Overview of the Company’s Financial Performance

The Joint Corp. is a rapidly growing franchisor that operates a network of chiropractic clinics using a private pay, non-insurance, cash-based model. The company’s key performance measures include gross sales, comparable same-store sales growth, number of new patients, conversion percentage, membership attrition, system-wide sales, clinic openings and closures, franchise license sales, adjusted EBITDA, and various earnings metrics.

In the first quarter of 2025, the company and its franchisees operated a total of 969 clinics, with 847 operated by franchisees and 122 operated as company-owned or managed clinics. The company’s current strategy is to grow through the sale and development of additional franchises, and it has been actively refranchising or selling the majority of its company-owned or managed clinics.

The number of franchise licenses sold in the first quarter of 2025 was 9, compared to 15 in the first quarter of 2024. The company ended the first quarter of 2025 with 16 regional developers who were responsible for 56% of the licenses sold during the period. The company believes it can continue to leverage the power of the regional developer program to accelerate the number of clinics sold and opened across the country.

Revenue and Profit Trends

For the three months ended March 31, 2025, the company reported total revenue of $13.08 million, up from $12.18 million in the same period of 2024, representing a 5.0% increase in system-wide sales for all clinics open for any amount of time.

However, the company reported a segment loss of $506,021 for the first quarter of 2025, compared to a segment loss of $398,919 in the same period of 2024. This increase in segment loss was primarily due to higher franchise and regional developer cost of revenues, IT cost of revenues, selling and marketing expenses, and stock compensation expense, partially offset by higher revenue.

The company’s net income for the first quarter of 2025 was $801,430, which included $1.31 million in net income from discontinued operations. This compares to net income of $946,979 in the first quarter of 2024, which included $1.35 million in net income from discontinued operations.

Strengths and Weaknesses

Strengths:

• Rapidly growing franchisor with a focus on expanding its network of chiropractic clinics
• Private pay, non-insurance, cash-based business model that provides flexibility and control
• Leveraging the power of the regional developer program to accelerate clinic openings
• Generating significant interest from potential buyers for its company-owned or managed clinics as part of its refranchising strategy

Weaknesses:

• Segment loss has increased due to higher operating expenses, including franchise and regional developer costs, IT costs, and selling and marketing expenses
• Continued labor shortages and wage increases have negatively impacted the company’s general and administrative expenses
• Uncertain macroeconomic environment, including inflation and interest rate hikes, may adversely affect patient spending on the company’s services

Outlook for the Future

The company believes it continues to have a sound business concept and will benefit from the fundamental changes taking place in the manner in which Americans access chiropractic care and their growing interest in seeking effective, affordable natural solutions for general wellness. These trends, combined with the preference among chiropractic doctors to reject the insurance-based model, create an important opportunity for the company to accelerate the growth of its network.

However, the company also faces several challenges, including unfavorable global economic or political conditions, labor shortages, and inflation and other cost increases. The company anticipates that 2025 will continue to be a volatile macroeconomic environment, and it will need to carefully manage these factors to maintain its profitability and growth.

Overall, the company’s focus on franchising, refranchising its company-owned or managed clinics, and leveraging its regional developer program appears to be a sound strategy for driving long-term growth. However, the company will need to navigate the current economic uncertainties and continue to control its operating expenses to achieve its financial goals.