The Joint Corp. (NASDAQ:JYNT) Q1 2022 Earnings Conference Call May 5, 2022 5:00 PM ET
Company Participants
David Barnard – LHA Investor Relations
Peter Holt – President and Chief Executive Officer
Jake Singleton – Chief Financial Officer
Conference Call Participants
Jeremy Hamblin – Craig-Hallum Capital
Brooks O’Neil – Lake Street Capital
Jeff Van Sinderen – Barclays
Operator
Ladies and gentlemen, thank you for standing by, and welcome to The Joint Corp. Q1 2022 Financial Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded.
I would now like to hand the call over to your first speaker today David Barnard, LHA Investor Relations. Please go ahead sir.
David Barnard
Thank you, Alexander. Good afternoon, everyone. This is David Barnard with LHA Investor Relations.
On the call today, President and CEO, Peter Holt, will review the first quarter 2022 performance metrics and provide an update of the business. CFO, Jake Singleton, will detail our financial results and guidance, 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 https://ir.thejoint.com/events.
Today, after the close of the market, The Joint Corp. issued its financial results for the quarter ended March 31, 2022. 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; inflation, exacerbated by COVID-19 and the current war in Ukraine are 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; our inability to identify and recruit enough qualified chiropractors and other personnel to staff our clinics, due in part to the nationwide labor shortage, short selling strategies and negative opinions posted on the Internet, which could drive down the market price of our common stock and result in class-action lawsuits, our failure to remediate the current or future material weaknesses and internal controls of our financial reporting, which could negatively impact our ability to accurately report our financial results, prevent fraud, or maintain investor confidence and other factors described in our filings with the SEC included in the section under Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 14, 2022 and subsequently filed current and quarterly reports. 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 the 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. They 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 then 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 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, it is my pleasure to turn the call over to Peter Holt.
Peter Holt
Thank you, David. And I welcome everybody to the call. During the first quarter of 2022, we continue to drive growth of our retail-based chiropractic clinic concept. We opened new franchise and company-owned or managed clinics bringing the total to 736 at the end of March 31, 2022 with our corporate portfolio reaching the 100 clinic milestone. In addition year-to-date, we’ve acquired two regional developer territories, which support our corporate clinic growth strategy.
Throughout the year to advance our growth, we intend to execute on three enterprise initiatives, forging the chiropractic dream by offering the best career path for chiropractic and the doctors of chiropractic, harnessing the power of our data by leveraging our new CRM platform and accelerating the pace of clinic growth through continuous improvement of our comprehensive franchise sales and clinic opening strategy.
Guided by this strategic plan of action, we believe that we’re well positioned to achieve our goal of 1,000 clinics in operation by the end of 2023, creating the foundation for continued future growth.
Before I go into greater detail, I’d like to welcome our new investors and summarize our investment rationale. The Joint is revolutionizing access to chiropractic care. Located in convenient retail settings, our clinics provide concierge-style, membership-based services. Patients benefit from attractive pricing and convenient hours without the need for insurance or appointments.
Our growth strategy is to build our brand, increase awareness of the efficacy of chiropractic care, deliver an exceptional patient experience and open more clinics. We’re already the largest, most recognizable provider of chiropractic care in this country. And yet we account for approximately 2% of this highly fragmented, nearly $18 billion chiropractic market. As such, we have a significant opportunity to continue to increase our market share as we further refine and expand the market itself.
Turning to Slide 4, I’ll review our financial highlights, later Jake will discuss in the results in detail.
For first quarter 2022, compared to first quarter 2021, system-wide sales grew $98.8 million, increasing 27%. Our comp sales for clinics have been open for at least 13 full months, grew 15%. Revenue increased 28%. Adjusted EBITDA was $1.8 million, reflecting macroeconomic conditions as well as expected margin compression from the recent corporate greenfield openings. And at March 31, 2022, our unrestricted cash was $18.3 million compared to $19.5 million at December 31, 2021.
Turning to Slide 5, let’s review our portfolio. Regarding the clinic expansion, during Q1 2022, we opened 31 clinics, up from 13 clinics in Q1, 2021. Of the 31 opened this quarter four were greenfield clinics and 27 were franchise clinics, which is the highest number of franchise clinics opened in any given first quarter. Also during Q1 one franchise closed compared to none last year, same period. The Joint continues to have exceptionally low closure rates of less than 1% annually. Three of our greenfield clinic openings in Arizona, California, New Mexico reinforced our strategy for enlarging our presence in corporate clusters. Our fourth greenfield clinic opened in MacDill Air Force base in Tampa, Florida, which is the second clinic opened as a part of our agreement with the Army & Air Force Exchange Services to install our clinics on a military basis and provide chiropractic care to our members of the military and their families.
In summary in March 31, 2022, we had 736 clinics in operation consisting of 636 franchise clinics and 100 company-owned or managed clinics, and maintain the same portfolio mix compared to December 31 with 14% corporate clinics and 86% franchise clinics. At the end of the quarter, we also had 278 licenses in active development, similar to the 283 at December 31, 2021. This metric continues to demonstrate the strong pipeline for franchise clinic openings and reflects both the accelerated number of franchise openings as well as the ongoing increased interest in our franchise system.
Turning to Slide 6 we’ll review our regional developer strategy and our franchise license sales. In Q1 2022, we sold 22 franchise licenses of which RD sold 77%. This compares to 26 franchise license sales in Q1 2021 of which RDs were responsible for 81% of the sales. We continue to attract sophisticated, well capitalized franchisees and our overall performance proves that our RD system accelerates growth. We employ these regional developers to identify, vet and help manage franchisees, which leverage their knowledge and lowers our direct cost.
RDs are responsible for – RD responsibilities are extensive, including oversight and assistance with franchise sales, site selection, clinic buildout, landlord relations, training, marketing plan implementation and co-op formation.
That said, in certain circumstances will acquire mature RD territories to benefit from related economics and to other occasions we’ll acquire RD territories for those who choose to leave the system for financial or personal reasons.
Year-to-date, we acquired two RD territory rights. In March for $250,000 we acquired the Northern New Jersey region. This newer territory represents the right to manage four existing franchise clinics, as well as the opportunity to expand our recently established cluster and open additional franchise in corporate clinics in the area.
In April, for $2.4 million, we purchased the RD rights for Northern California. Our demographic modeling indicates that we have potential for 75 clinics in the area. Already we have 20 franchises in operation and 36 licenses that have been sold are in an active development, which leaves room for another 19 sites for future corporate or franchise clinic development.
As of April 1, we had 19 RDs that support 66% of our clinics and their territories cover 55% of the metropolitan statistical areas or MSAs. Our aggregate 10-year minimum development schedule for the new RD territories established since 2017 is 642 clinics as of April 1. Keeping in mind that that portion of these clinic closures are already opened, but the remaining unopened clinics still provide a large foundation to fuel our continued clinic expansion of those growth.
Turning to Slide 7, let’s review our marketing efforts. In Q1, we further increased our investment in higher level brand advertising, fueled by our growing National Marketing Fund, as well as our regional co-ops. Our growing buying power has increased access to more sophisticated marketing programs to reach our target audience in individual trade areas. We continue to innovate by testing new tactics in video marketing and social media, and our public relations efforts are driving hundreds of millions of earned media impressions every month. All these efforts are building our brand and increasing our name recognition in the mass market.
We rely increasingly on our digital marketing efforts to reach prospects and drive new patients to our clinics. In fact, according to our most recent attribution in Q1, over 63% of our new patients were influenced by our online marketing activities at some point in their journey to The Joint. We know that younger consumers lean heavily on Dr. Google and other websites with their healthcare education and validation. And while traditional chiropractic patients skew female and older, our patient base is an even gender split with a median age of just 36 years old with 61% of our patient base from the Gen Z and millennial generations.
In the development of management of our online marketing strategy, one challenge we often navigate is adapting to Google’s frequent changes in their online search algorithms. Even small changes can have implications on The Joint’s online search visibility and require changes to our search engine optimization activities and best practices. The algorithm changes Google made in late 2021 negatively impacted our organic search traffic. While suppressed in Q1, our new patient acquisition remains exceptionally high when compared to historical levels. We’re in the process of implementing additional changes to our search engine optimization activities that we believe will boost our organic search traffic and further improve our patient acquisition.
Turning to Slide 8, I’d like to review our initiative to improve our technology infrastructure. The global environment, including increased political uncertainty and cyber risk, reinforces our decision last year to have moved away from our homegrown IT platform to the Sugar CRM solution designed with security and mitigation capabilities. We continue to improve upon our initial CRM implementation, focusing on process efficiency and enhancing the patient experience. We’ve completed the work for a conceptual design of the patient portal. And to harness the power of our data we’ve engaged an outside partner and then begun the work onto the design of our enterprise data warehouse. These critical initiatives will continue to significantly impact the way that we use our data and run our business.
And with that Jake, I’ll turn it over to you.
Jake Singleton
Thank you, Peter. and turning to Slide 9. Before I review the quarterly financials, I’d like to close the discussion on 2021 and review the impact of the changing market conditions in 2022.
Regarding the 2021 material weaknesses related to our internal controls, we have begun the process of remediation. Internal controls have been designed and implemented. They will be tested for operational effectiveness over the next couple of quarters and we expect the process to be concluded by the end of 2022. We, like the rest of the country, have been impacted by the larger macroeconomic issues, such as inflation, rising interest rates and the tight labor market. These dynamics have contributed to higher turnover and rising labor costs. While we cannot control all of these issues, we have taken steps to be an employer of choice. As discussed in Q4, we raised the starting in average salary of our doctors of chiropractic or DCs.
Regarding our wellness coordinators, over the past year, we have increased the complexity of their job responsibilities, which has led to increased turnover.
In addition to the DC and WC, we had significant turnover in our field support. As such in Q1, we redefined the roles and started adjusting their compensation accordingly during.
During Q1, our new clinic opening ramps continued to outpace historical averages. However, based on external macro factors, both build out and operating costs have increased. In addition, the speed and magnitude of the accelerated greenfield openings and acquisitions warranted additional resources to manage this increased activity. To improve our corporate portfolio oversight, we’ve added operational support outside the four walls of the clinics and expect to bring the corporate portfolio back to its strong trajectory.
Regarding new patients at existing clinics, we encountered two challenges during the quarter. As Peter noted, Google’s changes to their online search algorithm had a negative impact on our digital marketing and consequently our new patient acquisition in Q1. We’ve implemented modifications that we believe will address the situation.
Further, another COVID strain combined with continued labor pressures, caused some temporary clinic closures. The temporary closures may have also impacted new patient count for the quarter.
That said, our expansion strategy continues. As noted in Q1, we opened a record number of franchise clinics and four more greenfield clinics, in addition to the 14 in the second half of 2021. With 18 recent greenfield openings increasing the company-owned or managed portfolio to 100 clinics and the previously outlined macroeconomic factors, it was identified that additional resources would be necessary to operate a portfolio of that size and continue development at the current pace. These additional expenditures, as well as continued labor pressures, contributed to the corporate clinic performance in Q1 2021. Even with this near term effect, we’re confident that these changes will allow us to appropriately manage the portfolio back to the same long term profitability of this sound business model.
Now I’ll review the financial results for Q1 2022, compared to Q1 2021. System-wide sales for all clinics open for any amount of time increased to $98.8 million, up 27%. System-wide comp sales for all clinics opened 13 months or more were 15%. System-wide comp sales for mature clinics opened 48 months or more were 11%. Revenue was $22.4 million, up $4.9 million or 28%. Company-owned or managed clinic revenue increased 33%, contributing $12.6 million. Franchised operations increased 22%, contributing $9.8 million.
Please note that while we implemented a new price schedule for new patients, existing patient subscriptions were grandfathered at their original price. Therefore, the impact of the price increase to our revenue will be gradual and incremental with the addition of new patients.
Cost of revenues was $2.3 million, up 31% over the same period last year, reflecting the increase in greenfield and franchise clinics, the associated higher regional developer royalties and commissions and higher website hosting costs related to the new IT platform.
Selling and marketing expenses were $3.3 million, up 32% over the same period last year. This reflects the grand opening expenses for new greenfields, the larger number of franchised and company owned or managed clinics and the timing of the National Marketing Fund spend, as well as the new brand campaign.
Depreciation and amortization expenses increase compared to the prior year period, primarily due to the depreciation expenses associated with our new it platform, amortization of previously acquired intangible assets and continued greenfield development.
G&A expenses were $15.4 million compared to $10.1 million up 52%. Reflecting the cost to support total clinic and revenue growth, higher payroll to remain competitive in the tight labor market, greater IT expenses and $600,000 and onetime increased audit and professional service fees related to the incremental services rendered in connection with the FY’21 audit conducted during the quarter. As noted last quarter, our rapid pace of greenfield openings will increase G&A as a percentage of revenue over the next several quarters. As a result, we reported an operating loss of $176,000, which reflects the compressed margins from accelerated greenfield development, the aforementioned higher depreciation and amortization expenses, and the higher G&A expenses. This compares to $2 million in Q1 2021.
Income tax expense was $13,000 compared to a benefit of $364,000 in Q1 2021.
Net loss was $206,000 or $0.01 per diluted share, compared to net income of $2.3 million or $0.16 per diluted share in Q1 2021.
Adjusted EBITDA was $1.8 million decreasing 48% compared to the same period last year. Franchise clinic adjusted EBITDA increased 19% to $4.6 million. Company-owned or managed clinic adjusted EBITDA was $1 million, a decrease of $1.6 million reflecting the increase in payroll required to remain competitive in the tight labor market, compounded by the margin compression related to the greenfield development.
Corporate expense as a component of adjusted EBITDA loss was $3.7 million, increasing $842,000 compared to Q1 2021, reflecting one time overages in audit and legal and other professional service fees related to the year-end audit.
On to our balance sheet and cash flow review. At March 31, 2022, our unrestricted cash was $18.3 million compared to $19.5 million at December 31, 2021.
During the quarter, the company entered into an amendment to its credit facilities with JP Morgan. Under the 2022 credit facility, the revolving line of credit was increased to $20 million up from $2 million. The revolver will be used for working capital needs, general corporate purposes, and for acquisitions, development and capital improvement uses.
During Q1 2022, our investing activities of $1.5 million consisting of the acquisition of RD territory rights and greenfield developments, were partially offset by $448,000 provided by operating activities.
On to Slide 10 for a review of our guidance for 2022. To reflect the impact of the macroeconomic environment and the impact of increased expenses as outlined, we’re adjusting our 2022 revenue and adjusted EBITDA guidance. We reaffirmed our guidance for franchise clinic openings and company-owned or managed clinics.
We now expect revenue to be between $98 million and $102 million, down from between $102 million and $106 million in our prior 2022 guidance. This reflects an increase from the $80.9 million in 2021 with the midpoint equal to 24% increase over the prior year.
We now expect adjusted EBITDA to be between $12 million and $14 million, down from $15 million to $17 million in our prior 2022 guidance. This compares to $12.6 million in 2021.
We continue to expect franchise clinic openings to be between 110 and 130 as compared to 110 in 2021. We continue to expect to increase our company-owned or managed clinics by between 30 and 40, through a combination of greenfield openings and franchise clinic purchases, as compared to 32 in 2021.
And with that, I’ll turn the call back over to you, Peter.
Peter Holt
Thanks, Jake. Turning to Slide 11, our growth strategy is to enlarge our presence to accelerating the opening of franchise clinics. We’ll also continue to open corporate clinics in existing clinic clusters by strategically opening greenfield and opportunistically acquiring previously franchised clinics. In 2022 to support this effort, we are focusing on three enterprise initiatives. During the first quarter, we’ve made progress.
Regarding forging the chiropractic dream, we’ve revamped our recruitment marketing materials and enhanced our messaging to better connect with candidates to become DCs. With the easing of COVID restrictions, we were able to participate in five like live chiropractic industry and university DC recruitment events. And we remain focused on developing new programs aimed at chiropractic students who are the future of the profession, along with the continuing education opportunities that appeal to established working DCS.
Regarding harnessing the data – harnessing the power of our data while remaining critically focused on improving and enhancing our access platform, we’re excited to launch our enterprise data warehouse initiative to enable more real-time self-serve more real-time self-serve reporting capabilities for a corporate office in the field, making our data more accessible and actionable by all decision makers.
And regarding the accelerating the pace of our clinic growth, we’ve discussed real estate optimization and development team innovation. In fact, we’ve shortened our development time line with new tools and training and are adding staff to our real estate and construction team that will enable us to move faster. In Q1, we opened our second clinic on a military base, as well as advance our strategy for targeting nontraditional sites such as micro or urban markets. Additionally, with the strong patient base from Canada within the U.S. operations, we’re exploring the feasibility of expanding to Canada.
We have our near-term goal set to open 1,000 clinics by the end of 2023, and this is just a tipping point. Already, our analysis comparing our actual patient demographics to MSAs across the U.S. indicates that we have a potential for almost 2,000 clinics, and this does not include the opportunities that we can create by expanding our business model to rural, urban, micro, military and even international locations. I’m confident in our ability to drive long-term growth and stakeholder value.
Alexander, I’m ready to begin the Q&A.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] We have your first question from Jeremy Hamblin with Craig-Hallum Capital. Your line is open.
Jeremy Hamblin
Thanks. I wanted to just get into the understanding of the cadence of the quarter. Obviously, you’ve seen a pretty significant change in the trends in inbound traffic, which sounds like some of it might be struggles with having enough docs, but it probably is more than that. So I wanted to get – first, how did January versus February versus March versus April look?
And then in terms of whether or not the slowdown in trends is more attributable to, let’s say, an overall slowdown in retail traffic, given your leverage to power centers and retail centers. How much of an impact from the price increases that was taken on March 1? I wanted to just get a better understanding of what you think is maybe transpired here?
Peter Holt
Well, Jeremy, you’ve got about 15 questions packed into that question and there’s a couple of things there. And you’re right as we reflect on Q1 performance that we did talk about the challenges in the labor market, but quite frankly, that was more related to our WCs and infill training. I think that the increase that we had on the DCs last fall has really helped us to retain the doctors that we have. So if I look at our turnover rate for the last three months in Q1 and compare that to the turnover rate of Q1 2021, it’s 50% better. So this quarter was like 26% turnover for our doctors compared to over 52% in Q1 2021. So I think the changes we made last fall on the doctors is really helping.
Now listen, our whole concept rests on doctors and so we know that we constantly have to be focused on recruiting and retaining the best doctors and that’s why that’s one of our enterprise initiatives.
But I think when I look at Q1 performance, we saw a very significant turnover in our WCs and then in that field that supports those now 100 clinics. And I think that’s closer to the impact of this kind of general resignation, this very tight labor market, people moving on because they can get better wages. I think we’re all in the retail sector specifically facing that kind of pressure and we have not been immune to that.
So I think those are the at least from the labor issues that we saw in 2021 and that turnover of that WC and those field support did, I think, impact our overall performance of the portfolio. We did see a little bit of a softening of our new patient count, which of course is the fuel of the business. And as we talked about on the call, I think, that was directly related to the algorithmic changes that Google made. We have an incredibly sophisticated digital marketing campaign. And as I said in my comments is that we’ve kind of tried to understand the attribution of those new patients.
At some point in that process, 63% of them are touched by our digital marketing campaign. So when you have some of the significant changes that were made to those algorithms that were drawing people into the clinic that had some impact for us in Q1.
Now we’re making some big changes in trying to address the way in which we are managing our SEO strategy that we believe will again offset those changes that Google made in the algorithmic formula.
I think you’re right like so many service sector concepts out in the market today is that this macro environment has in fact impacted us as well. And it’s hard to kind of measure exactly what that is, but I think that there is a concern about the war in Ukraine. The inflation is higher than it’s been in 40 years, that kind of consumer confidence. And I think it does give all of us a pause. I think that ultimately that we’ve shown ourselves in that short period during the pandemic that we are a very resilient concept and we expect that to continue to be true, but it’s also factors that we’re all in this retail environment trying to understand and adapt to.
I don’t know, Jake, if you have anything more to add to that?
Jake Singleton
No, I think you covered a lot of the points.
Jeremy Hamblin
Well, I think my first question was actually pretty simple with the cadence of like the 15% system-wide comps that you posted in the quarter, I wanted to see if you could shed a little more light on the cadence of that because my sense is that things probably really slowed in February and March. And I want to get a sense of how that’s compared to April as well. But any color you could share there would be greatly appreciated.
Jake Singleton
Yes. I mean it kind of depends on the KPIs that we’re looking at. As I look at new patient interest, the waiting months for us were actually January and March. And I think those could be different factors potentially. We had a large spike of the Omicron variant in January, which could have impacted that and then in March, I think, we were starting to see some of the real impacts of the search engine changes. February was relatively on par year-over-year.
So as we look at that, as I look at comps, I think, we started the year with a headwind. Our January results were a little bit lighter and we’ve kind of slowly made up some ground. In the overall system, our corporate clinics kind of did the opposite in terms of experiencing some of the headwinds.
So I think there was different factors that contributed in terms of cadence depending on which metric you look at.
Jeremy Hamblin
Okay. And last one for me because I’m not quite sure we’re getting at the root of it. But in terms of your guidance for the year, the lower guidance $4 million top line at the midpoint, is that – it looks like that’s basically assuming the performance that you had in Q1 kind of translate through the rest of the year without a whole lot of improvement nor a whole lot of decline. Is that a pretty fair assumption?
Jake Singleton
Yes. We have a lot of consistency in terms of the increasing performance throughout the year, right? We’ve continued to post strong organic comps, 15% for the year so far quarter-to-date. And as we look at some of the uncertainties out there, we certainly factored in those elements as we look at forward guidance for the full year. And so we reaffirmed our clinic opening guidance, which is a slight acceleration in terms of pace. But there are those macro uncertainties that, I think we have to acknowledge. So all of those have been factored into the full year 2022 estimates.
Jeremy Hamblin
All right, thanks guys, I’ll hope out of the queue.
Operator
We have your next question from Brooks O’Neil with Lake Street Capital. Your line is open.
Brooks O’Neil
Good afternoon guys. I’m going to try to keep it as simple as I can. What are your feelings about the slowdown in the performance of the corporate stores and what do you think the key to getting those back on track are?
Peter Holt
Brooks, an excellent question and it’s really kind of the things that we’ve been talking about. I think that there are a couple of factors that impacted the slowdown in particularly the corporate clinic performance and probably the most significant one was the higher turnover than expected with our WCs and our field support. Is that when you have that turnover and those are the people who are really driving that line performance and that WC is essential in the clinic. There’s only two people in the clinic typically so you have that WC and a DC and so they play a significant role. And while we had been really focused on making sure we were taking care of our doctors, I don’t think we paid enough attention to these other two levels.
And that’s why we have added additional resources, we’ve changed the onboarding process, we’re doing a home mentoring program. I absolutely believe that with those changes, we can pull that performance of our corporate portfolio back up to the high standard that it’s had. I think that now at 100 corporate units in operation, that’s a lot. And there’s probably a little growing pain there as well and that we’re learning from that or making those adoptions or adaptions so that we make sure that we absolutely continue that trajectory of improved performance. So I think quite frankly, those are the key issues that I would discuss.
Brooks O’Neil
And then I’ll just ask one more. How do you feel about available capital and do you see any scenario in which you’d need to go out and access additional capital beyond what you feel you have access to now?
Jake Singleton
Yes. We ended the quarter with $18 million of unrestricted cash. We also re-upped the revolver with JPMorgan, which really expanded that line up to $20 million. Of which, right now we’ve only pulled down $2 million. So as I look at overall liquidity, I’m confident that we still have the operational cash flow and the additional resources on hand. So I don’t envision us having to go that route.
Brooks O’Neil
Great. Thanks for taking my questions.
Peter Holt
Thank you.
Operator
We have your next question from Jeff Van Sinderen with Barclays.
Jeff Van Sinderen
Hi everyone. Just wanted to follow up. Jake, did you say that the – I think you mentioned quarter-to-date performance, did you say it was continuing comps at up 15%? I wasn’t clear on that.
Jake Singleton
Yes. I was just mentioning our comps for the first quarter were 15%.
Jeff Van Sinderen
Okay. I thought you were saying quarter-to-date for Q2.
Jake Singleton
No, no, no. For the first three months, our comps were 15%.
Jeff Van Sinderen
Right, okay. All right, fair enough on that. And I’m assuming you probably don’t want to give any color on comps for April or any guide on where comps might be for Q2?
Jake Singleton
No, not at this time.
Jeff Van Sinderen
Okay. And then maybe we can just turn to the greenfield clinics that have been recently opened, what you’re seeing there, how you’re seeing those come on board? Just any color you can give us on those?
Jake Singleton
Sure. We’ve done four in the first quarter, three of which were within existing clusters and then we had the Air Force location. As we mentioned, the top line ramps look good. Our clinics continue to start strong. We have a very strong grand opening program that’s in place. So we’re continuing to see the traction on the top line. I think where the headwinds are now from an overall time to breakeven are just the operating costs are increasing. And so while they’re still ramping on the top line well, I’ve got additional payroll costs and payroll in our model is such a significant piece of that and you’ve got significant wage pressures that’s going to increase your time to breakeven. But on the top line, our clinics continue to outperform historical averages and are on pace with some of our previous cohorts. So the top line looks good and it’s just our cost structure is increasing.
Jeff Van Sinderen
Okay and then following up to that – sorry go ahead.
Peter Holt
No, I was just going to add. One of the offsetting things that we talked about as well, which is why we did that price increase, was to use our price increases to offset some of the increasing cost to operate the business both for corporate and franchises. Again that’s going to be incremental and coming on in an impact that only affects new patients. But we think that that’s another tool that we have there that will help us overcome some of the challenges with this increasing cost of the model.
Jeff Van Sinderen
Well, and that’s another point I wanted to ask you about. Just I guess how are you approaching price increases? At this point what are you seeing? Is there a pushback at all from new patients? I guess maybe that’s early to really have a gauge on that. I guess just trying to understand how those are being received and plans going forward on price increases where you haven’t implemented them, where you might or just how you’re thinking about that with a consumer backdrop of inflation, et cetera?
Jake Singleton
Sure. I mean with the price increase going into effect March 1, I think, the answer as of now that it’s probably still a little early to tell. Obviously we’re carefully monitoring KPIs. Our conversion in the first quarter was down a tick, but I don’t know that we can attribute that fully to the price increase. Again when you have so much turnover at your wellness coordinator level, they’re a key component to that process and that sales cycle. And when you have a turnover at those ranks, you would expect an impact there to that core KPI.
–
As far as the pre-buy or anything we’re seeing in continuing KPIs, we’re not seeing a ton of softness there. So I think so far everything we’re seeing is pretty similar to our previous price increases, but I think it’s a little early to tell the full effects.
Jeff Van Sinderen
Okay.
Peter Holt
But promising. I mean just in the one month of that price increase that we can see is that, as Jake is saying, nothing is outstanding. Nothing is sitting and saying wait a minute, the consumer is pushing back on the price. I think that poor consumer is experiencing price increases about just anything that they touch these days.
Jeff Van Sinderen
Yes, exactly. Okay. And then I wanted to just broach one other subject and then I’ll turn it over to somebody else. But I’m just wondering as you’re thinking about franchisees, I know you mentioned most of them are well capitalized, any thoughts around potentially bringing on a third-party financial partner to support financing of franchising new clinics? Just any thoughts on that, out of the question or just any thoughts there?
Peter Holt
Jeff, listen, the whole franchise model is based upon financing. And so anytime that you can improve the financing access to your franchisees is only going to benefit the system and the franchisee. And so while we do not provide any direct franchising – excuse me, any direct financing to a franchisee, we’re continually working with third-party providers out there and working with them so that we get kind of preapproved as a concept. And just given the strong unit economics that we have is that the lending institutions really like The Joint as somebody to lend to.
And in fact Brand Data [ph] just came out with – every year they have an award that they give to, it’s called FranFund [ph] and that we were awarded now two years in a row just given the strong financials that we have that provides the opportunity for lending and compared to all the other franchisors that are out there.
So we have strong new economics, they are attractive to the lenders. We are continually looking at ways to make sure that that capital is available to our franchisees for further investment. And as we’ve talked about in the past that if you look at in general, let’s say from 2018 to today, is that 52% of our system-wide sales were to new franchisees, new to The Joint; but 48% of them were to existing franchisees. And so it’s the existing franchisees who believe in the system, that understand the business model that you absolutely want to make sure that they are able to have access to capital to further expand to their desire.
Jake Singleton
Yes, the only thing I would add to that…
Peter Holt
Go ahead, sorry.
Jake Singleton
The only thing I would add to that is a pool of funds that we’re looking at is what we’re calling a fund to really help the doctors of chiropractic secure financing and so giving them a path to ownership within this model and looking for institutional partners to partner with us really to help them. So again just looking at ways to continue the career progression for our chiropractors.
Jeff Van Sinderen
Okay. And if I could just squeeze in one more just on that. As you’re thinking about higher rates out there, I mean for anybody who is borrowing to open more franchises, are you thinking that there may be a slowdown in new franchises opened because of the higher interest rates in association with opening franchises?
Peter Holt
Jeff, it’s certainly possible I mean because – okay, I’ve been at this franchise business for 35 years so that means that I have – I wasn’t here 40 years ago when we were dealing with this massive inflation and how that impacted franchise sales. But I think that your sense is right is that as the cost of borrowing goes up, whether you’re trying to borrow for a house or borrow for a business, it becomes more expensive. That window closes a little bit on those who are able to be in that market. And I think that certainly I would imagine will be having impact on franchisers across the board as well or franchisers borrowing.
Jake Singleton
Yes. The only thing I would add to that is I think a mitigating factor for us is just the overall cost to build, right? When you’re looking at a build-out cost in our model of call it $200,000 compared to other concepts, that’s relatively lesser. So as I think about the overall impacts to interest rates on lending and what they might need to acquire to invest within our concept, the simplicity and the size of our build-outs, I think, would be a potential mitigating factor to that.
Peter Holt
Absolutely.
Jeff Van Sinderen
Okay, thanks for taking my questions. And best of luck.
Operator
[Operator Instructions] We have your next question from Anthony Vendetti with Maxim Group.
Unidentified Analyst
Hi. This is Matt on for Anthony Vendetti. Thanks for taking my questions. I was hoping if you could comment on any trends you may be noticing in terms of patients not renewing memberships or canceling memberships? Are you getting the general sense that budgets are tightening? And then I think you mentioned that you’re exploring the feasibility of expanding into Canada. If you could just comment a little bit further on that in terms of what that would look like and the timing. Thanks.
Peter Holt
Sure. Great talking with you Antony. And if we look at the key metrics of the business, they really are new patient counts, that conversion rate and then attrition. And what I can tell you in the first three months of our business what we saw, as we talked about on the call, is that we did see a drop in our new patient count and we said we attribute that to the changes in the algorithmic or logarithms or algorithms of Google and that’s a huge piece to our new patient development.
I mean we still got – there’s other sources for new patients. One of them is referral and so if you just get a good service, it’s very often you’re going to tell friends and family and that’s a significant portion of our new patients. But the digital marketing campaign is increasingly more important. And so that was the first metric that’s been – again we still have some strong patient counts, but not as strong as we saw let’s say in than Q1 2021.
The second metric that we’re looking at is our conversion rate and again, as Jake had mentioned, that we’re seeing a little drop in that. And so that’s just more people not – they may come in, they try the service and they’re just not buying that membership. The one metric that we’re seeing improve is that’s our attrition. And I think what we’ve seen in Q1 is that our attrition rate has improved not massively, but it’s definitely been a reasonable improvement in saying that our patients are staying with us longer. So those are the three metrics that we’ve watched and the impact we’ve seen go through Q1.
Your question about Canada is that we believe Canada can be potentially a really good market for us. With what we know as we think about international expansion is that we wouldn’t even consider a country that doesn’t already have a strong chiropractic tradition just because obviously just think about the resources required to educate a consumer that has no expertise or experience or knowledge of a chiropractic and we’re coming in and saying hey, here is our revolution of access.
But when you look at the Canadian market, it does have a very strong tradition for chiropractic usage. Interestingly enough, the national health care system there does not cover chiropractic care. And we look at our base of members in this country and quite frankly, the largest portion of those from outside the United States are from Canada. And not that quite surprising, but it just again gives us the confidence that there is an opportunity to open up in the Canadian market. So we’ve done some additional research. We’re looking at just some of the issues around patient privacy, about those that are managing the system and providing services in a medical environment. And so we’re just doing that due diligence to make sure that our model is functional in that market.
And there’s other markets that we can consider that also have a strong chiropractic tradition like Mexico, but obviously Canada is the most likely market for us to really explore seriously.
Unidentified Analyst
Understood, thanks for the color. I’ll hop back into the queue.
Peter Holt
Thank you.
Operator
[Operator Instructions] We have your next question from JP Roland [ph] with Roth Capital Markets. Your line is open.
Unidentified Analyst
Hi, thanks for taking my questions guys. I think most of mine have been answered already. But one I wanted to just touch on quickly would be the corporate managed clinics. On the guidance of about $30 million to $40 million, I’m wondering if you guys have any thoughts sort of on mix between greenfield and buybacks? And regardless of whether or not you’re willing to kind of share any thoughts on that, I’d just be curious to know if you’ve seen any further opportunities from the challenges with labor over the last year and it’s kind of made you reconsider that mix at all? Thanks guys.
Jake Singleton
Yes, good question. As I look at the overall kind of pro forma ramp for our greenfield clinic, we have seen those labor costs increase, that I mentioned. But I think when you factor in the long-term impacts of the price increase, I think, the top line increased potential would address some of those.
So as I look at the return on capital for a greenfield unit today, it’s still a great use of capital for us. So, there’s nothing there that would indicate we’re going to change our strategy. We had no acquisitions in the first quarter. But as we’ve mentioned, that’s always an opportunistic piece of our strategy and we evaluate those deals as they come through or we do hold the right of first refusal for any deals that are proposed across our system.
So those are things that we look at. It’s certainly a lever that we have to potentially gain some top line revenues or accretive earnings. It’s such a large component of our GAAP revenues now. Those are all things that we’ll continue to evaluate.
Unidentified Analyst
Great. Thank you guys.
Operator
I’m showing no further questions at this time. I would now like to turn the conference back to Mr. Peter Holt, President and CEO, for any closing remarks.
Peter Holt
Thank you, Alexandra. And thank you all for your time today. Next week we’re hosting our National Franchise Conference and we’re so excited to be in person for the first time in three years. The event includes general sessions, workshops and a trade show, all focusing on the improvement of our running of our businesses and as we acknowledge and celebrate the remarkable performance of our franchise community.
We’re inviting you all to our offices in Scottsdale on May 26 for our Annual General Meeting of Shareholders and we plan to present at the B. Riley, Craig-Hallum, Oppenheimer and Stifel conferences in May and June of this year.
And today I’m going to close with comments from a fairly new patient. Tracy, a 53-year-old flight attendant who describes herself as a short person, has said lifting bags into the overhead compartment strains her upper back and shoulders. Tracy finds The Joint drop-in convenience very valuable, especially with her frequently changing schedule. More importantly, she thinks our chiropractics are the best she’s seen.
Tracy notes, a visit to The Joint not only adjust my spine, but it also adjusts my attitude. I feel better. I feel like I’m aligned. It helps me make healthy choices for the rest of the day. It’s just the time I spend on myself. I love that place. Thank you and stay well adjusted.
Operator
Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
