JOINT Corp
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
JYNT$6.85-7.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001612630-24-000006
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 3Current report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001628280-24-036301
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 3The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 118 previous paragraphs and 91 current paragraphs.
31 unchanged; 32 reworded; 19 added; 40 removed; 15 previous and 9 current paragraphs rearranged.
Tables are not compared: 9 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
On June 24, 2024, we entered into an agreement pursuant to which we repurchased the right to develop franchises in various counties in Maryland. The total consideration for the transaction was $0.6 million. We carried an upfront regional developer fee liability balance associated with this transaction of $0.1 million, representing the unrecognized fee collected upon the execution of the regional developer agreement. We accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated upfront regional developer fee liability was netted against the aggregate purchase price. We recognized the net amount of $0.5 million as a general and administrative expense for the three and six months ended June 30, 2024.
Current report
Revenues from company-owned or managed clinics decreased, primarily due to the divestitures of our company-owned or managed clinics in 2024. As of June 30, 2024 and 2023, there were 131 and 134 company-owned or managed clinics in operation, respectively.
Current report
Total Revenues - Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023
Current report
Consolidated loss from operations increased by $3.1 million for the three months ended June 30, 2024 compared with the three months ended June 30, 2023, primarily due to the increased expenses in the corporate clinics and unallocated corporate segments discussed below.
Current report
Our corporate clinics segment had loss from operations of $0.2 million for the three months ended June 30, 2024, a decrease of $0.3 million compared to income from operations of $21,790 for the prior year period. The decrease was primarily due to:
Current report
•decrease in revenues of $0.2 million from company-owned or managed clinics; plus
Current report
•$0.1 million net increase in operating expenses due to the re-franchising efforts with changes in the following: (i) an increase in net loss on disposition or impairment of $1.3 million, (ii) an increase in payroll-related expenses of $0.3 million, (iii) a decrease in depreciation and amortization expense of $0.8 million, (iv) a decrease in utilities and facilities expenses of $0.5 million, and (v) a decrease in selling and marketing expenses of $0.2 million.
Current report
Our franchise operations segment had income from operations of $3.9 million for the three months ended June 30, 2024, a decrease of $0.3 million, compared to income from operations of $4.2 million for the prior year period. This decrease was primarily due to:
Current report
•increase in selling and marketing expenses of $1.0 million driven by an increase in advertising fund expenditures from a larger franchise base; plus
Current report
•increase of $0.4 million in operating expenses due to an increase in payroll-related expenses; partially offset by
Current report
Unallocated corporate expenses for the three months ended June 30, 2024 increased by $2.6 million compared to the prior year period, primarily due to litigation expenses, including settlement costs related to employment matters that were outside the normal course of business of $1.5 million plus increases in general and administrative expenses of $1.1 million.
Current report
Loss from Operations - Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023
Current report
Consolidated loss from operations increased by $1.4 million for the six months ended June 30, 2024 compared with the six months ended June 30, 2023, primarily due to impairment charges on company-owned or managed clinics classified as held for sale and company-owned or managed clinics closed during the six months ended June 30, 2024.
Current report
•$1.3 million net decrease in operating expenses due to the re-franchising efforts with changes in the following: (i) a decrease in depreciation and amortization expense of $1.6 million, (ii) a decrease in utilities and facilities expenses of $1.3 million, and (iii) an increase in net loss on disposition or impairment of $1.6 million.
Current report
•decrease of general and administrative expenses related to reacquired regional developer rights of $0.3 million; partially offset by
Current report
Unallocated Corporate
Current report
Unallocated corporate expenses for the six months ended June 30, 2024 increased by $3.5 million compared to the prior year period, primarily due to litigation expenses, including settlement costs related to employment matters that were outside the normal course of business, of $1.5 million incurred for the six months ended June 30, 2024 and no comparable costs for the same period in 2023 plus a decrease in other (expense) income, net related to the ERC received in 2023.
Current report
Other Income (Expense), Net
Current report
Other income (expenses), net increased during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to decreased interest expense due to the pay down of the outstanding balance on our Debt under the Credit Agreement in 2024.
Removed paragraphs (40)
Previous report
Forward-Looking Statements
Previous report
This Quarterly Report on Form 10-Q, especially in this Management’s Discussion and Analysis or MD&A, contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts, included or incorporated in this Form 10-Q could be deemed forward-looking statements, particularly statements about our plans, strategies and prospects under the heading “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “intend,” “seek,” “strive,” or the negative of these terms, “mission,” “goal,” “objective,” or “strategy,” or other comparable terminology. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations as described from time to time in our SEC reports, including those risks outlined under “Risk Factors” which are contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 and in Part II, Item 1A of this or any subsequent quarterly reports on Form 10-Q. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. You should carefully consider the trends, risks and uncertainties described below and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. We undertake no obligation to update or revise publicly any forward-looking statements, other than in accordance with legal and regulatory obligations. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
Previous report
The specific forward-looking statements in this Quarterly Report on Form 10-Q include the following:
Previous report
Some of the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following:
Previous report
•the nationwide labor shortage has negatively impacted our ability to recruit chiropractors and other qualified personnel, which may limit our growth strategy, and the measures we have taken in response to the labor shortage have reduced our net revenues;
Previous report
•inflation has led to increased labor costs and interest rates and may lead to reduced discretionary spending, all of which may negatively impact our business;
Previous report
•the COVID-19 pandemic has caused significant disruption to our operations and may continue to impact our business, key financial and operating metrics, and results of operations in numerous ways that remain unpredictable; future widespread outbreaks of contagious disease could similarly disrupt our business;
Previous report
•we may not be able to successfully implement our growth strategy if our franchisees are unable to locate and secure appropriate sites for clinic locations, obtain favorable lease terms, and attract patients to our clinics;
Previous report
•we have limited experience operating company-owned or managed clinics in those geographic areas where we currently have few or no clinics, and we may not be able to duplicate the success of some of our franchisees;
Previous report
•short-selling strategies and negative opinions posted on the internet may drive down the market price of our common stock and could result in class action lawsuits;
Previous report
•we have previously identified material weaknesses in our internal controls over financial reporting and we may fail to remediate future material weaknesses in our internal controls over financial reporting or may otherwise be unable to maintain an effective system of internal control over financial reporting, which might negatively impact our ability to accurately report our financial results, prevent fraud, or maintain investor confidence;
Previous report
•we may fail to successfully design and maintain our proprietary and third-party management information systems or implement new systems;
Previous report
•we have restated our prior consolidated financial statements, which may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price;
Previous report
•we may fail to properly maintain the integrity of our data or to strategically implement, upgrade or consolidate existing information systems;
Previous report
•we may not be able to continue to sell franchises to qualified franchisees, and our franchisees may not succeed in developing profitable territories and clinics;
Previous report
•new clinics may not reach the point of profitability, and we may not be able to maintain or improve revenues and franchise fees from existing franchised clinics;
Previous report
•the chiropractic industry is highly competitive, with many well-established independent competitors, which could prevent us from increasing our market share or result in reduction in our market share;
Previous report
•state administrative actions and rulings regarding the corporate practice of chiropractic and prepayment of chiropractic services may jeopardize our business model;
Previous report
•expected new federal regulations and state laws and regulations regarding joint employer responsibility could negatively impact the franchise business model, increasing our potential liability for employment law violations by our franchisees and the likelihood that we may be required to participate in collective bargaining with our franchisees’ employees;
Previous report
•an increased regulatory focus on the establishment of fair franchise practices could increase our risk of liability in disputes with franchisees and the risk of enforcement actions and penalties;
Previous report
•adverse developments affecting institutions, including bank failures, could adversely affect our liquidity and financial performance;
Previous report
•negative publicity or damage to our reputation, which could arise from concerns expressed by opponents of chiropractic and by chiropractors operating under traditional service models, could adversely impact our operations and financial position;
Previous report
•our IT security systems and those of our third-party service providers (as recently experienced by one of our marketing vendors) may be breached, and we may face civil liability and public perception of our security measures could be diminished, either of which would negatively affect our ability to attract and retain patients;
Previous report
•new SEC regulations governing disclosure about risk management, strategy and governance regarding cybersecurity risks and new requirements for reporting of cybersecurity incidents may increase our compliance costs;
Previous report
•legislation, regulations, as well as new medical procedures and techniques, could reduce or eliminate our competitive advantages; and
Previous report
•the delayed filing of one of our quarterly reports has made us currently ineligible to use a registration statement on Form S-3 to register the offer and sale of securities, which could adversely affect our ability to raise future capital or complete acquisitions.
Previous report
Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the SEC. Any forward-looking statements in this Quarterly Report on Form 10-Q should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others.
Previous report
Consolidated Results
Previous report
Corporate Clinics
Previous report
Franchise Operations
Previous report
General and administrative expenses increased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to restructuring costs of $0.2 million and due to the increases in the following to support continued clinic count and revenue growth in both operating segments: (i) payroll and related expenses of $0.5 million; and (ii) professional and advisory fees of $0.5 million primarily related to increased audit fees. The increases were partially offset by a decrease of $1.0 million in amortization of ROU assets for the clinics held for sale during the three months ended March 31, 2024.
Previous report
Income (Loss) from Operations
Previous report
Consolidated Results
Previous report
Consolidated income from operations increased by $1.7 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to the discontinued recording of depreciation on property and equipment, net, amortization of intangible assets, net and amortization of ROU assets for the clinics held for sale during the three months ended March 31, 2024, as required by GAAP.
Previous report
Corporate Clinics
Previous report
•a decrease of $1.8 million in operating expenses due to discontinued recording of depreciation on property and equipment, net, amortization of intangible assets, net and amortization of ROU assets for the clinics held for sale during the three months ended March 31, 2024; partially offset by
Previous report
•an increase in impairment loss of $0.3 million.
Previous report
Franchise Operations
Previous report
Unallocated corporate expenses for the three months ended March 31, 2024 increased by $1.0 million compared to the prior year period, primarily due to the increases in payroll-related expenses due to a higher head count to support the expansion of both operating segments and increases in audit and accounting fees to support the Company as a publicly traded company.
Previous report
Other Income, Net
Reworded paragraphs (32)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with ourunaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 8, 2024.
Previous wording
Key Performance Measures. We receive monthly performance reports from our system and our clinics that include key performance indicators per clinic, including gross sales, comparable same-store sales growth, or “Comp Sales,” number of new patients, conversion percentage and membership attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales, adjusted EBITDA and various earnings metrics in the aggregate and per clinic. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance. Comp Sales include the sales 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. System-wide sales include sales at all clinics, whether operated by us or by franchisees. While franchised clinic sales are not recorded as revenues by us, management believes the information is important in understanding the overall brand’s financial performance, because these sales are the basis on which we calculate and record royalty fees and are indicative of the financial health of the franchisee base. Adjusted EBITDA consists of net income before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, costs related to restatement filings, restructuring costs and other income related to the ERC. There were no costs related to restatement filings or bargain purchase gain for the three months ended March 31, 2024 and 2023.
Current wording
Key Performance Measures. We receive monthly performance reports from our system and our clinics that include key performance indicators per clinic, including gross sales, comparable same-store sales growth, or “Comp Sales,” number of new patients, conversion percentage and membership attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales, adjusted EBITDA and various earnings metrics in the aggregate and per clinic. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance. Comp Sales include the sales 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. System-wide sales include sales at all clinics, whether operated by us or by franchisees. While franchised clinic sales are not recorded as revenues by us, management believes the information is important in understanding the overall brand’s financial performance, because these sales are the basis on which we calculate and record royalty fees and are indicative of the financial health of the franchisee base. Adjusted EBITDA consists of net income before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, costs related to restatement filings, restructuring costs and other income related to the ERC. There were no costs related to restatement filings or bargain purchase gain for the three and six months ended June 30, 2024 and 2023.
Previous wording
Key Clinic Development Trends. As of March 31, 2024, we and our franchisees operated or managed 954 clinics, of which 819 were operated or managed by franchisees and 135 were operated as company-owned or managed clinics. Of the 135 company-owned or managed clinics, 65 were constructed and developed by us, and 70 were acquired from franchisees.
Current wording
Key Clinic Development Trends. As of June 30, 2024, we and our franchisees operated or managed 960 clinics, of which 829 were operated or managed by franchisees and 131 were operated as company-owned or managed clinics. Of the 131 company-owned or managed clinics, 62 were constructed and developed by us, and 69 were acquired from franchisees.
Previous wording
The number of franchise licenses sold for the year ended December 31, 2023 was 55, compared with 75 and 156 licenses for the years ended December 31, 2022 and 2021, respectively. We ended the first three months of 2024 with 17 regional developers who were responsible for 27% of the 15 licenses sold during the period. This strong result reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the United States.
Current wording
The number of franchise licenses sold for the year ended December 31, 2023 was 55, compared with 75 and 156 licenses for the years ended December 31, 2022 and 2021, respectively. We ended the first half of 2024 with 16 regional developers who were responsible for 27% of the 22 licenses sold during the period. This strong result reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the United States.
Previous wording
The primary inflationary factor affecting our operations is labor costs. In 2023 and 2024, clinics owned or managed by us were negatively impacted by labor shortages and wage increases, which increased our general and administrative expenses. Further, should we fail to continue to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our patient service to suffer. While we anticipate that these continued headwinds will be partially mitigated by pricing actions, there can be no assurance that we will be able to continue to take such pricing actions. A continued increase in labor costs could have an adverse effect on our operating costs, financial condition and results of operations.
Current wording
The primary inflationary factor affecting our operations is labor costs. In 2023 and 2024, clinics company-owned or managed by us were negatively impacted by labor shortages and wage increases, which increased our general and administrative expenses. Further, should we fail to continue to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our patient service to suffer. While we anticipate that these continued headwinds will be partially mitigated by pricing actions, there can be no assurance that we will be able to continue to take such pricing actions. A continued increase in labor costs could have an adverse effect on our operating costs, financial condition and results of operations.
Previous wording
•System-wide comp sales of clinics that have been open for at least 13 full months increased 3%.
Current wording
•System-wide comp sales of clinics that have been open for at least 13 full months increased 2%.
Previous wording
•System-wide comp sales for mature clinics open 48 months or more decreased 3%.
Current wording
•System-wide comp sales for mature clinics open 48 months or more decreased (4)%.
Previous wording
•System-wide sales for all clinics open for any amount of time increased 9%.
Current wording
•System-wide sales for all clinics open for any amount of time increased 8%.
Previous wording
There were no changes in our critical accounting estimates during the three months ended March 31, 2024 from those set forth in “Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
There were no changes in our critical accounting estimates during the six months ended June 30, 2024 from those set forth in “Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Total revenues increased by $1.4 million, primarily due to the continued expansion and revenue growth of our franchise base and the continued expansion and revenue growth of our company-owned or managed clinics portfolio.
Current wording
Total revenues increased by $1.0 million, primarily due to the continued expansion and revenue growth of our franchise base.
Previous wording
•Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics. As of March 31, 2024 and 2023, there were 819 and 740 franchised clinics in operation, respectively.
Current wording
•Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics. As of June 30, 2024 and 2023, there were 829 and 756 franchised clinics in operation, respectively.
Previous wording
Revenues from company-owned or managed clinics increased, primarily due to the expansion of our company-owned or managed clinics portfolio. As of March 31, 2024 and 2023, there were 135 and 130 company-owned or managed clinics in operation, respectively.
Current wording
Revenues from company-owned or managed clinics increased, primarily due to improved same-store sales growth in newer clinics. As of June 30, 2024 and 2023, there were 131 and 134 company-owned or managed clinics in operation, respectively.
Previous wording
•Franchise fees decreased due to the impact of accelerated revenue recognition resulting from the terminated franchise license agreements during the first quarter of 2023. There were no such comparable events during the first quarter of 2024.
Current wording
•Franchise fees decreased due to the impact of accelerated revenue recognition resulting from the terminated franchise license agreements in the current period compared to the prior period.
Previous wording
•Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement, as described in “Revenue Recognition” in Note 1, Nature of Operations and Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Current wording
•Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described in Note 1, Nature of Operations and Summary of Significant Accounting Policies—Revenue Recognition, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Previous wording
For the three months ended March 31, 2024, as compared with the three months ended March 31, 2023, the total cost of revenues increased primarily due to an increase in regional developer royalties of $0.2 million.
Current wording
For the three months ended June 30, 2024, as compared with the three months ended June 30, 2023, the total cost of revenues increased primarily due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics in regional developer regions. For the six months ended June 30, 2024, as compared with the six months ended June 30, 2023, the total cost of revenues increased primarily due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics in regional developer regions.
Previous wording
Selling and marketing expenses decreased for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, driven by: (i) a decrease in local marketing expenditures by the company-owned or managed clinics and (ii) the timing of the national marketing fund spend.
Current wording
Selling and marketing expenses increased for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, driven by the in-person national franchise conference held in 2024 and an increase in advertising fund expenditures from a larger franchise base and an increase in local marketing expenditures by the company-owned or managed clinics.
Previous wording
Depreciation and amortization expenses decreased for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to no depreciation and amortization expense recorded during the three months ended March 31, 2024 related to the assets held for sale at March 31, 2024.
Current wording
Depreciation and amortization expenses decreased for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to no depreciation and amortization expenses recorded during the three and six months ended June 30, 2024 related to the assets held for sale at June 30, 2024.
Previous wording
As a percentage of revenue, general and administrative expenses during the three months ended March 31, 2024 and 2023 were 68% and 71%, respectively.
Current wording
General and administrative expenses increased for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to the litigation expenses, including settlement costs related to employment matters that were outside the normal course of business of $1.5 million as well as increases in payroll and related expenses of $1.1 million to support continued clinic count and revenue growth in both operating segments. General and administrative expenses increased for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to the litigation expenses, including settlement costs related to employment matters that were outside the normal course of business of $1.5 million as well as increases in the following to support continued clinic count and revenue growth in both operating segments: (i) payroll and related expenses of $1.7 million, (ii) professional and advisory fees of $0.5 million, and (iii) legal and accounting fees of $0.5 million partially offset by a decrease in utilities and facilities expenses in the corporate clinic segment of $1.3 million. As a percentage of revenue, general and administrative expenses during the six months ended June 30, 2024 and 2023 were 71% and 69%, respectively.
Previous wording
Our corporate clinics segment had income from operations of $1.5 million for the three months ended March 31, 2024, an increase of $1.9 million compared to loss from operations of $0.4 million for the prior year period. This increase was primarily due to:
Current wording
Our corporate clinics segment had income from operations of $1.2 million for the six months ended June 30, 2024, an increase of $1.6 million compared to loss from operations of $0.4 million for the prior year period. The increase was primarily due to:
Previous wording
•an increase in revenues of $0.4 million from company-owned or managed clinics; and
Current wording
•increase in revenues of $0.3 million from company-owned or managed clinics; plus
Previous wording
Our franchise operations segment had income from operations of $5.3 million for the three months ended March 31, 2024, an increase of $0.8 million compared to income from operations of $4.5 million for the prior year period. This increase was primarily due to:
Current wording
Our franchise operations segment had income from operations of $9.3 million for the six months ended June 30, 2024, an increase of $0.5 million, compared to income from operations of $8.8 million for the prior year period. This increase was primarily due to:
Previous wording
•an increase of $1.0 million in total revenues; partially offset by
Current wording
•increase of $2.1 million in total revenues; plus
Previous wording
•an increase of $0.2 million in cost of revenues primarily due to an increase in regional developer royalties.
Current wording
•increase of $0.5 million in cost of revenues primarily due to an increase in regional developer royalties and an increase of $1.4 million in operating expenses, primarily due to an increase in: (i) selling and marketing expenses resulting from a larger franchise base of $0.9 million, and (ii) payroll-related expenses of $0.5 million.
Previous wording
Other income, net decreased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to the recognition and receipt of the $3.8 million employee retention credits, net of the consulting fee, in the first quarter of 2023. There were no such comparable events during the first quarter of 2024.
Current wording
Other income (expenses), net decreased during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to the recognition and receipt of the $3.8 million of ERC, net of the consulting fee, in the first quarter of 2023, partially offset by net interest expense of $0.1 million.
Previous wording
Income tax expense decreased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to decreased earnings before income tax expense and a change in the valuation allowance assessment as of December 31, 2023, at the Joint Corp.
Current wording
Income tax expense decreased during the three and six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to decreased earnings before income tax expense and a change in the valuation allowance assessment as of December 31, 2023 at the Joint Corp, which was partially offset by increased earnings at the variable interest entities.
Previous wording
The following table reconciles net income to Adjusted EBITDA for the three months ended March 31, 2024 and 2023:
Current wording
The table below reconciles net income (loss) to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023.
Previous wording
Adjusted EBITDA consists of net income before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, costs related to restatement filings, restructuring costs, and other income related to the ERC. There were no costs related to restatement filings or bargain purchase gain for the three months ended March 31, 2024 and 2023. We have provided Adjusted EBITDA because it is a non-GAAP measure of financial performance commonly used for comparing companies in our industry. You should not consider Adjusted EBITDA as a substitute for operating profit as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. We may calculate Adjusted EBITDA differently from other companies.
Current wording
Adjusted EBITDA consists of net income (loss) before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, 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 the ERC. There were no costs related to restatement filings or bargain purchase gain for the three and six months ended June 30, 2024 and 2023. We have provided Adjusted EBITDA because it is a non-GAAP measure of financial performance commonly used for comparing companies in our industry. You should not consider Adjusted EBITDA as a substitute for operating profit as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. We may calculate Adjusted EBITDA differently from other companies.
Previous wording
As of March 31, 2024, we had unrestricted cash and short-term bank deposits of $18.7 million and $20 million of available capacity under the line of credit. While unfavorable global economic or political conditions create potential liquidity risks, as discussed further below, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, our anticipated cash flows from investments as we execute our re-franchising strategy and amounts available under our line of credit will be sufficient to fund our anticipated operating and investment needs for at least the next 12 months.
Current wording
As of June 30, 2024, we had unrestricted cash and short-term bank deposits of $17.5 million and $20 million of available capacity under the Line of Credit. While unfavorable global economic or political conditions create potential liquidity risks, as discussed further below, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, our anticipated cash flows from investments as we execute our re-franchising strategy and amounts available under our Line of Credit will be sufficient to fund our anticipated operating and investment needs for at least the next 12 months.
Previous wording
Net cash provided by operating activities decreased by $3.2 million to $2.8 million for the three months ended March 31, 2024, compared to $6.0 million for the three months ended March 31, 2023. The decrease was primarily attributable to recognizing the $3.9 million ERC during the Three months ended March 31, 2023, which was partially offset by an increase in revenue over the prior year period, and a decrease in depreciation and amortization expenses over the prior year period.
Current wording
Net cash provided by operating activities decreased by $5.7 million to $1.8 million for the six months ended June 30, 2024, compared to $7.5 million for the six months ended June 30, 2023. The decrease was primarily attributable to the receipt of the $4.8 million ERC in the prior period, in addition to an increase in general and administrative expenses over the prior year period.
Previous wording
Net cash used in investing activities was $0.3 million and $1.2 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, this included purchases of property and equipment of $0.4 million. For the three months ended March 31, 2023, this included purchases of property and equipment of $1.2 million.
Current wording
Net cash used in investing activities was $0.4 million and $3.8 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, this included proceeds from sales of clinics of $0.2 million, and purchases of property and equipment of $0.7 million. For the six months ended June 30, 2023, this included acquisitions of $1.1 million, and the purchases of property and equipment of $2.7 million.
Previous wording
Net cash used in financing activities for the three months ended March 31, 2024 was $2.0 million, compared to net cash provided by financing activities of $0.1 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, this included paying down the outstanding balance on its Debt under the Credit Agreement of $2.0 million.
Current wording
Net cash used in financing activities for the six months ended June 30, 2024 was $2.0 million, compared to $0.2 million in net cash provided by financing activities for the six months ended June 30, 2023. For the six months ended June 30, 2024, this included paying down the outstanding balance on its Debt under the Credit Agreement of $2.0 million.
Previous wording
During the three months ended March 31, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.
Current wording
During the six months ended June 30, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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•Franchise fees increased due to the impact of accelerated revenue recognition resulting from the terminated franchise license agreements in the current period compared to the prior period.
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•Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described above.
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•Other revenues primarily consisted of merchant income associated with credit card transactions.
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Components of revenues were as follows:
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Total revenues increased by $2.4 million, primarily due to the continued expansion and revenue growth of our franchise base.
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•Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics. As of June 30, 2024 and 2023, there were 829 and 756 franchised clinics in operation, respectively.
Current report — wording carried from elsewhere
Loss from Operations - Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023
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•decrease of $1.1 million in total revenues
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•that we seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry through the rapid and focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad;
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•our belief that our monthly performance reports from our system and our clinics include key performance indicators per clinic, including gross sales, comparable same-store sales growth, or “Comp Sales,” number of new patients, conversion percentage and membership attrition;
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•our plan to re-franchise or sell the majority of our company-owned or managed clinics, which refined strategy will leverage our greatest strength - our capacity to build a franchise - to drive long-term growth for both our franchisees and The Joint as a public company;
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•our belief that the strong results with respect to our franchise licenses sold and our regional developers reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened across the country;
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•our belief that we continue 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;
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•our belief that these trends join with the preference we have seen among chiropractic doctors to reject the insurance-based model to produce a combination that benefits the consumer and the service provider alike, and our belief that these forces create an important opportunity to accelerate the growth of our network;
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•our belief that recent events that may impact our business include unfavorable global economic or political conditions, such as the Ukraine War, the Israel-Gaza conflict, labor shortages, and inflation and other cost increases;
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•our anticipation that 2024 will continue to be a volatile macroeconomic environment;
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•our belief that we have created a robust framework for the re-franchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency, and that we have received significant interest to date from our existing franchisees;
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•our goal to generate significant processes that will provide us with value creating capital allocation opportunities, which opportunities could include, but are not limited to, reinvestment in the brand and related marketing, continued investment in our IT platforms, the repurchase of RD territories, and/or a stock repurchase program;
Previous report — wording carried elsewhere
•our belief that our operating results may fluctuate significantly as a result of a variety of factors, including the timing of new clinic sales, openings, closures, markets in which they are contained and related expenses, general economic conditions, cost inflation, labor shortages, consumer confidence in the economy, consumer preferences, competitive factors, and disease epidemics and other health-related concerns, such as the COVID-19 pandemic;
Previous report — wording carried elsewhere
•our belief that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our line of credit will be sufficient to fund our anticipated operating and investment needs for at least the next 12 months;
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•our belief that we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business; and
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•our expectation that for the remainder of 2024, we expect to use or redelploy our cash resources to support our business within the context of prevailing market conditions, which, given the ongoing uncertainties described above, could rapidly and materially deteriorate or otherwise change.
Previous report — wording carried elsewhere
For the three months ended March 31, 2024, compared to the prior year period: