Good afternoon, everyone, and welcome to The Joint Corp. Fourth Quarter and Full Year 2023 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Kirsten Chapman with LHA Investor Relations, The Division of Alliance Advisors. Please go ahead.

Thank you, Jamie. Good afternoon, everyone. This is Kirsten Chapman of LHA Investor Relations, The Division of Alliance Advisors. Joining us on the call today are President and CEO, Peter Holt; and CFO, Jake Singleton. Please note, we are using a slide presentation that can be found at ir.thejoint.com/events. Today, after the market close, The Joint issued its results for the quarter and year ended December 31, 2023. You can find that press release on the Investor Relations section of the company's website. As provided on Slide 2, please be advised that today's discussion includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, may be considered forward-looking statements. Although the company believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, it can make no assurances that such expectations or assumptions will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. As a result, we caution you against placing undue reliance on the forward-looking statements. For a discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please review the risk factors detailed in the company's reports on Forms 10-K and 10-Q, as well as other reports the company files from time to time with the SEC. Finally, any forward-looking statements included in this call are made only as of the date of this call, and we do not undertake any obligation to revise our results or publicly release any updates to the 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 the financial performance. Management believes they provide a more transparent view of the company's underlying operating performance and operating trends than GAAP measures alone. A reconciliation of the 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, which includes contract termination costs associated with reacquired regional developer rights, stock-based compensation expense, bargain purchase gain, net loss or gain on disposition of impairment, costs related to restatement filings, restructuring costs and other income related to employee retention credits. Management also uses commonly discussed performance metrics. System-wide sales includes revenues at all clinics, whether operated by the company or by franchisees. While franchise sales are not recorded as revenues by the company, management believes this information is important in the understanding of the company's financial performance because these sales are based on which the company calculates and records royalty fees and are indicative of the financial health of the franchisee base. System-wide comp sales includes the revenue from both company-owned or managed clinics and franchise clinics that in each case have been opened at least 13 full months and exclude any clinics that have been closed. Turning to Slide 3, it is my pleasure to turn the call over to Peter Holt. Please go ahead, Peter.

Thank you, Kirsten, and I welcome everybody to the call. As we review 2023, I'd like to begin by acknowledging how proud I am of our whole team, our doctors, wellness coordinators, corporate employees, franchisees and regional developers for their steadfast commitment to supporting our patients. In a market of ongoing uncertainty among our patient demographic, we delivered growth in system-wide sales, revenue, adjusted EBITDA, the number of new patients, and the number of patients treated. Also, we improved our patient conversion and existing patient attrition rates. I'm even more impressed as they embraced our enhanced marketing strategies targeted to increasing new patient count and improving existing patient engagement. Our efforts are beginning to gain traction, augmented by our year-end campaign. The Joint is revolutionizing access to chiropractic care by providing portable, concierge-style, membership-based services in convenient retail settings. And this franchise concept remains strong. In fact, there has been significant interest in our refranchising strategy as we announced at the end of last year. We put a thoughtful process in place to ensure that we are getting these clinics into the hands of our franchisees who can most effectively run them. As we move into 2024, we’ve renewed our mission to improve quality of life through routine and affordable chiropractic care, and we’ve advanced our vision to be the champion of chiropractic. Jake and I will elaborate. But first, I’d like to review our 2023 operating metrics. During the year, the doctors of chiropractic at The Joint performed 13.6 million adjustments, up from 12.2 million patient visits in 2022. We treated 1.75 million unique patients, up from 1.6 million in 2022. And of those treated, over 932,000 were new patients, up from approximately 845,000 in 2022. Of our new patients, 36% or approximately 336,000 had never been to chiropractic before visiting The Joint. Our model is literally expanding the market of chiropractic users. Finally, during 2023, our monthly memberships contributed 85% of our system-wide gross sales, up from 84% in 2022. Turning to Slide 4, I’ll review our financial highlights for the full year 2023. System-wide sales grew to $488 million, increasing 12% compared to 2022. Comp sales for clinics that have been open more than 13 full months increased 4% compared to 2022. Revenue increased 16% compared to 2022. Adjusted EBITDA was $12.2 million for 2023, up 6% over last year. At December 31, 2023, our unrestricted cash was $18.2 million compared to $9.7 million at December 31, 2022. Turning to Slide 5, I’ll discuss our clinic metrics for 2023. We opened 114 clinics, 104 franchise and 10 greenfields. This compares to 2022 with 137 clinics opened, 110 franchise and 20 greenfields. We closed 13 franchised and four corporate units, which is less than 2% of our portfolio. This reflects the fact that some of the clinic market conditions changed. For example, a retail center may lose an anchor tenant or other demographic changes impact the viability of the site. Having said that, we’re working on a number of profitability initiatives to improve financial performance of our clinics. We added three previously franchised clinics to our corporate portfolio. At December 31, 2023, we had 935 clinics in operation, consisting of 800 franchise clinics and 130 company-owned or managed clinics. The clinic portfolio mix shifted slightly to 86% franchise, and 14% company-owned and managed from 85% to 15% at the end of 2022. As we execute our refranchising strategy, the portfolio mix will shift more significantly. Regarding our corporate portfolio, while we are no longer proactively pursuing a greenfield expansion strategy, we are actively supporting the three greenfield clinics that are in the process of being opened. We will uphold our various obligations related to their leases and build-outs. Turning to Slide 6, regarding our refranchising strategy, as noted before, many of these clinics are quality assets of high value, and we will allow the necessary time to capture that best value. Our team has prepared the framework for the sale of the majority of our corporate clinics. We have organized units and clusters and generated comprehensive disclosure packages for marketing efficiently. We gave initial preference to existing franchisees and have broadened the net to potential buyers outside the existing Joint community. The majority of our corporate clinics are at various stages of sales negotiations. We intend to sell these clinics to our franchisees who can most effectively run them. Today, we’ve received significant interest with over 100 requests for information. Later this month, we’ll be marketing at the Multi-Unit Franchise Conference in Las Vegas. Ultimately, our goal is to get these clinics in the hands of our best-performing franchisees, generate capital that can be used for many purposes, such as reinvesting in brand marketing, reacquiring RD territories and/or repurchasing stock among other options. Turning to Slide 7, let’s review our franchise license sales. As expected, when we announced our new refranchising strategy, we experienced a slowdown in new franchise license sales. While there will be some franchisees that want to start with a brand-new clinic and continue to purchase new licenses, we expect the speed of new franchise sales to be impacted while the refranchising is in full swing. During Q4, we sold five franchise licenses, bringing the 2023 sales to 55 compared to 75 in 2022. The year-over-year change reflects the continued impact of the higher interest rates, inflation, strong employment rates, in addition to our newly announced refranchising strategy. On licenses sold, 58% were sold to existing franchisees who reinvested in The Joint, reflecting their belief in our business. At year-end, we had 172 franchise licenses in active development. Our marketing efforts, which I'll detail more in a moment, are built to support our nationwide brand-building efforts. Our regional developer strategy remains consistent. We have demonstrated over the past several years that the natural progression of territory development can lead to the reacquisition of certain RD regions, and will continue to execute as criteria are met. We do not plan to add additional RD territories, and as such, over time, we would expect RD share franchise royalty fees to decrease as we acquire those RD rights. We ended 2023 with an RD count of 17, and the aggregate 10-year minimum development schedule for the RD territories is 674. Turning to Slide 8. Let's review our key performance indicators. We've taken great measures to increase our new patient conversion rates, grow new patient counts and lower patient attrition. In 2023 compared to 2022, we improved attrition by 20 basis points to 11%. Also, conversions rose 160 basis points to 52.1%, and we're continuing to work hard to increase our new patient counts. I'll review our marketing efforts related to that on Slide 9. Black Friday and year-end wellness sales were both strong promotions for us in 2023, resulting in new record-breaking totals in several areas. Total sales for the Black Friday packages increased 31% compared to 2022. The annual end-of-year wellness sale helped the patients start the new year with wellness in mind. This promotion enabled our patients to purchase 10 months of membership and receive two months free. Total end-of-year promotional sales increased 21% compared to 2022. In 2024, it's shaping up to be an exciting year for marketing at The Joint led by our new CMO, Lori Abou Habib. We focused on initiatives to drive new patients including increasing our media efficiency by adjusting our channel mix and increasing our working media spend to reach even more prospective patients. This adjusted media mix pairs with our patient strategy to ensure that we're delivering the message of affordable, convenient chiropractic care to those most likely to be consumers. Additionally, we plan new promotions and offers aimed directly at adding new patients. To take advantage of our local differences, we're creating more robust local store marketing programs by providing proven tactics and more nuanced tools for our system. Finally, to ensure that we maximize convenience for our patients, we're testing an initiative to enable initial patient bookings, something that we're learning is important to a subset of our prospective patients. Additionally, we're putting a greater focus on existing and lapsed patient engagement. We will introduce new promotions aimed at reengaging former patients. Moreover, we'll apply our learnings about the patient life cycle to automated messages to retain patients during the critical phases of their journey. In partnership with our marketing co-ops, we're testing new programs and channels to increase our co-op synergies and overall brand awareness. The marketing team has been working hard on expanding the brand's architecture. We continue to evolve our brand positioning and define the brand essence to deepen our competitive advantage. During Q4, we had several workshops to define current consumer perceptions, our target consumers, and unique benefits that we can offer as a brand. More recently, we had an opportunity to work with our franchisees to incorporate their feedback into the process. We're refining language and defining impact areas to leverage this new positioning. We expect these efforts to have a positive impact on our performance in 2024. And with that, I'll turn the call over to Jake.

Thanks, Peter. Let's turn to Slide 10. I'll review our clinic comps for Q4 2023 compared to Q4 2022. System-wide sales for all clinics opened for any amount of time increased to $133.1 million, up 11%. System-wide comp sales for all clinics opened 13 months increased 5%. System-wide comp sales for mature clinics open 48 months or more decreased 1%. Revenue was $30.6 million, up $2.9 million or 11%. Revenue from franchised operations increased 14%, contributing $12.7 million. Company-owned or managed clinic revenue increased 9%, contributing $17.9 million. The increases represent continued year-over-year growth in both the franchise base and the corporate portfolio. Cost of revenues was $2.9 million, up 16% over the same period last year, reflecting the associated higher regional developer royalties and commissions. Selling and marketing expenses were $3.4 million, up 2% year-over-year and down 22% compared to Q3 2023. This reflects our Q4 cost management efforts to offset selling and marketing spending earlier in the year. Depreciation and amortization expenses decreased by $379,000 or 18% compared to the prior year period, reflecting the corporate clinics that are being held for sale as part of the refranchising efforts. General and administrative expenses were $21.3 million compared to $18.3 million, reflecting the cost to support the increased clinic count. These were partially offset by cost control initiatives such as hiring freezes, travel reductions, and the elimination of non-core projects. Loss on disposition or impairment was $1.5 million compared to $50,000 in Q4 2022. The increase is related to our refranchising efforts, which include those additional corporate clinics that were announced to be held for sale in November of 2023. Operating loss was $147,000 compared to operating income of $1.5 million in Q4 2022, reflecting the aforementioned impairment charges. During Q4, we recorded a non-cash valuation allowance of $10.8 million against our deferred tax assets. A valuation allowance is a non-cash accounting entry to record a reserve against existing deferred tax assets. As we mentioned earlier, there is uncertainty regarding the timing of our refranchising transactions. When you introduce uncertainty, the GAAP accounting guidance indicates you should review the potential realizability or our ability to benefit from those future tax assets until such time that those uncertainties are resolved, it’s more prudent to record a valuation allowance at this time. It’s important to know that we still maintain these tax assets and they will be available to utilize in the future as we return to profitability. As a result, income tax expense was $10.9 million compared to $629,000 in Q4 2022. Q4 2023 net loss was $11.0 million or $0.75 per share compared to Q4 2022 net income of $763,000 or $0.05 per diluted share. Adjusted EBITDA was $4 million for both Q4 2023 and 2022. Franchise clinic adjusted EBITDA was up 11% at $6.6 million. Company-owned or managed clinic adjusted EBITDA increased 15% to $1.8 million. Corporate expense as a component of adjusted EBITDA was $4.4 million, $814,000 higher than Q4 2022 related to increased headcount to support the larger clinic count. On to Slide 11, for the year ended December 31, 2023 compared to 2022. System-wide sales for all clinics open for any amount of time increased 12%. System-wide comp sales for all clinics open 13 months or more increased 4%. System-wide comp sales for mature clinics open 48 months or more decreased 1%. Revenue was $117.7 million, up $16.4 million or 16%. 2023 net loss, including the non-cash valuation allowance was $9.8 million or $0.66 per basic share. This compares to 2022 net income of $627,000 or $0.04 per diluted share. Adjusted EBITDA was $12.2 million, up $691,000 or 6%. On to review of our balance sheet and cash flow, at December 31, 2023, our unrestricted cash was $18.2 million compared to $9.7 million at December 31, 2022. This reflects $14.7 million in cash flow from operations, including the receipt of employee retention credits of $4.8 million, net of $6.2 million investment in clinic acquisitions. Development of greenfield clinics and the improvement of existing clinics and corporate assets. At December 31, 2023, we had $2 million drawn on our line of credit with JPMorgan Chase. Since year-end, based on our high closing cash balance and our projected proceeds from the refranchising strategy, we decided to reduce our interest expense and repaid the $2 million line of credit balance. We continue to have immediate access to $20 million of additional cash through this line of credit with JPMorgan Chase. On to Slide 12 for a review of our guidance. As Peter discussed, we are well into our refranchising strategy. Because of the timing of the corporate clinic sales is uncertain and will impact the revenue and adjusted EBITDA in 2024, we have modified financial guidance to be system-wide gross sales and system-wide comp sales. We will continue to provide guidance on new franchise openings, excluding the impact of refranchised clinics. System-wide sales are expected to be between $530 million and $545 million compared to $488 million in 2023. System-wide comp sales for all clinics open 13 months or more are expected to increase in the mid-single digits compared to an increase of 4% in 2023. New franchise clinic openings, excluding the impact of refranchised clinics, are expected to be between 60 and 75 compared to 104 in 2023. The difference reflects the impact of the refranchising efforts. As we think about the financial impacts of the refranchising efforts, please note that our cost of sales is primarily related to regional developer fees, and we expect it to remain fairly static. We expect our sales and marketing expenses to decrease as we reduce the scale of our corporate portfolio. Currently, our corporate clinics spend about $3,000 per clinic per month in local advertising. Regarding general and administrative expenses, we expect to see significant reductions in our clinic-level four-wall operating expenses, or outside the four-wall expenses, and in our unallocated corporate overhead. These expenses will be reduced proportionately as we reduce the scale of our corporate portfolio. As such, the timing of these G&A reductions will be gradual and incremental. Overall, while we reduce our top-line revenue, we expect reductions in G&A to expand our operating margins and increase profitability in the long run. Finally, it’s important to note that while some of our underperforming clinic valuations may result in non-cash impairment charges, the better a clinic performs, however, the better a clinic performs, it will create higher sales proceeds and the opportunity for a gain on sale. And with that, Peter, I will turn the call back over to you.

Thank you, Jake. As I noted at the onset of this call, we’ve expanded our vision to be the champion of chiropractic care by providing consumers expanding access to chiropractic services that meet the demands and improve their health. Our strategic pillars are our brand, our people, and our performance. To elevate our brand equity and drive awareness, we’ll strive to increase our active patient count by improving the intake process, by testing, booking new visit, patient initial visits, and by optimizing local clinic marketing. We plan to lengthen the time patients stay engaged with The Joint, and to reactivate lapsed patients by leveraging new content, automated messaging and additional promotions. Also, we intend to employ new media campaigns to increase our new patient leads. Our goal is to ensure we assemble and retain the strongest team. We are continually building our lead pipelines for our doctors of chiropractic to share with our whole franchise system by cultivating professional relationships and mentoring programs. We’re evaluating and recommending enhanced incentives and benefits, including creating The Joint’s first continuing education platform for our doctors. Additionally, we’re employing programs that better align staff with our patient experience vision. These initiatives are being implemented to improve our performance. We expect to drive total system sales by increasing new patient counts and optimizing sales per patient. Additionally, we’re evaluating the line extensions in ancillary products. Ultimately, we expect to foster our strong franchise base, improve unit economics, increase productivity and expand margins at the clinic and company level. Finally, The Joint is consistently recognized for our excellence. Most recently, Entrepreneur Magazine ranked The Joint number one franchise in chiropractic services, number 61 for veterans, and number 83 out of the top 500 franchise systems in the United States. Before we begin questions, I’d like to invite you to meet us at the ROTH Annual Growth Conference later this month in Orange County. And with that, Jamie, I’m ready to take the Q&A.

Ladies and gentlemen, at this time, we’ll begin the question-and-answer session. And our first question today comes from George Kelly from Roth MKM. Please go ahead with your question.

Hey everybody. Thanks for taking my questions. Maybe I’ll start with trying to just get a feel for the process, the refranchising process underway. And there was a comment, I think, in your prepared remarks, and it’s in the slide deck as well, just about how you’re sort of broadening the scope of potential buyers of those businesses. And I’m just curious, is it fair to interpret that as like the initial interest has maybe lacked your previous expectation? Or how should I interpret that comment in the presentation? And then the second part of the question, same topic is, do you have a better sense of timing when this process should be complete? Are you comfortable? Should it be a year-end thing? Or could this be several years?

Hey George, two great questions. To answer your first question about broadening the people that could potentially be interested in our franchise clinics that we’re selling, that is not a reflection of lower interest than expected from our franchise community, absolutely not. What we’ve also recognized is the most important thing for us is to get these clinics not just off our books, but into the hands of franchisees who can most effectively run them. We recognize it makes sense to work closely with the interest in our franchisees, while also being open to other alternatives. So that was really the purpose there. It’s just to broaden the scope of what we’re looking for to make sure that we’re getting the best franchisees in the system. Your second question was about the timing of it. I would say we’re still a little early in the process. We’ve got all of our systems in place and done the clustering, and we’re in conversation with our franchisees. So I don’t have an exact timeline to give you, but I expect we should see a significant amount of these clinics sold this year, but I would also expect it to extend into 2025.

Okay. Thanks. And then just one other question for you. I'm wondering if you could – I appreciate the guidance you gave. That’s helpful, just those key metrics for the year. But curious if you could just maybe give a little more on what you’ve seen so far this year, just in the couple of months on same-store sales growth. And has it improved from what you just reported in Q4, or is it kind of consistent? Just any observations there would be helpful. And that’s all I had. Thank you.

Typically, George, we do not guide outside of quarters. But as we look at the first two months of 2024, I would say we’re beginning to see a turn in new patient counts. I think that we’re noticing some improvement as we look forward for this year and beyond.

And our next question comes from Ryan Meyers from Lake Street Capital. Please go ahead with your question.

Hey guys, thanks for taking my questions. It’s a little bit of a follow-up to the last question. But as I look through the slide deck, it looks like the more mature clinics, ones open greater than 48 months, saw a slight decline in same-store sales. Just wondering if you could maybe unpack that a little bit or if there’s any more commentary you can provide there.

Yeah. Consistent result from the last quarter, Ryan. We have seen that trend for the last couple of quarters, which is why you see the continued emphasis on our marketing efforts, not only trying to show the rebound in those new patient prospects, but also increasing our focus on our lapsed patients and trying to engage our existing patient base. As clinics mature and your markets become denser, there are more prospects available to refill the bucket from an attrition standpoint. So it has to remain a critical focus of ours. I think you heard that in terms of our renewed interest in marketing initiatives.

Got it. And then just kind of as a brief follow-up to that question, obviously, the marketing strategy remains a priority, like you just mentioned. How have you seen some of those results pay off? And are you seeing positive trends there?

Absolutely. As we've talked about, the one key metric we look at for our business: patient counts, conversion, and attrition. The metric we had the most challenge with in 2023 was certainly the new patient count. When we look at our new patient count for the full year of 2023, we were 6% below where we were in 2022. In 2022 compared to 2021, there was a 14% increase. So, we had an improvement from negative 6% in 2022. In the last four months, our new patient counts are flat. So for 2023, we had 86 new patients per clinic per month compared to 91 in 2022. We are seeing a flattening of that curve. I think we'll see that continue to improve as our new CMO implements the marketing programs. We're also focusing on not just new patients, but ensuring that those patients stay with us for a longer period. Currently, the average patient stays as a member for a little over six months. Our programs aim to extend that time. Finally, we're focusing on our lapsed patients, as we know that a significant percentage come back within six months after leaving. We have an opportunity to improve in 2024.

Got it. That’s helpful. Thank you for taking my questions.

Our next question comes from Jeff Van Sinderen from B. Riley. Please go ahead with your question.

Hi everyone. I realize some of these questions may be a little tough due to the refranchising efforts. But all things considered, how many new licenses do you think you would sell or expect to sell this year? Maybe a targeted range there would be helpful.

Hey Jeff, thanks for the question. We do not provide guidance on franchise sales, as you know. We had 55 sales for the full year 2023. We know that some of the factors affecting those new sales are the economic environment, higher interest rates, and strong employment rates. These factors had an impact on 2023 compared to 2022 when we sold 75 licenses. While we expect the refranchising efforts to impact new license sales in 2024 and had 55 in 2023, that gives you where we estimate it to be.

Okay. That’s helpful. And then sort of along the same lines of guidance. And again, I realize this is a little bit of a moving target, but based on the refranchising cadence you’re working on so far, is there a way you can help us understand? I mean, I know you gave the system-wide sales, but just maybe try to get to a reported sales line decline rate for FY 2024, just maybe an order of magnitude there. Any help you can give us there?

Yes. The tough part is that GAAP revenues will shift from being 100% recognized for a corporate location to a royalty stream as we execute the transactions. The depth and breadth of that GAAP revenue decline will largely depend on the pace and size of those early transactions, which makes it hard to provide guidance from a revenue perspective in 2024. That's why we changed the guidance metrics to overall sales figures, where we have predictability now. We won't put out a target from a GAAP revenue basis because it's uncertain regarding the timing of those transactions.

Once we finish this, I think we can get back to, at least for us, the traditional metrics that we guide on. But there's too much uncertainty in terms of how this unfolds to give you relevant guidance on EBITDA and revenue.

Understood. And then if we could shift the marketing for a minute, and I know you spoke to that, but I'm just wondering if you could provide any other color on how you're shifting the marketing? I know you mentioned maybe new channels and just any other color you can give us there?

Sure. It's exciting to see our new CMO come into play. She was the CMO over at SONIC, and she brings fresh eyes, new programs, and different disciplines. One of the first things she's done is conduct an audit of all of our media buys to ensure we're maximizing their potential. We'll be doing some RFPs on key marketing vendors to ensure we're working with a partner that can effectively support our business. She’s also designed some new programs that involve working more with influencers. Focusing on our co-ops is crucial because when they pool their funds, they can make a sizable impact in the local market compared to independent practitioners. We're excited about the initiatives that will be coming down the pike. Additionally, focusing on improving the patient experience to retain patients longer should have significant implications for us. We recognize we've been heavily focused on attracting new patients and need to better engage lapsed patients to enhance our bottom line. We’re concentrating on improving unit economics at the clinic level, particularly given challenges with labor costs and new patient engagement.

Okay, appreciate you taking my questions and best of luck.

Thank you very much.

And our next question comes from CJ Dipollino from Craig-Hallum Capital. Please go ahead with your question.

Hey, guys, CJ Dipollino on for Jeremy Hamblin. I wanted to ask a quick question about sales and marketing. Looks like it was down about $1 million sequentially from Q3 to Q4. Could you give a little color on that drop and then maybe how we should think about it into the New Year?

Sure. I think you'll see that normalize. As we mentioned earlier in the first three quarters of 2023, we were running a bit hot in terms of our sales and marketing spend for the year. So Q4, you witnessed some normalization. As we think about our national marketing fund, the goal is to spend that entire pool each period. When expenses are accelerated earlier in the year, we typically see a natural step back in Q4. As we move into 2024, I expect to see normalization again in the quarterly cadence. Typically, spending increases in Q2 and Q3, while Q1 and Q4 are lighter.

It's also important to note that most marketing expense incurred in our franchise system is through local store marketing, which is separate from our P&L. Our national marketing fund does run through the P&L, but the bulk of the marketing effort is done on the local level by our franchisees.

Okay. Very helpful. And then just one more on the P&L. Thinking about G&A moving forward, it looks like in 2022 and 2023, it jumped up to about 69%, 70% of sales. How would you think about that moving forward in 2024?

Overall, with the refranchising strategy, we expect to see the G&A burden reduce considerably for the consolidated organization. The timing of these G&A reductions is predicated on when we begin executing those refranchising transactions. As we progress through 2024 and 2025, we’ll start to see decreases in clinic-level G&A costs and will also curtail outside the four-wall overhead and corporate unallocated overhead. We'll focus on controlling these expenses throughout the process.

Okay. Very helpful. Thanks guys and best of luck.

Thank you very much.

And our final question today comes from Thomas McGovern from Maxim Group. Please go ahead with your question.

Hey guys. So real quick, I wanted to touch back on some of that employee retention. Based on my industry research, I've seen a lot of articles suggesting that there is going to be a considerable reduction in skilled medical professionals over the coming years. Maybe if you could just go into a little more detail on your plans to continue to attract and keep that retention rate high?

That's a great question. Our doctors are at the core of our business. Without doctors in chiropractic, we have no business because that's obviously the core of what we do. We are very much focused on working with the schools and associations to make them aware of The Joint, and why we are a good place for them to either become a franchisee if they have the resources or come work for us. If you look at the overall market, there are 16 accredited schools in the United States today that graduate around 2,400 to 2,500 doctors annually. With our 935 clinics at the end of the year, we had a little over 3,000 doctors under The Joint's umbrella, either full or part-time. This suggests a healthy supply of professionals to support our growth. Our aim is to create environments where we attract and retain the best doctors. It’s crucial for us to maintain and recruit top talent to ensure the continued success of The Joint.

Appreciate that color. That’s very helpful. Okay. You guys mentioned that your portfolio mix reduced slightly, with 14% of total clinics being company-owned versus 15% in 2022. You also mentioned that you expect that to shift more dramatically as you move through this refranchising initiative. I was wondering if you have maybe a targeted portfolio mix? Or when the dust settles, where you expect the company-owned percentage to come in as a percent of total clinics opened? Thanks.

We haven't guided on an expected percentage, but it's clear that the majority of our corporate portfolio will be refranchised. If we ended last year with 135, by 'majority,' we're talking more than 51%. We don’t have a final number yet, but it will be significantly lower than the current 14%.

Understood. I appreciate you guys taking the time to answer my questions.

Thank you.

Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.