JYNT Joint Corp

The Joint Corp. (NASDAQ: JYNT), a national operator, manager, and franchisor of chiropractic clinics, reported its financial results for the quarter ended June 30, 2024.

Financial Highlights: Q2 2024 Compared to Q2 2023

• Grew revenue 3% to $30.3 million.
• Reported net loss of $3.6 million, including $1.5 million in litigation expense, $1.4 million in loss on disposition or impairment and the cost associated with an in-person national franchise conference, compared to net loss of $320,000, including loss on disposition or impairment of $144,000.
• Reported Adjusted EBITDA of $2.1 million, compared to $3.2 million.
• Increased system-wide sales1 8% to $129.6 million.
• Reported system-wide comp sales2 of 2%.
• Sold 7 franchise licenses, compared to 21, reflecting the impact of the refranchising process.
• Increased the total clinic count to 960 – 829 clinics franchised and 131 clinics company-owned or managed clinics – at June 30, 2024. During Q2 2024, The Joint
  • opened nine franchised clinics;
  • refranchised two clinics; and
  • closed three clinics: one franchised and two company-owned or managed.

“In 2024, our highest priorities are refranchising corporate clinics and improving unit economics. In the second quarter of 2024, we delivered topline growth and positive Adjusted EBITDA, even with the ongoing economic concerns,” said Peter D. Holt, President and Chief Executive Officer of The Joint Corp. “Based on early negotiations with existing franchisees, we refranchised two clinics in the second quarter and have over ten more in the letter of intent process, including five in the Kansas City market. Having recently finalized our Confidential Information Memorandum package with Capstone Partners, a full-service middle market investment bank with specialization in refranchising, we are prepared to aggressively market clusters of clinics. To increase clinic profitability, we are embracing new innovation in operations, IT and marketing that leverage the size of our network on national and local levels. Our educational efforts attracted over 930,000 new patients to The Joint in 2023, of which 36% were new to chiropractic care. In 2024, we continue to positively influence the market, and as more and more people discover chiropractic care, our reach is boundless.”

Financial Results for Second Quarter Ended June 30, 2024 Compared to June 30, 2023 Revenue was $30.3 million in the second quarter of 2024, compared to $29.3 million in the second quarter of 2023. Cost of revenue was $2.8 million, compared to $2.6 million in the second quarter of 2023, reflecting the associated higher regional developer royalties and commissions.

Selling and marketing expenses were $5.4 million, compared to $4.7 million, reflecting expenses related to the in-person national franchise conference and the timing of advertising spend. Depreciation and amortization expenses decreased 35% for the second quarter of 2024, as compared to the prior year period, primarily due to the impact of corporate clinics that are being held for sale in connection with the refranchising efforts.

General and administrative expenses were $22.6 million, up from $19.9 million in the second quarter of 2023, primarily due to $1.5 million in legal expenses associated with a class action suit related to time and wages reflecting the complexity of doing business in California as well as the increased expense to support more clinics.

Loss on disposition or impairment was $1.4 million, related to the quarterly impairment analysis of clinics held for sale as part of the refranchising efforts, compared to $144,000 in the second quarter of 2023.

Income tax expense was $178,000, compared to income tax benefit of $161,000 in the second quarter of 2023. Net loss was $3.6 million, including $1.5 million in employee litigation, $1.4 million of loss on disposition or impairment and the expense associated with an in-person national franchise conference, or $0.24 loss per share. This compares to net loss of $320,000, including the $144,000 of loss on disposition or impairment, or $0.02 loss per share, in the second quarter of 2023.

Adjusted EBITDA was $2.1 million, compared to $3.2 million the second quarter of 2023.

Financial Results for Six Months Ended June 30, 2024 Compared to June 30, 2023 Revenue was $60.0 million in the first half of 2024, compared to $57.6 million in the first half of 2023. Net loss was $2.6 million, including $1.8 million of loss on disposition or impairment, $1.5 million in employee litigation and the expense associated with an in-person national franchise conference, or 18 cents loss per share. This compares net income for the first half of 2023 of $2.0 million, including the $3.9 million employee retention credit and $210,000 of loss on disposition or impairment, or $0.13 loss per diluted share.

Adjusted EBITDA was $5.6 million, compared to $5.3 million the first half of 2023.

_______________

1 System-wide sales include revenues at all clinics, whether operated or managed by the company or by franchisees. While franchised sales are not recorded as revenues by the company, management believes the information is important in understanding the company’s financial performance, because these revenues are the basis on which the company calculates and records royalty fees and are indicative of the financial health of the franchisee base. 2 System-wide comp sales include the revenues from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed.

Balance Sheet LiquidityUnrestricted cash was $17.5 million at June 30, 2024, compared to $18.2 million at December 31, 2023. Cash flow for the six-month period ended June 30, 2024 includes $1.8 million from operations and $224,000 from the net proceeds of the sales of clinics offset by ongoing IT capex and the $2.0 million first quarter 2024 repayment of the line of credit to JP Morgan Chase. Through this facility, we have retained immediate access to $20 million through February 2027.

2024 Guidance The company reiterated all elements of its guidance.

• System-wide sales are expected to be between $530 and $545 million, compared to $488.0 million in 2023.
• System-wide comp sales for all clinics open 13 months or more are expected to be in the mid-single digits in 2024.
• New franchised clinic openings, excluding the impact of refranchised clinics, are expected to be between 60 and 75, compared to 104 in 2023.

Conference Call The Joint Corp. management will host a conference call at 5:00 p.m. ET on Thursday, August 8, 2024, after the market close. Stockholders and interested participants may listen to a live broadcast of the conference call by dialing 1-(833) 630-0823 or (412) 317-1831 and ask to be joined into the ‘The Joint’ call approximately 15 minutes prior to the start time.

The live webcast of the call with accompanying slide presentation can be accessed in the IR events section https://ir.thejoint.com/events and available for approximately one year. An audio archive can be accessed for one week by dialing (877) 344-7529 or (412) 317-0088 and entering conference ID 9073185.

Commonly Discussed Performance MetricsThis release includes a presentation of commonly discussed performance metrics. System-wide sales include revenues at all clinics, whether operated by the company or by franchisees. While franchised 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. System-wide comp sales include the revenues from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed.

Non-GAAP Financial Information This release also includes a presentation of non-GAAP financial measures. EBITDA and Adjusted EBITDA are presented because they are important measures used by management to assess financial performance, as management believes they provide a more transparent view of the company’s underlying operating performance and operating trends. Reconciliation of historical net income/(loss) to EBITDA and Adjusted EBITDA is presented in the table below. The company defines EBITDA as net income/(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), net (gain)/loss on disposition or impairment, stock-based compensation expenses, costs related to restatement filings, restructuring costs, litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business) and other income related to employee retention credits.

EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or cash flows from operations, as determined by accounting principles generally accepted in the United States, or GAAP. While EBITDA and Adjusted EBITDA are used as measures of financial performance and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. EBITDA and Adjusted EBITDA should be reviewed in conjunction with the company’s financial statements filed with the SEC.

Forward-Looking StatementsThis press release contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of industry trends, our future financial and operating performance and our growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. Words such as, "anticipates," "believes," "continues," "estimates," "expects," "goal," "objectives," "intends," "may," "opportunity," "plans," "potential," "near-term," "long-term," "projections," "assumptions," "projects," "guidance," "forecasts," "outlook," "target," "trends," "should," "could," "would," "will," and similar expressions are intended to identify such forward-looking statements. Specific forward looking statements made in this press release include, among others, our 2024 highest priorities of refranchising corporate clinics and improving unit economics; our plans to aggressively market clusters of clinics; our plans to increase clinic profitability, by embracing new innovation in operations, IT and marketing that leverage the size of our network on national and local levels; our belief that in 2024, we continue to positively influence the market, and as more and more people discover chiropractic care, our reach is boundless; our anticipation of the success of the fourth quarter of 2024 promotions; and our expectations for system-wide sales, system-wide comp sales for all clinics open 13 months or more; and new franchised clinic openings, excluding the impact of refranchised clinics. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. 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 shortage and an increase in operating expenses due to measures we may need to take to address such shortage; inflation, which has increased our costs and which could otherwise negatively impact our business; our failure to profitably operate company-owned or managed clinics; our failure to refranchise as planned; 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 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 in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 8, 2024 and subsequently filed current and quarterly reports. We qualify any forward-looking statements entirely by these cautionary factors. We assume no obligation to update or revise any forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

About The Joint Corp. (NASDAQ: JYNT) The Joint Corp. (NASDAQ: JYNT) revolutionized access to chiropractic care when it introduced its retail healthcare business model in 2010. Today, it is the nation's largest operator, manager and franchisor of chiropractic clinics through The Joint Chiropractic network. The company is making quality care convenient and affordable, while eliminating the need for insurance for millions of patients seeking pain relief and ongoing wellness. With over 900 locations nationwide and more than 13 million patient visits annually, The Joint Chiropractic is a key leader in the chiropractic industry. Consistently named to Franchise Times "Top 500+ Franchises" and Entrepreneur's "Franchise 500" lists and recognized by FRANdata with the TopFUND award, as well as Franchise Business Review's "Top Franchise for 2023," "Most Profitable Franchises" and "Top Franchises for Veterans" ranking, The Joint Chiropractic is an innovative force, where healthcare meets retail. For more information, visit www.thejoint.com. To learn about franchise opportunities, visit www.thejointfranchise.com.

Business StructureThe Joint Corp. is a franchisor of clinics and an operator of clinics in certain states. In Arkansas, California, Colorado, District of Columbia, Florida, Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Washington, and West Virginia, The Joint Corp. and its franchisees provide management services to affiliated professional chiropractic practices.

Media Contact: Margie Wojciechowski, The Joint Corp., margie.wojciechowski@thejoint.comInvestor Contact: Kirsten Chapman, LHA Investor Relations, 415-433-3777, thejoint@lhai.com

– Financial Tables Follow –

THE JOINT CORP.CONSOLIDATED BALANCE SHEETS
	June 30,2024				December 31,2023
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	17,457,625			$	18,153,609
Restricted cash		1,190,096				1,060,683
Accounts receivable, net		3,575,784				3,718,924
Deferred franchise and regional development costs, current portion		1,041,492				1,047,430
Prepaid expenses and other current assets		3,436,072				2,439,837
Assets held for sale		16,686,248				17,915,055
Total current assets		43,387,317				44,335,538
Property and equipment, net		8,928,658				11,044,317
Operating lease right-of-use asset		11,859,692				12,413,221
Deferred franchise and regional development costs, net of current portion		4,798,535				5,203,936
Intangible assets, net		4,145,162				5,020,926
Goodwill		7,677,695				7,352,879
Deferred tax assets ($1.1 million and $1.1 million attributable to VIEs as of June 30, 2024 and December 31, 2023)		907,019				1,031,648
Deposits and other assets		736,498				748,394
Total assets	$	82,440,576			$	87,150,859
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,639,841			$	1,625,088
Accrued expenses		3,161,257				1,963,009
Co-op funds liability		1,190,096				1,060,683
Payroll liabilities ($0.7 million and $0.7 million attributable to VIEs as of June 30, 2024 and December 31, 2023)		4,272,155				3,485,744
Operating lease liability, current portion		3,811,835				3,756,328
Finance lease liability, current portion		26,038				25,491
Deferred franchise fee revenue, current portion		2,521,156				2,516,554
Deferred revenue from company clinics ($2.2 million and $1.6 million attributable to VIEs as of June 30, 2024 and December 31, 2023)		4,420,601				4,463,747
Upfront regional developer Fees, current portion		298,306				362,326
Other current liabilities		532,251				483,249
Liabilities to be disposed of ($2.8 million and $3.6 million attributable to VIEs as of June 30, 2024 and December 31, 2023)		12,140,570				13,831,863
Total current liabilities		34,014,106				33,574,082
Operating lease liability, net of current portion		10,205,222				10,914,997
Finance lease liability, net of current portion		24,858				38,016
Debt under the Credit Agreement		—				2,000,000
Deferred franchise fee revenue, net of current portion		12,935,888				13,597,325
Upfront regional developer fees, net of current portion		814,823				1,019,316
Other liabilities ($1.2 million and $1.2 million attributable to VIEs as of June 30, 2024 and December 31, 2023)		1,235,241				1,235,241
Total liabilities		59,230,138				62,378,977
THE JOINT CORP.CONSOLIDATED BALANCE SHEETS (CONT)
	June 30,2024				December 31,2023
LIABILITIES AND STOCKHOLDERS' EQUITY (CONT’)	(unaudited)
Commitments and contingencies (Note 10)
Stockholders' equity:
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of June 30, 2024 and December 31, 2023		—				—
Common stock, $0.001 par value; 20,000,000 shares authorized, 14,996,787 shares issued and 14,963,772 shares outstanding as of June 30, 2024 and 14,783,757 shares issued and 14,751,633 outstanding as of December 31, 2023		14,996				14,783
Additional paid-in capital		48,595,496				47,498,151
Treasury stock 33,015 shares as of June 30, 2024 and 32,124 shares as of December 31, 2023, at cost		(870,058	)			(860,475	)
Accumulated deficit		(24,554,996	)			(21,905,577	)
Total The Joint Corp. stockholders' equity		23,185,438				24,746,882
Non-controlling Interest		25,000				25,000
Total equity		23,210,438				24,771,882
Total liabilities and stockholders' equity	$	82,440,576			$	87,150,859

THE JOINT CORP. CONDENSED CONSOLIDATED INCOME STATEMENTS(unaudited)
	Three Months EndedJune 30,								Six Months EndedJune 30,
		2024				2023				2024				2023
Revenues:
Revenues from company-owned or managed clinics	$	17,648,736			$	17,802,838			$	35,186,240			$	34,930,795
Royalty fees		7,846,328				7,172,159				15,433,874				14,038,182
Franchise fees		719,103				671,368				1,374,977				1,425,794
Advertising fund revenue		2,240,838				2,041,050				4,407,311				3,993,455
Software fees		1,415,036				1,234,812				2,801,812				2,444,817
Other revenues		390,520				384,957				778,513				774,962
Total revenues		30,260,561				29,307,184				59,982,727				57,608,005
Cost of revenues:
Franchise and regional development cost of revenues		2,458,186				2,236,442				4,799,951				4,377,277
IT cost of revenues		368,486				359,070				742,797				692,920
Total cost of revenues		2,826,672				2,595,512				5,542,748				5,070,197
Selling and marketing expenses		5,401,834				4,707,818				9,287,948				8,868,062
Depreciation and amortization		1,523,813				2,329,267				2,927,718				4,544,322
General and administrative expenses		22,570,908				19,904,796				42,834,600				39,943,272
Total selling, general and administrative expenses		29,496,555				26,941,881				55,050,266				53,355,656
Net loss on disposition or impairment		1,435,320				144,345				1,797,423				209,815
Loss from operations		(3,497,986	)			(374,554	)			(2,407,710	)			(1,027,663	)
Other income (expense), net		79,910				(106,520	)			115,540				3,714,642
Income (loss) before income tax expense		(3,418,076	)			(481,074	)			(2,292,170	)			2,686,979
Income tax (benefit) expense		178,322				(160,585	)			357,249				681,304
Net (loss) income	$	(3,596,398	)		$	(320,489	)		$	(2,649,419	)		$	2,005,675
Earnings (loss) per share:
Basic (loss) earnings per share	$	(0.24	)		$	(0.02	)		$	(0.18	)		$	0.14
Diluted (loss) earnings per share	$	(0.24	)		$	(0.02	)		$	(0.18	)		$	0.13
Basic weighted average shares		14,950,082				14,684,035				14,875,718				14,625,435
Diluted weighted average shares		15,206,238				14,952,363				15,110,736				14,907,593

THE JOINT CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)
	Six Months EndedJune 30,
		2024				2023
Cash flows from operating activities:
Net income (loss)	$	(2,649,419	)		$	2,005,675
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		2,927,718				4,544,322
Net loss on disposition or impairment (non-cash portion)		1,797,422				209,815
Net franchise fees recognized upon termination of franchise agreements		(73,526	)			(20,050	)
Deferred income taxes		124,629				477,154
Stock based compensation expense		1,045,460				683,227
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		85,861				376,444
Prepaid expenses and other current assets		(997,307	)			(1,208,605	)
Deferred franchise costs		385,256				51,268
Deposits and other assets		5,196				(12,557	)
Assets and liabilities held for sale, net		(1,674,226	)			—
Accounts payable		14,284				(1,440,375	)
Accrued expenses		1,198,248				1,104,369
Payroll liabilities		786,411				815,290
Deferred revenue		(631,272	)			245,363
Upfront regional developer fees		(268,513	)			(397,457	)
Other liabilities		(239,348	)			59,259
Net cash provided by operating activities		1,836,874				7,493,142
Cash flows from investing activities:
Proceeds from sale of clinics		224,100				—
Acquisition of CA clinics		—				(1,050,000	)
Purchase of property and equipment		(657,450	)			(2,729,875	)
Net cash used in investing activities		(433,350	)			(3,779,875	)
Cash flows from financing activities:
Payments of finance lease obligation		(12,610	)			(12,087	)
Purchases of treasury stock under employee stock plans		(9,583	)			(2,637	)
Proceeds from exercise of stock options		52,098				202,386
Repayment of debt under the Credit Agreement		(2,000,000	)			—
Net cash provided by (used in) financing activities		(1,970,095	)			187,662
Increase (decrease) in cash, cash equivalents and restricted cash		(566,571	)			3,900,929
Cash, cash equivalents and restricted cash, beginning of period		19,214,292				10,550,417
Cash, cash equivalents and restricted cash, end of period	$	18,647,721			$	14,451,346
Reconciliation of cash, cash equivalents and restricted cash:	June 30,2024				June 30,2023
Cash and cash equivalents	$	17,457,625			$	13,602,515
Restricted cash		1,190,096				848,831
Cash, cash equivalents and restricted cash, end of period	$	18,647,721			$	14,451,346

THE JOINT CORP. RECONCILIATION FOR GAAP TO NON-GAAP(unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Non-GAAP Financial Data:
Net (loss) income	$	(3,596,398	)		$	(320,489	)		$	(2,649,419	)		$	2,005,675
Net interest expense		(79,910	)			14,937				(115,540	)			64,661
Depreciation and amortization expense		1,523,813				2,329,267				2,927,718				4,544,322
Tax expense (benefit)		178,322				(160,585	)			357,249				681,304
EBITDA		(1,974,173	)			1,863,130				520,008				7,295,962
Stock compensation expense		552,065				417,017				1,045,460				683,227
Acquisition related expenses		478,710				716,299				478,710				857,992
Loss on disposition or impairment		1,435,320				144,345				1,797,423				209,815
Restructuring costs		144,240				—				301,276				—
Litigation expenses		1,490,000				—				1,490,000				—
Other income related to the ERC		—				91,583				—				(3,779,304	)
Adjusted EBITDA	$	2,126,162			$	3,232,374			$	5,632,877			$	5,267,692