JOINT Corp
For the period ended Dec 31, 2024. Filed Mar 14, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 14, 2025
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-K
Period ended 2023-12-31; filed 2024-03-08.
0001628280-24-009767
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-14.
0001628280-25-012702
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe 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 128 previous paragraphs and 122 current paragraphs.
65 unchanged; 44 reworded; 10 added; 19 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 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 (10)
Current report
Effective October 10, 2024, Peter D. Holt resigned as the President and Chief Executive Officer of the Company and as a member of the Company’s Board of Directors.
Current report
Effective October 14, 2024, the Board of Directors of the Company appointed Sanjiv Razdan as President and Chief Executive Officer of the Company and as a member of the Company’s Board of Directors.
Current report
As discussed further in Note 3, Acquisitions and Divestitures, in the Notes to consolidated financial statements, during the fourth quarter of 2024, the Company classified its corporate clinic business segment as held for sale. The results of operations of the corporate clinic business segment are reported in (Loss) income from discontinued operations before income tax expense in its consolidated income statement for all periods presented and the related assets and liabilities associated with discontinued operations are classified as discontinued operation assets and liabilities, current and net of current, in the consolidated balance sheet for all periods presented. The consolidated statement of cash flows includes cash flows related to the discontinued operations and accordingly, cash flow amounts for discontinued operations are disclosed in Note 3, Acquisitions and Divestitures, in the Notes to consolidated financial statements.
Current report
Net Loss (Gain) on Disposition or Impairment
Current report
•an increase of $2.2 million in selling and marketing expenses resulting from a larger franchise base and increased marketing expenditures expanding our franchise marketing efforts,
Current report
•an increase of $0.1 million in depreciation expenses related to additional development of internal use software made available for use in the first half of 2024,
Current report
•an increase of $3.6 million in general and administration expenses primarily due to (i) payroll and related expenses of $1.3 million; (ii) restructuring costs of $0.6 million; (iii) professional and advisory fees of $1.2 million primarily related to additional IT outsourced resources to support the Company’s proprietary chiropractic software and help desk; and (iv) accounting services expense of $0.4 million to support compliance requirements as a public company, partially offset by
Current report
Other Income (loss), Net
Current report
Other income (loss), net increased during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to decreased interest expense due to the pay down of the outstanding balance on our Debt under the Credit Agreement in the first quarter of 2024.
Current report
The high effective tax rate for the year ended December 31, 2023 was primarily driven by the establishment of a valuation allowance against the Company’s deferred tax assets, resulting in a one-time increase in income tax expense. In contrast, the absence of this adjustment for the year ended December 31, 2024 led to an effective tax rate that remained within a more comparable range. Please see Note 8, Income Taxes, in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for further discussion.
Removed paragraphs (19)
Previous report
In October 2023, we entered into two separate letters of intent to sell two of our company-owned or managed clinics that were part of the approximately 10% of clinics identified for sale and classified as held for sale as of September 30, 2023 for a combined total sales price of $185,000. The sales are expected to close during the first quarter of 2024, subject to customary closing conditions.
Previous report
For the year ended December 31, 2023, we constructed and developed 10 new corporate clinics.
Previous report
Royalties and Advertising Fund Revenue. We collect royalties from our franchisees, as stipulated in the franchise agreement, equal to 7% of gross sales and a marketing and advertising fee currently equal to 2% of gross sales. Royalties, including franchisee contributions to advertising funds, are calculated as a percentage of clinic sales over the term of the franchise agreement. The revenue accounting standard provides an exception for the recognition of sales-based royalties promised in exchange for a license (which generally requires a reporting entity to estimate the amount of variable consideration to which it will be entitled in the transaction price). The franchise agreement royalties, inclusive of advertising fund contributions, represent sales-based royalties that are related entirely to our performance obligation under the franchise agreement and are recognized as franchisee clinic level sales occur. Royalties and marketing and advertising fees are collected bi-monthly two working days after each sales period has ended.
Previous report
Consolidated Results
Previous report
Corporate Clinics
Previous report
•Revenues from company-owned or managed clinics increased, primarily due to the expansion of our corporate-owned or managed clinics portfolio. As of December 31, 2023 and 2022, there were 135 and 126 company-owned or managed clinics in operation, respectively.
Previous report
Franchise Operations
Previous report
Net loss on disposition or impairment increased $2.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to the impairment charges of long-lived assets resulting from the planned sale or determined closure of certain company-owned or managed clinics classified as held for sale and those classified as held and used that were determined to not be recoverable.
Previous report
Consolidated Results
Previous report
Corporate Clinics
Previous report
Our corporate clinics segment had loss from operations of $2.5 million for the year ended December 31, 2023, a decrease in income of $2.6 million compared to income from operations of $0.1 million for the year ended December 31, 2022. This decrease was primarily due to:
Previous report
•A $13.9 million increase in operating expenses primarily due to the increases in the following: (i) payroll-related expenses of $5.6 million due to a higher head count to support the expansion of our corporate clinic portfolio and general wage increases to remain competitive in the current labor market; (ii) depreciation and amortization expense of $1.9 million primarily associated with the expansion of our company-owned or managed clinics portfolio; (iii) selling and marketing expenses due to increased local marketing expenditures by the company-owned or managed clinics of $1.9 million; (iv) general overhead and administrative expenses to support the expansion of our corporate clinic portfolio of $2.3 million; and (v) an increase in impairment loss of $2.2 million; partially offset by
Previous report
•An increase in revenues of $11.3 million from company-owned or managed clinics primarily due to the expansion of our corporate-owned or managed clinics portfolio.
Previous report
Franchise Operations
Previous report
Our franchise operations segment had income from operations of $20.3 million for the year ended December 31, 2023, an increase of $3.0 million, compared to income from operations of $17.3 million for the year ended December 31, 2022. This increase was primarily due to:
Previous report
•An increase of $1.4 million in cost of revenues, primarily due to an increase in regional developer royalties and website hosting costs. An increase of $0.8 million in operating expenses, primarily due to an increase in (i) selling and marketing expenses resulting from a larger franchise base of $0.8 million, (ii) payroll-related expenses of $1.0 million, and (iii) travel costs of $0.1 million; offset by a reduction in acquisition related expenses of $1.1 million.
Previous report
Unallocated Corporate
Previous report
Unallocated corporate expenses for the year ended December 31, 2023 increased by $3.3 million compared to the prior year period, primarily due an increase in (i) payroll related expenses of $1.6 million, (ii) professional and advisory fees of $1.0 million primarily related to the accounting restatement, and (iii) general overhead and administrative expenses of $0.7 million primarily related to insurance and software and maintenance expenses.
Previous report
2023 is primarily attributable to (i) an increase in accrued expenses of $0.8 million, mainly driven by accruals relating to the restatement and ERC consultants, (ii) an increase in payroll liabilities of $1.5 million, mostly due to the short-term incentive compensation accrual in the current year (without the comparable accrual as of December 31, 2022) and payroll cycle timing, (iii) an increase in deferred franchise cost of $0.4 million related to the commissions paid for the sale of franchise licenses during the year and (iv) an increase in deferred revenue of $0.3 million related to the amounts collected for the sale of franchise license and membership and wellness packages sold during the year (which are recorded as deferred revenue until the service is performed). These increases in operating assets and liabilities were partially offset by the decreases in (i) upfront regional developer fees of $0.6 million, (ii) accounts payable of $1.4 million due to the general increase in operating expenses and timing of payments, and (iii) prepaid expenses and other current assets of $0.3 million, mainly driven by the general increase in operating expenses.
Reworded paragraphs (44)
Previous wording
The following discussion and analysis of our results of operations and financial condition for the years ended December 31, 2023 and 2022 should be read in conjunction with the consolidated financial statements and the notes thereto, and other financial information contained elsewhere in this Form 10-K. Information pertaining to fiscal year 2021 was included in our Amended Annual Report on Form 10-K/A for the year ended December 31, 2021 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on September 26, 2023.
Current wording
The following discussion and analysis of our results of operations and financial condition for the years ended December 31, 2024 and 2023 should be read in conjunction with the consolidated financial statements and the notes thereto, and other financial information contained elsewhere in this Form 10-K.
Previous wording
We are a rapidly growing franchisor and operator of chiropractic clinics that uses a private pay, non-insurance, cash-based model. 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. We delivered over 13.6 million patient visits in 2023, up from 12.2 million patient visits in 2022, generating over $488.0 million and $435 million of system-wide sales, respectively, across our highly franchised network. We will continue the rapid and franchised focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad. We saw over 932,000 new patients in 2023, with approximately 36% of those new patients visiting a chiropractor for the first time. We are not only increasing our percentage of market share, but are expanding the chiropractic market.
Current wording
We are a rapidly growing franchisor that uses a private pay, non-insurance, cash-based model. 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. We delivered over 14.7 million patient visits in 2024, up from 13.6 million patient visits in 2023, generating over $530.3 million and $488 million of system-wide sales, respectively, across our highly franchised network. We will continue the rapid and franchised focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad. We saw 957,000 new patients in 2024, with approximately 36% of new patients visiting a chiropractor for the first time. We are not only increasing our percentage of market share, but are expanding the chiropractic market.
Previous wording
Key Performance Measures. We receive monthly performance reports from our system and our clinics, which include key performance indicators per clinic, including gross sales, comparable same-store sales growth (“Comp Sales”), number of new patients, conversion percentage and member attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales 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. System-wide 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. While gross sales from franchised clinics 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.
Current wording
Key Performance Measures. We receive monthly performance reports from our system and our clinics, which include key performance indicators per clinic, including gross sales, Comp Sales, number of new patients, conversion percentage and member attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales 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. System-wide 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. While gross sales from franchised clinics 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.
Previous wording
Key Clinic Development Trends. As of December 31, 2023, we and our franchisees operated or managed 935 clinics, of which 800 were operated or managed by franchisees and 135 were operated as company-owned or managed clinics. We and our franchisees opened 114 clinics during 2023, 104 franchised clinics and 10 company-owned or managed clinics. This compares to 137 clinics opened in 2022, 121 franchised clinics and 16 company-owned or managed clinics. Of the 135 company-owned or managed clinics at December 31, 2023, 65 were constructed and developed by us, and 70 were acquired from franchisees.
Current wording
Key Clinic Development Trends. As of December 31, 2024, we and our franchisees operated or managed 967 clinics, of which 842 were operated or managed by franchisees and 125 were operated as company-owned or managed clinics. Our franchisees opened 57 clinics during 2024. This compares to 114 clinics opened in 2023, 104 franchised clinics and 10 company-owned or managed clinics. Of the 125 company-owned or managed clinics at December 31, 2024, 58 were constructed and developed by us, and 67 were acquired from franchisees.
Previous wording
Our current strategy is to grow through the sale and development of additional franchises. After evaluating options for improvement, during 2023 the board authorized management to initiate a plan to re-franchise or sell the majority of our company-owned or managed clinics. This 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. We have created a robust framework for the re-franchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency. We have given initial preference to existing franchisees and have received significant interest to date. Our goal will be to generate significant proceeds that will provide us with value creating capital allocation opportunities. These 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.
Current wording
Our current strategy is to grow through the sale and development of additional franchises. After evaluating options for improvement, during 2023 the board authorized management to initiate a plan to refranchise or sell the majority of our company-owned or managed clinics. During the third quarter of 2024, the Company expanded the refranchising plan to include the full portfolio of our company-owned or managed clinics, marketing the clinics in large clusters grouped by geographic territory. This 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. We have created a robust framework for the refranchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency. We had given initial preference to existing franchisees and in the third quarter of 2024 expanded the marketing efforts to larger multi-unit, multi-brand operators and certain private equity firms interested in purchasing and operating large market-based clinic clusters and have received significant interest to date in most markets. Subsequent to the balance sheet date, we have received draft letters of intent (“LOIs”) for our full portfolio of company-owned or managed clinics and as of the filing of this Form 10-K are in the financial stages of LOI term negotiations.
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 2023 with 17 regional developers who were responsible for 51% of the 55 licenses sold during the year. This strong result reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the country.
Current wording
The number of franchise licenses sold for the year ended December 31, 2024 was 46, compared with 55 and 75 licenses for the years ended December 31, 2023 and 2022, respectively. We ended 2024 with 16 regional developers who were responsible for 30% of the 46 licenses sold during the year. We will continue to leverage the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the country.
Previous wording
We believe 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. 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. We believe that these forces create an important opportunity to accelerate the growth of our network.
Current wording
We believe 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. These trends join with the preference we have seen among chiropractic doctors to reject the insurance-based model produce a combination that benefits the consumer and the service provider alike. We believe that these forces create an important opportunity to accelerate the growth of our network.
Previous wording
On September 8, 2023, JP Morgan Chase waived, on a one-time only basis, a default that occurred under the Credit Agreement. The default occurred as of the close of business on September 6, 2023. The default resulted from our inability to deliver in a timely manner the financial statements in its Quarterly Report on Form 10-Q for the period ended June 30, 2023 (the “2023 Q2 10-Q”). Our inability to produce and file the 2023 Q2 10-Q in a timely manner (which filing constitutes delivery to JP Morgan Chase of our financial statements) was the result of the discovery of errors in the GAAP accounting treatment for re-acquired regional developer rights and for transfer pricing for our VIEs. JP Morgan Chase waived this default until September 30, 2023. The filing of our 2023 Q2 10-Q on September 26, 2023 cured the default.
Current wording
On September 8, 2023, JP Morgan Chase waived, on a one-time only basis, a default that occurred under the Credit Agreement. The default occurred as of the close of business on September 6, 2023. The default resulted from our inability to deliver in a timely manner the financial statements in its Quarterly Report on Form 10-Q for the period ended June 30, 2023 (the “2023 Q2 10-Q”). Our inability to produce and file the 2023 Q2 10-Q in a timely manner (which filing constitutes delivery to JP Morgan Chase of our financial statements) was the result of the discovery of errors in the GAAP accounting treatment for reacquired regional developer rights and for transfer pricing for our VIEs. JP Morgan Chase waived this default until September 30, 2023. The filing of our 2023 Q2 10-Q on September 26, 2023 cured the default.
Previous wording
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. We anticipate that 2024 will continue to be a volatile macroeconomic environment.
Current wording
Recent events that may impact our business include unfavorable global economic or political conditions, such as uncertainties that come with changes to the presidential administration, labor shortages, and inflation and other cost increases. We anticipate that 2025 will continue to be a volatile macroeconomic environment.
Previous wording
•Comp Sales for mature clinics open 48 months or more decreased 1%.
Current wording
•Comp Sales for mature clinics open 48 months or more decreased 2%.
Previous wording
•System-wide sales for all clinics open for any amount of time grew 12% to $488.0 million.
Current wording
•System-wide sales for all clinics open for any amount of time grew 9% to $530.3 million.
Previous wording
We saw over 932,000 new patients in 2023, compared with 845,000 new patients in 2022, with approximately 36% of those new patients having never been to a chiropractor before. We are not only increasing our percentage of market share, but expanding the chiropractic market. These factors, along with continued leverage of our operating expenses, drove improvement in our bottom line.
Current wording
We saw 957,000 new patients in 2024, compared with 932,000 new patients in 2023, with approximately 36% of new patients having never been to a chiropractor before. We are not only increasing our percentage of market share, but expanding the chiropractic market.
Previous wording
On November 6, 2023, we discussed certain strategic initiatives with the Board of Directors and were authorized to initiate a plan to re-franchise the majority of our corporate-owned or managed clinics with plans to retain a small portion of high-performing clinics. Based on the timing and varied scope of the initiative, we are unable to estimate the financial impact of such plans.
Current wording
On November 6, 2023, we discussed certain strategic initiatives with the Board of Directors and were authorized to initiate a plan to refranchise the majority of our company-owned or managed clinics with plans to retain a small portion of high-performing clinics. During the third quarter of 2024, the Company, with the authorization of the Board of Directors, expanded the refranchising plan to include the full portfolio of our company-owned or managed clinics, marketing the clinics in clusters grouped by proximity to larger private equity firms. We had given initial preference to existing franchisees and in third quarter of 2024, we have expanded the marketing efforts to larger private equity firms interested in purchasing and operating large market-based clinic clusters and have received significant interest to date in most markets. Subsequent to the balance sheet date, we have received draft letters of intent (“LOIs”) for our full portfolio of company-owned or managed clinics and as of the filing of this Form 10-K are in the financial stages of LOI term negotiations.
Previous wording
Intangible assets consist primarily of re-acquired franchise rights and customer relationships. We amortize the fair value of re-acquired franchise rights over the remaining contractual terms of the re-acquired franchise rights at the time of the acquisition, which range from one to ten years. The fair value of customer relationships is amortized over their estimated useful life which ranges from two to four years.
Current wording
Intangible assets consist primarily of reacquired franchise rights and customer relationships. We amortize the fair value of reacquired franchise rights over the remaining contractual terms of the reacquired franchise rights at the time of the acquisition, which range from one to ten years. The fair value of customer relationships is amortized over their estimated useful life which ranges from two to four years.
Previous wording
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. We look primarily to estimated undiscounted future cash flows in the assessment of whether or not long-lived assets are recoverable. We record an impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value. During the year ended December 31, 2023, intangible assets and property and equipment, net related to a closed clinic and asset groups determined to not be recoverable with a total carrying amount of approximately $3.0 million was written down to $1.2 million. As a result, we recorded a noncash impairment loss of approximately $1.8 million during the year ended December 31, 2023. During the year ended December 31, 2022, an operating lease ROU asset related to a closed clinic with a total carrying amount of $0.2 million was written down to their fair value of zero. As a result, we recorded a noncash impairment loss of approximately $0.2 million for the year ended December 31, 2022.
Current wording
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. We look primarily to estimated undiscounted future cash flows in the assessment of whether or not long-lived assets are recoverable. We record an impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value.
Previous wording
We generate revenue through our company-owned and managed clinics and through royalties, franchise fees, advertising fund contributions, IT related income and computer software fees from our franchisees.
Current wording
We generate revenue through royalties, franchise fees, advertising fund contributions, IT-related income and computer software fees from our franchisees. Additionally, as we execute on our strategy to refranchise and divest from all of our company-owned and managed clinics, we generate revenue through our company-owned or managed clinics in Loss from discontinued operations before income tax expense.
Previous wording
We regularly assess the tax risk of our tax return filing positions, and we have identified $1.2 million and $1.3 million in uncertain tax positions as of December 31, 2023 and 2022, respectively.
Current wording
We regularly assess the tax risk of our tax return filing positions, and we have identified $0.9 million and $1.2 million in uncertain tax positions as of December 31, 2024 and 2023, respectively.
Previous wording
The following discussion and analysis of our financial results encompasses our consolidated results and results of our two business segments: Corporate Clinics and Franchise Operations.
Current wording
The following discussion and analysis of our financial results encompasses our consolidated results and results of our business segment: Franchise Operations. All financial results and metrics discussed below are on a continuing operation basis.
Previous wording
•Total revenues increased by $16.4 million, primarily due to the continued expansion and revenue growth of our franchise base, continued same-store sales growth and expansion of our corporate-owned or managed clinics portfolio.
Current wording
•Total revenues increased by $4.9 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 2023, along with continued sales growth in existing franchised clinics. As of December 31, 2023 and 2022, there were 800 and 712 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 2024, along with continued sales growth in existing franchised clinics. As of December 31, 2024 and 2023, there were 842 and 800 franchised clinics in operation, respectively.
Previous wording
•Franchise fees revenue increased due to the continued increase in active franchise licenses and the impact of accelerated revenue recognition resulting from the terminated franchise license agreements, with 21 and 17 franchise license agreements terminated during the years ended December 31, 2023 and 2022, respectively.
Current wording
•Franchise fees revenue increased due to the continued increase in active franchise licenses and the impact of accelerated revenue recognition resulting from the terminated franchise license agreements, with 24 and 21 franchise license agreements terminated during the years ended December 31, 2024 and 2023, respectively.
Previous wording
•Other revenues primarily consisted of merchant income associated with credit card transactions.
Current wording
•Other revenues primarily consisted of merchant income associated with credit card transactions and during the year ended December 31, 2024 also included conference fee revenue for our national franchisee conference held in 2024.
Previous wording
For the year ended December 31, 2023, as compared with the year ended December 31, 2022, the total cost of revenues increased due to an increase in regional developer royalties and sales commissions of $1.3 million and an increase in website hosting costs of $0.1 million.
Current wording
For the year ended December 31, 2024, as compared with the year ended December 31, 2023, the total cost of revenues increased due to an increase in regional developer royalties and sales commissions.
Previous wording
Selling and marketing expenses increased $2.6 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, driven by an increase in advertising fund expenditures from a larger franchise base and increased local marketing expenditures from a larger company-owned or managed clinic base.
Current wording
Selling and marketing expenses increased $2.2 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, driven by an increase in advertising fund expenditures from a larger franchise base and increased marketing expenditures expanding our franchise marketing efforts.
Previous wording
Depreciation and amortization expenses increased $1.9 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to depreciation expenses associated with the expansion of our company-owned or managed clinics portfolio.
Current wording
Depreciation and amortization expenses increased $0.1 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to depreciation expenses related to development of internal use software made available for use in the first half of 2024.
Previous wording
General and administrative expenses increased during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily 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 $8.2 million; (ii) general overhead and administrative expenses of $2.7 million; (iii) professional and advisory fees of $1.0 million primarily related to the accounting restatement; and (iv) software and maintenance expense of $0.4 million; offset by a decrease in acquisition related expenses of $1.1 million. As a percentage of revenue, general and administrative expenses were flat at 69% during the year ended December 31, 2023 and 2022, respectively.
Current wording
General and administrative expenses increased during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the increases in the following expenses to support the Company’s continued efforts in executing on its strategy to become a pure-play franchisor: (i) payroll and related expenses of $1.3 million; (ii) restructuring costs of $0.6 million; (iii) professional and advisory fees of $1.2 million primarily related to additional IT outsourced resources to support the Company’s proprietary chiropractic software and help desk; and (iv) accounting services expenses of $0.4 million. As a percentage of revenue, general and administrative expenses were 57% and 56% during the year ended December 31, 2024 and 2023, respectively.
Previous wording
Net Loss on Disposition or Impairment
Current wording
Net loss on disposition or impairment nominally changed for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to the disposal of property and equipment.
Previous wording
Consolidated income from operations decreased by $2.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the impairment charges in the corporate clinics and increases in expenses from unallocated corporate segments discussed below.
Current wording
Income from operations decreased by $2.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the following:
Previous wording
•An increase of $5.2 million in total revenues due to an increase in the number of franchised clinics in operation, along with continued sales growth in existing franchised clinics; partially offset by
Current wording
•An increase of $4.9 million in total revenues due to an increase in the number of franchised clinics in operation, along with continued sales growth in existing franchised clinics.
Previous wording
For the years ended December 31, 2023 and 2022, the effective tax rates were 695.1% and 9.8%, respectively. The fluctuation in the effective rate was primarily attributable to state taxes, including the change in rates, stock-based compensation and changes in valuation allowance during the year ended December 31, 2023, as compared to the year ended December 31, 2022. Please see Note 9, “Income Taxes” in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for further discussion.
Current wording
For the years ended December 31, 2024 and 2023, the effective tax rates were (4.2)% and 4,339.9%, respectively. The fluctuation in the effective rate was primarily attributable to state taxes, including the change in rates, stock-based compensation, the officer’s compensation limit under Section 162(m), change in valuation allowance and uncertain tax positions during the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Previous wording
The table below reconciles net (loss) income to Adjusted EBITDA for the years ended December 31, 2023 and 2022.
Current wording
The table below reconciles net loss from continuing operations to Adjusted EBITDA from continuing operations for the years ended December 31, 2024 and 2023.
Previous wording
Adjusted EBITDA consists of net (loss) 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. The costs related to restatement filings of $0.4 million were incurred as of September 30, 2023 but were not included in the Q3 2023 Form 10-Q as a cost excluded from Adjusted EBITDA for the three and nine months ended September 30, 2023. However, as these costs are non-recurring, we have identified them as an adjustment to EBITDA for the years ended December 31, 2023 and 2022. We have provided Adjusted EBITDA, a non-GAAP measure of financial performance because it is 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 from continuing operations consists of net loss from continuing operations 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 litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business). We have provided Adjusted EBITDA, a non-GAAP measure of financial performance because it is 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
•. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
Current wording
•. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
Previous wording
•. Adjusted EBITDA does not reflect the (gain) loss on disposition or impairment, which represents the impairment of assets as of the reporting date. We do not consider this to be indicative of our ongoing operations.
Current wording
•. Adjusted EBITDA does not reflect the (gain) loss on disposition or impairment, which represents the impairment of assets as of the reporting date. We do not consider this to be indicative of our ongoing operations; and
Previous wording
•. Adjusted EBITDA does not reflect the bargain purchase gain, which represents the excess of the fair value of net assets acquired over the purchase consideration; and
Current wording
•. While not included in the presented periods, Adjusted EBITDA would not reflect any bargain purchase gain, which would represent the excess of the fair value of net assets acquired over the purchase consideration.
Previous wording
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You should review the reconciliation of net (loss) income to Adjusted EBITDA above and not rely on any single financial measure to evaluate our business.
Current wording
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You should review the reconciliation of Net loss to Adjusted EBITDA above and not rely on any single financial measure to evaluate our business.
Previous wording
As of December 31, 2023, we had cash and short-term bank deposits of $18.2 million. We generated $14.7 million of cash flow from operating activities in the year ended December 31, 2023. 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 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 December 31, 2024, we had cash and short-term bank deposits of $25.1 million. We generated $9.4 million of cash flow from operating activities from both continuing and discontinued operations in the year ended December 31, 2024. 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 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
While the interruptions, delays and/or cost increases resulting from political instability and geopolitical tensions, economic weakness, inflationary pressures, increase in interest rates and other factors have created uncertainty as to general economic conditions for 2024, as of the date of this Form 10-K, we believe 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. For 2024, we expect to use or redeploy 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. Our long-term capital requirements, primarily for acquisitions and other corporate initiatives, could be dependent on our ability to access additional funds through the debt and/or equity markets. If the equity and credit markets deteriorate, including as a result of economic weakness, political unrest or war, or any other reason, it may make any necessary equity or debt financing more difficult to obtain in a timely manner and on favorable terms, if at all, and if obtained, it may be more costly or more dilutive. From time to time, we consider and evaluate transactions related to our portfolio and capital structure, including debt financings, equity issuances, purchases and sales of assets, and other transactions. Given the ongoing uncertainties described above, the levels of our cash flows from operations for 2024 may be impacted. There can be no assurance that we will be able to generate sufficient cash flows or obtain the capital necessary to meet our short and long-term capital requirements.
Current wording
While the interruptions, delays and/or cost increases resulting from political instability and geopolitical tensions, adverse weather conditions, economic weakness, inflationary pressures, increase in interest rates and other factors have created uncertainty as to general economic conditions for 2025, as of the date of this Form 10-K, we believe 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. For 2025, we expect to use or redeploy 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. Our long-term capital requirements, primarily for acquisitions and other corporate initiatives, could be dependent on our ability to access additional funds through the debt and/or equity markets. If the equity and credit markets deteriorate, including as a result of economic weakness, political unrest or war, or any other reason, it may make any necessary equity or debt financing more difficult to obtain in a timely manner and on favorable terms, if at all, and if obtained, it may be more costly or more dilutive. From time to time, we consider and evaluate transactions related to our portfolio and capital structure, including debt financings, equity issuances, purchases and sales of assets, and other transactions. Given the ongoing uncertainties described above, the levels of our cash flows from operations for 2025 may be impacted. There can be no assurance that we will be able to generate sufficient cash flows or obtain the capital necessary to meet our short and long-term capital requirements.
Previous wording
Net cash provided by operating activities was $14.7 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $8.2 million for the year ended December 31, 2022. The increase was primarily attributable to the increased net income, net of non-cash charges, in the year ended December 31, 2023 of $13.9 million versus $8.4 million in the prior year period and the changes in operating assets and liabilities of $0.8 million in the year ended December 31, 2023 versus $(0.2) million in the prior year period. The increase in operating assets and liabilities for the year ended December 31,
Current wording
Net cash provided by operating activities for both continuing and discontinued operations was $9.4 million for the year ended December 31, 2024, compared to net cash provided by operating activities for both continuing and discontinued operations of $14.7 million for the year ended December 31, 2023. The decrease was primarily attributable to the decrease in net income, net of non-cash charges, from both continuing and discontinued operations in the year ended December 31, 2024 of $8.3 million versus $13.9 million in the prior year period offset by the increases in operating assets and liabilities of $1.2 million in the year ended December 31, 2024 versus $0.8 million in the prior year period. The increase in operating assets and liabilities from both continuing and discontinued operations for the year ended December 31, 2024 is primarily attributable to (i) an increase in accrued expenses of $4.6 million, mainly driven by accruals relating to two litigation settlements, (ii) an increase in accounts receivable of $1.6 million primarily related to a receivable recorded from the Company’s insurance related to medical injury claim settlement, and (iii) an increase in payroll liabilities of $2.4 million, mostly due to the short-term incentive compensation accrual in the current year (without the comparable accrual as of December 31, 2023), payroll cycle timing and restructuring cost accruals. These increases in operating assets and liabilities were partially offset by the decreases in (i) operating lease liabilities of $3.8 million related to monthly rent payments against the lease liabilities held for sale, (ii) a decrease in deferred revenue of $0.6 million and a decrease in deferred franchise cost of $0.5 million both primarily related to the decreased sales of franchise licenses during the year, and (iii) a decrease in upfront regional developer fees of $0.4 million.
Previous wording
Net cash used in investing activities was $6.2 million and $17.9 million during the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, this included clinic acquisitions for $1.2 million and purchases of property and equipment for $5.0 million. For the year ended December 31, 2022, this included clinic acquisitions for $12.1 million, purchases of property and equipment for $5.9 million.
Current wording
Net cash used in investing activities was $0.6 million and $6.2 million during the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, this included purchases of property and equipment for $1.2 million partially offset by proceeds from the sale of company-owned and managed clinics of $0.6 million. For the year ended December 31, 2023, this included clinic acquisitions for $1.2 million and purchases of property and equipment for $5.0 million.
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Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Our goal will be to generate significant processes that will provide us with value creating capital allocation opportunities. These 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, certain merger or acquisition opportunities and/or a stock repurchase program.
Current report — wording carried from elsewhere
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 year ended December 31, 2024.
Current report — wording carried from elsewhere
•an increase of $1.0 million related to the cost of revenue due to an increase in regional developer royalties and sales commissions,