Joint Q1 2025 Earnings Report

Joint EPS Results

• Actual EPS: -$0.03
• Consensus EPS: -$0.02
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Joint Revenue Results

• Actual Revenue: $13.08 million
• Expected Revenue: $13.02 million
• Beat/Miss: Beat by +$57.00 thousand
• YoY Revenue Growth: N/A

Joint Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Joint (NASDAQ:JYNT) operates and franchises chiropractic clinics in the United States. The company operates in two segments, Corporate Clinics and Franchise Operations. The Joint Corp. was incorporated in 2010 and is headquartered in Scottsdale, Arizona.

Joint Q1 2025 Earnings Call Transcript

Key Takeaways

• System-wide sales rose 5% to $132.6 M and comp sales grew 3% for clinics open ≥13 months, while revenue from continuing operations increased 7% year-over-year.
• Adjusted EBITDA from continuing operations plunged to $46 K in Q1 (vs. $425 K in Q1 ’24), resulting in a net loss of $0.5 M for the quarter.
• The company has signed LOIs covering 93% of its corporate clinics and aims to exit 2025 as a pure play franchisor, expecting improved margins as G&A costs are cut.
• Management is testing a dynamic pricing model in H2 2025 to offset rising labor costs, including elastic pricing for packages and wellness plans.
• For 2025, The Joint reiterated guidance of $550 M–$570 M system-wide sales, mid-single-digit comp growth, and $10 M–$11.5 M consolidated adjusted EBITDA, with 30–40 new franchise clinics anticipated.

Presentation

[Operator]

Please note this event is being recorded. I would now like to turn the conference over to David Barnard of Alliance Advisors Investor Relations. Please go ahead.

[David Barnard, SVP - IR at Alliance Advisors IR]

Thank you, Drew. Good afternoon, everyone. Again, this is David Barnard with Alliance Advisors Investor Relations. Joining us on the call today are President and CEO, Sanjeev Rasdan and CFO, Jake Singleton. Please note we are using a slide presentation that can be found at https:ir.thejoint.com under the Events section.

[David Barnard, SVP - IR at Alliance Advisors IR]

Today, after the close of the market, The Joint Corp. Issued its results for the quarter ended 03/31/2025. If you do not already have a copy of this press release, it can be found in the Investor Relations section of the company's website. As provided on slide two, please be advised that today's discussion includes forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be considered forward looking statements.

[David Barnard, SVP - IR at Alliance Advisors IR]

Although the company believes that the expectations and assumptions reflected in these forward looking statements are reasonable, it can make no assurances that such expectations assumptions will prove to have been correct. Actual results may differ materially from those expressed or implied in forward looking statements due to various risks and uncertainties. As a result, we caution you against placing undue reliance on these forward looking statements. For a discussion of the risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward looking statements, please review the risk factors detailed in the company's reports on Forms 10 ks and 10 Q as well as other reports that the company files from time to time with the SEC. Finally, any forward looking statements included in this earnings call are made only as of the date of this call, and we do not undertake any obligation to revise our results or publicly release any updates to these forward looking statements in light of new information or future events.

[David Barnard, SVP - IR at Alliance Advisors IR]

The results of operations of the Corporate Clients business segment have been classified as discontinued operations for all periods discussed, and the following comments represent continuing operations unless otherwise stated. Management uses EBITDA and adjusted EBITDA, which are nonfinancial measures. These are presented because they are important measures used by management to assess financial performance. Management believes they provide a more transparent view of the company's underlying operating performance and operating trends than GAAP measures alone. Reconciliation of net income to EBITDA and adjusted EBITDA is presented in the press release.

[David Barnard, SVP - IR at Alliance Advisors IR]

The company defines EBITDA as net income or loss before net interest, tax expense, depreciation and amortization expenses. The company defines adjusted EBITDA as EBITDA before acquisition related expenses, which includes contract termination costs associated with reacquired regional developer rights, stock based compensation expense, bargain purchase gain, net gain or 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 may arise outside of the ordinary course of our business. Management also includes commonly discussed performance metrics. System wide sales include revenues at all clinics, whether operated by the company or by franchisees. While franchised sales are not recorded as revenues by the company, management believes the information is important in understanding the company's financial performance because these sales are the basis on which the company calculates and records royalty fees and are indicative of the financial health of the franchisee base.

[David Barnard, SVP - IR at Alliance Advisors IR]

Comp sales include the revenues from both company owned or managed clinics and franchise clinics that in each case have been open for at least 13 and exclude any clinics that have closed. Turning to slide three. It's my pleasure to turn the call over to Sanjeev Rasdan.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Thank you, David, and I welcome everyone to the call. Turning to slide four. I am excited to speak with you today to review progress we are making. For those new to the call, our mission is to improve the quality of life through routine and affordable chiropractic care. After we execute our strategy to become a pure play franchisor, grow sales, reduce overhead and improve profitability, we will strive for our new Big Bold Vision to become America's most accessible health and wellness services company.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

As part of our transformation journey, in April, we hosted an incredibly productive franchisee spring convention, during which we discussed next steps and continued to improve franchise relationships. Before I elaborate, I'll summarize our Q1 twenty twenty five financial results compared to Q1 twenty twenty four. System wide sales were $132,600,000 up 5%, demonstrating resilience in this economic environment. Comp sales for all clinics opened thirteen months were 3% for the quarter and 4% in March. Revenue from continuing operations increased 7%.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Adjusted EBITDA from continuing operations was $46,000 compared to $425,000 in quarter one twenty twenty four. Jake will provide greater detail in a moment. Turning to slide five. I want to acknowledge the dynamic consumer environment that we're in. While we monitor the situation closely, we are pushing ahead with our transition plan.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

As unveiled on our March call, we have constructed a multi year phased approach. The changes we're making increase the potency and flexibility of our model. To become a pure play franchisor, we are refranchising. We have signed LOIs for 93% of our corporate clinics, and we are well into the due diligence phase for many. When we reach binding asset purchase agreements, we intend to make public announcements.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

In The Joints two point zero, we are focused on strengthening our core, reigniting growth and improving clinic and company level profitability. We will initiate dynamic revenue management, strengthen our digital marketing and promotional calendar, and upgrade our patient facing technology. Turning to slide six. The Franchisee Spring Convention was aptly named the Pulse Summit. Since I joined, we have been taking a pulse check of the business.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

At the summit, we reviewed The Joint's Pulse with our franchisees, regional developers, and our employees. We seized the opportunity to reinvigorate, to create momentum through collaboration, to ensure we are working as one team and to identify ways to become stronger, bigger, and faster so we can care for more patients more effectively. And we must always remember that when patients stay at the center of our focus, the business grows, profitability follows, and everyone wins. And to do that well, we know we have to level up across the board with a stronger brand, sharper marketing, better operations, and higher impact training. During the summit, our team and franchisees signed a franchise partnership pact that is a shared promise between franchisor and franchisee to lead with clarity, act with integrity, and stay true to the values that define The Joint.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

During the summit, we discussed near and longer term initiatives, including marketing execution with our new marketing agency and strategies to increase new patient leads, our plan to regain patient momentum and our new brand architecture. Operational execution with our priority focus on excellent patient experiences and clinic economics, our new clinic launch best practices and toolkit update, and our new clinic report cards that provide quantitative data and diagnostics on patient satisfaction, operational efficiency and sales. As well as training, we are introducing The Joint Chiropractic Elite Academies. Think of it as our version of The Joint University. We have planned the inaugural academy for Doctors of Chiropractic to be launched in 2025.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Events like the Summit enable us to synchronize with our franchisees, improve relationships with them, and strengthen our operating culture. Turning to slide seven, let's review dynamic revenue management. We must be intentional and balanced when reviewing price increases. We promise affordability as part of our mission, and it's a key determination among our patient demographic. Yet, since our last meaningful price adjustment in March 2022, labor costs have increased significantly, squeezing clinic level margins.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Working to alleviate the pinch, we have begun testing elasticity for different prices for various packages and wellness plans. We are reviewing the entire model, including legacy plans, nothing is sacred. Our goal is to create an innovative, flexible pricing model that more accurately aligns with treatment plans and patient usage during all phases of care from acute to maintenance. Options include premium memberships with more visits in their first month of care, new price options for our wellness plans, and increases for our packages. For example, for patients in acute pain that need to be adjusted more than one time per week per their treatment plan, we will begin offering prepaid visit pricing in the second half of this year.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Turning to slide eight. Let's review strengthening our digital marketing. We are working with our new marketing agency to drive brand awareness and consideration, as well as improve our SEO performance with enhanced content and technical strategies. Our new content strategy aims to increase relevance and foster trust. Our new user generated content is focused on building authority and community validation.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

The early tests are delivering encouraging results. Turning to slide nine, let's review strengthening our promotional calendar. In February, we implemented our new Step Into Wellness promo to encourage target existing patients to buy into wellness plans. We offered them the first month at $45 and then the rest of the membership at the standard rate. Although this impacted revenue in February, we increased active membership conversion significantly during the month.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

The Joint's Buy One, Get Buy Five, Get One wellness promo begins on Monday, June 3, and will provide patients with an affordable way to commit to their treatment plan and stay on the path to good health. This has been a very successful promo in the past, and I look forward to reviewing the results with you next quarter. Turning to slide 10. Let's review patient facing technology. We polled patients, wellness coordinators, and doctors of chiropractic to ensure the most essential elements for the users are included in our mobile app.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Features include Clinic Finder, which doctor is in clinic, in clinic check-in, and push notifications. Ultimately, all will benefit when we communicate to patients directly using in app push notifications. For example, we can remind them that they have adjustments, x number of adjustments remaining for the month, which would strengthen usage and engagement. Regarding the app, our beta is going well, and we expect to be in the app stores by June 30. With that, I'll turn the call to Jake.

[Jake Singleton, CFO at The Joint Corp]

Thank you, Sanjeev. And let's turn to Slide 12. Let's discuss our operating metrics.

[Jake Singleton, CFO at The Joint Corp]

When reviewing our quarterly results, I want to remind you of two factors. First, in 2024, it was a leap year and included an extra sales day in February compared to 2025. Then in February of twenty twenty five, we conducted a promotion targeted at our existing non wellness plan members that lowered the first month's membership rate to $45 which impacted sales in dollars, while securing more patients for the medium term. In Q1 twenty twenty five, system wide sales were up 5%, as Sanjeev mentioned, showing resilience while consumer sentiment is wavering. Comp sales for all clinics opened thirteen months were 3% in Q1 of twenty twenty five.

[Jake Singleton, CFO at The Joint Corp]

They increased to 4% in March of twenty twenty five. Comp sales for mature clinics opened forty eight months were negative 2%. Turning to Slide 13, let's discuss our clinics. As previously indicated, we expect franchise license sales to be impacted by our refranchising strategy. We sold nine licenses in Q1 twenty twenty five compared to 15 in Q1 twenty twenty four.

[Jake Singleton, CFO at The Joint Corp]

During Q1, we had 16 regional developers covering approximately 56% of the network and we had 146 franchise licenses in active development. In Q1 twenty twenty five, we opened five franchise clinics, refranchised two corporate clinics and closed one corporate clinic. At 03/31/2025, we had nine sixty nine clinics, of which eight forty seven or 87% are franchise clinics. Turning to Slide 14, let's discuss our financials. As discussed in March 2025 will be a year of transition as we conclude the refranchising efforts.

[Jake Singleton, CFO at The Joint Corp]

We are recording the company owned or managed clinics as discontinued operations. Please note, we have not yet experienced the financial benefit from our corporate clinic revenues transitioning to franchise royalties and fees, nor have we yet fully reduced our G and A expense. We are critically focused on reducing our G and A and will shed more overhead than what is currently reported in our continuing operations. This will improve the bottom line in the coming years. In 2026, we expect to further grow net new clinic openings, system wide sales, comp sales and adjusted EBITDA.

[Jake Singleton, CFO at The Joint Corp]

Now, I'll review continuing operations for Q1 twenty twenty five compared to Q1 twenty twenty four. Revenue reached $13,100,000 compared to $12,200,000 increasing 7% due to the greater number of franchise clinics in operation and offsetting the effects of the 2024 leap year and the twenty twenty five February promotion. Cost of revenues was $3,000,000 up 10% over the same period last year, reflecting the associated higher regional developer royalties and commissions and the greater number of franchise clinics in operation. Selling and marketing expenses were $3,500,000 compared to $2,200,000 The increase reflects the costs related to carrying two marketing agencies, while we ensure a smooth transition to our new team engaged to strengthen our digital marketing strategy. Depreciation and amortization expenses increased 10% compared to the prior year period due to depreciation expenses related to development of an internal use software deployed in 2024.

[Jake Singleton, CFO at The Joint Corp]

G and A expenses were $6,900,000 or 53% of revenue compared to $7,300,000 60 percent of revenue in the same period last year, reflecting lower payroll and stock based compensation. Income tax expense was $13,000 compared to $9,000 in Q1 twenty twenty four. Net loss from continuing operations was $506,000 or $03 per basic share compared to a loss of $399,000 or $03 per basic share in Q1 twenty twenty four. I'll provide adjusted EBITDA for three categories: for continuing operations, discontinued operations and consolidated operations. Adjusted EBITDA for continuing operations was $46,000 compared to $425,000 Adjusted EBITDA for discontinued operations was $2,800,000 compared to $3,100,000 And adjusted EBITDA for consolidated operations were $2,900,000 compared to 3,500,000 On to Slide 15, I'll review our balance sheet and cash flow.

[Jake Singleton, CFO at The Joint Corp]

At 03/31/2025, our unrestricted cash was $21,900,000 compared to $25,100,000 at 12/31/2024. Cash used in operations for the quarter was $3,700,000 which included the previously discussed legal settlement payment and annual employee bonuses, both of which were accrued as of 12/31/2024. The line of credit with JPMorgan Chase grants us immediate access to $20,000,000 through February of twenty twenty seven. On to Slide 16, we are reiterating 2025 guidance. While The Joint provides services within The U.

[Jake Singleton, CFO at The Joint Corp]

S. And is not directly impacted by potential tariffs, many of our patients are concerned about the impact to their lives. After the tariffs were announced in April, shifts in consumer confidence and spending did begin to affect The Joint. System wide sales are expected to be between $550,000,000 and $570,000,000 compared to $530,300,000 in 2024. Comp sales for all clinics opened thirteen months or more are expected to be in the mid single digits compared to an increase of 4% in 2024.

[Jake Singleton, CFO at The Joint Corp]

Consolidated adjusted EBITDA to be between 10,000,000 and $11,500,000 compared to $11,400,000 in 2024. The 2025 consolidated adjusted EBITDA estimates includes an adjustment for approximately $4,400,000 related to among other things, stock based compensation and depreciation and amortization. The company will factor in any additional impairments or restructuring charges related to the refranchising should they occur. New franchise clinic openings, excluding the impact of refranchised clinics, are expected to be between thirty and forty compared to 57 in 2024. In 2025, franchise license sales and clinic openings are likely to be less than twenty twenty four as we are working through the impact of our refranchising efforts.

[Jake Singleton, CFO at The Joint Corp]

Further, we see the impact of economic headwinds, stubborn inflation and volatile consumer sentiment impacting the beginning of 2025. That said, as clinics shift from company owned or managed clinics to franchise clinics, there will be a transformative financial impact. Our franchise royalties and fees will increase, and we will rationalize our unallocated G and A expenses, and The Joint Corp. Will be more profitable. And with that, I'll turn the call back over to you, Sanjeev.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Thanks, Jake. Turning to Slide 18. We've been reviewing the chiropractic care market and testing brand concepts. The bottom line is that America is suffering from pain, and we've got the data to prove it. Seventy four percent of our new patients cite aches and pains as at least one of the reasons for coming to The Joint.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

In fact, back pain is the third most frequent cause for visiting a doctor, the leading cause of job related disability, and one of the top reasons people miss work. But the good news is, we are starting to see an important shift. Across the country, people are thinking more about longevity, healthy aging, and how to take care of themselves before something breaks. With a growing focus on holistic fitness and sustainable well-being, people are changing their approach to health. Turning to slide 19, The Joint is in a position to set the pace and shape the pulse of the future of care.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Pain is the trigger bringing patients to our clinics. So we are shifting our external messaging to be pain centric. Once in the system, we start educating patients on the efficacy of chiropractic care for wellness and teach them the benefits of chiropractic care on an ongoing basis. Our new brand creative will empower individuals to reclaim their lives through transformational relief. People can move from pain to a life unpaused.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

We are excited to launch this new campaign in the second half of the year. Turning to slide 20, I'll reiterate, when we place patients at the heart of everything we do, the business grows, profitability follows and everyone wins. People are highly motivated to relieve pain. Our hypothesis is that pain relief is more resilient than other purchases in times of economic pressure. As discussed, we are pivoting our marketing to target those in pain.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Our team is dedicated to doing the work to improve our system. We are advancing our initiatives to strengthen our core, reignite growth and improve clinic and the company level profitability. Turning to Slide 21. Before we open for questions, I have a few updates and comments. On the corporate side, we welcome Andra Terrell in the newly created role of SVP Legal, an innovative legal strategist with two decades serving franchise systems.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Onra is experienced in strategic planning, refranchising, acquisitions, turnarounds and more. We also welcome our new SVP, Operations and Patient Experience, Eric Wyatt, to the executive team. Eric has thirty years of franchise operations experience at numerous national brands and joins us to improve quality and economics of our clinics, reduce variability of the patient experience and help us reignite growth. On the business side, as stewards of chiropractic, we support and encourage the success of future professionals. In March, we announced our latest scholarship at Northwestern Health Sciences University.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Additionally, we received awards from Entrepreneur Magazine. The Joint has been named one of the 150 fastest growing franchises, ranked number 37 of the Franchise 500 and added to the 10 plus club. On the investor side, I invite you to meet us at the B. Riley Securities Annual Investor Conference in Beverly Hills later in May or the virtual Oppenheimer Annual Consumer Growth and Ecommerce Conference in June. With that, operator, I am ready to begin Q and A.

[Operator]

The first question comes from Jeff Van Zinderen with B. Riley Securities. Please go ahead.

[Jeff Van Sinderen, Senior Analyst at B. Riley & Co]

Everyone. Sanjeeva, I wonder if you can start maybe or Jake, whoever's got the info, maybe speak about the new patient ad metrics and retention metrics and trends around those that you're seeing lately.

[Jake Singleton, CFO at The Joint Corp]

Yes. Jeff, I'll take that one. Yes, we made reference to the overall consumer sentiment. I think we are seeing that reflected in our new patient volumes. When we look at the gross number of volume, new patient leads that we're getting, those have been affected, especially as we think about the organic leads that are coming through.

[Jake Singleton, CFO at The Joint Corp]

So critically focused on those marketing strategies that Sanjeev alluded to. From a retention perspective, we're holding on to our patients at a similar rate that we always have. So that metric is holding up well for us.

[Jeff Van Sinderen, Senior Analyst at B. Riley & Co]

Okay, great. And then as we're thinking about you becoming a pure franchise business, and I don't know if you're ready to share this or not, but I know you mentioned in your prepared comments that you'll become more profitable. But just wondering if there are any metrics that you're prepared to share around that? How much you might remove from overhead? What level of margins you think are feasible?

[Jeff Van Sinderen, Senior Analyst at B. Riley & Co]

Is it level of margins of similar companies? Just wondering anything new to add on that.

[Jake Singleton, CFO at The Joint Corp]

Yes. I don't think we're ready to provide a forward guide on that yet, Jeff. As we look at last year's adjusted EBITDA on a consolidated basis, we did about $11,400,000 of adjusted EBITDA. As we reach the coming years, you've seen our guide for 2025. But as we think about 2026 as that pure play franchisor, we do expect profitability both on a gross dollars and on a margin basis as a percentage to be higher than we've seen historically.

[Jake Singleton, CFO at The Joint Corp]

The way that we accomplish that is by shedding the necessary G and A. And so that's where our critical focus will be. So as we get closer to announcing some of these refranchising deals as they reach those asset purchase agreements, we'll be able to give a better sense for kind of where we're going in the future.

[Jeff Van Sinderen, Senior Analyst at B. Riley & Co]

And given that, I think you said 90 some odd percent are basically sort of in the due diligence process. I think that was what you said. What do you think the timeframe is to be through the refranchising process at this point, just based on the pace that it's been going so far?

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Jeff, we have 93% of the remaining corporate clinics, which are now under LOI, and most of them are in the process of due diligence. I think it is our intent to exit 2025 as a pure play franchisor. And we would hope that we can accelerate this process as much as we possibly can, even intra year, but that is the timeline that we are working towards.

[Jeff Van Sinderen, Senior Analyst at B. Riley & Co]

Okay, great. Thanks for taking my questions and I will take the rest offline.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Okay. Thank you, Jeff.

[Operator]

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

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hey, everybody. Thanks for taking my questions. Excuse me. Maybe just to start with a follow-up from the prior question. Has the refranchising process slowed at all just with some of the macro noise?

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

You know, it's been a pretty crazy last six weeks. I I had thought that coming out of the last quarter, the goal was for most of it to be complete sometime in February. Maybe I misremember that, but just curious if things have slipped at all.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Hey, Jordan, we are not seeing any meaningful slowdown of the refranchising process. It's the nature of this in terms of due diligence, lease reassignments, etcetera, that it's very difficult to put a firm timeline to that, but we're not seeing any slowdown to the process, and definitely not seeing any connection between our process of refranchising and the macroeconomics.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay. That's great. And then, second topic I wanted to cover is just going back to your comments about comp growth. I guess the two specific questions are, can you share what comps were in April? And then secondly, can you disclose quarterly franchise versus owned comp performance?

[Jake Singleton, CFO at The Joint Corp]

Yes. We won't give an April number at this point. We did see a slight uptick from February into March. February had the leap year in the promo that I mentioned, but we were back to 4% by March. So those are the figures that we gave there.

[Jake Singleton, CFO at The Joint Corp]

What was the second part of your question there, George?

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

If you could give Q1 franchise versus owned comps.

[Jake Singleton, CFO at The Joint Corp]

Yes. As of right now, because 87% of our clinics are franchise clinics, their comp, relatively mirrors the consolidated comp. The corporate clinic comp is positive, but it does trail the franchise comp, for the period.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay. And then last question for me. Well, guess two last quick ones. Dynamic pricing, I understand it sounds like you want to take a measured approach. How much of a tilt like how much just all in if if you look at the the pricing opportunity?

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

I know it's gonna range by geography and, you know, it's it's maybe not easy to just put a number too, but is this like a high single digit opportunity for pricing? Or where do you see it all kind of shaking out when it's all been implemented?

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Here's what I can say. We're exploring, as I tried to give a sense on our prepared remarks, that really every single lever in our pricing model. So in the current climate, we're just wanting to be thoughtful and test the various iterations and make sure that whatever we scale nationally is something that helps us strike that balance between affordability and optimizing for price. So that's why the comment. I'm not sure that we provided guidance on what the pricing impact is to our overall numbers, but it certainly has the capacity to be double digit in terms of dollar value in millions to add to our total system wide sales.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay, so a $500,000,000 system, that's like a low at least a low single digit. Am I thinking about that right?

[Jake Singleton, CFO at The Joint Corp]

Correct. Correct. Yeah. And from a timing perspective, really, only wholesale increase that we've pushed to the full network to date is an increase to our single visit pricing. So that's only about 4% of our gross sales.

[Jake Singleton, CFO at The Joint Corp]

The rest that are in test now, you won't really see the impacts of those until the second half of the year, right, as we conclude the evaluation of those test markets, and then roll those out to the full system. So some of that will be backloaded, but that is factored into the full year guide.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

So that double digit millions, 10 million plus is just a partial year. That's the impact for the full year, but it's really just based on mostly partial year pricing?

[Jake Singleton, CFO at The Joint Corp]

That's correct.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Thank you. And then I guess one last one. Selling and marketing expense, I understand you were paying two different agencies in the quarter, 3,500,000.0 I think was the line.

[David Barnard, SVP - IR at Alliance Advisors IR]

Correct.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

When do you expect that to normalize? And what kind of range should we expect when you're down to one agency?

[Jake Singleton, CFO at The Joint Corp]

Yes. I definitely wouldn't use Q1 as the run rate figure for that. We have a lot of front loaded costs. I think you'll see a similar burden for Q2, right, as we continue that kind of dual transitioned approach. By Q3, I think you'll start to see that more normalized.

[Jake Singleton, CFO at The Joint Corp]

And then kind of by Q4, you'll get a better sense for overall run rate.

[George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay, thanks.

[Operator]

The next question comes from Jeremy Hamblin with Craig Hallum Capital Group. Please go ahead.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Thanks for taking the questions. And so I just want to come back and revisit the same store sales guide for a second here. As we look ahead, I think your compares are little bit tougher in the second half of the year, maybe I think about 5% in the second half of twenty twenty four versus a lower single digit in the first half of the year. I mean, have you seen a meaningful uptick here over the last five or six weeks that's providing some confidence of that mid single digit guide? Or is there another factor, maybe the pricing, that is playing into the mid single digit guide?

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Because obviously, it would imply a pretty healthy acceleration from current run rates.

[Jake Singleton, CFO at The Joint Corp]

Yes. The guide is probably more so predicated on some of those dynamic revenue management kind of pricing increases in the second half of the year. You're right, the comp the rollovers get a little tougher with a 6% comp in Q4 of twenty twenty four. So it's largely predicated on the pricing initiatives that factor into that full year guide.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Got it. And then just in terms of rolling out the dynamic pricing and kind of testing around that, obviously, it sounds fluid. But in terms of thinking how long you might take to refine, given that it's a new process for you, is it a quarter? Is it a couple of quarters? Is it, I mean, obviously it's an ongoing process overall, but, any more insight you can share there?

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Jeremy, clearly by the nature of its name, is ongoing, and also because, a lot of our plans, right, like for example, if you go into a membership plans, there is a minimum purchase requirement of two months. So in order to understand the impact of some of the things that we are trying to pull, I think at the bare minimum, are talking two to three months to understand the impact of test cells, at the very least. So just think about it in that way, that anything that we test, the earliest we can get a read on is in that sort of timeframe, particularly as it relates to our wellness plans and packages.

[Jake Singleton, CFO at The Joint Corp]

And because we're looking at the full pricing structure, we just have to be mindful that the changes to certain parts of our pricing mix have a tail impact to other elements of our pricing. So, it does take some time to evaluate to make sure you're not only evaluating that core piece of the pricing mix that you've put into test, but also how it affects conversions to other elements of our pricing structure. So, I wouldn't describe it as fluid. I'd describe it more as strategic to make sure that we're understanding the full range of impacts and making sure that it's best for the system before rolling it out.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Understood. And so do you sense that in the current environment, you're having clients that are looking more at kind of the monthly membership model versus the June '55 for one package type promo that you're looking at?

[Jake Singleton, CFO at The Joint Corp]

Yes. We still see approximately 85% of our gross sales coming in the form of our monthly recurring products. So that's always the vast majority of our revenue. As we think about things like our single visit pricing or our package pricing, we have to be very careful of how that impacts the overall wellness. We aren't seeing defection away from those core recurring products.

[Jake Singleton, CFO at The Joint Corp]

In fact, we're trying to do the opposite, right, encourage people to move into those recurring products, that better fit their treatment plans and ongoing care.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Got it. Okay. And then just one last thing. The spring convention that you did with franchisees, what was the cost of that? And then what line item?

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Did it flow through G and A? Or was some of that allocated to sales and marketing?

[Jake Singleton, CFO at The Joint Corp]

Yes. That full burden comes through the sales and marketing line. We did slightly scale back the convention this year in terms of the number of days that we typically do. So it's not the same level of cost impact that you see when we do our every other year full national conference agenda, But that did impact the second quarter sales and marketing line as well.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. Can you call out what the cost was?

[Jake Singleton, CFO at The Joint Corp]

I don't have that off the top of my head, Jeremy. In a given year, with the full scale agenda, some of that pass through is as much as $05,000,000. This was a much smaller production. So, it was south of that.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Got it. All right. Thanks so much for taking the questions and best wishes. Thank you.

[Operator]

The next question comes from Jeremy Perlman with Maxim Group. Please go ahead.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

Thank you for taking my question. So maybe if you could help us connect the dots between the reported comp sales, which were up 3% for clinics that were open at least thirteen months, but then for clinics open at least forty eight months, I think you said on the call that they were down 2%. Maybe why do you think that is? And then also, are there any specific strategies you're implementing or you plan to implement for the more mature clinics to help them get back to comp sale growth?

[Jake Singleton, CFO at The Joint Corp]

Yes, Jeremy, that's a typical spread that we've seen over the last five to six quarters in terms of that mature comp versus the system comp. So no real widening in terms of that gap. So I would say that's been consistent for us. We're always looking at ways to continue to strengthen all clinics within our system. So a number of the operational strategies and marketing tactics will certainly be geared towards that existing patient or existing clinic profile as well.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

Okay. Thank you. And then you mentioned to answer one of the questions that the guide for your system wide sales and your comp sales for 2025, it was underpinned by dynamic revenue pricing. Is there anything else that's going any other assumptions that you are that go behind the guide? And is that best case scenario?

[Jeremy Pearlman, Equity Analyst at Maxim Group]

Because considering the macroeconomic risks and you know, the consumer sentiment that you talked about on the call, it could affect, you know, higher prices. Is that baked into the guide or, you know, that would maybe cause you to pull back a little bit?

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Well, let me start, Jake can add to this. Dynamic revenue management is one of a few different strategies that I had outlined, which go into driving our comp sales growth, right. Just to recap, we are looking at promotional activity that we feel is stronger than what we have done before. We are looking at, in the second half of the year, being much more pointed in our external communications, and I have referenced that seventy four percent of our patients cite pain of some kind when they come to us, so our external messaging is going to be single mindedly focused on pain, as we transition into the back half of the year, which will help us get more patients into the funnel. The third thing we're doing is stronger digital marketing.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

That's the new agency we brought in. And just so that you understand specifically what that does is it allows us to do much better media planning and buying, so that all our clinics are buying media in a way that's relevant for their specific patient demographic and psychographics, including those mature clinics, right? Then we referenced patient facing technology. We are expecting that our mobile app, our first ever, will be in app stores by June 30, which whilst does not drive comps, but we believe over a period of time that helps to drive patient engagement and usage and therefore lifetime value. And then finally, clearly, one of the dynamics that we anticipate helping our comms is dynamic revenue management, because we have not taken any meaningful pricing since March of twenty twenty two, and that we're working through, and we do expect to take some pricing in 2025.

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

So hopefully that gives you a sense for what is underpinning our assumptions on comp sales. Thank you very much for that.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

I'll hop back in the queue.

[Operator]

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

[Sanjiv Razdan, CEO, President & Director at The Joint Corp]

Thank you, David. Thank you all for joining us. I look forward to getting to know you at conferences and non deal roadshows. Have a really good day and know that at The Joint, we always have your back.

[Operator]

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

Participants

Executives

• Sanjiv Razdan, CEO, President & Director
• Jake Singleton, CFO

Analysts

• David Barnard, SVP - IR at Alliance Advisors IR
• Jeff Van Sinderen, Senior Analyst at B. Riley & Co
• George Kelly, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
• Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Jeremy Pearlman, Equity Analyst at Maxim Group