Joint Corp (JYNT) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Joint Corp.'s Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Kirsten Chapman, LHA Investor Relations. Ma'am, you may begin.

Thank you, Lauren. Good afternoon, everyone. This is Kirsten Chapman of LHA Investor Relations. On the call today, President and CEO Peter Holt will review our fourth quarter 2018 operating metrics and our growth strategy. CFO Jake Singleton will detail our financial performance and 2019 guidance, then 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 issued its financial results for the quarter ended December 31, 2018. If you do not already have a copy of this press release, it can be found in the Investor Relations section of the company's website.

As provided on Slide 2, please be advised, today's discussion includes forward-looking statements, including statements concerning our strategy, future operations, future financial position and plans and objectives of management. Throughout today's discussion, we will present some important factors relating to our business that could affect these forward-looking statements. The forward-looking statements are made as -- based on current predictions, expectations, estimates and assumptions and are also subject to risks and uncertainties that may cause actual results to differ materially from the statements we make today.

As a result, we caution you against placing undue reliance on these forward-looking statements and encourage you to review our filings with the SEC for the discussion of these factors and other risks that may affect our results or market price of our stock.

Finally, we're not obligating ourselves to revise our results or publicly release any updates to these forward-looking statements in light of any 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. Management believes they provide a more transparent view of the company's underlying operating performance and operating trends. A reconciliation of net income or loss to EBITDA and adjusted EBITDA are presented in the press release.

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

Please note, 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. To have a more meaningful comparison, we will use the restated figures in this presentation.

The company expects to file the 10-K with the SEC on Friday, March 8.

Now turning to Slide 3, it's my pleasure to turn the call to CEO Peter Holt. Please go ahead, sir.

Thank you, Kirsten, and thank you all for joining us. I'm delighted to speak with you today. And in 2018, we delivered strong growth, reflecting increasing momentum of our business model.

2.5 years ago, we rolled up our sleeves and did the hard work necessary to stabilize our company. We improved franchise relations, restructured operations and reinvested in franchise sales and development. In 2018, we specifically focused on accelerating franchise sales, building upon our regional developers strategy and reinitiating our efforts to expand on corporate clinic portfolio within clustered locations in a deliberate and measured manner.

These focused efforts enabled us to meet and exceed our financial and business plans. As a result, we strengthened our foundation, laying the groundwork for our ongoing growth. In 2019, we plan to capitalize on this momentum. We'll execute a more aggressive plan to accelerate our brand-building through clinic expansion.

First, let's review our 2018 results. As we said before, more franchise sales, more clinics, more new patients and more patient visits have powered our growth. For example, in 2018, we almost tripled the number of franchise license sales to 99, up from 37 in 2017. We increased our year-end clinic count by over 10% compared to a year ago, adding a net of 43 clinics for a total of 442 at December 31, 2018. In 2018, we grew our total number of patients treated to 1.8 million, including 434,000 new patients. The number of new patients increased 25% compared to 2017.

And according to our most recent survey completed last month, 26% of our new patients have never seen a chiropractor before they visited The Joint, and that was up from 22% from 2017.

And we increased the number of adjustments made in the year by over 1 million from nearly 5 million in 2017 to 6 million in 2018. All this contributed to our strong financial results.

Turning to Slide 4, I'll highlight the fourth quarter 2018 compared to the same period last year. Gross system-wide sales grew 29% quarter-over-quarter. System-wide comp sales, or same-store retail sales of clinics that have been opened for more than 13 months, increased 24%. Revenue grew 32%.

Our bottom line continues to improve, driving us towards sustainable profitability. For the first time since being public, we achieved a positive GAAP net income of almost $1 million to $835,000. And adjusted EBITDA was positive for the sixth consecutive quarter at $1.5 million. Further, our unrestricted cash grew to $8.7 million at December 31, 2018, more than double compared to the $4.2 million on December 31, 2017. The increase once again represents our growing momentum and strong fourth quarter results, and we'll use this strengthened balance sheet to support our expansion strategy.

Before we get into the details, I'd like to welcome our newer investors and provide some background on our company. The premise of The Joint is to revolutionize access to chiropractic care. We do this in a convenient retail setting, providing concierge style, no appointment, walk-in only, no insurance membership-based services. The Joint's purpose is to alleviate pain and help move our patients towards a healthier lifestyle, the sweet spot in the growing health and wellness industry.

The Joint is distinguished among its consumers for our accessibility, credibility and empathy based on extensive market research that we completed in 2018. In 2019, this brand architecture will guide us as we build this business.

Turning to Slide 5. Regarding our portfolio during the fourth quarter, we opened 22 franchised clinics, which is the most in any quarter since going public and is another reflection of our increasing momentum. Our total number of franchises opened for the year was 47, approaching the top end of our guidance range of 40 to 50. As of December 31, 2018, we were in 32 states having opened in Maryland in the fourth quarter and Oklahoma earlier in the year.

For our franchise system, we continue to enjoy unusually low clinic closure rates of less than 1%. And during the quarter, we closed only 2 franchised clinics. At December 31, 2018, we had a total of 442 clinics, of which 394 or 89% were franchised clinics and 48 or 11% were company-owned or managed clinics.

In 2018, our goal was to begin a deliberate and measured expansion plan for company-owned or managed clinics in clustered locations that could benefit from the infrastructure and the marketing of other nearby clinics. To that end, we started developing new company-owned or managed clinics known as greenfields.

During 2018, we conducted site collection, engaged with landlords and began construction, setting the stage for our 2019 clinic opening plan. In 2019, we plan to accelerate our company-owned or managed clinic expansion to 8 to 12 clinics through a combined -- a combination of both greenfields and buybacks. And we're well on our way as we opened our first new greenfield since 2016 in Carlsbad, California in February, and the second in Azusa, California last week. To further support our greenfield development, to date, we've signed 2 additional leases and have begun construction on one of the units and expect to take position on the second next month, plus we have 9 letters of intent in play for additional sites.

Turning to Slide 6, we continue to prioritize operational execution. The fourth quarter is historically our strongest quarter in both gross sales and clinic openings, and the same held true this year. In fact, system-wide growth sales for the fourth quarter in 2018 were the best in the company's history. Our 2 annual promotions, the Black Friday package sale and the year-end membership drive, both occurred in the fourth quarter and have become incrementally stronger each year. And the remarkable success continues to bolster franchisee participation in these promotions.

Reviewing clinic operations, those that start strong tend to stay strong, and as such, our goal is to optimize all clinic openings. Success is evidenced by our trend in reducing average clinic time to breakeven. Our historical average from time to open to breakeven had been 18 to 24 months. Our 2017 class of 41 clinics achieved estimated breakeven in an average of 9 months. And as you can see on the chart, they continue to accelerate growth well above the historical performance. Our 2018 cohort has increased to 47 clinics and achieved estimated breakeven of 6 months on average. While we're also working to reduce the time between the signing of the franchise agreement to the opening of that clinic, we found that external factors, such as construction permitting, landlord responsiveness and municipal approvals, have lengthened the average window of signed agreement to open clinic from between 6 and 9 months to between 7 and 11 months. Nonetheless, we will continue to implement and improve programs within our control, such as identifying clinic locations even before the prospective franchisees have signed the franchise agreements to shorten this process.

Turning to Slide 7, growth of our regional developer, or RD program, continues to have positive impact on our franchise license sales and development. In 2016, we finished the year with 8 RDs who were responsible for 50% of the 22 franchise license sales for that year. In 2017, we ended with 18 RDs who were responsible for 49% of the 37 franchise license sales for that year. In the fourth quarter of 2018, we added 3 additional RDs, 1 in Northern California, 1 in Southern Florida, and 1 in Kentucky, bringing our total RD count to 21 as of December 31, 2018. These RDs were responsible for 89% of the 99 franchise license sales for that year. This growth in franchise sales reflects the power of our RD program to accelerate clinic development across this country.

The fast ramp of our franchise sales also reflects an increase in franchisees who signed 2 or more agreements at the same time. In 2017, approximately 30% of our franchise sales were multiunit sales. In 2018, they grew to 57% of sales, which includes 15 multiunit sales, 1 containing double-digit clinics. While the magnitude has increased, it's important to note that multiunit development tends to open in a linear succession rather than all at once and, therefore, are granted a longer time period to open. That said, we believe multiunit agreements are important and valuable as they create micro ecosystems and leverage infrastructure and marketing in clustered locations.

Our RDs continue to be a key driver to ramp our growth. And in 2019, we expect to further expand our overall RD program. In fact, this month, we sold RD rights to Pittsburgh, Pennsylvania and most of Virginia with a minimum 10-year development schedule of 40 opened units. However, as RD territories mature, there's potential for repurchase. And in February 2019, we opportunistically bought back the RD rights for South Carolina, which had 23 operating clinics. Today, our RDs cover almost half the metropolitan statistical areas of the country, and RDs support 3/4 of our franchisees. In aggregate, our total 10-year minimum development schedule for the 15 new RDs comes to 421 opened clinics. This large foundation of unit commitment bodes well for our continued clinic expansion and sales growth in 2019 and beyond.

Turning to Slide 8, let's review the innovative marketing program. Our mission to improve quality of life through routine and affordable chiropractic care can only be accomplished by delivering on 3 critical brand pillars.

First, accessibility, as defined by convenience and affordability, the very foundation of our category differentiation. Second, credibility or the promise of consistent quality chiropractic care no matter where or when you visit one of our clinics. And third, empathy, which is the ultimate objective and patient experience, personal, intuitive treatment oriented toward helping our patients achieve their wellness goals. Together, these 3 pillars form the how of our mission statement, and when we deliver on all 3, we enable our patients to live the best version of themselves, which becomes the why of our mission statement. This new brand architecture will help guide our strategic initiatives, operational training and consumer advertising as we seek to create a robust health and wellness brand with a clear, consistent and recognizable marketplace identity.

We continue to strengthen our digital marketing practice through innovation reinvestment. Organic search alone creates hundreds of thousands of leads for our clinics every year. Our paid digital advertising also has made significant gains in lead generation and new patient conversion. In 2019, we'll add to this an increased emphasis in our CRM efforts to improve the one-on-one lead nurturing and patient relationship marketing. We believe these gains in digital marketing performance are positively impacting our same-store sales performance and our new clinic ramp to profitability.

Turning to Slide 9. As discussed, in 2018, with our portfolio approaching critical mass, third-party ITeS, SaaS platform costs decreasing and external cybersecurity risks increasing, we decided to purchase a proven, well-maintained CRM platform to replace our existing proprietary system. We chose a system with a simple user interface, [leader-in-industry] customer experience and an intuitive customization platform. It should improve our ability to quickly and consistently provide important feature enhancements, system upgrades and state-of-the-art security across our entire clinic portfolio as it continues to grow. We've concluded the discovery phase of the implementation process and are well into the design and development. We expect to complete implementation by the end of 2019.

Overall, in 2018, we've built momentum that will, we believe, continue to drive brand awareness, financial growth and shareholder value.

And with that, I'll turn the call over to Jake Singleton, our CFO, to review the financial results.

Thank you, Peter.

Turning to Slide 10. As Peter mentioned, we continued to deliver strong growth across all our metrics. In this section, I will compare fourth quarter 2018 to fourth quarter 2017. Gross sales for all clinics opened for any amount of time grew 29% to $46.5 million. System-wide comp sales for all clinics opened 13 months or more increased 24%. System-wide comp sales for mature clinics, for us, those opened 48 months or more, increased 16%, further pushing the boundaries of our business model.

Turning to Slide 11. Revenue for the fourth quarter of 2018 grew to $9.1 million, up $2.2 million or 32%. Company-owned or managed clinics contributed revenue of $4.3 million, increasing 43% from a year ago. As we added one clinic in April, our growth is largely attributable to our continued focus on operational excellence, consistency and impactful marketing as well as the increasing adoption of chiropractic care. Franchise operations contributed $4.8 million, up 23% compared to last year. This growth is fueled by the same factors as our company-owned or managed clinics, which resulted in greater sales from existing clinics. Additional growth factors included sales from 47 new franchise clinics and increased participation in our successful fourth quarter promotions. Cost of revenues was $1.2 million, increasing 30% over the same period last year. As cost of revenue is largely driven by regional developer royalties and commissions, this cost increase reflects the success of the RD program.

As Peter noted, at December 31, we had 21 RDs responsible for 89% of 2018 franchise sales, and they are now supporting 77% of our 394 franchised clinics.

Selling and marketing expenses were $1.2 million or 14% of revenue in the fourth quarter of 2018 compared to $1.3 million or 19% of revenue in the fourth quarter of 2017.

General and administrative expenses were $5.3 million or 59% of revenue compared to $4.4 million or 64% of revenue in the fourth quarter of 2017. We posted positive GAAP net income for the first time since being public. Net income was $835,000 or $0.06 per diluted share, which improved $1 million when compared to a net loss of $213,000 or a loss of $0.02 per share for the fourth quarter of 2017.

Total adjusted EBITDA for the fourth quarter of 2018 was positive for the sixth consecutive quarter at $1.5 million, improving $1.1 million compared to adjusted EBITDA of $404,000 in the same quarter last year. Franchise adjusted EBITDA income increased 23% to $2.2 million. Company-owned or managed clinics adjusted EBITDA income more than quadrupled compared to last year, increasing to $1.4 million. Corporate expense adjusted EBITDA loss increased 22% to $2 million.

Turning to Slide 12. For the year, gross sales for all clinics opened for any amount of time grew 30% to $165.1 million. System-wide comp sales for all clinics opened 13 months or more increased 25%. And significantly, system-wide comp sales for mature clinics opened 48 months or more increased 17%, which is remarkable in today's retail environment.

Turning to Slide 13. For the year, revenue increased 28% to $31.8 million. The bottom line improved greatly. The company delivered annual net income for the first time since being public. Net income improved $3.7 million to $253,000. Adjusted EBITDA grew $3.3 million to $3 million.

Regarding the balance sheet, as of December 31, 2018, unrestricted cash was $8.7 million, more than double the $4.2 million we held at December 31, 2017. The increase reflects strong cash flow from operations, including increased individual franchise license sales and additional RD territory sales.

Also noteworthy, at December 31, 2018, we had $23.1 million of federal net operating losses or NOLs available to offset future taxable income.

Turning to Slide 14. Our 2019 guidance reflects our accelerated momentum. We expect our revenue to increase between 26% and 32% compared to $31.8 million in 2018; adjusted EBITDA to grow between 67% and 100% compared to $3 million in 2018; franchise clinic openings to range from 70 to 80; and company-owned or managed clinic expansion to range from 8 to 12. This could be through a combination of both greenfields and buybacks. The projected new clinic total nearly doubles the 2018 expansion of 47.

Overall, our strong 2018 results and $5.5 million of cash flow from operations have strengthened our balance sheet and positioned us well for growth.

And with that, I'll turn the call back over to Peter.

Thank you, Jake. Turning to Slide 15, I'd like to take a minute to talk about our expanding market opportunity. The opioid epidemic, the obesity epidemic and, quite frankly, the pain epidemic all make chiropractic care that delivers drug-free therapies meaningful, particularly to employers. And in fact, the majority of employers report that workers have expressed interest in chiropractic services according to a recent survey by the National Association of Worksite Health. A short time ago, they hosted a workshop on how to expand health center services to include and integrate chiropractic care for acute care, occupational health, pain management and rehabilitation. The sessions included new clinical guidelines for pain management aimed at reducing the need for opioids. Our increasing retail footprint and our ability to leverage our market and infrastructure expands the opportunity to lead increased adoption of chiropractic care.

As discussed on our last call, the 2018 Gallup-Palmer study reported that at some point in their lives, about 2/3 of U.S. adults have had neck or back pain significant enough to seek health care, while 25% had done so in the last 12 months. Also, 8 out of 10 adults prefer to try drug-free options before prescription medication.

However, most people are unaware of the efficacy of chiropractic adjustments. They did not know where to find it. They did not know of the benefits of it. They did not know they could afford it. The Joint is helping people to overcome these hurdles with accessible, affordable and convenient chiropractic care in neighborhood daily-use shopping centers. Our data reinforces increasing -- the increase in people seeking alternatives demonstrated an openness to nondrug remedies. For example, in 2013, 13% of our patients were new to chiropractic care, which grew to 21% in 2016, 22% in 2017 and 26% to our most recent survey completed last month.

Turning to Slide 16, overall, our hybrid model of franchised and company-owned or managed clinics enables us to expand in a capital-light fashion. This is essential in helping us to build brand awareness, name recognition, establish a predictable revenue stream, increase scale and improve shareholder value. As we plan ahead, our strategy is to continue to build upon the foundation we laid in 2016. In 2019, we intend to continue our focus on franchise sales to further leverage our RD strategy and to accelerate the expansion of our corporate clinic portfolio within clustered locations. To increase the size of our footprint through clinic expansion, we plan to expand our patient base to be the career path of choice for chiropractors, foster a robust regional developer community and enhance individual clinic performance and service.

Before I open up for Q&A, I'd like to mention that this month, we plan to be at the 31st Annual Roth Conference on March 17 through 19 in Dana Point, California, and the Cowen Annual Future of the Consumer Conference on April 2 in New York City.

In closing, I'd like to recognize The Joint chiropractic teams for their collective engagement. To our franchise community, to our RDs, our corporate team and The Joint colleagues across this country, I thank you. Our significant progress in making chiropractic care more accessible for patients and the strengthening of our company would not be possible without your commitment and dedicated efforts. The leadership team and I are grateful for all of your hard work.

Lauren, I'm ready to take the Q&A.

(Operator Instructions) Our first question comes from Mike Malouf with Craig-Hallum Capital.

Very impressive quarter, and it's nice to see the corporate stores are starting to accelerate. So good news. My first question is actually on the corporate stores. As I look at my numbers, really impressed with the revenue per average clinic move in those corporate stores, not only year-over-year but just sequentially. And I'm just wondering if you could give us a little bit of color on why that number is going up so high on a per-store basis and whether or not that's a sustainable level there.

Yes, Mike, this is Jake. We think it is. When we look at it year-over-year on a per-store basis, we're really encouraged with the overall growth. And the corporate clinic mix is a mix of those that we've acquired and those that we developed ourselves, those greenfield units. And really, the year-over-year growth in those greenfield units is really something that we're proud of. They averaged 38% year-over-year growth, sales growth, so I think those are really coming up to speed, and we're really encouraged by those efforts. But absolutely, we think the momentum is there. The corporate portfolio has an average age of 58 months, so we're certainly excited to get the new ones up and ramping, and we certainly hope to mirror the success of those breakeven numbers from the 2018 and 2017 cohorts from our franchises.

Well, Mike, I can tell you, it's all about execution. You can go right back to our VP of Operations Jorge Armenteros, that he's completely restructured the operational team, that he's completely restructured the support that they put out in the field, he's restructured the protocols, the very way we're operating the business, and it's working, and it's reflected in the corporate clinic performance and, quite frankly, it's reflected in the franchise clinic performance as well.

Yes, that's great. That's really good news. And then just moving to -- on the franchise licenses sold, you've got 99 sold in 2018. Now that's probably in part because of the big push in the RDs in 2017 and then continuing on to 2018. But when you take a look at that 99, is that sort of a blip up because you went from 8 to 18 and that they sold a lot of it in 2018? Or do you think that, that momentum continues on those franchise units sold?

I think it's absolutely a reflection of momentum. If it's anything like any other program I've had where you have a strong, robust concept that's driven by a strong, robust RD community, you're absolutely right. I kind of ran through those numbers as that -- of the 22 sales in '16, it was about half of them were sold -- or 30% were sold by the RDs; for '17, half of them were; for '18, 89% of them were sold by the RDs. And that is because that they are getting -- they're in the field, they're operating, they're doing their job and that it's working, and they'll continue to do that. I mean, that's -- from my perspective, that's not a blip. That's again, we have reengaged in our franchise development. We talked about this before that for several years we are focused more on our corporate clinic performance is that we didn't put as much energy on the development of the franchise program, let alone the RD program. That was one of the fundamental changes we put in place in 2016 and that we are starting to reap the results. And absolutely, I would believe that this is a reflection of increased momentum, not a one-off that we just had an incredible year in 2018.

Our next question comes from Brooks O'Neil with Lake Street Capital.

You have Frank Takkinen on for Brooks O'Neil. I have a couple of questions. So first, can you please touch on the seasonality a little bit on how you expect the new openings to pan out in the next 12 months? Obviously, in 2018, we saw Q4 very heavy with openings, and I was just curious if this is a good proxy to think about 2019?

No. Frank, I think, as we look at the quarter and the pipeline -- or the quarters and the pipeline, traditionally, we have seen that ramp up in the fourth quarter, deadlines per action. When we look at the portfolio right now, I think we're expecting a little bit more even spread and maybe just kind of an incremental build with each quarter. But the first quarter of 2019 is off to a good start, and we think there'll be a sequential increase quarter-over-quarter, but it shouldn't be quite as drastic as it was in 2018.

And I think, also, as I mentioned, that there was -- we did experience a lengthening at that time. And I think that was part of why we had such a crowded fourth quarter compared to the full year because if you look at it, what did we do? We opened up 25 units in the first 3 quarters and 22 in the fourth quarter. And part of that was, as I was talking about, unresponsiveness of landlord issues, municipalities being slow to give the approvals. It's interesting because a lot of these cities in these states are -- don't have the resources for people to be able to get your permitting done in a timely fashion. I think all of retail is kind of experiencing that, that we -- as that pipeline builds, I mean, it gives us, I think, a greater opportunity to spread it out for the full year. But as Jake said, it's not -- it certainly hasn't been historically unusual for us. The fourth quarter is our strongest quarter for openings.

Great. Secondly, thinking about profitability, obviously, with the resurgence in corporate-owned stores, I was wondering if you could tell us how you guys are kind of thinking about profitability in 2019.

Profitability on what level? Unit level?

Just earnings, basically. So what I'm kind of getting at is if you're investing more into these corporate-owned stores and having to deploy more operating expenses, how do you think about your breakeven level? And will this, do you think it will kind of fluctuate, some above, some below and kind of that sense?

Sure. So when I think about the portfolio, we're certainly hoping, as I mentioned before, to mimic that time to breakeven. But when I look at it at a higher level, as we make the investments in those greenfield units, traditionally, in the year that we're opening those, those are going to be a suppression on our earnings. In the early months, they're taking those losses. And hopefully, the faster times to breakeven will reduce those, but the greenfield units, they do take time to ramp. And so in those early months, those will be a suppression on earnings. If the mix shifts more towards the buybacks or the acquisitions, typically, those are additive much sooner in the process. So it will depend on kind of the mix of the clinic expansion, and we will be opportunistic as we look at those opportunities. But for the greenfields we control, historically, those are going to be a suppression in the near term, kind of depending on when they open throughout the year.

Great. And then my last question, thinking about same-store sales, obviously, 20% plus same-store sales has been great, but can you share with us your thoughts on a little bit more of a normalized long-term view? Is the 48-plus same-store sales maybe a good proxy for that?

Well, it's a great question. And Frank, quite frankly, we don't know the top of this business model. And I think there's a number of factors that are going on. And I've talked about this several times. Yes, there's no question that we are getting more efficient at what we're doing, where our patients are seeing us more often. We're more efficient in our lead generation of new patients, so we have more patients coming in the door. And that more fundamentally, we have a market that's opening up that, right now, today, 50%, according to that same study that I mentioned in the conversation, is that -- the Palmer-Gallup study, that 50% of American people don't even know what the word chiropractic means. 30% are scared. They know, okay, that it's some kind of bone manipulation, but they're scared to try it. And then, 15% are using chiropractic in the last 12 months. And so as we take this concept into a retail environment and we put it where they're shopping and where they're going to their daily-use center, where they get a haircut, buy a frozen yogurt or send a package, now they're looking at, "Oh my gosh, there's The Joint. That's not cannabis, that's chiropractic. I'll go try it." And that's really reflective of those 26% of our new patients that have never tried a chiropractic before. So when we come back to comps and you have this incredible market that's opening up, it's really hard to say how long can we sustain these kind of comps? I don't know. If we just look historically, our comps in 2016 were 26%, comps in 2017 were 21%, comps for the full year 2018 were 25%. So -- and again, okay, your mature clinics, okay, those over 48 months, as Jake mentioned, that, that was 17% for the full year of 2018. I meant to tell you, I've never worked with concepts that had those stronger comps. I worked with concepts that had consistent really strong same-store sales growth, especially when you are bringing a new product or service into the market, okay? We're not revolutionizing chiropractic, we're obviously revolutionizing access to chiropractic. So it will be interesting to see where that goes. I don't know if that answers your question, but it suggests that we've got a long runway in front of us.

Our next question comes from David Bain with Roth Capital.

I also wish you congratulations on another great quarter and forward metrics. First, I was hoping we could start with the corporate-owned strategy, just given the average cost to open a corporate-owned location, the acquisition multiples you've paid in the past, the continued comp results, the recurring nature of visibility in your business. And I'm looking at the $8.7 million of cash. I'm hoping you could provide a little bit of color around the thought process behind the 8 to 12 guidance range. It seems like you could have gotten a lot higher. Is that something that's going to be staying at a 10% base of overall clinics? Or how are you viewing that at this point? Do you look at that again in the near term?

It's a great question, David. And the way that we're looking at it is that we obviously profoundly believe in the corporate portfolio as a part of the mix that it's kind of funny, franchising area is a business of learning from your own mistakes and then trying to share that with your franchisees so they don't make them, and that we certainly have had significant mistakes we've made in terms of trying to grow aggressively beyond our capacity to support. And I think that we have certainly shown ourselves to be able to build and -- or not to build, but to manage those buybacks and they're doing phenomenally well, that we've now turned around those greenfields with -- this is the first year that we're actually going out and building for the first time since 2016 a greenfield portfolio. Now do we believe that we're capable of doing it? Yes. Do we think we can learn from mistakes? Do we have our restructured operational program in place? Absolutely. And that we also believe that it takes time to build up that infrastructure to be able to support it. So to go from one greenfield or, let's say, just a handful of greenfields and then all of a sudden go to 20, it's an enormous amount of work and infrastructure that has to take place behind that. And it takes time to actually build that if you're building it for the long term, and that we are building this for the long term and so we are cautiously developing this. So again, we're very measured and strategic in 2018. In 2019, we're clearly accelerating much stronger than just one clinic in '18. We're doing the 8 to 12 for 2019. We've talked about it already. We've opened 2 greenfields. We've got 2 leases signed. We've got 9 LOIs out there. We have all kinds of opportunistic opportunity -- opportunistic franchises from time to time if they fit within that portfolio of where we want to be geographically. So you're going to see it continue to grow, but we want to again prove to ourselves and to the community that we can in fact have the same results on the greenfields that we had with the buybacks.

Great. Okay. And then I guess, just a follow-up on the same-store sales question. I too had a question on that. I know it's hard to kind of heat boiling water, but at the same time, you cited that survey where you had 26% of new patients, up from 22% in 2013 (sic) [2017]. Are new patients, are they the primary driver of same-store sales growth? Or is it more increased visits from existing customers? Or are they more just like a backbone to the clinics at this point? I'm just trying to understand that number a little bit better as a metric? And then in your guidance, how do you think about same-store sales?

Sure. I would argue that it's both that it's -- obviously, we have an enormously increasing -- because when you talk about new to chiropractic, that's just not new patients that we -- and I mentioned that in 2018, we had 434,000 new patients walk in the door for the first time. Of that 434,000, 26% of them had never seen a chiropractor before. So I think that, again, as people get more accustomed to routine and affordable chiropractic care so that they're coming in and enjoying that membership. If you look at our membership, I think, in last year, 76% of our -- the average sales at the clinic was membership based. I think that went up to 79% in 2018. And that's a reflection of more existing patients utilizing the membership base as a way of getting routine and affordable chiropractic care. So we have our existing patient base who are using us more often. We have more patients who are coming in the door for the first time, whether it's new to chiropractic or just new to The Joint, and that as that footprint expands, that you're educating more and more people about the idea that you can even try chiropractic. You have so many factors out there that are -- that we as a society are truly looking for more and more noninvasive holistic ways to get out of pain, and we've talked in other calls about the millennials are such a core group of our patients, and they continue to represent almost 40% of all the patients that come in the door. And so they are driving that interest in avoiding the knife, in avoiding drugs to be able to manage their pain. How long can you sustain such strong comps? I think you can sustain it for a while as long as your market's increasing. I think that as we continue to expand into these markets, we have the clustering effect, so we see the store sales of those clinics increase because there's just more availability going into the clinic and more awareness of that. We've been more effective with our co-ops. We've introduced more and more co-ops in those markets who were starting to get a clustering of our clinics, and they're spending more money in that local store marketing, which is, again, raising awareness in that market about The Joint as an alternative. So I think this is -- as we've talked through the call, this momentum that's (inaudible) where you have this great interest in these noninvasive ways to get out of pain and that we're in a perfect position to take advantage of it.

David, the only thing I would add is that the relative use of our system. We've got 442 clinics as of December. The RDs alone have signed up for 421 to be opened by the end of their respective terms. So naturally, by the use of the system, you have those clinics that are going to be very young coming into the comp base, and with the ramps that we have right now are just going to be strong contributors to that. So naturally, with the youth and the growth of the system, you're going to have that comp base kind of propped up by that phenomenon.

Great. And then if I could just ask one more. I know you don't typically do this, but is there any way you could help us bifurcate EBITDA from corporate and franchise in '18 and then with your guidance? We have revenue...

Right. No, we haven't historically provided that split. You can certainly look at the segment performance from '18 as a relative proxy and depending on how you're modeling corporate clinic revenues and the franchise base. It may give you a slight shift in mix, but you can certainly use the historical segment information to give you a little bit of a proxy of that.

Our next question comes from Alexander Scharf with Maxim Group.

Peter and Jake, just to piggyback on a prior question about revenue per corporate clinic, are you going to potentially face a headwind as you open more greenfields and the average age of your corporate portfolio decreases? Or is that not really going to move the needle that much?

Statistically, it will move the needle, right? We're going to have some that are 3, 4, 5, 6, 7, 8 months old as we kind of creep out through the end of '19. So it will have to affect it some, but really, we've seen those strong ramps with the 2018 cohort. So really, as we're looking at the metrics, the overall average per unit given that the majority of the portfolio will be so significantly -- so much older than the kind of the newer subset, we're really looking at those as kind of 2 different things. So to do a blended average, that's not currently how I'm evaluating it, I'm looking at how they're starting with this younger set.

Okay. That's helpful. And then are there any metrics you could talk about the 2 greenfields that opened in 2019, like the cost or the time it took to open it? And also, I may have missed this, but did you provide the details of the second greenfield, like the location or the date you opened that?

Sure. From a location perspective, the first one in February was in Carlsbad, California, and the one that just opened last week was in Azusa, California. And what we're seeing from a cost perspective is that it's relatively in line with the number we've quoted in our historical decks from a buildout perspective. We also saw the same phenomenon in terms of kind of the ramp from start to finish, the same issues with the landlord responsiveness and the construction permitting and approvals and the things. So we saw that phenomenon ourselves, so we can kind of echo that from across our franchise base. But the cost, we didn't see a material change in that.

(Operator Instructions) Our next question comes from Michael Kawamoto with D.A. Davidson.

Just one of your last comments in your prepared remarks, Peter, saying that companies are saying that employees are asking for chiropractic care or looking for nondrug treatments. Now have you thought about partnering with some of these employers just to help their employees find a good chiropractor?

Well, we've looked at it a little differently in the sense that there's some wellness programs out there that we can participate in and so that we become a service that they're offering to their employees as added benefit, and that we've had various discussions over the years of trying put those programs together. And so I do think that there's some opportunities there. I think the real message there was just, again, the growing awareness and interest of chiropractic care as a way to help an employee -- your employment base stay active, healthy and show up at work.

Yes. And then just building on the marketing side, you had talked about the University of Houston partnership on the last call. Are there any other big partnerships you're going to do this year? Or how are you seeing about using that one for 2019?

We're certainly looking at various -- more of those kind of softer public relations opportunities that come up from time to time, that there's nothing that I'm in a position to be able to tell, okay, we're going to do that or we're going to sign up with this group or that group. And that particular group with the University of Houston actually was driven by a very strong co-op. Houston is one of our strongest markets in terms of just the number of units, and they collectively came together and entered into that relationship with the University of Houston. We have other co-ops who are exploring with some of the teams in their market that they could do the same. There's such a natural connection between sports and chiropractic so that we do see the interest in -- where it's feasible to put those relationships together. The bigger we get, the more opportunities we have to really bring that to the fore.

And we are encouraged -- we continue to encourage each of our markets, certainly, as they grow to form those co-ops. It's a great way for us. And we continue to expand in what I'll call awareness marketing. It's an important tactic for us to get the brand out there and more exposure. So we'll continue to encourage those co-ops to seek those opportunities as well.

Our next question comes from Alexander Klaus with Addisco Value Capital.

Again, congratulations. Just what everybody else said, fantastic quarter and great year. Glad to see that cash is being generated at this point. And you mentioned in the side note, Peter, that there was an opportunity taken to purchase a regional developership, and I wonder if you can provide a little more flavor on that, how accretive that will be to results for the year going forward and then also if there might be other opportunities like that in other more developed or older markets.

Sure. And what I would tell you, in any franchise system that utilizes the regional developer program to accelerate growth, it's really a natural progression for those RDs to either consolidate among other RDs or for the franchisor to buy them back from time to time. The buyback only makes sense when they're in a mature market. Obviously, when they're coming on board for the first time, they're paying that initial franchise fee or that territorial fee and that there's no real value to buy back an RD that's not really mature. And so that -- from time to time, we have -- we've started our -- some of those RD programs started in when we almost started franchising back in 2010 and '11, and so that in that case, that there was an opportunity for South Carolina, which we obviously exercised. That had 23 units in that market, and so that you can acknowledge that it certainly will have some overhead that we'll have to put in place to support that, not a lot, but we have a franchise business consultant that would be now doing the work that the regional development themselves did and then you're pulling back that 3% royalty on those 23 units, and so that would be the impact on the company financially.

Okay. So about 20%. And are there any other markets that you might be opportunistically looking at as well when projecting this year?

We do not have any opportunistic buybacks budgeted for this year. And in my experiences in franchising, there's all kinds of thing that drive a franchisee or regional developer to be at a point where they want to sell their franchise or their RD, and that in every franchise system, you always have that first right of refusal. So are there opportunities that could pop up that I am not aware of today? Of course. Are we anticipating additional buybacks of RDs in 2019? No.

And I'm not showing any further questions at this time. I'd now like to turn the call back over to Peter Holt for any closing remarks.

Thank you very much. Appreciate all of your interest. We've been adding patient testimonials to The Joint Corp. YouTube channel. And today, I'll leave you with a summary of a recent point in case. Richard Moore from Dallas Texas was always healthy and active. In fact, as an adult, he became very passionate about triathlons and being outdoors. When he was diagnosed with fibromyalgia, the muscle pain completely changed his life. As a triathlete, he could no longer compete and be active as he once was. Richard's condition caused him great pain, and he believes if he had not received care from the chiropractors of The Joint, he'd likely be in a wheelchair today. Now he maintains a fitness regime and credits his compassionate chiropractic care team at The Joint for saving his life. Thank you, and stay well adjusted.

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