The Joint Corp. (NASDAQ: JYNT), a national operator, manager, and
franchisor of chiropractic clinics, reported its financial results
for the quarter ended March 31, 2023.
Financial Highlights: Q1 2023 Compared to Q1
2022
- Grew revenue 27% to $28.5 million.
- Reported operating loss of $678,000, compared to a loss of
$176,000.
- Reported net income of $2.3 million, including $3.9 million of
employee retention credits, compared to a net loss of
$206,000.
- Increased system-wide sales1 by 17%, to $115.4 million.
- Reported system-wide comp sales2 of 8%.
- Reported Adjusted EBITDA of $2.0 million, compared to $1.8
million.
Q1 2023 Operating Highlights
- Sold 17 franchise licenses, compared to 17 in Q4 2022 and 22 in
Q1 2022.
- Grew total clinic count to 870, 740 franchised and 130
company-owned or managed, up from 838 clinics at December 31, 2022.
- Opened 29 franchised clinics and four company-owned or managed
greenfield clinics, for a total of 33 new clinics, as compared to
31 new clinics in Q1 2022.
- Closed one franchised clinic in both Q1 2023 and Q1 2022.
- Subsequent to quarter end, in April, opened one greenfield
clinic at Fort Dix in New Jersey, making this the fourth location
opened in conjunction with the Army & Air Force Exchange
Service.
“We entered 2023 with a fortified foundation, and we performed
well during the continued economic uncertainty in the first quarter
of 2023,” said Peter D. Holt, President and Chief Executive Officer
of The Joint Corp. “Steadfast in implementing our corporate
initiatives to forge the chiropractic dream, harness the power of
our data and accelerate the pace of clinic growth, we are gaining
traction. Our educational outreach to associations and schools of
chiropractic increased over the past couple of years and delivered
more interest than ever from doctors in the recent graduating
class. In data, we have launched our business intelligence and
analytics reporting tool, and we are preparing to begin our
automated marketing program. And we increased the number of our
clinics opened year-over-year and have positioned the network for
expansion as the economy improves. With only 16% of Americans using
chiropractic care and spending $19.5 billion dollars on it
annually, the chiropractic patient need is expanding as is our
market opportunity. We are committed to growing the overall
chiropractic care market as well as capturing greater share.”
Financial Results for First Quarter Ended March 31: 2023
Compared to 2022 Revenue was $28.5 million in the first
quarter of 2023, compared to $22.4 million in the first quarter of
2022. The increase reflects a greater number of franchised and
company-owned or managed clinics and continued organic growth. Cost
of revenue was $2.6 million, compared to $2.3 million in the first
quarter of 2022, reflecting the associated higher regional
developer royalties and commissions.
Selling and marketing expenses were $4.2 million, up 27%, driven
by the increase in advertising expenses from the larger number of
clinics, an increase in local marketing expenditures by the
company-owned or managed clinics, and the timing of the national
marketing fund spend. Depreciation and amortization expenses
increased 44% for the first quarter of 2023, as compared to the
prior year period, primarily due to the increase of the development
of greenfield clinics and the acquisition of franchised
clinics.
General and administrative expenses were $19.9 million, compared
to $15.4 million in the first quarter of 2022, reflecting increases
in costs to support clinic growth and in payroll to remain
competitive in the tight labor market.
Operating loss was $678,000, compared to a loss of $176,000 in
the first quarter of 2022. Income tax expense, including the impact
the employee retention credits, was $842,000, compared to $13,000
in the first quarter of 2022. Other income of $3.8 million included
net employee retention credits of $3.9 million in the first quarter
of 2023. Net income was $2.3 million, or $0.15 per diluted share,
compared to a net loss of $206,000, or $0.01 per basic and diluted
share, in the first quarter of 2022.
Adjusted EBITDA was $2.0 million, compared to $1.8 million in
the first quarter of 2022. The company defines Adjusted EBITDA, a
non-GAAP measure, as EBITDA before acquisition-related expenses,
stock-based compensation expense, bargain purchase gain, net
(gain)/loss on disposition or impairment, and other income related
to employee retention credits. The company defines EBITDA as net
income/(loss) before net interest, tax expense, depreciation, and
amortization expenses.
Balance Sheet LiquidityUnrestricted cash was
$14.8 million at March 31, 2023, compared to $9.7 million at
December 31, 2022. During the first quarter of 2023, cash provided
by operating activities was $6.0 million, including the receipt of
the employee retention credits mentioned above partially offset by
investing activities of $1.2 million for the development of
greenfield clinics and improvements of existing clinics.
2023 Guidance For 2023, management reiterated
financial and clinic opening guidance.
- Revenue is expected to be between $123.0 million and $128.0
million, compared to $101.9 million in 2022.
- Adjusted EBITDA is expected to be between $12.5 million and
$14.0 million, compared to $11.5 million in 2022.
- Franchised clinic openings are expected to be between 100 and
120, compared to 121 in 2022.
- Company-owned or managed greenfield clinic openings are
expected to be between 8 and 12, compared to 16 in 2022.
Note: Historically, guidance for company-owned or managed clinic
openings included a combination of both greenfields and
acquisitions. While the company will continue to acquire previously
franchised clinics, these transactions are opportunistic, and
management will no longer include them in guidance. In 2023,
company-owned or managed guidance includes greenfield clinic
openings only.
Conference Call The Joint Corp. management will
host a conference call at 5:00 p.m. ET on Thursday, May 4, 2023 to
discuss the first quarter 2023 financial results. Shareholders and
interested participants may listen to a live broadcast of the
conference call by dialing (833) 630-0823 or (412) 317-1831 and ask
to be joined into the ‘The Joint’ call approximately 15 minutes
prior to the start time.
The live webcast of the call with accompanying slide
presentation can be accessed in the IR events section
https://ir.thejoint.com/events and will be available for
approximately one year. An audio archive can be accessed for one
week by dialing (877) 344-7529 or (412) 317-0088 and entering
conference ID 8635209.
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 the table below. The Company defines EBITDA as net
income/(loss) before net interest, tax expense, depreciation, and
amortization expenses. The company defines Adjusted EBITDA as
EBITDA before acquisition-related expenses, bargain purchase gain,
net (gain)/loss on disposition or impairment, stock-based
compensation expenses, and other income related to employee
retention credits. The company defines EBITDA as net income/(loss)
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, our inability to
identify and recruit enough qualified chiropractors and other
personnel to staff our clinics, due in part to the nationwide labor
shortage, and an increase in operating expenses due to measures we
may need to take to address such shortage, inflation, exacerbated
by COVID-19 and the current war in Ukraine, which has increased our
costs and which could otherwise negatively impact our business, the
potential for further disruption to our operations and the
unpredictable impact on our business of the COVID-19 outbreak and
outbreaks of other contagious diseases, 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,
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
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, 2022 filed with
the SEC on March 10, 2023 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.
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 850
locations nationwide and over 12 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 in 2022 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
AFFILIATESCONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited)
|
March 31,2023 |
|
December 31,2022 |
ASSETS |
(unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
14,773,225 |
|
|
$ |
9,745,066 |
|
Restricted cash |
|
731,379 |
|
|
|
805,351 |
|
Accounts receivable, net |
|
3,525,643 |
|
|
|
3,911,272 |
|
Deferred franchise and regional development costs, current
portion |
|
1,059,126 |
|
|
|
1,054,060 |
|
Prepaid expenses and other current assets |
|
3,468,749 |
|
|
|
2,098,359 |
|
Total current assets |
|
23,558,122 |
|
|
|
17,614,108 |
|
Property and equipment,
net |
|
17,500,027 |
|
|
|
17,475,152 |
|
Operating lease right-of-use
asset |
|
22,451,137 |
|
|
|
20,587,199 |
|
Deferred franchise and
regional development costs, net of current portion |
|
5,678,935 |
|
|
|
5,707,678 |
|
Intangible assets, net |
|
11,905,176 |
|
|
|
12,867,529 |
|
Goodwill |
|
8,493,407 |
|
|
|
8,493,407 |
|
Deferred tax assets |
|
7,708,323 |
|
|
|
8,441,713 |
|
Deposits and other assets |
|
755,585 |
|
|
|
756,386 |
|
Total assets |
$ |
98,050,712 |
|
|
$ |
91,943,172 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
1,836,853 |
|
|
$ |
2,966,589 |
|
Accrued expenses |
|
1,996,427 |
|
|
|
1,069,610 |
|
Co-op funds liability |
|
731,379 |
|
|
|
805,351 |
|
Payroll liabilities ($0.9 million and $0.6 million attributable to
VIE) |
|
3,571,008 |
|
|
|
2,030,510 |
|
Operating lease liability, current portion |
|
5,622,576 |
|
|
|
5,295,830 |
|
Finance lease liability, current portion |
|
24,693 |
|
|
|
24,433 |
|
Deferred franchise and regional developer fee revenue, current
portion |
|
2,978,937 |
|
|
|
2,955,851 |
|
Deferred revenue from company clinics ($4.9 million and $4.7
million attributable to VIE) |
|
7,713,735 |
|
|
|
7,471,549 |
|
Other current liabilities |
|
494,250 |
|
|
|
499,250 |
|
Total current liabilities |
|
24,969,858 |
|
|
|
23,118,973 |
|
Operating lease liability, net
of current portion |
|
20,211,159 |
|
|
|
18,672,719 |
|
Finance lease liability, net
of current portion |
|
57,235 |
|
|
|
63,507 |
|
Debt under the Credit
Agreement |
|
2,000,000 |
|
|
|
2,000,000 |
|
Deferred franchise and
regional developer fee revenue, net of current portion |
|
15,682,833 |
|
|
|
15,661,412 |
|
Other liabilities |
|
27,230 |
|
|
|
27,230 |
|
Total liabilities |
|
62,948,315 |
|
|
|
59,543,841 |
|
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, 2023 and December 31,
2022 |
|
— |
|
|
|
— |
|
Common stock, $0.001 par
value; 20,000,000 shares authorized, 14,671,360 shares issued and
14,639,325 shares outstanding as of March 31, 2023 and
14,560,353 shares issued and 14,528,487 outstanding as of
December 31, 2022 |
|
14,671 |
|
|
|
14,560 |
|
Additional paid-in
capital |
|
45,962,861 |
|
|
|
45,558,305 |
|
Treasury stock 32,035 shares as of March 31, 2023 and
31,866 shares as of December 31, 2022, at cost |
|
(859,279 |
) |
|
|
(856,642 |
) |
Accumulated deficit |
|
(10,040,856 |
) |
|
|
(12,341,892 |
) |
Total The Joint Corp. stockholders' equity |
|
35,077,397 |
|
|
|
32,374,331 |
|
Non-controlling Interest |
|
25,000 |
|
|
|
25,000 |
|
Total equity |
|
35,102,397 |
|
|
|
32,399,331 |
|
Total liabilities and stockholders' equity |
$ |
98,050,712 |
|
|
$ |
91,943,172 |
|
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATESCONDENSED CONSOLIDATED INCOME
STATEMENTS(unaudited)
|
Three Months EndedMarch 31, |
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
Revenues from company-owned or managed
clinics |
$ |
17,127,957 |
|
|
$ |
12,606,999 |
|
Royalty fees |
|
6,866,023 |
|
|
|
6,008,932 |
|
Franchise fees |
|
754,425 |
|
|
|
640,965 |
|
Advertising fund revenue |
|
1,952,406 |
|
|
|
1,710,717 |
|
Software fees |
|
1,210,005 |
|
|
|
956,998 |
|
Regional developer fees |
|
149,478 |
|
|
|
201,787 |
|
Other revenues |
|
390,004 |
|
|
|
312,140 |
|
Total revenues |
|
28,450,298 |
|
|
|
22,438,538 |
|
Cost of revenues: |
|
|
|
Franchise and regional development cost of revenues |
|
2,290,313 |
|
|
|
2,002,813 |
|
IT cost of revenues |
|
333,850 |
|
|
|
309,958 |
|
Total cost of revenues |
|
2,624,163 |
|
|
|
2,312,771 |
|
Selling and marketing
expenses |
|
4,160,244 |
|
|
|
3,287,488 |
|
Depreciation and
amortization |
|
2,342,544 |
|
|
|
1,629,176 |
|
General and administrative
expenses |
|
19,936,115 |
|
|
|
15,378,623 |
|
Total selling, general and administrative expenses |
|
26,438,903 |
|
|
|
20,295,287 |
|
Net loss on disposition or
impairment |
|
65,469 |
|
|
|
6,906 |
|
Loss from operations |
|
(678,237 |
) |
|
|
(176,426 |
) |
Other income (expense),
net |
|
3,821,162 |
|
|
|
(16,147 |
) |
Income (loss) before income tax benefit |
|
3,142,925 |
|
|
|
(192,573 |
) |
Income tax expense
(benefit) |
|
841,889 |
|
|
|
13,224 |
|
Net income (loss) |
$ |
2,301,036 |
|
|
$ |
(205,797 |
) |
Earnings per share: |
|
|
|
Basic earnings (loss) per
share |
$ |
0.16 |
|
|
$ |
(0.01 |
) |
Diluted earnings (loss) per
share |
$ |
0.15 |
|
|
$ |
(0.01 |
) |
Basic weighted average
shares |
|
14,566,185 |
|
|
|
14,432,652 |
|
Diluted weighted average
shares |
|
14,861,734 |
|
|
|
14,432,652 |
|
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(unaudited)
|
Three Months EndedMarch 31, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities: |
|
|
|
Net income (loss) |
$ |
2,301,036 |
|
|
$ |
(205,797 |
) |
Adjustments to reconcile net
income (loss) to net cash provided by operating activities: |
|
|
|
Depreciation and
amortization |
|
2,342,544 |
|
|
|
1,629,176 |
|
Net loss on disposition or
impairment (non-cash portion) |
|
65,469 |
|
|
|
6,906 |
|
Net franchise fees recognized
upon termination of franchise agreements |
|
(73,095 |
) |
|
|
— |
|
Deferred income taxes |
|
733,390 |
|
|
|
(16,776 |
) |
Stock based compensation
expense |
|
266,210 |
|
|
|
323,556 |
|
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable |
|
385,629 |
|
|
|
88,008 |
|
Prepaid expenses and other current assets |
|
(1,370,390 |
) |
|
|
(144,644 |
) |
Deferred franchise costs |
|
(27,255 |
) |
|
|
(86,692 |
) |
Deposits and other assets |
|
801 |
|
|
|
(94,878 |
) |
Accounts payable |
|
(1,189,662 |
) |
|
|
59,461 |
|
Accrued expenses |
|
818,784 |
|
|
|
(164,751 |
) |
Payroll liabilities |
|
1,540,498 |
|
|
|
(1,522,340 |
) |
Deferred revenue |
|
288,359 |
|
|
|
296,487 |
|
Other liabilities |
|
(57,725 |
) |
|
|
280,162 |
|
Net cash provided by operating
activities |
|
6,024,593 |
|
|
|
447,878 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Purchase of property and equipment |
|
(1,200,215 |
) |
|
|
(1,289,943 |
) |
Reacquisition and termination of regional developer rights |
|
— |
|
|
|
(250,000 |
) |
Net cash used in investing
activities |
|
(1,200,215 |
) |
|
|
(1,539,943 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Payments of finance lease obligation |
|
(6,011 |
) |
|
|
(21,387 |
) |
Purchases of treasury stock under employee stock plans |
|
(2,637 |
) |
|
|
(2,598 |
) |
Proceeds from exercise of stock options |
|
138,457 |
|
|
|
49,623 |
|
Net cash provided by financing
activities |
|
129,809 |
|
|
|
25,638 |
|
|
|
|
|
Increase (decrease) in cash,
cash equivalents and restricted cash |
|
4,954,187 |
|
|
|
(1,066,427 |
) |
Cash, cash equivalents and
restricted cash, beginning of period |
|
10,550,417 |
|
|
|
19,912,338 |
|
Cash, cash equivalents and
restricted cash, end of period |
$ |
15,504,604 |
|
|
$ |
18,845,911 |
|
|
|
|
|
Reconciliation of cash, cash
equivalents and restricted cash: |
March 31,2023 |
|
March 31,2022 |
Cash and cash equivalents |
$ |
14,773,225 |
|
|
$ |
18,251,194 |
|
Restricted cash |
|
731,379 |
|
|
|
594,717 |
|
|
$ |
15,504,604 |
|
|
$ |
18,845,911 |
|
THE JOINT CORP. AND SUBSIDIARY AND
AFFILIATES RECONCILIATION FOR GAAP TO
NON-GAAP(unaudited)
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Non-GAAP Financial
Data: |
|
|
|
Net (loss) income |
$ |
2,301,036 |
|
|
$ |
(205,797 |
) |
Net interest
expense |
|
49,725 |
|
|
|
15,859 |
|
Depreciation and
amortization expense |
|
2,342,544 |
|
|
|
1,629,176 |
|
Tax expense
(benefit) |
|
841,889 |
|
|
|
13,224 |
|
EBITDA |
|
5,535,194 |
|
|
|
1,452,462 |
|
Stock compensation
expense |
|
266,210 |
|
|
|
323,556 |
|
Acquisition related
expenses |
|
39,332 |
|
|
|
— |
|
Loss on disposition or
impairment |
|
65,469 |
|
|
|
6,906 |
|
Other income (expense), net |
|
(3,870,887 |
) |
|
|
— |
|
Adjusted
EBITDA |
$ |
2,035,318 |
|
|
$ |
1,782,924 |
|
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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