Q2 2025 The Joint Corp Earnings Call
Speaker #3: Hello, and welcome to the Joint Corp Second Quarter 2025 Financial Results Conference call. All participants will be in a listen-only mode. Should you need any assistance, please signal the conference specialist by pressing the star key followed by zero.
Speaker #3: After today's presentation, there will be an opportunity to ask questions, to ask a question you may press star then one on your telephone keypad.
Speaker #3: To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to David Barnard with Alliance Advisors Investor Relations.
Speaker #3: Please go head.
Speaker #4: Thank you, operator. Good afternoon, everyone. This is David Barnard with Alliance Advisors Investor Relations. Joining us on the call today are President and CEO Sanjiv Razdan, and CFO Scott Bowman.
Speaker #4: Please note you're using a slide presentation that can be found at httpsir.thejoint.com under Events. Today, after the close of market, the Joint Corp issued a press release about the quarter-end of June 30th, 2025.
Speaker #4: If you do not already have a copy of this press release, it can be found on the Investor Relations section of the company's website.
Speaker #4: 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.
Speaker #4: All statements other than statements of historical facts may be considered forward-looking statements. 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 or assumptions will prove to have been correct.
Speaker #4: 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.
Speaker #4: 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 10K and 10Q, as well as other reports that the company files from time to time with the SEC.
Speaker #4: 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.
Speaker #4: As announced on July 30th, 2025, we intend to restate our previously issued financial statements for our 2024 annual report form 10K and our quarter-ended Q1 2025 form 10Q.
Speaker #4: Due to material errors identified by management related to the original valuation methodology for the non-cash impairment recorded for clinics held for sale within discontinued operations.
Speaker #4: From an income statement standpoint, the adjustments resulted in decrease in net loss for 2024 and an increase in net income for the first quarter of 2025.
Speaker #4: These adjustments are not expected to have any impact on adjusted EBITDA for 2024 or the first quarter of 2025. The effect on the balance sheet will be an increase in the carrying value of assets held for sale due to the necessary change in prior financial statements. As of the date of this filing, we are providing limited financial statements, including the income statement and adjusted EBITDA for the three months ended June 30th, 2025, and 2024.
Speaker #4: Respectively, the unrestricted cash and cash balance as of June 2025. Management uses EBITDA and adjusted EBITDA, which are non-GAAP financial measures. These are presented because they are important measures used by management to assess financial performance.
Speaker #4: 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 justed EBITDA is presented in the press release.
Speaker #4: 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.
Speaker #4: Which includes contract termination costs associated with reacquired regional developer rights, stock-based compensation expense, bargaining purchase gain, net gain, 30th, impairment, costs related to restatement filings, restructuring costs and litigation expenses.
Speaker #4: Consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business. Management also includes commonly discussed performance metrics.
Speaker #4: System-wide sales include revenues at all clinics, whether operated by the company or by franchisees. While franchise 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.
Speaker #4: Comp sales include the revenues from both company-owned or managed clinics and franchise clinics that, in each case, have been open for at ast 13 full months and exclude any clinics that have been closed.
Speaker #4: Turning to slide three, it's now my pleasure to turn the call over to Sanjiv Razdan.
Speaker #5: Thank you, David. And I welcome everyone to the call. Turning to slide four, today I'm excited to review our increasing momentum in becoming a pure-play franchisor and our pursuit of the Joint 2.0.
Speaker #5: We are strengthening our core and elevating our patient experience and improving profitability ultimately to reignite growth. Building for the future, our initiatives to improve profitability include enhancing our brand campaign by pivoting from a general wellness to a more focused pain relief message to better target patient acquisition, strengthening our digital marketing to drive long-term system-wide sales, optimizing holistic pricing for affordability and patient value through dynamic revenue management, and upgrading our patient-facing technology enriching our patients' experience and extending their lifetime value.
Speaker #5: Before I elaborate, for those of you who are new to the Joint, we are the largest franchisor of chiropractic care clinics. Our ongoing mission is to improve the quality of life through routine and affordable chiropractic care, and our big bold vision is to become America's most accessible health and wellness services company.
Speaker #5: I'll summarize our Q2 2025 financial results compared Q2 2024 and Scott Bowman, our new CFO, will provide greater detail in a moment. System-wide sales were 129.6 million dollars up 2.6%.
Speaker #5: Comp sales for all clinics opened 13 months were up 1.4% for the quarter. Revenue from continuing operations increased 5%. And consolidated adjusted EBITDA grew to 3.2 million dollars up 52% compared to quarter two 2024.
Speaker #5: On June 30th, 2025, unrestricted cash and equivalents reached 30 million Let's review our refranchising efforts. Turning to slide five, momentum is increasing. Our corporate clinics are attracting investments from sophisticated multi-unit franchisees, both existing and new to our system.
Speaker #5: This conveys confidence in our business model and our growth initiatives. We started Q2 2025 with 13% corporate clinics in our portfolio. During the quarter, we refranchised 37 clinics, reducing that to 8%.
Speaker #5: In Arizona and New Mexico, we sold 31 corporate clinics for an aggregate purchase price of 11.1 million dollars to our largest franchisee, Joint Ventures.
Speaker #5: We are excited to expand our partnership with Joint Ventures to 96 clinics with 10 more committed over time. We received 8.3 million dollars in cash and, as part of this deal, bought the regional developer rights to the Northwest region for 2.8 million.
Speaker #5: This transaction also reduced our annual royalties and commissions obligation, which in 2024 was 855 thousand lars. This territory consists of 46 existing franchise clinics and holds significant opportunity for growth with 30 sites planned for future clinic development.
Speaker #5: In Kansas City, we sold the five corporate clinics and we are actively engaged in refranchising the balance of the corporate portfolio. Turning to slide six, let's review our long-term profitability improvement initiatives starting with how we are enhancing our brand positioning and strengthening our digital marketing.
Speaker #5: In Q2, our comps were lower than expected. Even though attrition was on par with last year and conversions were better, the macroeconomic headwinds and lower new patient counts continued to impact us.
Speaker #5: Focusing on what we can control, we are working with our franchisees to increase investment in brand awareness to generate more demand and investing in our marketing infrastructure to improve search performance and drive consumers into the consideration set.
Speaker #5: Our market studies indicate that pain is the predominant trigger to see a chiropractor and we know that about 80% of our new patients cite aches and pains as the reason for coming to the Joint.
Speaker #5: Leveraging this insight to drive long-term system-wide sales we are pivoting from a broad-based wellness-related communication to a sharper message of chiropractic care for pain relief.
Speaker #5: In July, we launched our compelling new creative brand awareness campaign, Life Unpaused. This outreach educates prospects about how the Joint gets patients out of pain and back to doing what they love best.
Speaker #5: By focusing our content around pain, we expect to improve organic leads, and the new patient count. Increasing brand awareness and implementing more precisely targeted marketing strategies will make our services more accessible and attract patients who are in pain and in need of chiropractic care.
Speaker #5: With this launch, we will be shifting our marketing spend to an earlier point in the sales funnel and teaching prospects in advance that chiropractic care can reduce pain and that Joint is an incredibly affordable pain relief option.
Speaker #5: Brand awareness campaigns may take longer to come to fruition, but tend to attract the patients that stay longer. We are also investing in search engine optimization and solving for AI-related changes to search behavior.
Speaker #5: Both of these actions are intended to drive new patient count, which in turn will help improve comps. Turning to slide seven, let's review our long-term profitability improvement initiatives starting with dynamic revenue management.
Speaker #5: We are shifting our strategy to make more frequent smaller price increases. As discussed previously, we must be intentional and balanced when reviewing price increases that will be implemented in stages.
Speaker #5: In July, we introduced a new Kickstart plan to enable our clinics to charge new patients for supplemental adjustments beyond the four covered by their wellness plans.
Speaker #5: The intent is to get them started strong and to stay strong on their treatment plans. We plan to continue implementing nominal price increases to optimize holistic pricing while balancing affordability and patient value.
Speaker #5: We are taking other measures to extend the length of time patients maintain their wellness plans. Turning to slide eight, part of our strategy to enrich our patient experience is by updating patient-facing technology.
Speaker #5: I'm excited to say we launched our mobile app, Beta in June, and based on strong outcomes in July, we made our mobile app generally available to patients.
Speaker #5: We are seeing typical pickup rates which are gaining traction with approximately 10% of active patients using the app already. Our goal is to extend the lifetime value of our patients.
Speaker #5: So our next evolution of features will personalize information to our patients. Such as details of their wellness plans, reminders they have adjustments remaining, and their usage period, et cetera.
Speaker #5: Future aspects will incorporate gamification such as getting badges for adjustments, check-ins, or watching a video of the stretches that help with your condition. Now, I would like to introduce Scott Bowman, our new CFO.
Speaker #5: As a business transformation and growth expert, Scott is a great fit for the Joint. He has over three decades' experience in finance, including serving as CFO at four companies three of which were publicly traded.
Speaker #5: He brings deep expertise in capital markets, strategic planning, operations, and investor relations. We are pleased to have Scott on board as we drive ahead with our transition.
Speaker #5: Please go head, Scott.
Speaker #6: Thanks, Sanjiv. I would like to start by saying that I'm honored to be part of the team and I'm excited about the opportunities as we execute our multi-phase strategy to reignite growth, introduce new revenue streams, and become America's most accessible health and wellness services company.
Speaker #6: Most immediately, I'm focused on completing our ranchising effort to become a pure-play franchisor in our executing our capital allocation strategy. We started in June on this strategy with the purchase the redevelopment rights in the Northwest region and have established the infrastructure needed to execute our share repurchase program.
Speaker #6: Turning to slide 10, let's discuss our operating metrics. In the second quarter, system-wide sales were up 2.6%. Comp sales for all clinics opened 13 months were up 1.4%.
Speaker #6: In adjusted EBITDA for consolidated operations grew 52%. Turning to slide 11, let's discuss our clinics. We sold 13 franchise licenses in second quarter, compared to seven sold in the second quarter of last year.
Speaker #6: As Sanjiv noted, in July, we bought back the RD Territory rights in the Northwest region, which reduced our RDs to 15 covering approximately 52% of the network.
Speaker #6: At June 30th, we had 152 franchise licenses in active development. In the second quarter, we refranchised 37 clinics from company-owned or managed to franchise.
Speaker #6: We opened seven franchise clinics and closed six, and we closed three company-owned or managed clinics. At June 30th, 2025, our clinic count was 967, with 885 franchised or 92% of the portfolio.
Speaker #6: Turning to slide 12, let's discuss our financials. I'll review continuing operations for the second quarter compared to the same period last year. Revenue grew 5% to 13.3 million dollars, mainly due to the greater number of franchised clinics in operation.
Speaker #6: Cost of revenues was 2.8 million dollars, which was consistent with the prior year. Selling and marketing expenses were also consistent with the prior year.
Speaker #6: Depreciation and amortization expenses increased 18% to 402,000 dollars, which was mainly due to development of software, which was made available for use in the first half of 2025.
Speaker #6: G&A expenses decreased 1% to 7.7 million, as we make progress on our corporate cost reduction efforts related to refranchising. Income tax expense of 11,000 dollars reflected an effective tax rate of negative 1%.
Speaker #6: Consolidated net income was 93,000 dollars, compared to a net loss of 3.6 million dollars in same period last year. Net loss from continuing operations improved 720,000 dollars to 990,000 dollars or 6 cents per basic share, from a net loss of 1.7 million dollars or 11 cents per basic share in the same period last year.
Speaker #6: Adjusted EBITDA for consolidated operations improved 1.1 million dollars or 52% to 3.2 million dollars. For continuing operations, adjusted EBITDA improved 468,000 dollars to 88,000 dollars.
Speaker #6: On slide 13, I'll iew our liquidity and stock repurchase plan. At the end of the second quarter, unrestricted cash was 29.8 million dollars, compared to 25.1 million dollars at the end of last year.
Speaker #6: Proceeds from the sale clinics totaled 11.2 million dollars, while cash used to acquire the Northwest regional developer rights was 2.8 million dollars. We maintained our line of credit with JPMorgan Chase for 20 million dollars and had zero funds drawn during the quarter.
Speaker #6: In June, the board authorized a stock repurchase program under which the company may repurchase up to 5 million dollars of our outstanding common stock through June 2027.
Speaker #6: Underscoring our commitment to disciplined capital allocation, and delivering value to our stockholders, the buyback reflects the board's confidence in our long-term strategy refranchising program and our ected cash flow generation.
Speaker #6: On to slide 14, for a review of 2025 guidance. In light of softer sales trends coupled with macro headwinds, we are taking a balanced view for remainder of the year and are revising our 2025 guidance.
Speaker #6: For system-wide sales, we now expect the range to be 530 to 550 million dollars, compared to prior guidance of 550 to 570 million. For comp sales, we now expect an increase in the low single-digit range, compared to prior guidance of an increase in the mid-single-digit range.
Speaker #6: Through diligent overhead reduction, we are increasing our consolidated adjusted EBITDA guidance to be in the range of 10.8 to 11.8 million dollars, versus prior guidance of 10 million to 11.5 million dollars.
Speaker #6: New franchise clinic openings excluding the impact of refranchised clinics we now expect to range from 30 to 35, compared to 57 in 2024. Remember, as clinics ift from corporate-owned or managed to franchised, there will be a transformative financial impact.
Speaker #6: Our franchise royalties and fees will increase, we will continue to rationalize our allocated G&A expenses, and we will increase our cash position as we sell the remainder of our corporate-owned or managed clinics.
Speaker #6: And with that, I'll turn the call back over to Sanjiv.
Speaker #7: Thanks, Scott. Turning to slide 16, when we place patients at the heart of everything we do, the business grows, profitability follows, and everyone wins.
Speaker #7: At the beginning of 2025, we laid out our multi-year strategy to strengthen our core reignite growth and improve both clinic and company-level profitability. To do that, we are fueling our growth flywheel.
Speaker #7: We are building our people capability and culture to support our clinics, our team, our franchisees, and our growth. We have strengthened leadership in franchise development, legal, operations, and patient experience, and most recently in finance function.
Speaker #7: Our team is dedicated to ensuring that the Joint offers the best patient experience possible. Our success will yield referrals, our most effective and cost-efficient patient acquisition tool.
Speaker #7: Which will turbocharge sales and profits for franchisees and the company. And in turn, reignite clinic network growth. Our team is executing our plan. And an approximately 12 months, we expect to enter the next phase of our evolution, Joint 3.0.
Speaker #7: When we will focus on capturing new revenue streams by creating additional sales channels and growing in new markets. Turning to slide 17, before we open for questions, I have a few updates and comments.
Speaker #7: We welcome two new directors increasing board membership to eight. Sandy Carman, our most recently Senior Vice President and Chief Human Resources Officer for Kimberly-Clark, brings over two decades of extensive experience with publicly traded healthcare companies and franchises both in the US and globally.
Speaker #7: Chris Grandpre, an Operating Partner with MidOcean, charged with targeting franchise consumer business for investment, brings over 30 years of experience leading multi-branded franchise companies and in M&A investment banking.
Speaker #7: Also, we will be conducting some non-deal roadshows. Please contact Alliance Advisors Investor Relations if you would like to connect with that operator. I am ready to begin Q&A.
Speaker #3: Thank ou. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad.
Speaker #3: If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Your first question comes from George Kelly from Ross Capital.
Speaker #3: Please go ahead.
Speaker #8: Hey, everyone. Thanks for taking my questions. the first one is just on the lowered comp guide. I was wondering if you could give more detail behind that change.
Speaker #8: yeah, I can I can start off. on that, George and then, I can, hand it over to Sanjiv for any further comments. You know, when we looked at the guide, we looked at a couple of things.
Speaker #8: You know, number one, we looked at our cent trends. And, you know, recent trends are a little bit softer. and so, you know, that had a part to play.
Speaker #8: And as we look at, you know, that softness, it's mainly in new patients, right? And so, as we look at our conversion rate, conversion rate is actually up year over year.
Speaker #8: And attrition is in line with last year. And so, so you couple that and you also look at our comparables from last year in the back half, especially in fourth quarter.
Speaker #8: And we have some tougher compares. so that was, a data point as well. And, you ow, just looking at, you know, kind of the macro headwinds that are out there, we could consumer incentive getting a little better, but coming off of a bottom.
Speaker #8: So there was a couple of data points from a macro, you ow, view that we took into account as well. Okay? And so, that's that's really what colored ur decision on, the guidance.
Speaker #8: And, you know, the, the main reason why we're a ittle bit softer in the quarter. but we are, you know, addressing, you know, those headwinds.
Speaker #8: we're looking at a few things that we think will help. You know, not immediately, but over time, we think it'll help. You know, number one is, you know, we're shifting, more of our marketing dollars into top-of-funnel brand awareness.
Speaker #8: to capture, more of those customers and cast a wider net. we also see some opportunity in SEO optimization. there's some very tangible actions there.
Speaker #8: that we can take. and that we're starting to execute on that we think will help that organic search component. and then, you know, we're oring, you know, some additional programs.
Speaker #8: You know, and some of the survey work that we've done, you know, I ink just consumers in general out there, you know, they're looking for value.
Speaker #8: They're looking affordability. and we think we give great, you know, day-to-day value. you know, but some of our package are priced pretty high. There's very good value there, but from an affordability standpoint, it's a higher upfront cost.
Speaker #8: And so we're looking for some options to buy now, pay later. And so that can take, you know, different forms. but we're exploring that because we think that could, you know, be an unlock for some of those customers that want to buy, you know, those longer-term packages, but, you ow, the higher price point may be an issue.
Speaker #9: Okay. That's pful. Thank ou. sure. And so it sounds like you're kind of backing off the planned, broader pricing increase that that was previously anticipated for the back half.
Speaker #8: George, this is Sanjiv. I think part of our strategy remains what we're ing dynamic revenue management. We have already taken some pricing actions December of last year.
Speaker #8: We increased our walk-in price, which has helped overall increase our conversions as well as our contribute to our comps. We have also in July, in fact, July 1, initiated something that we are calling Kickstart Plan, where patients, when they sign up for a wellness plan, are able to buy either four, six, or eight incremental adjustments upfront, at a time which is, to make sure that they get the best care possible, but it's also optimizing that revenue opportunity upfront for us.
Speaker #8: And we will continue to work with our franchise community to optimize pricing in the back half of the year as well. So, we will keep watching the market and also make sure that we're not walking away from the affordability.
Speaker #8: aspect of our value proposition.
Speaker #9: Okay. Thank you. And then, last questions are just on the, the EBITDA guide. So two questions on that. First, can you break down the guidance by continuing versus discontinued ops?
Speaker #9: And then secondly, you ow, you're you're expense structure in the first half. If I look at selling and marketing, you know, you're you're overspending your ad fee, collections.
Speaker #9: And your G&A, in 2Q, was, you know, I know it was down a little bit year over year, but still at almost record quarterly levels.
Speaker #9: how should we think about the back half of the year? Are you starting to get more aggressive after this recent, refranchising transaction, or should we expect those two lines to remain kind of elevated in the back half?
Speaker #8: Right. so, you know, first off, we don't really we don't typically split out continuing discontinued on our on our idance. And, yeah, I ink keep in mind, too, when you look at, you ow, kind of the, results for discontinued ops, it's not entirely clear or a good picture because there are certain things from an accounting standpoint that distort, you know, that number a bit.
Speaker #8: You know, number one is we don't record, rent for those clinics, you know, held for sale. And we we also don't include depreciation. Okay?
Speaker #8: And that that can distort that number a little bit under this continued ops. So I was cautioning you on making any, you ow, significant kind assumptions, on that because we do have some accounting, that, you ow, distorts that a little bit.
Speaker #8: You know, as we look at, you know, the G&A, you know, for the remainder of the year, we have, you know, some initiatives that have helped us so far.
Speaker #8: we think as we get further down the path on refranchising, you know, we'll see even more, you know, favorability there. you know, we want to make sure that we maintain a balance there as we transition.
Speaker #8: and not get ahead of ourselves. And so as we get closer to the end on refranchising, we should see some more benefit there.
Speaker #9: Okay. Thanks all. Hop back in the queue.
Speaker #3: Thank you. Your next question comes from Jeremy Hamblin from Craig Hallam, Capital Group. Please go head.
Speaker #10: thanks. for taking the questions. And I wanted to to kind of explore a bit more on the on the change in the systems, the total system sales.
Speaker #10: And just understand, you know, how much of the the total change I guess you could call it maybe 300 basis point change in same-store sales is due to traffic.
Speaker #10: whether it's new patient traffic or just overall, and that's part one. Part two is just understanding the implication on price increase and whether or not that might be creating some sticker shock, particularly, you noted the struggles with new patient acquisition.
Speaker #10: and whether or not, you know, would you plan on testing potentially lowering price, in seeing what that does for the system or for a portion of the system?
Speaker #8: Yeah. I'll start off on the traffic piece of it, and then Sanjiv can chime in as well, you know, on the price increases.
Speaker #8: So first off, on the traffic, it's a good estion. You know, I see it as mainly a traffic, you know, problem when we think about new patients.
Speaker #8: You know, once we get the patients in the door, we have a, we really do a good job on converting. and, you know, like I said, the attrition, year over year, is about, you know, it's about the same.
Speaker #8: You know, so it's about attracting, you ow, those new patients in the door. And so, that's why we're really focused on kind of the marketing effort right now, the top-of-funnel, you know, work that we want to do.
Speaker #8: but also, really beef up our SEO and maximize that capability for organic search. so we're really focused on on those two areas. to get, you know, new patients, in the door.
Speaker #8: you know, once we do that, you know, we we have a pretty good chance of of converting them. And then, I'll I'll start off on the price increase.
Speaker #8: You know, the sticker shock comment, you ow, you know, hits home for us because, you know, that goes back to our to Sanjiv's comment about, you know, making sure we're balancing the affordability.
Speaker #8: Of our pricing. And so we're really careful. and, you ow, kind of keep within the guardrails of what we think is reasonable, but still giving a good value.
Speaker #8: part of that also includes, you ow, some some test and learn work, right? And so if we have some ideas about pricing, you ow, in many cases, we will test those first, you ow, to make sure that, you know, our assumptions are correct and then if they're not correct, then, you know, we have a chance to adjust before we, push it out, you know, for, a broader group of clinics.
Speaker #10: Yeah. Just to add to, what Scott was saying, as a reminder, our patients make about $50,000 to $105,000 in annual household income. So as there is uncertainty in the environment, we find that any expense or investment as it relates to their wellness could potentially be pulled back.
Speaker #10: As we thought about that quite deeply, we are pivoting our external messaging to a much more sharper, pain-related message. 80% of our existing patients come to us citing some aches and pains that's about the same number that shows up as we research the use of chiropractic profession as a category.
Speaker #10: So Jeremy, that's why we are shifting our external messaging around a much more pain-focused message and positioning ourselves as the solution for non-invasive holistic pain care.
Speaker #10: So I think that will help us. Second thing is that from a pricing perspective, the last time we took anything what I would call meaningful pricing was in March of 2022.
Speaker #10: So in terms of all that period of time, the value proposition has only strengthened because we've held our wellness plan pricing from March of 2022.
Speaker #10: How much longer we're able to hold that, at that same price point remains to be seen, but we are keeping a close eye on the situation.
Speaker #10: 80% of our sales come from wellness plans and packages. So we're we're we're holding our pricing over there for now, right? But we will continue to find opportunities of taking small bites of the apple and don't want to put ourselves in the position where we have to wait another three and a half years to take meaningful pricing.
Speaker #10: So that's just an opportunistic well-thought-through purposeful approach that we will take. as Scott mentioned just to repeat, search engine optimization is an opportunity that is emerging for us, especially given the change in search behavior due to AI, which we are we are working to address that.
Speaker #10: And then finding ways of working our franchisees to increase the investment in brand awareness all around so that we can create more awareness amongst our potential patients about how to leverage the Joint when it es to pain care, and last but certainly not the least, finding ways of exploring any buy now, pay later type options, especially when we have those packages where you can have if you buy for 10 months, you get two months free, five plus one, you buy for five months, you get one month free.
Speaker #10: That is when the upfront cost is excellent value, but in absolute terms, we're trying to find ways of helping our patients to be able to buy now, pay later, and those are solutions we're actively exploring as well.
Speaker #10: So we're feeling quietly confident about our approach for the back half of this year. Got it. And then, I ant to explore a little bit of the the deals, the refranchising, that you've done.
Speaker #10: So I think you said for, Arizona, New Mexico, 31 units, 8.3 million, that those were sold for, and I think that would imply the other six locations.
Speaker #10: you realized about 2.9 million. For those, I wanted to get a sense for you know, kind of the sales volumes and the profitability of the collective of the 37 locations.
Speaker #10: Are those fairly typical? are they slightly better locations? slightly worse locations? What kind of color can you share with us on that?
Speaker #8: Yeah. I can start on that. So you think the 31 locations, in Arizona and New Mexico, many of those locations are higher performers. Okay?
Speaker #8: Kansas City had five clinics. They were lower performers. And so I I think it's I think it could be gone a good question because as we look at the remainder of the clinics, there is a range of based on geography and and volume and profitability.
Speaker #8: that will influence, you know, the proceeds. from the sale. And so when we when we sold the the 37 clinics in in total, there's actually about 11.2 million in in gross proceeds.
Speaker #8: And then we used 2.8 of that to buy back some RD Territory rights in the Northwest. Okay? so that's kind of how you get that 8.3, 8.4 net effect.
Speaker #8: But the total proceeds for the sale of the clinics was about $11 million. So that's going to vary, you know, based on those criteria that I just mentioned.
Speaker #8: And so you can't necessarily extrapolate, you know, that number over the remaining clinics and and come to a number. but I think, you know, having said that, those clinics in Arizona and New Mexico are higher performers that gives you some sense that they've over-indexed a bit on the proceeds.
Speaker #10: I see. So just clarifying, it's the total cash received for all of the 37 was about 8.3 million.
Speaker #8: Yeah. $8.3 million net. So, we got a little over $11 million on the proceeds. And then we used about $2.8 million of that to buy back those RD Territory rights in the West.
Speaker #10: Got it. all right. And then just to follow up on the the prior question around you know, sales and marketing. All right. So you know, in terms of thinking about total sales and marketing costs, in the second half of the year, and it sounds ike you're making some investment in that.
Speaker #10: So we would assume that that might actually turn a little bit higher in the back half of the year. Is that a fair assumption?
Speaker #8: It it, it could be. It could be slightly higher. you ow, and part of that depends. You know, on, you know, what results that we see.
Speaker #8: And so as we spend, you know, some dollars and focus on upper funnel, you know, marketing, if we see, you know, good results coming from that, then that could change our opinions on, you ow, if we spend more, maybe we can get a good return on those dollars.
Speaker #8: So it'll somewhat variable based on the performance of the dollars we're utting towards upper funnel marketing.
Speaker #10: To add to that, Jeremy, I think when we were in our prepared remarks sharing a shifting of marketing investment dollars working with our franchisees to further up in the funnel around brand activation, and more brand awareness, that was more taking shifting the investment from lower down in the funnel to upper in in the marketing funnel.
Speaker #10: So not necessarily sort of signaling incremental investment, but shifting where we're ending the money or what we're spending the money on. Got it. thanks so much for taking the questions and best wishes.
Speaker #8: Thank you.
Speaker #3: Thank you. Once again, if you do wish to ask a question, please press star then one. Your next question comes from Nick Sherwood from Maxim Group.
Speaker #3: Please go head.
Speaker #11: Hi. good ing. Can you kind of talking about the the effect of those recent clinic sales? How's that going to affect your back office expenses?
Speaker #11: Shall we be expecting any restructuring expenses in the near term? And then what are some of those long-term savings you'll have you know moving those clinics from the corporate side to the the franchise side?
Speaker #8: Yeah. So so near term, you know want to make sure that you ow we get you know a good transition you know over to you know the the franchise clinics.
Speaker #8: And so probably we'll continue to see you ow some reduction in G&A you know because of that, that unallocated piece. you know longer term, there's other areas of spend that we can also look at.
Speaker #8: You know, from the payroll side from other categories like insurance and software cost and legal fees and travel. So there's there's quite a few line items that you know we're taking a look at.
Speaker #8: you know being careful not to cut too soon, but to identify what the opportunity is and then over time you know tighten up with those expense line items you know as we continue to transition.
Speaker #10: Okay. Thank you for the detail of that. And then talking the dynamic revenue management system, are you trying out you know are you piloting certain price points in certain locations to get a better idea of that like price elasticity demand so that you know when to change prices in certain areas?
Speaker #10: Or can you kind of just talk how you're testing prices in this dynamic revenue system?
Okay, that all makes sense. Uh, those are all my questions and I'll return to the queue.
Thank you. Your next question comes from Jeff Van Cinder from B Riley. Please go ahead.
Um, yes. Hi everyone. Um, Sanji. I know you made a a comment or you focused a little bit on pain management and given that.
It seems like you're really in the pain management business as far as most of the customers that go to the Joint perceive you.
How do you lean more into that role as a pain manager to be more comprehensively as an Enterprise
Uh, and as a pain management destination, maybe you can just touch on.
Sort of exploration of adding other products and services to the Joint.
um, and I guess where you are in contemplating actions, you might take their
Yeah. Hi Jeff. Uh, thank you for, for that question. So, I think first of all,
I want to go back to our mission. To try and answer your question. Our mission is to provide routine.
Improve the quality of life by providing routine and Affordable, Chiropractic Care.
That is really what we want to do.
Now, when we look at the actuality of what attracts patients to us, and the Chiropractic profession in general more often than not,
Eighty percent of people tend to first come to a chiropractor because they were in some sort of ache or pain.
So what we're trying to do is to shift the external messaging the advertising uh language that we're using.
To.
Help our consumers, our patients, understand that we are a great option for pain relief.
Day 1, when they come to us. And we
our doctors examine them and prepare a
their care plan for them.
That day itself starts the Journey of educating our patients of the role. Chiropractic Care plays in their Wellness Journeys.
And in order to truly invest behind your overall Wellness, Chiropractic Care requires an ongoing routine care. So, what we do is or what we're doing, is pivoting the external communication towards more pain orientation. And from the moment, you come inside our clinic and engage with our doctors and wellness coordinators to start transitioning, you towards more of the wellness, um, philosophy of Chiropractic profession through the doctors through education and overtime using the electronic methods, we have at our uh, disposable example, the mobile app, right? So that's what we're trying to do here.
As far as the pain management piece relates, does that now allow us?
The ability to provide incremental products or Services, we believe it does.
Uh, and we're absolutely committed to exploring what might be the most meaningful ways of us testing that without disrupting the Simplicity of our operating model.
At the moment.
if you recall,
We're in Joint 2.0, where we believe we have work to be done to strengthen the core.
Become a pure play franchise or reignite growth, shed overhead, and create operating leverage. That's the phase we're in. We think that would, as I laid those plans out.
Earlier this year, we think we probably have another 12 months approximately in that phase but during these 12 months we will start testing some of these things which are around incremental products and services that will become meaningful.
Revenue drivers for us around things that we don't do today, so definitely more to follow its on the road map, but we want to
Crawl, walk, run in this regard.
Okay fair enough and then um just your latest thoughts on timing of completing the remaining corporate Clinic where franchises. Um and then also can you remind us which or I know you just repurchased the I guess the Northwest Arty rights which are the rights to remain to be or are you targeting reacquiring at this juncture?
So let me first take the refrigerant question.
We have now re-anchor about a third of our corporate clinics and we're actively engaged in re-rating the other 2/3.
Um, our intent.
And effort is to exit 2025 as a proper franchise owned. So we're doing everything possible to make that happen.
As far as RDS go.
We have now got 6, 15 RS, left in our system that represent coverage of about 52% of our system down from about 57% of the fifth system. So we were 16 RDS 57%. We are now at 15 RS 52% uh of system coverage.
And we will continue to.
Explore.
With our RDS, that option will continue to work with our board on RD buybacks as appropriate.
Uh vehicle for Capital allocation and shareholder value creation. That is an ongoing uh, dialogue that we're having um both with our RDS and our board at the same time.
So, no timelines on that. That's just okay.
If the deal is right, if there's a value creation opportunity, if the RDS are, you know, willing, uh, to, to sell at a price that makes sense for the joint shareholders, that is what will lead to those uh, those outcomes.
Okay, thanks for taking my questions. I'll take the rest offline.
Okay.
Thank you. There are no further questions at this time and may I have the call back over to Sanji razdan for any closing remarks.
Thank you, operator, and thank you all for joining us. I look forward to getting to know you at conferences and non-real road shows.
Have a good day and know that at The Joint, we always have your back.
Operator over to you. Thank you.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect