference is being recorded. I'd now like to introduce your host for today's conference, Ms. Kirsten Chapman, LHA Investor Relations. Ma'am, please go ahead.

Thank you, operator. This is Kirsten Chapman of LHA Investor Relations. On the call today, President and CEO, Peter Holt, will review our second-quarter 2018 operating metrics and growth strategy; Controller Jake Singleton will detail our financial performance; and Peter will close with our long-term vision and open the call for questions. Please note we are using a slide presentation that can be found at IR.thejoint.com/events.

Today after the close of market The Joint Corporation Corp. issued its financial results for the quarter ended June 30, 2018. If you do not already have a copy of this press release, it can also 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 predictions, expectations, estimates and other information that might be considered forward-looking. Throughout today's discussion we will present important factors relating to our business that could also affect these forward-looking statements.

The forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements we make today. As a result we caution you against placing undue reliance on these forward-looking statements and would encourage you to review our filings with the SEC for a discussion of these risk 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 any of our results or publicly release any updates to these forward-looking statements in light of new information or future events.

Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures. These are presented because they are important measures used by management to assess financial performance as well as management believes they provide a more transparent view of the Company's underlying operating performance and operating trends. A reconciliation of net loss to EBITDA and adjusted EBITDA is presented in the press release.

The Company defines adjusted EBITDA as EBITDA before acquisition-related expenses, bargain purchase gain, loss on disposition or impairment and stock-based compensation expenses. The Company defines adjusted EBITDA as net income or loss before net interest tax expense, depreciation and amortization expenses.

Please note that the restatement required in accordance with ASC 606, which changed the way franchisors recognize revenue, led to some minor changes in the numbers reported in 2017. In order to have a more meaningful comparison, we use these restated figures. Turning to slide 3, it's my pleasure to introduce CEO Peter Holt. Please go ahead, Peter.

Thank you, Kirsten, and thank you all for joining us. It is a pleasure to speak with you today. For another quarter our accelerating growth was driven by a greater number of clinics as well as increasing number of new patients and existing patients using us more often. And with that I'd like to review the second quarter 2018 compared to the same period last year.

Gross system-wide sales grew 29%. System-wide comp sales, or same-store retail sales of clinics that have been open for at least 13 full months, increased 25%. Revenue grew 26%. The bottom line continued to improve towards sustainable profitability as GAAP net loss of $43,000 improved $1 million and adjusted EBITDA profit of nearly $700,000 improved by $1.1 million.

Further, cash and cash equivalents increased to $4.6 million at June 30, 2018 compared to $4.2 million at December 31, 2017. And in April we acquired our first corporate owned clinic since meeting our milestone of achieving positive adjusted EBITDA. More about that in a minute.

Before we get into the details I'd like to welcome our newer investors and provide some background on our Company. The Joint's mission is to alleviate pain and help move our patients towards a healthier lifestyle, the sweet spot of the growing health and wellness industry.

The Joint's purpose is to improve the quality of life for patients we serve by providing quality and affordable chiropractic care. Our doctors focus on patient care, on pain relief and ongoing wellness to promote a healthy lifestyle. We do this in a convenient retail setting that uses no appointment, walk-in only, no insurance membership-based services.

Turning to slide 4, regarding our portfolio, during the second quarter we opened eight franchise clinics bringing the total number of franchises open to 15 clinics by quarter end. In April we also acquired a franchise clinic and closed one franchise clinic. At June 30, 2018 we had a total of 413 clinics, 365 or 88% were franchise clinics and 48 or 12% were corporate clinics.

As established last year, our 2018 plan to accelerate growth consists of three key strategies: one, continue to accelerate franchise sales; two, continue to build upon our regional developer strategy; and three, expand our corporate clinics portfolio within clustered locations.

We believe these measures will drive openings in the latter half of 2018 and we are on track to meet our guidance of 40 to 50 new franchises and up to five new corporate clinics for a net increase of 40 to 52 clinics for the full year.

Our April acquisition of one franchise clinic in San Diego represents the first step in our plan to take deliberate and measured actions to expand our corporate portfolio. This buyback fit our criteria perfectly and was a great opportunity as the purchase price was well below our historical average for buybacks of approximately $220,000.

We continue to evaluate other potential franchise buybacks. In my 30 years of experience in building and managing franchise networks I found that at any given time roughly 10% of franchisees are considering selling their franchise to monetize their investment or to prepare for a new life change such as a divorce, health management or retirement. We maintain open and positive relationships with our franchisees, enabling us to know when these situations arise.

We've also begun the clinic buildup process by signing a couple of lease LOIs in areas where we have mature marketing and demographic demand for more clinics. These are letters of intent and it's possible that we may not reach an agreement on a lease. However, if we do, once that lease is signed it typically averages two to four months to open a clinic. It's possible that these clinics could be a part of the 2018 class or early 2019.

Turning to slide 5 our hard work and improved operational protocols is paying off on the top line to the bottom line. Since my arrival a little over two years ago to The Joint, reducing time to breakeven for new clinics was a priority. I am pleased that the 2017 class of 41 clinics achieved an estimated breakeven on average in nine months, down from the historical average of 18 months.

What's really important, as you can see in this graph, is the 2017 cohorts continue to grow gross sales and ramp well above historical performance. Monitoring the performance of our 2018 class of the 15 clinics is even more impressive as they are on track for an estimated average breakeven of less than six months.

What we do know about our business is that clinics that start strong tend to stay strong. We're also training regional developers to be more effectively managing franchisees as well as adding resources to assist in site selection, which is the biggest use of time in the lifecycle of opening clinics.

Additionally, we are working to help regional developers to begin pre-selecting suitable sites so that once they identify a franchisee they can move quickly into lease negotiations.

Turning to slide 6, our regional developers continue to be a key driver to ramp up growth. As of June 30, 82% of the franchise licenses have been sold by RDs compared to 49% in all of 2017. And for the first six months of 2018 we sold 34 franchises compared to 37 in all of 2017 and 22 in all of 2016. This increase bodes well for increased clinic openings in late 2018 and 2019.

As a reminder, we sell a regional developer the rights to open up a minimum number of clinics in the defined territory. They in turn help us to identify and qualify potential new franchisees in that territory, assist in the provided field training, clinic opening and ongoing support. And for that assistance we share part of the initial franchise fee and part of the ongoing royalties.

Today regional developers oversee approximately two-thirds of our franchise operation and their territories cover approximately one-third of the Metropolitan statistical areas in the United States.

At June 30 we had 18 regional developers. As markets reach maturity we look for opportunities to repurchase the developer rights. The RD agreements are usually for 10 years. In July we reached an agreement with one of our original RDs to acquire back their rights. This RD team has been a great partner and did an excellent job developing Las Vegas into a mature market with solid unit economics.

This transaction reduced our current RD count down to 17 and exemplified the natural progression of franchise management. However I want to be very clear; we continue to believe that using regional developer partners is a proven method of rapidly and profitably expanding franchise businesses. We are committed to actively seeking additional RDs to help us penetrate and expand into new markets.

During the year, we provide ongoing support and education for our regional developers and our franchisees. In late August we are conducting a series of one-day regional meetings across the country. We chose this format for 2018 to make it easier for franchisees to attend, ask questions, receive education and updates and celebrate performance. And we look forward to reviewing event with you in our next call.

Turning to slide 7, one of the strongest new patient acquisition tools in our arsenal is digital marketing. In small box retail digital marketing has become an increasingly more important element to drive new patient growth. In 2017 we overhauled our search engine optimization strategy, which included the launch of our new consumer facing website. As a result we are benefiting from continued gains an organic web traffic as well as new patient leads and conversions.

In 2018 we turned our attention to paid digital marketing innovation with the objective of driving more leads and conversions from paid search and paid social media advertising spend. While referrals from members continues to be the greatest driver of new patient acquisition at about 40%, digital marketing is approaching that magnitude growing from approximately 30% and taking share from the more traditional guerrilla marketing tactics.

Now we're in the midst of a significant consumer research initiative probing the opinions, motivations and behavior of existing patients and new patient prospects. The objective is to elevate our understanding of our consumer journey to the clinics, refine our brand architecture and improve the effectiveness of our advertising and promotional campaigns.

Turning to slide 8, at this time I would like to welcome our newest board member, Abe Hong, who joined us in June. As EVP and CIO for Discount Tire, a more than $5 billion retail company headquartered here in Scottsdale, Abe is responsible for all the customer facing and back-of-the-house systems and the digital technology strategy both online and for the 950-plus stores.

He's also gained valuable IT experience and perspective from his tenure and roles of increasing responsibility at Red Rock Resorts and Starbucks. Abe's experience immediately proved helpful when he joined forces with Manjula Sriram, our new VP of IT we hired in April. Together and with the board's guidance we've reevaluated our plan to internally upgrade our proprietary IT platform that runs our clinics.

As we have been in the process of upgrading this platform costs for off-the-shelf CRM platforms have decreased and external cyber security risks have increased. Meanwhile, our system is driving to point of critical mass. Therefore we believe a third-party SaaS platform will cost-effectively meet our infrastructure needs, reduce risk and overall provide a better support to our growing clinic system.

We expect to record a non-cash charge of approximately $0.5 million in the third quarter representing the write-off of the previously capitalized IT development costs related to the upgrade of this in-house system. We anticipate that the initial cost of the SaaS platform will be in line with the estimated cost of internal development of which a portion is expected to be -- which a large portion is expected to be capitalized.

We expect this new IT platform strategy to improve our ability to quickly and consistently provide important feature enhancements, system upgrades and state-of-the-art security across our entire platform as we continue to grow. Overall we believe our larger footprint, along with our improved operations in marketing and IT, will continue to heighten our brand awareness nationally, to grow our business and to enhance shareholder value.

And with that I'd like to introduce Jake Singleton who's stepping in while we conduct our search for a new CFO. Jake has been our controller since mid-2015 following a 10-year auditing career with Ernst & Young where he focused on public companies in the United States and the UK. He holds a Masters of Accounting from the University of Arizona and is a licensed CPA in Arizona and California. And with that I'd like to turn the call over to Jake to review the financial results.

Thank you, Peter we've provided detail on our financial performance for the second quarter 2018 compared to the second quarter 2017. Please note that our segment data will be available in our 10-Q which we expect to file on Friday, August 10.

Turning to slide 9, as Peter mentioned, we continue to deliver strong growth in our metrics. I will now compare second-quarter 2018 to second-quarter 2017. Gross sales for all clinics opened for any amount of time grew 29% to $39.4 million. System-wide comp sales for all clinics open 13 months or more increased 25%. And more significantly, system-wide comp sales for mature clinics, those open 48 months or more, increased 16%, further pushing the boundaries of our business model.

At June 30 our corporate clinic segment consisted of 48 clinics, 16 clinics are greenfields built from the ground up and 32 are buybacks purchased from existing franchisees. Gross sales for the buybacks, which we have now owned for an average of 33 months, have increased on average 73% from the month prior to acquisition through Q2, demonstrating our capacity to successfully manage these clinics.

Turning to slide 10, revenue for the second quarter of 2018 grew 26% to $7.6 million from $6 million in the same period last year. Of the $1.6 million increase, corporate clinics contributed 48% and franchise operations 52%. The revenue improvements in both our corporate clinic and franchise segments are driven by the increasing comp sales that our clinics continue to experience as they mature. Increased sales in our corporate clinic portfolio is attributed to the marketing and operational improvements we have implemented.

Franchise operations segment revenue growth was due to the higher sales from both existing clinics and from adding 29 clinics since the end of second quarter of 2017. Cost of revenues in the second quarter of 2018 was $1.1 million, increasing 37% over the same period last year, primarily due to the higher regional developer royalties from increased gross sales of franchise clinics and regional developer territories.

Gross profit increased 24% to $6.5 million. Selling and marketing expenses were $1.3 million or 17.1% of revenue in the second quarter of 2018, compared to $1.1 million or 17.6% of revenue in the second quarter of 2017. The 22% increase was driven by an increase in local marketing expenditures in our company owned or managed clinics.

General and administrative expenses were flat at $4.7 million or 61.6% of revenue in the second quarter of 2018, representing an improved expense ratio compared with 77.8% of revenue in the same period last year.

During the second quarter, as discussed, we purchased a franchise clinic for $100,000 for which GAAP accounting required us to record a non-cash bargain purchase gain of $75,000. We've posted a GAAP net loss of $43,000 or $0.00 per share, compared to a net loss of $1 million or $0.08 per share for the second quarter of 2017.

Total adjusted EBITDA income for the second quarter of 2018 was $697,000, improving $1.1 million when compared to the adjusted EBITDA loss of $360,000 in the same quarter last year. Of the $1.1 million improvement, corporate clinics contributed 42% or $446,000; franchise operations contributed 50% or $529,000, and unallocated corporate overhead provided the remaining 8% or $81,000 improvement. Our corporate clinic segment adjusted EBITDA income was $409,000 and positive for the fourth consecutive quarter.

Turning to the balance sheet, as of June 30, 2018 cash and cash equivalents were $4.6 million up from $4.2 million at December 31, 2017, increasing primarily from cash flow from operations. Pursuant to the terms of our credit agreement, during the first quarter of 2017 the Company borrowed $1 million as required by the terms of its line of credit. It remains unused on the balance sheet at quarter end. With that I now will turn the call back over to Peter.

Thanks, Jake. Turning to slide 11, our growth indicators for 2018 remain strong. As noted earlier, in 2018 we have sold 34 franchise licenses through June compared to 37 for all of 2017. Our regional developers are very active in the field delivering 82% of the license sales through June 30 of this year. Also, we reengaged in our deliberate measured corporate clinic growth strategy. With that we are reaffirming our 2018 guidance.

Total new clinic openings are expected to be in the range of 40 to 52, including 40 to 50 new franchise clinics, up to two corporate owned or managed greenfield clinics and up to three buyback clinics which are existing clinics acquired from franchisees and will not change the total clinic count.

We continue to expect revenue to be between $31 million and $32 million compared to $25 million in 2017. And we expect positive adjusted EBITDA to range between $2.5 million and $3.5 million, improving from a loss of $274,000 and 2017. This reaffirmed guidance reflects our decision to implement the third-party software solution.

Now turning to slide 12, The Joint has a significant growth opportunity. Already chiropractic care has reached 17% of the $90 billion spent on back pain alone and that is only 2% of the $650-billion-plus spent in pain in the United States annually. Trends among millennials, aging baby boomers and a nation struggling to overcome the opioid epidemic indicate that more and more patients will turn to chiropractic in the coming years. And our data supports this trend.

In 2017, 22% of our patients system-wide were new to chiropractic. We believe The Joint's concierge, no appointment, no insurance model provides greater accessibility, simplicity and other advantages that are increasingly resonating with today's patients.

Direct primary care concierge care is growing cross the US healthcare industry. Like our model at The Joint, direct primary care uses a subscription fee and no involvement from healthcare insurance. Thus far this new model has been driven by interest from individual clinics and their patients. However, more and more employers are beginning to explore whether direct primary care can provide a better or an additional alternative for their employees as a part of their comprehensive healthcare offering.

If this trend continues we believe it will accelerate consumer adoption of The Joint's unique business model. We survey dynamic and fragmented market that offers significant growth opportunity as we continue to work successfully to establish The Joint as the first and dominant national brand in this historically -- which has been a non-branded local clinic-based category.

We frequently get asked about the competition copying us and frankly we expect it and welcome it, because it will further raise the awareness and the adoption of the concierge chiropractic concept that we are pioneering. Much like Starbucks pioneered and redefined the retail coffee market, we believe the chiropractic category has the potential for the equivalent area of increased accessibility and adoption over the coming generations. All of this data means we need to continue to reach out and educate the public about chiropractic in general and specifically about The Joint.

As I noted before, we are investing in smarter digital marketing. Our goal is to drive awareness to The Joint, increase the number of patients in our system and, when appropriate, to communicate patient care plan and encourage greater usage.

Based on our detailed analysis of our current user base, we believe in the United States we have an opportunity to open at least 1,700 clinics. However, as chiropractic becomes more commonplace we expect this number of potential clinics to increase. This is important as studies show 1,000 franchisees tend to be the tipping point to national recognition that further drives accelerated growth.

Turning to slide 13, overall our hybrid models of franchised and company owned or managed clinics enables us to expand in a capital light fashion. This is essential in helping build brand awareness and name recognition, establish a predictable revenue stream and increase scale.

We continue to execute to our long-term vision, which is to be the premier provider of chiropractic care in health and wellness plans; to accelerate our footprint through the expansion of corporate and franchise clinics; to be the career path of choice for chiropractors; to build a world-class organizational culture; to foster a robust regional developer community; and to implement and maintain a world-class IT platform.

Before I open up to Q&A, I'd like to thank our franchise community and our employees for the major contribution for the health and growth of this Company. This progress would not be possible without their commitment and hard work. Liz, I'm ready to open up to Q&A.

(Operator Instructions). David Bain, Roth Capital.

First, congratulations particularly on the EBITDA result. My first question is on just ownership levels. Given where unit return and growth metrics are, where we are consistently seeing them come out at, the new breakeven timeline, the cost of acquisition seemingly versus your trading multiple, and what I think is a clear inflection to positive recurring EBITDA, is there not more urgency towards unleashing a higher ownership goal at this point?

And I understand -- and I think investors definitely appreciate the discipline you've implemented. But is there a green light metric we're waiting for to become more aggressive on that front?

Dave, it's great to talk with you. And when you say ownership goal, I'm assuming that you're talking about corporate ownership, correct?

Correct.

Because obviously we are very aggressively focused on expanding the footprint. And specifically we know that the greatest part of that growth will come from our franchise portfolio. And the answer is that, yes, we are absolutely committed to the development of our corporate portfolio, that we haven't really given guidance for 2019 about what that looks like.

We are in discussion about what that would mean and the capital requirements associated with that. But right now we are sticking to our guidance of the zero to five corporate clinics in 2018 and really trying to make very -- good decisions about the strategic long-term value of this organization.

Okay, fair enough. And then just to follow up on the least LOIs you signed, is that in a strategic cluster or is that more targeted by location? And then any color as to what jurisdiction that could be in?

Well, like we said, any clinic that we are looking at for 2018 has to be where we currently have outside the four wall support. And of course that would mean in the three states that we are operating, and that would be California, Arizona and New Mexico. And so the LOIs are in locations that are really clustered where we already have a portfolio of corporate clinics so we can leverage that overhead and then take advantage of the clustering of that market that we are already in. And so, the LOIs we are looking at are really in those three states.

Okay, great. And then just one final one just so I understand -- sorry for this. On the regional developer acquisition of rights, does that mean that the economics remain the same in terms of the revenue stream to the parties for the existing units, but now the market opens for you to pursue directly? Is that the adjustment or -- I kind of was hoping to get some clarity on that.

Sure. What that means is that obviously the regional developer, we split the franchise fee with the regional developer, we share 3% of the 7% royalty we collect. We acquired those rights back and so now we will directly serve that market. And that means that the numbers for the franchisee don't change. They will still pay the same franchise fee, they still will pay the same 7% royalty. The difference is that we will not be splitting that 3% royalty with that regional developer and instead we will be directly supporting in this case the Las Vegas market.

And I'm sorry, one last one. Are there any financial metrics from that you can share on the acquisition of rights?

No, we don't have any metrics on it. We reached a fair price between the two parties -- and I will tell you, David, in my experience as a franchisee, and it is very normal over time that the franchisor, once you see the regional developer out there, they develop it, the market matures, that it's not unnatural for you to come back and acquire those rights back and to directly serve it (multiple speakers).

Okay great. Okay, very cool. Congratulations again.

Mike Malouf, Craig-Hallum.

Hi, guys. This is Eric Des Lauriers on for Mike. Thanks for taking my questions. I was wondering if I could dig in a little bit more on the regional developers and the overall process of getting -- going from licenses sold to franchises opened.

It seems like you guys have had a real good acceleration over the past couple years in terms of getting more licenses sold. And just wondering how we should expect that to matriculate into franchises opened.

That's a great question and, as you know, it's a two-part process to get a clinic open and the first part is to sell the license and then the second part is to find the right location, negotiate the lease, and get the clinic built and then open up. And historically the timeline from the time to sign -- the time that you sign that licensed to the time that the clinic is open ranges let's say between six months and 12 months.

Now you may have a situation where somebody has signed for the opening of three clinics and typically they won't open three clinics at once and there will be a progression. So they may open the first clinic by the first nine months, the second clinic six months later and the third clinic six months after that. And that the biggest time used in at six to nine months or six to 12 months is really in site selection.

And so, if you're looking at kind of -- we talk about, okay, if we are at 34 [sales] through June 30 of this year and were talking about a lifecycle of six to nine months before that clinic opens, so we know all of the clinics we are selling in the last couple months going forward will be opening up in 2019 and beyond.

Okay, that makes sense. I appreciate the color there. And then I wanted to talk a little bit about your third-party technology platform that you guys are investing in now. It seems like a good use of capital. And I think you guys -- along the technology upgrade theme, I think you guys had also talked about your desire to upgrade your app to include such things as a live busyness metric or just be able to see how (multiple speakers).

Sure, mobile check-in is what we call it.

And to be able to see how busy the clinic is at a given time. And was just wondering if you had any updates on there, if you're still looking to do that by yourselves or if that could also be something that you reach out to a third-party for.

At this point I think what we realize is given the size of our network, given the opportunities of the third-party providers that are out there, that it makes a lot more sense to be focused on acquiring and adapting these platforms to our use as opposed to us trying to build and manage it ourselves. And I've said this before, that we are not an IT company, we are a chiropractic care company that's building using a real term format and franchising.

So I think when we look at these enhancements, and certainly one of them is the mobile check-in or digitalizing our intake forms, and then just the growing plethora of different opportunities that you can create, whether it is a patient portal that's tracking your whole relationship with us, that we see using that third-party platform and adapting it to our needs really puts us in a position to be much more effective in bringing in these new enhancements that would be a lot more complicated to us and build and maintain on our own.

That makes sense. And do you guys have any update or I guess any timeline on when you expect these IT upgrades to be completed?

Well, I think first of all it's an ongoing process that, as you can imagine with IT, you are continually upgrading and enhancing, that process never stops -- that we are in the final negotiations. We've gone through quite a bit of research in trying to determine what would be in fact the best provider for this platform.

And that we are still in the process of finalizing that agreement. And once that agreement is finalized that really we can talk more detailed in a timeline of its implementation. But from our perspective there is an urgency to get this in place and up and running and supporting our network as quickly as possible.

(Operator Instructions). Brooks O'Neil, Lake Street Capital.

This is Frank Takkinen on for Brooks O'Neil. Thanks for taking my question. So my first question is kind of about your customer base. And I was curious about how you guys feel about the younger demographic. And how you see them starting to move into this chiropractic area. And if you possibly have any data about the different age groups that you guys cater to right now.

We do; it's a great question in that just quite frankly my experience of working here is that we have one of the broadest demographics I've ever had the pleasure to work with in this kind of small box retail environment. That if you look at just our overall patient base is that there is no question that millennials make the largest segment of that group followed by the baby boomers.

And if you look just at the history of chiropractic, I'm a baby boomer and we kind of grew up with this ethos or this mythology that chiropractic is quackery and that you're really seeing a fundamental change in that, particularly in the medical community where before -- many years ago they were very anti-chiropractic.

Today you have some of the largest associations for the medical community that are endorsing chiropractic to address lower back pain before you try the knife or opioids, try a spinal manipulation. And this is just really a complete turnaround where traditional medicine is in fact endorsing chiropractic as a methodology of pain or getting out of pain.

If you look at our target base is that we skew slightly female. That our ideal range is between 25 and 55 years old. The average household income is somewhere between $50,000 and $100,000. That we skew -- we are predominantly in suburbs where we over-index on Hispanics, we over-index on education, we over-index on aerobic exercise as you can imagine and it is a really broad and deep demographic that supports our concept.

And I think, particularly as we look at the millennials and younger, they simply do not have this prejudice about chiropractic that was much more traditional in my generation. And in fact they are seeking out more natural holistic ways to get out of pain and I think a natural driver to our business to increase the growth of our business.

Great, that helps a lot. And then something you guys have talked about on previous calls, and I apologize if you talked about it a little bit on this one. But can you update me on what your guys' sense is about the pricing outlook?

We did a price increase in 2016 and that we do not have any plans at the moment to introduce a price increase across the country. Our pricing structure is basically for membership; we have three categories based on really the demographics of where we are. So it's either $59, $69 or $79 and you pay that monthly. And with that $79 or $69 fee you get four adjustments for that month.

We also have an initial fee, so if you're coming in for the first time it is $29 for the consultation, examination and adjustment. And then if you don't want to be a member and we also have a package program where you can buy a six-pack or a 10-pack, that just a walk-in rate for us is $39.

We're constantly looking at what's the most effective pricing structure that we would -- for the use of our patients. So that is definitely something we review on a periodic basis and can potentially open up a different pricing program based on the usage of our patients who have been doing some testing on that. But that's -- that's not an across-the-board price increase that planned.

Great. Thanks. That's all from me and congrats on the continued progress.

(Operator Instructions). I'm showing no further questions in queue at this time. I would like to turn the call back for closing remarks.

Thanks very much, Liz. Thank you all for your interest. I am going to leave you with a patient testimonial. From the outside, Liz [Ramahos] looks like a typical 25-year-old, but inside she's in near constant pain. Three years ago she was diagnosed with Lyme disease which causes her to suffer daily from migraines back pain and other joint aches.

In the beginning of her medical journey Liz was placed on a plethora of prescription medication. She was unable to eat or sleep and lost 30 pounds. As her symptoms worsened Liz became more discouraged. I decided to take my health and my own hands she said. I found The Joint and it now plays a role in my entire treatment plan.

Before she visited The Joint she felt constant throbbing and shooting pains throughout her lower back. She often did not feel well enough to keep all the medical appointments that she had for her various treatments. She's grateful The Joint offers walk-in adjustments.

Fortunately after her first adjustments her symptoms lessened. She said on a scale of 1 to 10 her pain dropped from a level 8 to a level 2. Liz is likely to feel these symptoms of Lyme disease throughout her life, but she's thankful that The Joint and the chiropractic care that they help her with much-needed relief exactly when she needs it. Thank you and stay well-adjusted.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.