Earnings Call Transcript - JYNT Q1 2023

Operator, Operator

Good day, and welcome to The Joint Corp. First Quarter 2023 Financial Results Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to David Barnard of LHA Investor Relations. Please go ahead.

David Barnard, Investor Relations

Thank you, Dave. Good afternoon, everyone. This is David Barnard of LHA Investor Relations. On the call today, President and CEO, Peter Holt, will review our first quarter 2023 performance metrics and provide an update on 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, 2023. If you 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, our inability to identify and recruit enough qualified chiropractors and other personnel to staff our clinics, due in part to the nationwide labor shortages and an increase in operating expenses due to measures we may need to take to address such shortage; inflation, exacerbated by COVID-19 and the current war in Ukraine, which has increased our costs and could otherwise negatively impact our business, the potential for future disruption to our operations and the unpredictable impact on our business of the COVID-19 outbreak and outbreaks of other contagious diseases, 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 for its own strategies and negative opinions posted on the Internet, which could drive down the market price for our common stock and result in class action lawsuits, our failure to remediate future material weaknesses in our internal control over 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, including the section entitled Risk Factors in our annual report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10, 2023 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 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 than 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, stock-based compensation expenses, bargain purchase gain, net gain or loss on disposition, or impairment and other income related to the employer retention credits. Management also includes commonly discussed performance metrics. System-wide sales include 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 the information is important in understanding the company's financial performance because these sales are the basis on which the company calculates and records royalty fees and are indicative of the financial health of the franchisee base. Comp sales include the revenues from both company-owned or managed clinics and franchise clinics that in each case have been open at least 13 full months and exclude any clinics that have closed. Turning to Slide 3; It is now my pleasure to turn the call over to Peter Holt.

Peter Holt, CEO

Thank you, David, and I welcome everybody to the call. As we noted in March, we enter 2023 with a solid foundation to support our clinics as well as our long-term clinic expansion and financial growth. Today, I'm pleased to report that in Q1 2023, we performed well during the continued economic uncertainty and expect our robust underlying clinic model and unit economics to thrive as markets improve. For those investors who are new to the company, The Joint is revolutionizing access to chiropractic care by providing an affordable cost-share style membership-based services in a convenient retail setting. Turning to slide 4, let's review our financial metrics for the first quarter 2023 compared to the first quarter 2022. System-wide sales grew 17%. Comp sales for clinics that have been open for at least 13 full months increased 8%. Revenue grew 27%. Adjusted EBITDA improved to $2 million. And on March 31, 2023, our unrestricted cash was $14.8 million compared to $9.7 million on December 31, 2022. Turning to slide 5, I'll discuss our clinic metrics. During Q1 2023, we opened 33 clinics: 29 franchised and 4 greenfield. This compares to 31 clinics: 27 franchised and 4 greenfield in Q1 2022. Our greenfield strategy looks for clinic sites where there will be a capture of pent-up demand in new markets where they can rapidly build a solid presence. This quarter, we augmented existing clinic clusters in California, Georgia, Missouri, and North Carolina. As previously stated, in 2023, we are focusing on supporting our existing greenfield clinic portfolio as it matures and moderating our pace of new greenfield openings. In the first quarter of 2023, we closed one franchise clinic, which will be relocated. That compares to closing one franchise clinic in the first quarter of 2022. Once again, our closure rate is one of the lowest in the franchise community at less than 1%. In summary, on March 31, 2023, we had 170 clinics in operation, consisting of 740 franchise clinics and 130 company-owned or managed clinics. The portfolio mix remained 85% franchise clinics and 15% company-owned or managed clinics. At quarter end, we had 218 franchise licenses and active development, which is a solid pipeline for future franchise clinic openings. Subsequent to quarter end in April, we opened one greenfield clinic at Fort Dix, New Jersey. This is our fourth location opened in conjunction with the Army and Air Force exchange service. Turning to slide 6. In Q1 2023, we sold 17 franchise licenses, which is the same number as Q4 2022, and compares to 22 licenses sold in Q1 2022. This past quarter, the existing franchisees bought approximately 59% of our new licenses. This means that even in uncertain environments, those who are intimately involved in our network are reinvesting in the brand. This is a powerful indicator of the strength of our business model, demonstrating the health and viability of our franchise system. On March 31, our clinic count with our aggregate tenure minimum development schedule for the new territories established since 2017 was 626 clinics. Turning to slide 7, let's review our marketing efforts. New patient acquisition continues to be a focus. For Q1 of 2023, the average number of new patients per clinic was down approximately 7% from the same quarter a year ago. To further improve new patient leads and conversions, our marketing team has invested in pay channel maximization and new paid digital tactics, as well as prioritizing non-digital approaches such as guerrilla marketing. We've created multiple learning modules to effectively walk our franchisees through best practices in digital marketing, guerrilla marketing, traditional awareness marketing, and referrals. In February, we held our annual Love The Joint and social media campaign and giveaway where 12 lucky winners received a gift of one year of free chiropractic care. During this promotion, we saw significant increases in our overall engagement on The Joint's National Instagram account, where we gained almost 15,000 entries and comments and more than 20,000 likes, and attracted over 13,000 new followers. In March, we held our new patient contest. This event incentivized clinic teams to promote The Joint's $29 new patient offer, distribute referral cards, and engage with local businesses and community events. For March, the network increased new patients by over 19% compared to the prior three months’ average. In terms of our digital efforts, in March, we also launched a test to capture leads through chatbot technology, as well as leveraged enhanced doctor of chiropractic profiles on online medical sites as a new source for patient leads. For the quarter, organic traffic to the site increased 14% year-over-year. As part of our PR effort, we continue to focus on the education and benefits of chiropractic care and generate brand awareness about The Joint. Our PR strategies are reaching new heights, and in Q1 alone, we surpassed 1 billion in earned editorial impressions. And with that, Jake, I'll turn it over to you.

Jake Singleton, CFO

Thank you, Peter. Turning to slide 8, I'll review the financial results for Q1 2023 compared to Q1 2022. System-wide sales for all clinics open for any amount of time increased to $115.4 million, up 17%. System-wide comp sales for all clinics open 13 months or more increased 8%. System-wide comp sales for mature clinics open 48 months or more increased 1%. Revenue was $28.5 million, up $6 million or 27%. Company-owned or managed clinic revenue increased 36%, contributing $17.1 million. Revenue from franchise operations increased 15%, contributing $11.3 million. The increases represent continued growth in both the corporate portfolio and franchise base. Cost of revenues was $2.6 million, up 13% over the same period last year, reflecting the associated higher regional developer royalties and commission. Selling and marketing expenses were $4.2 million, up 27% over the same period last year, driven by an increase in advertising fund expenditures from a larger franchise base and increase in local marketing expenditures by the company-owned or managed clinics and the timing of our national marketing funds spend. Depreciation and amortization expenses increased by $713,000, up 44% compared to the prior year period, primarily due to the increase in the number of greenfield clinics developed and franchise clinics acquired. G&A expenses were $19.9 million compared to $15.4 million, up 30%, reflecting the cost of supporting the increased clinic count, revenue growth, and higher payroll to remain competitive in the tight labor market. Operating loss was $678,000 compared to a loss of $176,000 in Q1 2022, mostly driven by the previously mentioned higher depreciation and amortization expenses. Other income was $3.8 million, reflecting the receipt of employee retention credits, compared to other expenses of $16,000 in Q1 of 2022. Income tax expense, including the impact of the employee retention credits, was $842,000 compared to $13,000 in Q1 of 2022. Net income was $2.3 million, or $0.16 per diluted share, compared to a net loss of $206,000, or $0.01 per diluted share in Q1 of 2022. Adjusted EBITDA was $2 million, compared to $1.8 million in the same period last year. Franchise clinic adjusted EBITDA increased 6% to $4.8 million. Company-owned or managed clinic adjusted EBITDA increased 68% to $1.6 million, reflecting the maturation of our clinics in the corporate greenfield portfolio, as well as our concentrated effort to optimize labor. Corporate expenses as a component of adjusted EBITDA were $4.4 million, up $671,000, or 15% higher than Q1 2022. On slide 9, we are reiterating our guidance for 2023. We continue to expect to grow revenue to between $123 million and $128 million, compared to $101.9 million in 2022. We continue to expect adjusted EBITDA to be between $12.5 million and $14 million, compared to $11.5 million in 2022. We continue to expect franchise clinic openings to be between 100 and 120, compared to 121 in 2022. Please note historically, guidance for company-owned or managed clinic openings included a combination of both greenfield and acquisition. While we continue to acquire previously franchised clinics, these transactions are opportunistic and are no longer included in our guidance. For greenfield clinic openings, we continue to expect to open between 8 and 12 compared to 16 in 2022. And with that, I'll turn the call back over to you, Peter.

Peter Holt, CEO

Thanks, Jake. Turning to slide 10. While managing today's uncertain economic conditions, including inflation and wage pressure, we remain focused on what we can control and continue to execute programs to improve performance and drive long-term growth. We continue to methodically implement our multi-year corporate initiative to support the chiropractic dream. Over the past several years, we've been increasing our educational outreach efforts with associations and schools of chiropractic to drive awareness and support recruitment. As our relationships with these institutions continue to improve, these endeavors are being felt across the network nationwide. In fact, we have more interest than ever from doctors in these recent graduating classes and we're attracting new doctors of chiropractic to The Joint. To harness the power of our data, we've launched our business intelligence and analytical reporting tool, and we're also launching an automated marketing program. This will reach existing, lapsed, and potential patients to ensure that we send the right message to the right patient at the right time. To accelerate the pace of our clinic growth, we remain focused on our franchise sales in addition to opening greenfield clinics. As reported this quarter, we continue to increase the number of our clinics opened year-over-year. Our network is well positioned for expansion as the economy improves. Frankly, with only 16% of Americans using chiropractic care in the last 12 months and spending $19.5 billion on it annually, the chiropractic patient demand is growing, and our market opportunity is considerable. Based on our current patient demographics, we are approaching our near-term target of 1,000 clinics and are well positioned for a longer-term goal of 2,000 clinics. By expanding our network and potential base through developing rural, urban, and possibly international clinic models, we will broaden our long-term market potential. We are committed to capturing a greater share and growing the overall market. With that, Dave, I'm ready to begin the Q&A.

Operator, Operator

We will now begin the question and answer session. Our first question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead.

Jeremy Hamblin, Analyst

Thanks so much for taking the questions. I wanted to start by asking about the sales and marketing. It was up about $900,000 sequentially from Q4 and about the same amount on a year-over-year basis. You noticed there was a change in the timing of the national marketing fund spend. I wanted to see if you could provide a little bit more detail on how and what that was and how it may impact the rest of the year if there are any other kinds of timing differences that we should expect looking forward?

Peter Holt, CEO

Yes, Jeremy, great question. I would say the majority of that is just the increase in collections from the increased clinic count. There is a chunk of that that is really just the timing quarter to quarter. Right. So it depends on the timing of certain campaigns or when we're pushing collateral out to the clinics. And so I would categorize that as just a slight front-loading in Q1. But we expect that to normalize as we continue on. So there's really no kind of one-time item to call out there. I think it's just a slight quarter-over-quarter timing variance.

Jeremy Hamblin, Analyst

Got it. Okay. And then also wanted to just get a little bit more color on the net employee retention credits, which I believe was around $3.9 million. I think that’s related back to FICA credits from COVID still, which is similar to what we've seen in the past with other businesses, but wanted to just see if you could help provide a little bit of color on that as well.

Peter Holt, CEO

Sure, yes. And it is related to some of the jobs act credits that were made available. Our qualification period was four periods in the first two quarters of 2021. And so really the timing of both the application and then the processing through the IRS, so we just happened to receive the funds in the first quarter of '23, which triggered our particular recognition.

Jeremy Hamblin, Analyst

Got it. And if we back that out, that's about the EPS on a normalized basis would be like $0.04 per share loss or so.

Peter Holt, CEO

That's about right. Yes. It's really that net $3.9 million we recorded that in other income. So adjusted EBITDA neutral, but it does have that boost to net income.

Jeremy Hamblin, Analyst

Got it. And then last question, I wanted to just get an understanding in terms of what you're seeing for clinic performance corporate versus franchise. It looked like you saw a nice little step forward here on the company-operated clinics, like if we're thinking about it on a, let's call it revenue per average clinic basis, whereas you saw maybe a little bit of a step down overall, maybe in the franchisee performance, at least certainly the royalties you earned from that basis. I just wanted to get a sense in terms of what you're seeing company-operated versus franchise performance.

Peter Holt, CEO

Yes. I think in both cases, it's reflecting some of the use within our system. So our corporate portfolio, with the number of clinic additions we've made over the last two years, I think we're going to have a natural leg up on the overall system average, just based on our younger greenfield connects continuing their maturation. Again, when you're talking about overall growth, we added another 29 franchise units in the quarter. If you're using that end of quarter number as your final denominator, that's going to kind of decrease the revenue on a per-clinic basis. So we still posted same-store sales of 8% as a system. Again, not a huge disparity there between corporate and franchise performance. So we're still pleased with the organic growth of the unit. But as you look at the denominators, the number of new clinics we have coming into the system, I think you could get some fluctuation there on a revenue per clinic basis. What I'd add to that, Jeremy is that historically, that was an interesting and unusual situation for a franchise system, in that our corporate portfolio has operated parallel to or slightly better than our franchise segment. We saw that change a little at the end of 2021, and made some corrections. By the end of 2022, we got our corporate portfolio operating equal to or better than our franchise portfolio. So we have seen a dip, but we've made some changes in those operations, and we're now seeing that come back. If we look at some of the key metrics, whether we're talking about conversion or attrition, the corporate portfolio continues to do equal to or better than our franchise community. The one area where I think the franchisees continue to do better than corporate, which we're focused on, is our new patient count, and we're seeing our new franchisees have a higher new patient per clinic per month than the corporate portfolio at the moment.

Jeremy Hamblin, Analyst

Got it. That's great color. Just one more if I could sneak in here, in terms of thinking about kind of mature store comps, you're seeing just like a little bit of degradation there. I wanted to get a sense in terms of that price increase that you took last March. What percentage of your patients are on a legacy pricing plan at this point in time?

Peter Holt, CEO

Yes. We continue to see about a 5% shift per quarter of our active members moving on to that new price point. I think as I look at the legacy mix now, I think we're trending about 35% of our system is still on some legacy price points. The majority of those being at the pricing one year ago, but because we have an existing current policy to grandfather in active members at their signup rate, we do have some that are at last year's pricing, but the majority are now on the higher price point.

Jake Singleton, CFO

Yes. And we've talked about that before in that group. That's been there for a long time. It's probably around 15% that we don't see that moving much over time.

Jeremy Hamblin, Analyst

Got it. Thanks so much for taking the questions and best wishes.

Peter Holt, CEO

Thank you very much.

Operator, Operator

Next question comes from Jeff Van Sinderen with B. Riley. Please go ahead.

Jeff Van Sinderen, Analyst

Hi everyone, and congratulations. It's great to see the 8% comp. Multipart questionnaire if you can bear with me, but I wanted to ask a little bit more on the patient retention, attrition, new patient add metrics. I guess any more color you can share around that? And what do you think will drive the new patient adds up going forward? And then maybe also, how are you faring in terms of the Google search and location elements that I know there were some changes there? And then any change you're seeing in terms of influencing new patient adds, given the macro backdrop? And then would it make sense to promote more on price to get new patient adds? I know a lot there, apologies.

Peter Holt, CEO

I'm going to try to remember all of those components. What you're really saying is I really focused on new patient counts. So are we seeing declines? If you look at where our new patient counts come from, they're really from three sources. Number one, referrals from existing patients who refer their friends and family to our clinics, which accounts for about 35% of our network's new patients. Number two, the digital marketing campaign is a vital part of our new patient count. Right now, we can track that roughly 63% of our new patients have interacted with us digitally. Measuring patient attribution is always tricky because if a patient sees our ad online or uses a coupon, tracing that back can be complicated. The third source for new patients is what I'll call Guerilla marketing—it's community outreach. These are critical factors that we're focusing on to ensure an increase in patient count.

Jeff Van Sinderen, Analyst

Okay, that's really helpful. And then any color you can give us if there are any changes you're seeing in underlying trends so far in Q2, maybe versus Q1 or year-over-year from Q2 last year? Just any other color since the quarter ended?

Peter Holt, CEO

We typically, obviously, do not comment on upcoming quarters because we will get to that in about three months. But I will say that we're in a time of economic uncertainty, and while I don't believe we are in a recession, there is a lot of concern around it. We're trying to forecast for Q2, Q3, and beyond. What we're really focused on is all the things we can control, particularly regarding new patient count and ensuring that our conversion rate from new patients to membership is effective. In the last quarter, our conversion rate was right over 50%, which is a very high number for us. Our attrition rate continues to stay low or improve, which are critical metrics we can focus on.

Jeff Van Sinderen, Analyst

What do you think, and then just as a follow-up to that, Peter? What do you think that, I mean, let's just say we do go into a recession. People will still not want to live with pain, even in a recession, when you think they would prioritize getting that pain handled?

Peter Holt, CEO

Absolutely. We haven't actually gone through a full recession in our system. I follow that logic, Jeff: as people tighten their belts and make decisions, they are likely to give up discretionary items like coffee or frozen yogurt rather than pain relief. Our typical customer falls within the family income range of $50,000 to $105,000, which means that in our markets, we are often perceived as affordable. When economic concerns filter through the population, we expect that more people might consider using our services.

Jeff Van Sinderen, Analyst

Makes sense. Okay, thanks for taking my questions. I’ll take the rest offline.

Peter Holt, CEO

Thank you very much.

Operator, Operator

Our next question comes from George Kelly with ROTH Capital Partners. Please go ahead.

George Kelly, Analyst

Hey everybody, thanks for taking my question. So maybe to start with a couple of my segments. Just curious, on the profitability there. How much visibility do you have? It seems like the whole plan of the maturation of these new stores and everything, the margin improvement has been spotty. Another quarter of what I would call kind of mixed results in that segment again. So I guess two-part question: what is the visibility like there for the rest of the year? And aside from the maturation of these new clinics, what else can you do to drive margin in that business?

Peter Holt, CEO

Yes. Good question, George. We have clear visibility to individual clinic levels. We're focusing on maintaining and driving sequential improvements in profitability. Still, we have a lot of young units in this portfolio working through their growth curves, which can suppress margins. However, throughout the remainder of the year, I expect to see sequential improvements. We've also been looking to optimize labor and ensure the correct staffing levels are aligned with our volume to control profitability.

George Kelly, Analyst

Okay, and then the second question, same topic, but if we stripped out the new clinics, talking about your legacy-owned business, has the four-wall margin on that store base stabilized, or is it still seeing labor pressure and is seeing compression?

Peter Holt, CEO

I think we are starting to see some stabilization. For wall margin numbers for my mature base, which I would call clinics greater than four years, we're still doing that mid 20% four-wall margin, which accounts for labor pressures from the last two years, and it seems to have settled there. We recently released our Franchise Disclosure Document for 2023, and I believe franchisees reported a four-wall margin in the high 20% range. Overall, we are starting to see some labor pressures plateauing, and we must continue to focus on top-line growth for those clinics.

George Kelly, Analyst

Okay, that's helpful. And then last one. Back to the new patient discussion. I'm still a little unclear exactly what the issue is there. And just to be specific and more detail, are there any competitive issues that you see arising? Are there challenges that you're facing in certain markets or anything else you can isolate that's impacting new patients?

Peter Holt, CEO

Sure, George. I'll address your second question first—are we seeing any competition impacting performance or new patient counts? I would say I have never worked for a franchise system that has a greater first-mover advantage than this one. Yes, competitors are emerging, but they remain small and localized. I don’t see this as a significant factor overall for new patient performance. I expect these emerging competitors to grow, but we have plenty of market potential. Regarding new patient counts and driving that, there is no question that as digital marketing becomes more vital, we’ve noticed changes with Google’s algorithm affecting our organic search patient counts. However, we’re seeing continued success from our paid search, and our conversion rates remain strong. We are continually focusing on digital strategy enhancements, and we believe this area presents significant opportunities.

George Kelly, Analyst

Thank you.

Operator, Operator

Our next question comes from Anthony Vendetti with Maxim Group. Please go ahead.

Anthony Vendetti, Analyst

Yes, thanks! First, on the patient volumes: you mentioned that patients are more likely to forego their daily coffee for joint treatment. Do you still feel that way? Given recent inflation, I'm curious if any data supports that.

Peter Holt, CEO

It's a great question, Anthony. I don't have much data as our company has only ever been formed in 2010, but we haven’t gone through a traditional recession since then, aside from the quick dip during COVID. We're witnessing overall increases in our same-store sales, where Q1 2023 saw an 8% increase despite economic uncertainty. This indicates that patients still prioritize pain relief over discretionary spending, which I believe remains a crucial driver.

Anthony Vendetti, Analyst

Got it. And last question on digital marketing initiatives: can you discuss your spending on various platforms? Which ones are showing better results, and do you feel you need to increase spending to maintain the same type of patient interaction?

Peter Holt, CEO

Great question! Yes, our digital marketing strategy evolves continuously. There have been reallocations in spending based on what brings the best returns. For example, we are currently seeing positive results from Meta advertising—I've increased spend on that platform while reducing some on YouTube as we track which platforms yield better outcomes. Everything in our marketing is measurable today. We will be maximizing impact and refining strategies based on performance data.

Anthony Vendetti, Analyst

Okay, great. Thanks so much, Peter. I appreciate that.

Peter Holt, CEO

Thank you very much. Appreciate the support.

Operator, Operator

This concludes our question and answer session. I would like to turn the conference over to Peter Holt for any closing remarks.

Peter Holt, CEO

Thank you. Before I close, I want to note that we will hold our annual meeting of stockholders on May 25 here in Scottsdale, Arizona, and we will also present and conduct meetings at the B. Riley Securities investor conference on May 24th in Los Angeles, and the virtual Oppenheimer consumer growth and e-commerce conference on June 13. Finally, as we’re constantly receiving patient testimonials, this spring, an athlete and parent managing several elements caught our attention. Miriam from California wrote us and said, 'I can't say enough about these healers. I have significant and severe chronic spine injuries including degenerative disc disease, bone spurs, osteoarthritis, and bulging herniated discs. I'm an athlete and live a very healthy life that demands a high level of activity and energy output daily. The Joint doctors have been treating me for over a year now along with my son who's five. These magical masters helped me bring my body back in alignment so it's not agonizing pain that limits my demanding life. They're always immensely kind and playful with my little one and never mind me bringing him in or rushed me. I'm very picky about my care team, and I promise you won't be sorry coming in for relief from these gems. With my new breast cancer diagnosis, I'm even more vigilant about self-care. And these angels are my supportive network for good.' Thank you and stay well.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.