The Joint Corp. (NASDAQ: JYNT), a national operator, manager, and
franchisor of chiropractic clinics, reported its financial results
for the quarter ended March 31, 2022.
Financial Highlights: Q1 2022 Compared to Q1
2021
- Grew revenue 28% to $22.4 million.
- Recorded net loss of $206,000, compared to net income of $2.3
million.
- Increased system-wide sales1 by 27%, to $98.8 million.
- Reported system-wide comp sales2 increase of 15%.
- Reported Adjusted EBITDA of $1.8 million, compared to $3.5
million.
Recent Operating Highlights
- Sold 22 franchise licenses in Q1 2022, compared to 26 in Q1
2021.
- Increased total clinics to 736 at March 31, 2022, 636
franchised and 100 company-owned or managed, up from 706 at
December 31, 2021.
- Opened 27 new franchised clinics in Q1 2022, compared to 12 in
Q1 2021.
- Opened four greenfield clinics in Q1 2022, compared to one in
Q1 2021.
- Closed one franchised clinic in Q1 2022, compared to none in Q1
2021.
- Acquired the regional developer (RD) territory rights in
Northern New Jersey in March for $250,000 and in Northern
California in April for $2.4 million.
“During first quarter of 2022, we continued to drive growth,
achieving the milestone of 100 corporate clinics and opening the
most franchised clinics in any first quarter in the history of the
company,” said Peter D. Holt, President and Chief Executive Officer
of The Joint Corp. “While increasing labor costs and higher
turnover impacted the entire system’s bottom line, the pace of our
corporate clinic revenue growth was also impacted by the increasing
magnitude and speed of the expansion of our corporate portfolio.
Committed to executing our long-term growth strategy, we have added
operational support to return the corporate portfolio to its strong
trajectory, and we are implementing tactics to address today’s
market. In forging the chiropractic dream, we are creating a more
attractive environment to recruit and retain doctors of
chiropractic. In harnessing the power of our data, we are
finalizing our roadmap to create individualized and automated
consumer marketing platforms. In accelerating the pace of clinic
growth, we continue to improve our comprehensive franchise sales
and clinic opening strategy. In fact, in March and April, we
acquired rights to two regional developer territories, increasing
our margin contribution within the franchise segment as well as
creating the opportunity to open greenfield clinics in those
regions. We are confident in our plan to overcome the near-term
macro environment, build upon our strong foundation, and drive
toward our goal of opening 1,000 clinics by the end of
2023.”
Financial Results: First Quarter 2022 Compared to First
Quarter 2021
Revenue was $22.4 million in the first quarter of 2022, compared
to $17.6 million in the first quarter of 2021. The increase
reflects a greater number of franchised and corporate clinics and
continued organic growth. Cost of revenue was $2.3 million,
compared to $1.8 million in the first quarter of 2021, reflecting
the increased number of greenfield and franchised clinics, higher
regional developer royalties and commissions, and the greater
website hosting costs related to the new IT platform, which went
live in July 2021.
Selling and marketing expenses were $3.3 million, up 32%, driven
by the larger number of franchised and company-owned or managed
clinics, the grand opening expenses for four greenfields, and the
timing of the national marketing fund spend as well as the new
brand campaign.
Depreciation and amortization expenses increased for the first
quarter of 2022, as compared to the prior year period, primarily
due to the expenses associated with the new IT platform, previously
acquired intangible assets and continued greenfield
development.
General and administrative expenses were $15.4 million, compared
to $10.1 million in the first quarter of 2021, reflecting increases
in costs to support clinic growth, in payroll to remain competitive
in the tight labor market, in professional fees, and in IT
expenses.
Operating loss was $176,000, including the impact of the
accelerated greenfield development, higher G&A expenses, and
higher depreciation and amortization. This compares to $2.0 million
of operating income in the first quarter of 2021. Income tax
expense was $13,000, compared to a benefit of $364,000 in the first
quarter of 2021. Net loss was $206,000, or $0.01 per share,
compared to net income of $2.3 million, or $0.16 per diluted share,
in the first quarter of 2021.
Adjusted EBITDA was $1.8 million, compared to $3.5 million in
the first quarter of 2021. The company defines Adjusted EBITDA, a
non-GAAP measure, as EBITDA before acquisition-related expenses,
bargain purchase gain, net (gain)/loss on disposition or
impairment, and stock-based compensation expenses. The company
defines EBITDA as net (loss) income before net interest, tax
expense, depreciation, and amortization expenses.
Balance Sheet Liquidity
Unrestricted cash was $18.3 million at March 31,2022, compared
to $19.5 million at December 31, 2021. During the quarter, the
Company entered into an amendment to its Credit Facilities with JP
Morgan. Under the 2022 Credit Facility, the revolving line of
credit was increased to $20 million, up from $2 million. The
revolver will be used for working capital needs, general corporate
purposes and for acquisitions, development and capital improvement
uses.
2022 Guidance
Management updated its revenue and Adjusted EBITDA guidance to
reflect the impact of the macro-economic environment and the impact
of increased expenses. Management reaffirmed its guidance for
franchised clinic openings and company-owned or managed clinic
increases.
- Revenue is now expected to be between $98.0 million and $102.0
million, compared to $80.9 million in 2021.
- Adjusted EBITDA is now expected to be between $12.0 million and
$14.0 million, compared to $12.6 million in 2021.
- Franchised clinic openings are expected to be between 110 and
130, compared to 110 in 2021.
- Company-owned or managed clinic increases, through a
combination of both greenfields and buybacks, are expected to be
between 30 and 40; up from 32 added in 2021.
Conference Call The Joint Corp. management will
host a conference call at 5 p.m. ET on Thursday, May 5, 2022, to
discuss the first quarter 2022 financial results. Shareholders and
interested participants may listen to a live broadcast of the
conference call by dialing 765-507-2604 or 844-464-3931 and
referencing code 5175957 approximately 15 minutes prior to the
start time.
The accompanying slide presentation will be in the IR section of
the website under Presentations and in Events. A live webcast of
the conference call will also be available on the IR section of the
company’s website at https://ir.thejoint.com/events. An audio
replay will be available two hours after the conclusion of the call
for one week. The replay can be accessed by dialing 404-537-3406 or
855-859-2056. The passcode for the replay is 5175957.
Commonly Discussed Performance MetricsThis
release includes a presentation of 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. Comp sales include
the revenues 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.
Non-GAAP Financial Information This release
also includes a presentation of non-GAAP financial measures. EBITDA
and Adjusted EBITDA are presented because they are important
measures used by management to assess financial performance, as
management believes they provide a more transparent view of the
company’s underlying operating performance and operating trends.
Reconciliation of net income/(loss) to EBITDA and Adjusted EBITDA
is presented in a table below. The company defines Adjusted EBITDA
as EBITDA before acquisition-related expenses, bargain purchase
gain, net (gain)/loss on disposition or impairment, and stock-based
compensation expenses. The company defines EBITDA as net income
before net interest, tax expense, depreciation, and amortization
expenses.
EBITDA and Adjusted EBITDA do not represent and should not be
considered alternatives to net income or cash flows from
operations, as determined by accounting principles generally
accepted in the United States, or GAAP. While EBITDA and Adjusted
EBITDA are used as measures of financial performance and the
ability to meet debt service requirements, they are not necessarily
comparable to other similarly titled captions of other companies
due to potential inconsistencies in the methods of calculation.
EBITDA and Adjusted EBITDA should be reviewed in conjunction with
the company’s financial statements filed with the SEC.
Forward-Looking StatementsThis press release
contains statements about future events and expectations that
constitute forward-looking statements. Forward-looking statements
are based on our beliefs, assumptions and expectations of industry
trends, our future financial and operating performance and our
growth plans, taking into account the information currently
available to us. These statements are not statements of historical
fact. Forward-looking statements involve risks and uncertainties
that may cause our actual results to differ materially from the
expectations of future results we express or imply in any
forward-looking statements, and you should not place undue reliance
on such statements. Factors that could contribute to these
differences include, but are not limited to, the continuing impact
of the COVID-19 outbreak on the economy and our operations
(including temporary clinic closures, shortened business hours and
reduced patient demand), inflation, exacerbated by COVID-19 and the
current war in Ukraine, our failure to develop or acquire
company-owned or managed clinics as rapidly as we intend, our
failure to profitably operate company-owned or managed clinics, our
inability to identify and recruit enough qualified chiropractors
and other personnel to staff our clinics, due in part to the
nationwide labor shortage, short-selling strategies and negative
opinions posted on the internet which could drive down the market
price of our common stock and result in class action lawsuits, our
failure to remediate the current or future material weaknesses in
our internal control over financial reporting, which could
negatively impact our ability to accurately report our financial
results, prevent fraud, or maintain investor confidence, and other
factors described in our filings with the SEC, including in the
section entitled “Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2021 filed with the SEC on March
14, 2022 and subsequently-filed current and quarterly reports.
Words such as, "anticipates," "believes," "continues," "estimates,"
"expects," "goal," "objectives," "intends," "may," "opportunity,"
"plans," "potential," "near-term," "long-term," "projections,"
"assumptions," "projects," "guidance," "forecasts," "outlook,"
"target," "trends," "should," "could," "would," "will," and similar
expressions are intended to identify such forward-looking
statements. We qualify any forward-looking statements entirely by
these cautionary factors. We assume no obligation to update or
revise any forward-looking statements for any reason or to update
the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new
information becomes available in the future. Comparisons of results
for current and any prior periods are not intended to express any
future trends or indications of future performance, unless
expressed as such, and should only be viewed as historical
data.
Management has disclosed in our Form 10-K that our management
concluded that our internal controls over financial reporting were
not effective as of December 31, 2021, and our auditors expressed
an adverse opinion on the Company’s internal control over financial
reporting as of December 31, 2021, due to a material weakness. The
details of this material weakness were provided in our 10-K filing.
We have undertaken remediation measures to address the
material weakness, which we expect will be completed prior to the
end of fiscal year 2022.
About The Joint Corp. (NASDAQ: JYNT) The Joint
Corp. (NASDAQ: JYNT) revolutionized access to chiropractic care
when it introduced its retail healthcare business model in 2010.
Today, it is the nation’s largest operator, manager and franchisor
of chiropractic clinics through The Joint Chiropractic network. The
company is making quality care convenient and affordable, while
eliminating the need for insurance, for millions of patients
seeking pain relief and ongoing wellness. With more than 700
locations nationwide and nearly 11 million patient visits annually,
The Joint Chiropractic is a key leader in the chiropractic
industry. Ranked number one on Forbes’ 2022 America's Best Small
Companies list, number three on Fortune’s 100 Fastest-Growing
Companies list and consistently named to Franchise Times “Top 400+
Franchises” and Entrepreneur’s “Franchise 500®” lists, The Joint
Chiropractic is an innovative force, where healthcare meets retail.
For more information, visit www.thejoint.com. To learn about
franchise opportunities, visit www.thejointfranchise.com.
Business StructureThe Joint Corp. is a
franchisor of clinics and an operator of clinics in certain states.
In Arkansas, California, Colorado, District of Columbia, Florida,
Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota, New
Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode
Island, South Dakota, Tennessee, Washington, West Virginia and
Wyoming, The Joint Corp. and its franchisees provide management
services to affiliated professional chiropractic practices.
Media Contact: Margie Wojciechowski, The Joint
Corp., margie.wojciechowski@thejoint.comInvestor
Contact: Kirsten Chapman, LHA Investor Relations,
415-433-3777, thejoint@lhai.com
– Financial Tables Follow –
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATESCONSOLIDATED BALANCE SHEETS
(unaudited)
|
March 31,2022 |
|
December 31,2021 |
ASSETS |
(unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
18,251,194 |
|
|
$ |
19,526,119 |
|
Restricted cash |
|
594,717 |
|
|
|
386,219 |
|
Accounts receivable, net |
|
3,612,802 |
|
|
|
3,700,810 |
|
Deferred franchise and regional development costs, current
portion |
|
985,557 |
|
|
|
994,587 |
|
Prepaid expenses and other current assets |
|
2,426,409 |
|
|
|
2,281,765 |
|
Total current assets |
|
25,870,679 |
|
|
|
26,889,500 |
|
Property and equipment,
net |
|
14,880,942 |
|
|
|
14,388,946 |
|
Operating lease right-of-use
asset |
|
18,927,052 |
|
|
|
18,425,914 |
|
Deferred franchise and
regional development costs, net of current portion |
|
5,601,142 |
|
|
|
5,505,420 |
|
Intangible assets, net |
|
4,829,941 |
|
|
|
5,403,390 |
|
Goodwill |
|
5,085,203 |
|
|
|
5,085,203 |
|
Deferred tax assets |
|
9,205,410 |
|
|
|
9,188,634 |
|
Deposits and other assets |
|
662,080 |
|
|
|
567,202 |
|
Total assets |
$ |
85,062,449 |
|
|
$ |
85,454,209 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
1,874,911 |
|
|
$ |
1,705,568 |
|
Accrued expenses |
|
1,644,709 |
|
|
|
1,809,460 |
|
Co-op funds liability |
|
594,717 |
|
|
|
386,219 |
|
Payroll liabilities ($0.7 million and $0.4 million attributable to
VIE) |
|
2,383,977 |
|
|
|
3,906,317 |
|
Operating lease liability, current portion |
|
4,872,292 |
|
|
|
4,613,843 |
|
Finance lease liability, current portion |
|
34,479 |
|
|
|
49,855 |
|
Deferred franchise and regional developer fee revenue, current
portion |
|
3,130,856 |
|
|
|
3,191,892 |
|
Deferred revenue from company clinics ($3.6 million and $3.5
million attributable to VIE) |
|
5,546,856 |
|
|
|
5,235,745 |
|
Other current liabilities |
|
541,250 |
|
|
|
539,500 |
|
Total current liabilities |
|
20,624,047 |
|
|
|
21,438,399 |
|
Operating lease liability, net
of current portion |
|
17,184,696 |
|
|
|
16,872,093 |
|
Finance lease liability, net
of current portion |
|
81,928 |
|
|
|
87,939 |
|
Debt under the Credit
Agreement |
|
2,000,000 |
|
|
|
2,000,000 |
|
Deferred franchise and
regional developer fee revenue, net of current portion |
|
15,410,136 |
|
|
|
15,458,921 |
|
Other liabilities |
|
27,230 |
|
|
|
27,230 |
|
Total liabilities |
|
55,328,037 |
|
|
|
55,884,582 |
|
Commitments and
contingencies |
|
|
|
Stockholders' equity: |
|
|
|
Series A preferred stock,
$0.001 par value; 50,000 shares authorized, 0 issued and
outstanding, as of March 31, 2022 and December 31,
2021 |
|
— |
|
|
|
— |
|
Common stock, $0.001 par
value; 20,000,000 shares authorized, 14,493,049 shares issued and
14,461,332 shares outstanding as of March 31, 2022 and
14,451,355 shares issued and 14,419,712 outstanding as of
December 31, 2021 |
|
14,492 |
|
|
|
14,450 |
|
Additional paid-in
capital |
|
44,273,294 |
|
|
|
43,900,157 |
|
Treasury stock 31,717 shares as of March 31, 2022 and 31,643
shares as of December 31, 2021, at cost |
|
(853,436 |
) |
|
|
(850,838 |
) |
Accumulated deficit |
|
(13,724,938 |
) |
|
|
(13,519,142 |
) |
Total The Joint Corp. stockholders' equity |
|
29,709,412 |
|
|
|
29,544,627 |
|
Non-controlling Interest |
|
25,000 |
|
|
|
25,000 |
|
Total equity |
|
29,734,412 |
|
|
|
29,569,627 |
|
Total liabilities and stockholders' equity |
$ |
85,062,449 |
|
|
$ |
85,454,209 |
|
.
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATESCONDENSED CONSOLIDATED INCOME
STATEMENTS(unaudited)
|
Three Months EndedMarch 31, |
|
|
2022 |
|
|
|
2021 |
|
Revenues: |
|
|
|
Revenues from company-owned or managed clinics |
$ |
12,606,999 |
|
|
$ |
9,466,083 |
|
Royalty fees |
|
6,008,932 |
|
|
|
4,769,246 |
|
Franchise fees |
|
640,965 |
|
|
|
695,427 |
|
Advertising fund revenue |
|
1,710,717 |
|
|
|
1,374,741 |
|
Software fees |
|
956,998 |
|
|
|
760,537 |
|
Regional developer fees |
|
201,787 |
|
|
|
217,956 |
|
Other revenues |
|
312,140 |
|
|
|
263,975 |
|
Total revenues |
|
22,438,538 |
|
|
|
17,547,965 |
|
Cost of revenues: |
|
|
|
Franchise and regional development cost of revenues |
|
2,002,813 |
|
|
|
1,624,572 |
|
IT cost of revenues |
|
309,958 |
|
|
|
140,745 |
|
Total cost of revenues |
|
2,312,771 |
|
|
|
1,765,317 |
|
Selling and marketing
expenses |
|
3,287,488 |
|
|
|
2,489,279 |
|
Depreciation and
amortization |
|
1,629,176 |
|
|
|
1,169,866 |
|
General and administrative
expenses |
|
15,378,623 |
|
|
|
10,087,060 |
|
Total selling, general and administrative expenses |
|
20,295,287 |
|
|
|
13,746,205 |
|
Net loss on disposition or
impairment |
|
6,906 |
|
|
|
64,767 |
|
(Loss) income from
operations |
|
(176,426 |
) |
|
|
1,971,676 |
|
Other expense, net |
|
(16,147 |
) |
|
|
(21,537 |
) |
(Loss) income before income tax benefit |
|
(192,573 |
) |
|
|
1,950,139 |
|
Income tax expense
(benefit) |
|
13,224 |
|
|
|
(364,148 |
) |
Net (loss) income |
$ |
(205,797 |
) |
|
$ |
2,314,287 |
|
Earnings per share: |
|
|
|
Basic (loss) earnings per
share |
$ |
(0.01 |
) |
|
$ |
0.16 |
|
Diluted (loss) earnings per
share |
$ |
(0.01 |
) |
|
$ |
0.16 |
|
Basic weighted average
shares |
|
14,432,652 |
|
|
|
14,178,542 |
|
Diluted weighted average
shares |
|
14,432,652 |
|
|
|
14,854,809 |
|
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(unaudited)
|
Three Months EndedMarch 31, |
|
|
2022 |
|
|
|
2021 |
|
Cash flows from operating
activities: |
|
|
|
Net (loss) income |
$ |
(205,797 |
) |
|
$ |
2,314,287 |
|
Adjustments to reconcile net
(loss) income to net cash provided by operating activities: |
|
|
|
Depreciation and
amortization |
|
1,629,176 |
|
|
|
1,169,866 |
|
Net loss on disposition or
impairment (non-cash portion) |
|
6,906 |
|
|
|
99,022 |
|
Net franchise fees recognized
upon termination of franchise agreements |
|
— |
|
|
|
(69,702 |
) |
Deferred income taxes |
|
(16,776 |
) |
|
|
(418,810 |
) |
Stock based compensation
expense |
|
323,556 |
|
|
|
246,494 |
|
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable |
|
88,008 |
|
|
|
(442,008 |
) |
Prepaid expenses and other current assets |
|
(144,644 |
) |
|
|
(384,377 |
) |
Deferred franchise costs |
|
(86,692 |
) |
|
|
(204,112 |
) |
Deposits and other assets |
|
(94,878 |
) |
|
|
(3,313 |
) |
Accounts payable |
|
59,461 |
|
|
|
(443,463 |
) |
Accrued expenses |
|
(164,751 |
) |
|
|
60,493 |
|
Payroll liabilities |
|
(1,522,340 |
) |
|
|
(217,020 |
) |
Deferred revenue |
|
296,487 |
|
|
|
329,383 |
|
Other liabilities |
|
280,162 |
|
|
|
234,708 |
|
Net cash provided by operating
activities |
|
447,878 |
|
|
|
2,271,448 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Purchase of property and equipment |
|
(1,289,943 |
) |
|
|
(951,641 |
) |
Reacquisition and termination of regional developer rights |
|
(250,000 |
) |
|
|
(1,388,700 |
) |
Net cash used in investing
activities |
|
(1,539,943 |
) |
|
|
(2,340,341 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Payments of finance lease obligation |
|
(21,387 |
) |
|
|
(18,238 |
) |
Purchases of treasury stock under employee stock plans |
|
(2,598 |
) |
|
|
(618,154 |
) |
Proceeds from exercise of stock options |
|
49,623 |
|
|
|
620,776 |
|
Repayment of debt under the Paycheck Protection Program |
|
— |
|
|
|
(2,727,970 |
) |
Net cash provided by (used in)
financing activities |
|
25,638 |
|
|
|
(2,743,586 |
) |
|
|
|
|
Decrease in cash, cash
equivalents and restricted cash |
|
(1,066,427 |
) |
|
|
(2,812,479 |
) |
Cash, cash equivalents and
restricted cash, beginning of period |
|
19,912,338 |
|
|
|
20,819,629 |
|
Cash, cash equivalents and
restricted cash, end of period |
$ |
18,845,911 |
|
|
$ |
18,007,150 |
|
|
|
|
|
Reconciliation of cash, cash
equivalents and restricted cash: |
March 31,2022 |
|
March 31,2021 |
Cash and cash equivalents |
$ |
18,251,194 |
|
|
$ |
17,834,526 |
|
Restricted cash |
|
594,717 |
|
|
|
172,624 |
|
|
$ |
18,845,911 |
|
|
$ |
18,007,150 |
|
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATES RECONCILIATION FOR GAAP TO
NON-GAAP(unaudited)
|
Three Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
Non-GAAP Financial
Data: |
|
|
|
Net (loss) income |
$ |
(205,797 |
) |
|
$ |
2,314,287 |
|
Net interest expense |
|
15,859 |
|
|
|
21,537 |
|
Depreciation and amortization
expense |
|
1,629,176 |
|
|
|
1,169,866 |
|
Tax expense (benefit) |
|
13,224 |
|
|
|
(364,148 |
) |
EBITDA |
|
1,452,462 |
|
|
|
3,141,542 |
|
Stock compensation
expense |
|
323,556 |
|
|
|
246,494 |
|
Acquisition related
expenses |
|
— |
|
|
|
5,974 |
|
Loss on disposition or
impairment |
|
6,906 |
|
|
|
64,767 |
|
Adjusted EBITDA |
$ |
1,782,924 |
|
|
$ |
3,458,777 |
|
1 System-wide sales include revenues at all clinics, whether
operated or managed 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 revenues are the
basis on which the company calculates and records royalty fees and
are indicative of the financial health of the franchisee
base. 2 Comp sales include the revenues 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.
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