The Joint Corp. (JYNT) Q2 2020 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Joint Corporation Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Moriah Shilton. Thank you. Ma’am, please begin.

Thank you, operator. Good afternoon, everyone. This is Moriah Shilton of LHA Investor Relations. On the call today, President and CEO, Peter Holt, will review our second quarter and provide an update of the business. CFO, Jake Singleton, will detail our financial results. Then Peter will close with a summary 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 the market, The Joint Corp. issued its financial results for the quarter ended June 30, 2020. If you do not already have a copy of this press release, it can be found in the Investor Relations section of the company’s website. As provided on Slide 2, please be advised, today’s discussion includes forward-looking statements, including statements concerning our strategy, future operations, future financial position and plans and objectives of management. Throughout today’s discussion, we will present some important factors relating to our business that could affect these forward-looking statements. The forward-looking statements are made based on our current predictions, expectations, estimates and assumptions and are also subject to risks and uncertainties that may cause actual results to differ materially from the statements we make today. Factors that could contribute to these differences include, but are not limited to, the continuing impact of the COVID-19 outbreak on the economy and our operations, including temporary clinic closures, shortened business hours and reduced patient demand, our failure to develop or acquire company-owned or managed clinics as rapidly as we intend, our failure to profitably operate company-owned or managed clinics and the other factors described in Risk Factors in our Annual Report on Form 10-K as filed with the SEC for the year ended December 31, 2019, as updated for any material changes described in any subsequently filed quarterly reports on Form 10-Q, as they may be revised or updated in our subsequent filings, including the one we anticipate filing on August 7. 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 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. 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 within GAAP measures alone. Reconciliation of net income to EBITDA and adjusted EBITDA is presented in the press release. The company defines EBITDA as net income or loss before the net interest, tax expense, depreciation and amortization expenses. The company defines adjusted EBITDA as EBITDA before acquisition-related expenses, bargain purchase gain, net gain or loss on disposition or impairment and stock-based compensation expenses. Turning to Slide 3. And it’s my pleasure to turn the call over to Peter Holt.

Thank you, Moriah, and I welcome everybody to the call. I’d like to start by thanking all of our doctors and staff, who in the middle of this pandemic are providing essential health care services to our patients who truly see chiropractic care as essential to their health care need. And by utilizing chiropractic care to help reduce their pain, we’re able to alleviate some of the pressures on our country’s overtaxed emergency rooms and hospitals. It’s hard to imagine it’s only five months ago that our lives were overturned by COVID-19. As I reflect on the performance of The Joint, I’m humbled and gratified by the resiliency of our business model. As we witnessed so many other retail concepts urgently reinventing themselves to survive, the strategic vision and the operating model of The Joint continues to perform, as illustrated by the fact that 99% of our clinics are open, the strength of our overall financial performance, our continued growth in both franchise and greenfield clinic openings as well as our ongoing franchise license sales. And while no one can predict the course of COVID-19 with certainty, we remain confident in our ability to adapt, to serve and to grow in this unique environment. While Americans spend over $15 billion a year on chiropractic care, The Joint continues to revolutionize access with convenient retail settings, concierge-style membership-based services, attractive pricing and hours and without the need for insurance or appointments. Our growth strategy is to open new clinics, which builds our brand, grows familiarity with chiropractic care and attracts new patients. Already, we’re the largest and most recognizable provider of chiropractic care in the country. We utilize a franchise model as well as company-owned and managed clinics to expand in a capital-light fashion. As noted on our last call, at the onset of the pandemic, we undertook measures to enhance the cleanliness and the sanitization procedures to protect and support our patients, our doctors and our staff. As we learn more, we continue to evaluate and improve upon the procedures and protocols. For example, we now require the use of mask by all of our doctors and staff in all of our clinics across the country. We’ve also reduced the number of seats in reception areas, and in some clinics, we moved adjustment table from the open bay area to ensure our ability to maintain social separation. In the process, we’ve demonstrated that we can serve the same number of patients even though we’re reducing the number of people at any one time in our clinics. As for the – as the need of pain – as the need for pain relief grows, our patients continue to validate that chiropractic care is essential to their health care. Franchisees increasingly understand the strength of our value proposition. That is why in the middle of this pandemic, we’re able to sell licenses in open clinics. Our business model remains unchanged in the – which is the foundation for our long-term growth. We continue to march toward our goal of reaching 1,000 clinics by the end of 2023. In addition to enhanced safety procedures that provide assurance to our patients, we’ve implemented new marketing promotions with two areas of focus: first, to welcome existing patients back from membership freezes, and second, to invite new patients to try our services for the first time. The whole month of June, we offered a free initial visit to all new patients, resulting in one of the highest average new patient counts per clinic for any single month in the history of our company. I’ll go into more detail on the promotion, but I’d first like to review our quarterly metrics. Later, Jake will discuss our financial results in greater detail, after which I’ll open the call for questions. Turning to Slide 4. While COVID-19 negatively impacted the second quarter 2020 compared to the second quarter 2019, the resiliency of our business model is reflected in our results. System-wide sales increased 2%, in spite of the impact of our promotions, including the first three visits in June. Comp sales for clinics that have been open for at least 13 full months decreased by 6%. Revenue increased 13%. Adjusted EBITDA was flat at $1.1 million. Unrestricted cash was $14.6 million at June 30, 2020, compared to $10.7 million on March 31, 2020. Turning to Slide 5. Let’s review our portfolio. At June 30, 2020, we had 539 clinics, of which 99% were open. The clinic composition at quarter end was 477 franchises and 62 company-owned or managed. The mix remained 88% franchised and 12% corporate. During the first full quarter of the pandemic, our clinic count increased by nine, including one new greenfield and 12 new franchise clinics, net of the four franchise clinics that closed. The closures consisted of one clinic in the process of being relocated that will reopen, one non-traditional clinic located in Relax The Back store and two of our lowest performing clinics. We’re now returning to new clinic growth. As of June 30, we opened 30 clinics in 2020, one more compared to the same period last year. Our new clinics are performing well. In fact, a new clinic in Texas, which opened in June, reached aggregated sales of over $75,000 in its first two months of operation, creating another company record. Turning to Slide 6. For any franchise system to be selling licensees – licenses in this current climate is remarkable, making our franchise sales results all the more impressive. During the second quarter, we sold 11 new franchise licenses bringing the total to 35 year-to-date. We believe that to achieve this level of sales under the current environment is indicative of the positive long-term outlook of our business. I applaud our sales team, including our 22 regional developers for this performance. Our RDs continue to fuel our growth and are responsible for 80% of our franchise sales in Q2 2020. This group has risen to the occasion to serve our community and continue to accelerate the growth of our system. Our momentum continues. For example, in July, we’re back to double-digit system-wide comp sales for all clinics open 13 months or more at 10%. We sold 14 licenses in July, and we opened six franchise clinics. We continue to expand corporately in the Los Angeles area, opening our third greenfield clinic for this year. Through the end of July, our total franchise and corporate clinic count increased to 546. We know that meeting our goal of 1,000 clinics by the end of 2023 requires more than concentrating solely on franchise growth. We’re also focused on corporate expansion with more greenfields. While our greenfields are performing well, it’s important to note that greenfields suppress total earnings in the short-term until they reach their breakeven point. We believe this short-term impact on the bottom line is well worth the long-term benefit of revenue growth, greater scale and increased national recognition. Turning to Slide 7. One of our earliest and most decisive actions in initial days of COVID-19 was to support the positioning of chiropractic care as an essential health care service. This became a critical point of differentiation versus other retail service concepts. It also served as a rallying cry for our doctors and our staff. It helped to guide our approach to the pandemic that now more than ever, we need to be open to treat our patients. Being an essential healthcare service is also reflected in our marketing communications. Through video and blogs, e-mails and texts, clinic signage and PR, we increased the frequency of our messaging, not only to reassure our patients that we remained open, but that we’re taking the necessary precautions to ensure their safety. Additionally, our content focused on heavily on best practices for maintaining healthy lifestyle, including the benefit of routine chiropractic care. With so many consumers facing anxiety related to health and finances, we recognize that accessible, affordable chiropractic care is more important than ever. So in March and April, we made it easier for our members to freeze their accounts, and in May and June, we launched two important promotions to provide patients with more opportunities to obtain the care they need. Turning to Slide 8. Our direct marketing promotion launched in May encouraged members to unfreeze their accounts in exchange for the incentive for their first month they came back. We moved over 22% of our frozen members to active status during this month-long promotion. Our national marketing promotion launched for the month of June offered every new patient in the United States the opportunity to get moving with chiropractic at no charge of their initial visit. During the month, we gave away over $1.7 million in chiropractic care. What’s more, we converted those patients to packages and memberships at record levels, which underscores the considerable demand for chiropractic care during this pandemic. As a result, by the end of the promotion, our average number of members per clinic, which is one of the most important clinic performance metrics, surpassed all-time record, including any pre-COVID number. More importantly, we’re grateful to do our part to help so many patients access chiropractic care at The Joint during this difficult time. Turning to Slide 9. We recently updated our patient demographics based on those who visited The Joint in 2019. From the data, we continue to see a nearly even gender split with 49% of our patients being female. Additionally, we found our patients’ median age move from 39 years old to 37. The percentage of millennials who visited increased from 39% to 44%, with another 11% from Gen Z. This data reaffirms our concept is resonating with increasingly younger audience who values convenient, affordable chiropractic care at The Joint. And with that, Jake, I’ll turn it over to you.

Thank you, Peter. Turning to Slide 10. As we review the performance of 2020 compared to 2019, keep in mind that the COVID-19 impacts included the effects of reduced new patient traffic in the early part of the quarter, frozen memberships and discounts associated with the marketing promotions that Peter reviewed. Notably, our performance improved throughout the quarter and the trend continues. Comparing the second quarter 2020 to the second quarter 2019. Even taking into account the discounts related to our two promotions, system-wide sales for all clinics open for any amount of time increased 2% to $53.5 million. System-wide comp sales for all clinics open 13 months or more decreased 6%. System-wide comp sales for mature clinics open 48 months or more decreased 10%. Revenue was $12.6 million, up $1.4 million or 13%. Company-owned or managed clinics contributed revenue of $6.9 million, increasing 19% from the same period a year ago. Franchise operations contributed $5.7 million, up 6% compared to the same period last year. Increased revenue for both categories is due to the greater number of clinics and continued organic growth, offset by the impacts of COVID-19. Cost of revenues was $1.4 million, up 5% over the same period last year. The increase was in line with total increase in franchise sales and reflective of higher regional developer royalties and commissions. Selling and marketing expenses were $1.8 million for both periods, reflecting the timing of our advertising fund spend. General and administrative expenses were $8.5 million compared to $7.2 million, primarily due to an increase in payroll and related expenses to support revenue growth and increased clinic count. We continue to operate our corporate clinics and headquarters without any furloughs or layoffs while working to increase sanitary measures to ensure patient and employee safety. Also, as previously discussed, increases in corporate clinics will require additional resources to ensure our high operational standards. We continue to believe that the increase in our corporate portfolio, and particularly our greenfield clinics, will provide long-term bottom line growth despite compressing operating margins and earnings in the near-term. This is important to remember as we return to growth and increase the pace of development. For the quarter, we posted net income of $116,000 or $0.01 per diluted share, compared to $462,000 or $0.06 per diluted share for the same period last year. Total adjusted EBITDA was $1.1 million, increasing 5% compared to the same period last year. Franchise clinic adjusted EBITDA decreased 4% to $2.5 million, reflecting the impact of COVID-19. Company-owned or managed clinic adjusted EBITDA was $1.1 million, up 25% compared to last year, even with the expenses associated with the new clinics. Corporate expense as a component of adjusted EBITDA was $2.5 million in both periods, reflecting our cost control measures. As of June 30, 2020, we had $14.6 million in unrestricted cash compared to $8.5 million at December 31, 2019. During the six months, cash flows from operations was $3 million. In addition, as previously discussed, we took measures to fortify our position and increase our financial flexibility. In March, we drew $2 million on our revolving line of credit. In April, meeting the CARES Act PPP loan requirements, we applied for assistance and received $2.7 million through JPMorgan Chase. The goal of the program is to maintain jobs in the small business sector, and we used the PPP loan proceeds to ensure we could retain our employees and fund payroll. The Joint operates 62 clinics, and as a franchisor, supports 477 franchise small businesses in 33 states. With our support, the vast majority of our franchisees also received PPP loans. In March, we withdrew our financial and clinic opening guidance. And due to the continued uncertainty around the impacts of COVID-19, we will not reiterate guidance at this time. Turning to Slide 11. For the six months ended June 30, 2020, revenue was $26.2 million, increasing 20% compared to the $21.8 million in the same period of 2019, reflecting a greater number of clinics and increased growth sales of both franchise and company-owned or managed clinics during the first quarter, which was partially offset by the negative impact of the pandemic during the second quarter. Net income was $931,000 or $0.06 per diluted share, compared to $1.4 million or $0.10 per diluted share in the first six months of 2019. Adjusted EBITDA was $2.8 million compared to $2.6 million in the first six months of 2019. And with that, I will turn the call back over to you, Peter.

Thanks, Jake. Turning to Slide 12. As noted, our resilient model is driving growth and our long-term opportunities continue to expand. As a nation, we’re looking for more natural holistic ways to get out of pain. The U.S. chiropractic market is already $15 billion, and 50% of the Americans still don’t even know what the word chiropractic means or how it can help them. As we increase awareness, our new patient base continues to grow. Now with many working from homes slouched on their couch or using non-ergonomic chairs, more people than ever are experiencing pain. The Joint will be there to help them out. And with our newest tagline that says, we truly have got your back, baby. In closing, I’d like to once again express my deepest gratitude to all of The Joint chiropractic teams who have continued to selflessly serve during this pandemic. Their dedication to our mission is awespiring. To our franchise community, our RDs, our corporate team and The Joint colleagues around the country, I thank you. You’re truly making a difference in all the lives that you touch. Howard, I’m ready to begin the Q&A.

[Operator Instructions] Our first question or comment comes from the line of Jeff Van Sinderen from B. Riley. Your line is open.

This is Richard Magnusen in for Jeff Van Sinderen. First, congratulations on performing so well in spite of the COVID impact. Can you give us some insight into what your current expectations of 3Q revenue are compared to your pre-COVID expectations?

Richard, thanks for the kind words. We appreciate it. And Jake?

Yes. As you know from the remarks, we’re not reiterating or providing any forward-looking guidance. In the release and in the comments, we did refer to the momentum that we’re seeing in July back to double-digit comps of 10%, license sales and openings picking back up. So I think we’ll refer to those comments in terms of any forward-looking projections.

Okay. And you communicated with the patient base frequently during the early stages of COVID, and it seems to have paid off. Can you provide us any metric or feedback from patients on how successful these efforts were at making patients feel safe and how it may have strengthened your relationship – their relationship with Joint? And then also, how much higher was the conversion rate of new patients during the campaign in June that offered the free initial visits to the new clients?

Sure. And there’s no question, as the pandemic broke out, and we’re all wondering what to do, how to respond, what does this mean to our patient base, what does this mean to our franchisees. On every level, we leaned into a greater level of communication with our franchisees. We had all kinds of different calls that we set up, town hall calls, webinars, helping them get their PPP loans. And we had the same reach out to our patients. And our patients were reaching out to us. They were going online. They were expressing their concerns. They were asking about what is our protocols or procedures. And so that we did, in fact, both through text, with email to our patient bases, expressed to them what some of the changes that we’re doing, making sure they understood that we remained open. There are so many businesses that were closing; it’s always not clear whether you were open or not. And at one point, as we talked about in earlier calls, about 10% of our network was, in fact, closed for a period. Today, 99% is open. And that, in terms of the conversion rate, is our historical conversion rate has been running, let’s say, in later 40s as a system, and that since COVID is that aside from just the promotion, we have seen consistently a higher conversion rate, well over 50% on average across the network in light of this COVID environment. And when we looked at it for the promotion itself, it was even a little bit higher than that 50% mark. So we were bringing more people into the clinic and then converting them at a rate that we have not seen before historically as a company.

Wow, that’s pretty strong. And then my follow-up question, considering where you are in this prolonged pandemic environment and considering what has worked for you recently, can you provide any more details or direction on your marketing message to new patients and existing patients going forward?

Well, the main message to our patients going forward is that we’re there, we’re open, we’re there to serve you, that we’ll continue to make sure they understand the increasingly important protocols of cleanliness and sanitization. That we’ve obviously, as I outlined in my conversation there, that there’s a number of changes we’ve made in the way in which that we treat our patients and where the – how much – how many we’ll allow in the clinic any given time, the number of seats in those reception area, removing or limiting the number of people in the open bay. And so we’ll continue to share that message with our patient base. The other thing is that we believe this is a real opportunity for chiropractic. 60% of the American people right now are teleworking. And they’re not in their ergonomically sound chairs. They’re slouched over the couch. Their spines are a mess. And so we believe that we’re in a space that we can bring them in, give them – show them the benefit of chiropractic care, and it’s affordable, and it’s accessible, and it’s convenient at a time when there’s so many things that are going crazy in this environment, that we believe that, that’s a really important message that we’ll continue to share as we go forward through the rest of the year.

Very good. Thank you.

Thank you very much, Richard.

Thank you. Our next question or comment comes from the line of Frank Takkinen from Lake Street Capital. Your line is open.

Hey guys, congrats on all the strong progress and the continued resiliency of demand in the quarter. I got a couple for you today. First, I kind of want to focus in more on the conversion rate we were just previously speaking about. What else do you think was behind that 50% conversion rate aside from the promotional activity? Is there something occurring in the competitive environment where maybe some of your less funded mom-and-pop shops weren’t able to stay open, and you’re seeing conversions from some of those people? Or what else is driving that high conversion rate in the quarter?

Hi Frank, thanks for the kind words, and that’s such a great question. And what I really truly believe is that one of the reasons we’ve, through this pandemic, experienced such a high conversion rate, and not just because of the promotion, in fact, actually, to be very frank, there was a concern that if we were offering free visits in the month of June, historically, you bring in a patient that’s more of a tire kicker, not really serious, okay, they get their free adjustment, but are they really going to stay with us as a patient? Is it worthwhile for our doctors to be busy with these patients that ultimately won’t stay on as a member? And what we found is, obviously, the opposite. So we were converting at a rate that we really were surprised by. And I really believe that more than anything else, that’s because of those patients who are going out into chiropractic care today, are in probably more pain and more serious about it because of the pandemic because you may be concerned about going to get your coffee, or going to a fast food restaurant or some of the other places, a bar, which is, I think, one of the worst places you can go with in light of COVID, but if you’re going to a chiropractic care clinic for the first time, it’s because you’re in pretty significant pain. And so I think that in some way, there was self-selecting in that those patients who really ventured out and came into our clinics for the first time and not really knowing what to expect, were the ones that really needed us and then that’s reflected in the conversion rate that we saw throughout this pandemic in particularly the promotion.

Got it. That’s very helpful. On the second question, I was hoping we could talk about the comp sales a little bit. It was encouraging to see that jump back into the double digits as quickly as it did in July. How are you guys thinking about comp sales for the rest of the year? And do you feel that we may have a linear outlook from the lows that we probably experienced in April, May time frame?

Yes, Frank, great question. If you think trajectory, as we mentioned, obviously, we had the deepest impacts in the early part of the quarter, and we’ve seen those trends improve. I think the same reason we’re not reiterating guidance. I think there’s still uncertainty that remains out there. But really, as we look at the momentum that we picked up in the latter half of the second quarter and into July, we’re optimistic that those trends will continue. But I think uncertainty remains, which is why we’re not providing that longer-term guidance at this time.

The one thing I’d add to that, though, Frank, is that if you look at our network is that – and if we go back into the early part of this pandemic, is that the parts of the country that were most impacted were Northern California, were the New York corridor and places where we had the least amount of clinics. And as we come into this new hotspots or surges or whatever you want to call it, is that you’re looking at clinics in Southern California, Arizona, Texas, Florida, all in which areas where we obviously have a significant portion of our clinics. In fact, probably about half of our clinics are in those four states alone. And as we’re analyzing, we gave the number for July, and we typically never break down our comp sales by region, but when we looked at the July numbers and the overall rate for any clinic open more than 13 months, as we said, was over 10%. And we analyzed just those four states, and it was, I think, 9.4% for those four states that were in the heart of this impact. And so while we’re still not clear because no one can really give us certainty on the course of this pandemic, we’re heartened by the trends that we’ve seen as we move through this pandemic.

Got it. All right, I’ll hop back in queue. Thanks so much for taking the questions.

Thanks a lot.

Thank you. Our next question or comment comes from the line of Brian Finley from ROTH Capital. Your line is open.

This is Brian Finley. I work with Dave Bain. We are hoping if you could discuss if COVID has accelerated any plan to accelerate the diversification of your mix of greenfields or acquisitions from a geographic standpoint. Also, as we hopefully exit COVID, your business has proven extremely resilient, adding to overall confidence in our view. Does that change your calculus to be even more aggressive with greenfields or acquisitions as we think about next year? Or is the 2021 plan pretty much the same as pre-COVID?

Yes, Brian, thanks. Those are great questions. I’ll start with the second one first in that, I think, overall, the trends and the resiliency of the model have given us confidence. We mentioned a couple of times in the comments that we are returning to growth. Another thing that Peter mentioned is that as we look at the model in our strategic direction is that we really didn’t have to pivot off of that. So our growth strategy in terms of the franchise and corporate mix is still the same as it was. The underlying model and the economics make sense for us to continue to grow our corporate portfolio and balance that against the continued franchise growth. So I think through the pandemic, we’ve just seen the resiliency, which provides us more confidence to get back into that growth and increase our development. We reiterated the goal to reach 1,000 by the end of 2023. And with the slight pause here in the second quarter, the slowdown, we’re going to have to get back on that to reach that goal, but it’s very much attainable for us. So I think the resiliency has provided us continued confidence to move forward. As it relates to the geographies, the core concept is still the same, right? We would always look to cluster where we have existing corporate clinics, so we can leverage that overhead. But the model is sound. As we look at regions, as Peter mentioned, or different states throughout the country, the model – the consumers wanting chiropractic care is proving to be something that we see viable across the entire country. So we will continue to deploy the regional developer model and complement that with our corporate clinic development.

Great, thank you.

Thank you. Our next question and comment comes from the line of Anthony Vendetti from Maxim Group.

Thanks. Good afternoon, and good evening. Sorry, I missed part of the call, but I heard the part, and I just want to make sure I have this right. So about half your clinics, Peter, are in Florida, Texas, Arizona, California. And for those clinics, did you say patient visits or patient volume was up 9.4%? And was that for the quarter, if that’s the correct percentage, or is that for the month of July?

Yes. What I was saying is those were comp sales for those four states, and that – and I guess what – Jake was just correcting me that our system-wide comp sales for any clinic open for 13 months in the month of July, we said it’s 10%. It’s actually 10.2%. And that in our analysis, and this is just looking at comps, not visits but just comp sales, in our analysis, we took four states, California, Arizona, Texas and Florida, which represents roughly 50% of our network, what we’ve seen in the country, some of the biggest impact in these resurgence or hotspots of COVID. And we looked at the comp rates in July now for those four states separate. And what – I said the number was 9.4%, but Jake just corrected me and said that actually, the number was 10.1%.

Wow. So it’s even with the surge or outbreak.

Correct, exactly.

It’s pretty close to what you’re seeing for all your other clinics.

Correct. It’s 10.1% versus the 10.2% across the whole country.

Right. Okay. That’s impressive. Okay, and…

And also, I think, Anthony, I think that’s really reflective of kind of the whole message that we – one of the messages that we’ve been talking about today is the resiliency of the model, that health care – the chiropractic care is essential to health care, but not just because I say it, because our patients need it. Our patients are coming in. The patients are coming in from the promotions. They’re coming off freezes. They truly see this as essential for them. And of course, that gives us comfort with this model going forward.

Sure. I don’t know if this was mentioned before, but just on – in terms of COVID-19 for whether it’s your franchise owners, the corporate-owned clinics or the chiropractors that you employ, what has been the level of positivity? Or what’s been the level of positive tests? How many of your employees and then how many of the franchise owners’ employees, particularly at the chiropractic level, have contracted COVID-19?

It’s a great question. As a straightforward number, I don’t have that. I can certainly know how many have got it within our corporate office and within our – with our own corporate network. What I would say is that we definitely have seen it. We’ve seen a few cases in our corporate office. Our corporate office is relatively closed. We’re in Phase 1, we call it. So there’s only – normally, we’d have 50 people in the office here and that we are only allowing 10% – 10 people in the office any given time, and we have a series of procedures that we put in place to protect the staff. On our corporate level, again, not a significant number, but yes, that we have had doctors and wellness coordinators who have tested positive. We’ve had patients who’ve called in, and said to us, I just got tested positive. We sought all the local health procedure or the local health authorities on how you proceed when you have these positive cases. And so it’s happening out there, but not to any measurable degree is the way I would say that. And I think on the franchise side, I have a little less visibility into that since these obviously are independently owned and operated businesses, but I think that their experience has been reflected similar to the corporate.

Okay. So even though there’s been some cases, what you’re saying is that it hasn’t had a material impact on your business thus far, correct?

No. And I mean, that’s a very fair statement. I mean with the number of employees or staff or doctors or franchisees who’ve been positive to COVID-19, it has not materially in any way impacted the business.

Okay, great. Thanks a lot. I’ll hop back in the queue.

Thanks, Anthony.

Thank you. [Operator Instructions] Our next question or comment comes from the line of Ryan Kimbrel from Craig-Hallum. Your line is open.

Hey guys, congrats on the quarter. I understand the environment is wildly different right now. But can you talk about the 13 clinics you opened in the quarter and how the current ramp rates of those new clinics compare to your more typical ramp rates?

Sure, Ryan. Thanks for the question. I’ll point to the comment that we made within Peter’s section with kind of the post-COVID example. We opened a clinic in Texas that opened in June. And in June and July, the cumulative sales were $75,000, which is an all-time system record for us. So while that is obviously the record in the outlier, the clinics are starting strong. So again, the resiliency of the model, I think, is the message that patients still need this chiropractic care, and the affordable and convenient way that we’re providing it is resonating. So we are seeing kind of this post-COVID environment with strong starts.

Okay, great. And then maybe if you guys could provide some color on the success of the free trial program in June. And then as a second part, I guess, we’re seeing sort of a second wave of sorts across the country in terms of COVID cases. I guess, if you could provide some color on what you’re hearing from customers and sort of the differences between customer behavior during the initial onset of COVID in March and compared to sort of what you’re seeing today, that would be great.

Sure. I’m going to start with your second question, kind of the customer behavior, as it started in March and how it is today. And what – and we talked a little bit about this on the earlier quarter call is that what was interesting is that our attrition rate, and that’s the rate in which our members drop – remain steady or dropped during the COVID, the initial part of the COVID pandemic through to today. And so we’ve seen a consistency in that attrition rate. And I would have expected, quite frankly, that we would have seen an increase. Now we did see an increase in freezes, but it was not translated into attrition or drop. So I think people canceling their membership. And that while we may see a little bit more of that as we go forward, but the messages then is that they – we have not, in fact, seen an increase in attrition to date. We have also, as I already talked on the call, seen during this period, in particular during the June month promotion, an increase in the conversion rate. And again, I think that’s reflective of those patients who are actually opening that door for the first time, are really in need of our services and that they’re converting at a rate historically that we have not seen before, which is, again, very positive. The one area that we had seen a particular drop in one of the key metrics that we measure, especially if we go back to Q1, was, in fact, our new patient counts, which also makes sense to me because if you’re a new patient, you’ve never been to the chiropractor or you’ve never been to The Joint, and that you’re in the middle of a pandemic, and you realize, wow, how much pain do I have to be in before I’ll open that door and try out this service. So our existing patients who knew what to expect, they’re getting the e-mails and the text in terms of our increased sanitization and cleanliness procedures, they’re coming in and being comforted. But if you’re new to it, you don’t know what to expect, and so, I can see the reluctance of not coming in. And so that was really the purpose of both those two promotions. One, the freezes, which we talked about, 22% of our patients that froze came out of freezing from that promotion by giving them a discount on their first month membership. And then quite frankly, the June promotion was – exceeded our expectations. That if we look at – we measure our new patients count per month on average across the board. And as I said in my remarks, is that when we looked at the June new patient count average across our system, it was nearly – it was almost the best month we have ever had in new patients. There’s one month earlier in 2019 that actually beat it by like half a patient on average across the network. So that the impact of that new promotion was quite solid. And then what was interesting, not only were they coming in, but they were converting at a higher rate, which makes them members. So, okay, yes, we gave away the $1.7 million in the initial patient visit, but what we’re seeing is that, that connection is they’ve joined as a member and then stay with us going forward. So I would say that both promotions were – achieved and were exactly what we’re hoping them to do, is to help unfreeze our patients maybe a little earlier than they would have and to bring new patients into the door that hadn’t been there before. And as we talked about it, is that you’ve got all these new people coming in, are working at home, in pain, all these challenges they’re facing. And it’s making them, I believe, more open to that conversation of trying chiropractic care than we’ve ever seen before.

Great, thanks for taking the questions, and congrats again.

Thank you.

I’m showing no additional questions in the queue at this time. I’d like to turn the conference back over to Mr. Holt for any final comments.

Thank you, Howard, and thank you all for your time today. Please note that we plan to participate virtually in the Lake Street Best Ideas Growth Conference and LD 500 later on this quarter. Typically, I’d like to end the call with a patient story. And today, the patient is from Portland, and I’m quoting, "Right before COVID, I flew a lot for work, and it triggered an old back injury. When shelter-in-place started, and I was working from home, I was in a lot of pain. However, I was worried that where could I go to get treatment. My friends recommended The Joint. With their sanitary protocols and masks, I felt comfortable getting adjustments. I’ve continued treatment, and my pain is significantly improved. With my pain nearly gone, I’ve been able to work at home – work in my home office, exercise and garden." So thank you and stay well adjusted.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Stay safe.