Joint Corp Aktie

Good day, and welcome to The Joint Corporation First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Richard Land, Alliance Advisors Investor Relations. Please go ahead.

Thank you, Danielle, and good afternoon, everyone. This is Richard Land with Alliance Advisors Investor Relations. Joining us on the call today are President and CEO, Sanjiv Razdan, and CFO, Scott Bowman.

Please note, we are using a slide presentation that can be found on The Joint Corp's IR website. This afternoon, The Joint Corp. issued a press release for the first quarter ended March 31, 2026. If you do not already have a copy, it can also be found on the company's website. Please be advised that today's discussion, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some important factors that could cause such differences are discussed in the Risk Factors section of The Joint Corp's filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update them, except to the extent required by applicable securities laws. Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA, free cash flow and system-wide sales. A description of these measures is included in the press release issued earlier this afternoon and reconciliations to the most directly comparable GAAP measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab on our website. With that, I'll now turn the call over to Sanjiv Razdan. Sanjiv, please go ahead.

Thank you, Richard. Good afternoon, everyone. Alongside the strong first quarter results we reported today, we continue to have meaningful progress with our Joint 2.0 initiative, the first phase of our transformation journey.

In April, we entered into an agreement for the sale of 45 company-owned or managed clinics in Southern California. When combined with the 2 other signed refranchising agreements that are pending closing, just 3 clinics out of our entire portfolio remain company-owned or managed. That is down from 135 at the start of this process. This is a defining milestone. With our refranchising efforts effectively complete, The Joint is now in every meaningful sense, a pure-play franchisor. And as we continue to implement heightened cost discipline across our operations, our financial results are benefiting. These benefits include higher profitability and free cash flow conversion, which we are in part allocating for the benefit of our shareholders, including through our continued share repurchases as well as through recent RD territory buybacks.

On Slide 5, let me touch on the Q1 financial highlights before walking through the details of our transformation. Revenue from continuing operations grew 13% year-over-year to $14.8 million. Adjusted EBITDA from continuing operations was $2.2 million compared to $46,000 in Q1 2025, underscoring the operating leverage we are generating as we shift towards more royalty and fee-based franchise revenue. Net income from continuing operations was $1.1 million compared to a net loss of $506,000 in Q1 2025. And cash flow from operating activities improved by $2.2 million from the first quarter of 2025, helping to drive a $2.3 million improvement in free cash flow over the same period.

On Slide 6, now I'll walk through our recent refranchising activity in more detail. In March 2026, we signed a letter of intent for the sale of 5 company-owned or managed clinics. Then in April, subsequent to quarter end, we signed an asset purchase agreement for the sale of 45 additional company-owned or managed clinics for a total of $2.3 million. When completed, these 2 transactions, along with the asset purchase agreement announced in December last year, will bring our company-owned clinic count down to just 3, which compares to 135 corporate clinics at the start of our Joint 2.0 initiative. Completing this journey ahead of schedule is a testament to the strength of our operator relationships and the attractiveness of The Joint franchise model.

In addition to our success with refranchising, we also recently completed buybacks of 3 regional developer territories, allowing us to capture a greater share of long-term royalty economics in those markets. Now that we have bought back these RD territories, it allows us to provide strong direct support to our franchisees and drive growth over time.

On Slide 7, with the Joint 2.0 transformation efforts nearing completion, I want to share our thinking about what comes next. We are increasingly focused on the Joint 3.0, the next phase of our journey, which will begin in earnest in 2027. That phase will prioritize growth through new channels, including B2B, expansion into underpenetrated U.S. markets and potential entry into our first international market. Underpinning this is a powerful set of consumer trends, including growing interest in longevity, health span, mindfulness, sleep quality and noninvasive whole body care. Chiropractic care and The Joint's unique model is exceptionally well positioned against this backdrop. We see significant opportunity to evolve our brand positioning, not just around the theme of pain relief, but also around moving better with quantifiable patient outcomes through the creation of the Joint Bova score feature. In line with this positioning, we are exploring signature treatments, nutritional supplements and orthotics.

On Slide 8, now turning to our marketing efforts and how we are driving top line momentum. Our messaging continues to center on chiropractic care for pain relief, helping patients improve their mobility and get back to doing the things they love. This message tends to attract patients who stay with us longer. Our national marketing and advertising program, which was launched in November is now several months in. We have seen sequential improvement in active member growth each month since launch, which is encouraging.

On the digital side, our ongoing SEO and AI visibility optimization work is driving higher organic traffic and lead quality with our AI visibility score improving to between 78 and 80, up from about 70 at the beginning of the process. We now exceed the industry benchmark. Meanwhile, all local clinic micro sites have been migrated to the new optimized template, and we are seeing continued positive trends in traffic and high-intent actions, including new inbound phone calls and form submissions.

During Q1, we benefited from new sales initiative tests, including the introduction of a new 3-month minimum term commitment program, new, more flexible offerings to drive conversion and longer-term retention, and we signed our first B2B partnership program, which gives our partners' employees access to care at The Joint. In addition, we have started to roll out our new CareCredit program nationwide, which provides patients with deferred payment options on a higher ticket packages and plans, improving their access to care. It also enables access to 12 million members in the CareCredit program network.

Lastly, our pricing optimization efforts continued during the quarter with $5 to $10 price increases now rolled out across approximately 300 clinics with the rest of the portfolio starting to implement this pricing beginning in the third quarter. Feedback to date indicates no meaningful patient pushback, and we are using this data to ensure pricing changes support revenue optimization without impacting patient acquisition or retention.

Turning to Slide 9. I'll speak to comp sales and patient engagement. Q1 comp sales of negative 4.2% reflected the impact of continued macro headwinds such as general cost of living pressures across the entire market. However, comp sales are expected to consistently improve throughout the balance of the year, as Scott will speak to shortly.

Beginning with January, we have now had 4 consecutive months of month-on-month improvement in active member count per clinic. We expect comp sales trends to improve throughout the balance of the year as our national campaign matures, SEO improvements compound and pricing optimization rolls out more broadly. Growing our active member base remains a central driver of comp sales improvement, and we will drive growth through stronger lead generation, better in-clinic conversion and improved retention, along with the benefit of optimized pricing. Our patient retention rate has improved over the prior year, supported by more flexible offerings and longer contract minimums. This gives us a stronger foundation from which to accelerate growth. With that, I'll turn it over to Scott, our CFO.

Thanks, Sanjiv. To start, let's discuss our operating metrics. System-wide sales in the first quarter were $126 million, a decline of 4.9% compared to the same period last year. Comp sales were negative 4.2%, consistent with the headwinds Sanjiv discussed earlier. Meanwhile, adjusted EBITDA from consolidated operations grew 22% to $3.5 million, demonstrating our profitability improvements.

Turning to Slide 12. I'll review our results from continuing operations for the first quarter, unless otherwise specified. Revenues grew 13% to $14.8 million, reflecting the early benefits of transitioning clinics to continuing operations as part of refranchising. Cost of revenues was $2.7 million, down 8% compared to the same period last year, primarily due to lower regional developer royalties. Selling and marketing expenses were $3.7 million, up 6% compared to the same period last year, driven by the transition of clinics to continuing operations. Meanwhile, G&A expenses increased 2% to $7.1 million, of which approximately $300,000 relates to expenses that will not be incurred upon the completion of our refranchising strategy.

Overall, we expect G&A to decline as a percentage of revenue as we complete the transition of company-owned clinics to franchise clinics. Net income from continuing operations was $1.1 million compared to a net loss of $506,000 in the same period last year, while consolidated net income was $1.3 million compared to $1 million in the prior year period. And lastly, adjusted EBITDA from continuing operations was $2.2 million compared to $46,000 in the same period last year, a clear reflection of the operating leverage we will have in our pure franchise model.

On Slide 13, let's discuss our clinic count. Total clinic count was 943 at the end of the first quarter compared to 960 at year-end 2025. During the first quarter, we opened 3 clinics and closed 20, resulting in 868 franchise clinics and 75 company-owned or managed clinics. This reflects our previously discussed strategy to optimize the portfolio for quality and performance. As Sanjiv noted, the asset purchase agreement signed in April, combined with the letter of intent signed in March, will reduce our company-owned clinic count to just 3 when the transactions close. Meanwhile, our work to improve new clinic performance through enhanced preopening protocols continues to drive faster time to breakeven for new openings.

Now I'll review our balance sheet and capital allocation. Unrestricted cash at the end of the first quarter was $20.7 million compared to $23.6 million at year-end 2025. We maintain our $20 million line of credit for JPMorgan Chase, which remains fully undrawn and is available through August 2029. In early May, we extended the maturity of our credit facility by 2 years from August 2027 to August 2029. During the quarter, we repurchased approximately 137,000 shares for total consideration of $1.1 million at an average price of $8.35 per share. We now have $4.5 million remaining under the $12 million authorization approved in November of 2025.

As Sanjiv mentioned, we also completed 3 RD territory buybacks recently, which will further optimize our portfolio economics. Through these buybacks, we expect to realize approximately $450,000 in reduced RD royalties on an annualized basis, partially offset by internal costs to manage these territories.

On to Slide 15, we are reiterating our full year 2026 guidance as originally provided in March 2026. We expect system-wide sales of $519 million to $552 million, comp sales in the range of negative 3% to positive 3%, consolidated adjusted EBITDA in the range of $12.5 million to $13.5 million and new franchise clinic openings in the range of 30 to 35. As Sanjiv noted, we expect comp sales trends to improve throughout the year with a general cadence of slightly negative comps in Q2, followed by positive comps in Q3 and Q4 with the fourth quarter expected to be higher than the third quarter.

New clinic openings will continue to be offset by closures as we reshape the portfolio around stronger operators and healthier sites meaning that on a net basis, our clinic count at the end of 2026 will be lower than 2025. This clinic portfolio optimization leaves us with a stronger foundation to grow from, and we continue to believe that there is potential for more than 1,800 franchise clinics in the U.S. alone.

On Slide 16, we continue to work towards our pure-play franchisor model, which will be capital-light with lower G&A expense and higher profitability margins. Once refranchising is complete, we expect to achieve this model starting in the back half of 2026. Keep in mind that these are not our long-term targets. They are just a starting point once the full benefit of refranchising is realized, which we intend to build on in 2027 and beyond.

For the model, gross margin is expected to be 83% to 85% of revenues compared to 90% in 2025. G&A expense is expected to be 40% to 42% of revenues compared to 64% in 2025. CapEx is expected to be approximately 3% of revenues, and free cash flow conversion, which we define as free cash flow divided by adjusted EBITDA, is expected to be 60% to 70%. These assumptions would result in an estimated adjusted EBITDA margin of 19% to 21% and net income margin of 13% to 15%.

Finally, on Slide 17, I'll speak to our capital allocation. As highlighted by our activities in Q1, we remain committed to a disciplined capital allocation framework that prioritizes investments in growth initiatives, share repurchases and opportunistic repurchase of RD territories. With that, I'll turn it back over to Sanjiv.

Thanks, Scott. On Slide 19, Q1 was another quarter of continued progress towards reigniting growth. The financial results with 13% revenue growth from continuing operations and 22% consolidated adjusted EBITDA growth are starting to reflect the franchisor model we have been building. The Joint 2.0 transformation is now nearing completion, and we are securing a strong foundation to launch the Joint 3.0 as a capital-light pure-play franchisor with a growing national brand, improving patient acquisition trends and a pipeline of new B2B initiatives.

Meanwhile, our capital allocation, including share repurchases, RD buybacks and disciplined investment in growth initiatives reflects our conviction in the long-term value of this business and our commitment to delivering returns for stockholders. And finally, we are also building a business that is well aligned with where health care and wellness are heading. Consumer demand for longevity, health span and non-invasive whole-body care is growing, and The Joint is uniquely positioned to meet that demand at scale. With that, operator, we are ready for Q&A.

[Operator Instructions] The first question comes from Jeff Van Sinderen from B. Riley.

Just wondering on the time frame to close the refran transactions. I think you said second half you expected those to be completed. So it sounds like they're closing in the next month or so, a couple of months?

Yes. So the timing on those -- really, the timing is dependent on getting the leases assigned to the new owners. And so that's an ongoing process. And so over the next couple of months, we should be very near completion of that lease assignment process.

Jeff, in addition to that, what I just want to make sure is clear is that all but 6 or 7 of those clinics now are being operated by the buyers of these clinics. Either those leases have already been transferred to them and they are owning and operating those clinics or they are operating them under a management services agreement, which for all intents and purposes mirrors the economics of a pure franchiser model. So the only mechanical piece that needs to be complete to conclude these deals is to reassign those leases, which we are confident will happen here in the next couple of months.

We do have one other small cluster of 4 or 5 clinics in Northern California that are under a letter of intent where an APA will be -- is expected to be signed shortly. And that then leaves us with 3 clinics that we are also addressing. I hope that clarifies.

Sure. I'm sorry, how is that? Last cluster you mentioned, how many clinics is that?

The last cluster is 5.

Okay. Got it. And then I'm just -- I know you went through a bunch of different things in the prepared comments. But I guess trying to get a better sense of what you think are the main drivers of getting the same-store sales turned around. It sounds like you feel like you're on the right path to that, but maybe you could just delve a little bit more into that and how you see that coming about?

Yes, absolutely. First of all, I think what I didn't say in my prepared comments, but I think I don't want to get this point to be lost here. As we have now practically concluded refranchising, it's going to allow this entire team here to be single-mindedly focused on growth outcomes. What gives us confidence that we will continue to see the sequential improvement we're seeing is based on the work that we started late last year, which to recap, one, was to pivot the external messaging to pain relief. Secondly, we transferred $500 per clinic per month from local marketing to national advertising to invest more on the brand awareness side. Three, we got caught up on search engine optimization and now have optimized for AI search, where we are slightly ahead of the industry benchmark, and we're being rated well there.

So that is stuff that we've already done and that impact is compounding. In addition to that, what we have done and continue to feel good about is that our patient retention is improving. It is significantly better than last year. That is happening as a result of 2 things. One is that we have extended the minimum contract term from 2 months to 3 months, and we have had 0 pushback from patients on that. And I think the other thing we have done is to create this new offering to help extend the lifetime value of patients. So essentially, we have patients who are on our wellness plan that gets them 4 visits a month, we are -- should they wish to cancel, we are offering them the option of a plan called Align One, which gives them 1 visit per month at $35 a month or $39 a month depending on what part of the country they're in. That gets them 1 visit per month and then the ability to buy incremental visits. And we find that people are very on the balance, quite happy to extend their stay -- their membership with us on that plan, and it's -- we are seeing significantly lower attrition on that plan. And even though it's just 1 month -- 1 visit per month plan, we are seeing the actual uptake on that closer to 2 visits per month.

So those are some of the things that are giving us confidence. Plus the pricing, Jeff, that was rolled out to 300 clinics. Now we feel very confident of extending that to the rest of the enterprise. And that, as I had indicated, is expected to happen early in the third quarter.

Okay. Good to hear. And then can you just remind us how many RD rights you still have left to buy back if you wanted to buy those back?

Yes. And just as a reminder, we have now bought back 4 RD rights in the last 12 months or so, which equate to about $1.3 million in RD royalties, which we are now going to be able to recover. One of those 4 was done last year and 3 we have just concluded and shared with you on this call. And I'm going to let Scott answer exactly how many RD territories are left.

Yes. So remaining, we have 12 RD territories remaining. And so we'll continue to evaluate those opportunities and work with the RDs.

The next question comes from Jeremy Hamblin from Craig-Hallum.

This is [ Will ] on for Jeremy. First, I was just wondering if you could give us a sense of sort of the demand elasticity you've seen in geographies where you've taken the most price? And then also just what you've seen in terms of comp impact from that $10 raise?

Yes. So it's interesting. So we have done the analysis looking at the trends and everything, but we coupled that with conversations with the local operators just to understand the dynamics of the price increases. And one thing I'll start off by saying that these price increases are just for new patients. So everybody that was already on a plan continues at that same price. It's just for new patients. And so what we've seen is little or no pushback because I think as customers walk in, even with a little bit of an increase in price, we still provide tremendous value. And so we've seen very little or no pushback.

A couple of the metrics that we look at is our conversion rate to see if that has gone down, it has not. No meaningful movement in conversion and our attrition rate has actually improved. So the metrics tell us that it's working and the operators confirm that. And so that gives us the confidence to roll it out further.

Okay. That's helpful. And then I was just wondering how we should be thinking about SG&A dollars here post-refranchise kind of for the remainder of '26. And then kind of wondering when you'd expect to kind of hit stride with the new go-forward run rate?

Yes. So the go-forward run rate, we should be -- mostly on that new model in the back half of this year. So as Sanjiv talked about, we signed some agreements late in the quarter, making those transitions, which does take a little time to get those fully transitioned over. In many ways, they are mimicking franchise model with the services agreements that they're under. But it's going to be in the back half where we'll start to see that model come into play and based on the model that I put out there. And from a G&A standpoint, so in the materials, you show that we show that we were $7.1 million in G&A for the quarter. And so that's just continuing operations. And so we'll likely see some reductions in that number for the remaining quarters. But keep in mind that is a continuing operations number.

In addition, Will, what I'd like to add is that the slide that Scott shared on this call about where we expect to land in mid-2026, that is exactly that, right? We expect to be there in the back half of this year. As we start to hit that run rate, we expect our ability to be even more -- bring even more resource to drive growth on the top line and revenue and equally optimize our cost structure. So over time, we expect that those numbers that we've shared for mid-2026 will only continue to strengthen as we get into 2027 and beyond.

Okay. Yes, that's super helpful. And then just last one for me. Just wondering how the new clinic pipeline is shaping up? Maybe anything on new interest from new franchisees versus existing? And then if you could provide anything on just the cadence of openings for the remainder of the year to get to the guidance?

Yes. So our guidance of 30 to 35, we believe that we have confidence to be able to get to that guidance, which is why we've reiterated it. The cadence of opening is skewed towards the back half of the year. So in terms of assuming when those openings are happening, they will be second half of the year more heavily loaded. I think what we're seeing is 2 things. One, the new openings we had in 2025, if you recall, we had 29 openings. Those 29 openings have outperformed our run rate of prior openings and are tracking to breakeven times at half the time of the run rate. The 3 clinics or the 2 clinics that opened very early this year are tracking at the moment, it's very early days at an even faster run rate. So we're very optimistic about the new clinic openings because of who is opening these clinics, stronger franchisees, strong diligence on site selection and approval and very robust on-the-ground new clinic opening protocols, which we believe is yielding these results.

We are seeing interest from new franchisees coming into the system as well as existing franchisees. An area of focus for us is to grow and develop in the Northeast where we've been traditionally underpenetrated, and we've had some great successes, early successes over there. And even our Southern California corporate clinic bundle, we have just sold to a franchisee that is completely new to our system. So we're very excited and encouraged by existing franchisees doubling down on investing in the brand as well as new franchisees being attracted to the brand. Once we publish our franchise disclosure document, we will be able to share some of these numbers more publicly with potential franchisees and optimistic about the impact that will have on our pipeline.

[Operator Instructions] The next question comes from George Kelly from ROTH Capital.

First one is on pricing. Maybe I missed it in your prepared remarks, but did you settle on a $10 pricing increase?

So going forward, we -- yes, we're leveraging the $10 price increase more and looking at the analytics and working with the operators, that is the preferred increase that we have right now.

Okay. But do you expect to take some kind of price across the entire base by year-end? And then second question, you mentioned about the 4 consecutive months of improved active members. Could you give like just a sort of comp trend over that same time frame? And like where did you exit the quarter? Or what kind of comp growth did you generate? I think you said it was slightly negative, but could you just quantify where comps are trending currently?

Yes. So the end -- to end the quarter, they were similar to the full quarter of negative 4.2%. They were right in that range. However, once we got into April, we did see some improvement. And so quarter-to-date, we're running about negative 3% so as Sanjiv mentioned, we're seeing some good signs and improvement, month-over-month improvement in our active member growth. And that improvement is better trends in attracting new patients, the conversion of those patients and then also improvement on our patient retention. And so those 3 areas are what we look at as KPIs to drive active member growth, and we've seen improvement in all 3.

Okay. Okay. And then 2 other quick ones. Back to the prior question about your G&A kind of go-forward G&A. So if I look at the $7.1 million in Q1, you mentioned that there was $300,000 of nonrecurring, I think, post refranchising, $300,000 that's expected to come out. Was that a quarterly number? And then the second question on G&A, is there was also a $600,000 restructuring charge in the quarter? And did that fully hit G&A? So if I take those 2 amounts out, is the kind of real go-forward G&A run rate somewhere in the kind of low 6% range?

Yes. So the $300,000, you're right, that was a quarterly number, which will go away with -- once we're fully refranchised. And then the restructuring, yes, most of that was in G&A and then was added back for adjusted EBITDA.

Okay. Okay. And then last question for me. Sanjiv, you mentioned the FDD and your sort of optimism around messaging that whenever that comes out, I presume shortly. I guess if you could, the one question I had is just on 4-wall margin. I don't know if you can talk to it at all or give any kind of hint, but has that stabilized? Do you still hear a lot of input from your franchisees about labor inflation and other aspects of inflation? Or do you have a sense that like that 4-wall margin is holding in?

Yes. So George, 2 things. One, of course, the FDD is due out shortly. So prospective franchisees and anybody who looks at it will get a transparency to the Item 19 and some of the numbers over there. I think what we're seeing now is stabilization for quite some time, I think by some time, I mean, several months, almost a year, the labor or wage inflation that we were seeing in this business has stabilized and that is not growing at the same rate that it was in that post-pandemic period. So that is definitely our -- I would say, the input cost structure is relatively stable. And that is why as active members keep growing and our ability to transfer some of that cost that we have not transferred on to consumers, we found with these 300 clinics where we've taken the price increases that there's really been no impact to conversion or retention. So we're optimistic that, that will help start to shore up some of the unit level economics as the new pricing starts to kick in early quarter 3.

This concludes our question-and-answer session. I would like to turn the conference back over to Sanjiv Razdan for closing remarks.

Thank you all for joining us today. Have a great day. And remember, at The Joint, we always have your back.

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

Good day, and welcome to The Joint Corp. Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Richard Land, Investor Relations. Please go ahead.

Thank you, Chloe, and good afternoon, everyone. This is Richard Land of Alliance Advisors Investor Relations.

Joining us on the call today are President and CEO, Sanjiv Razdan; and CFO, Scott Bowman. Please note, we are using a slide presentation that can be found at ir.thejoint.com/events.

This afternoon, The Joint Corp. issued a press release for the fourth quarter and full year ended December 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 2, please be advised that today's discussion, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some important factors that could cause such differences are discussed in the Risk Factors section of The Joint Corp's filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA and system-wide sales. A description of these non-GAAP financial measures is included in the press release issued earlier today and reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website.

Turning to Slide 3. With that, it's my pleasure now to turn the call over to Sanjiv Razdan. Sanjiv, please go ahead.

Thank you, Richard, and I welcome everyone to the call.

Turning to Slide 4. Today, I will review the fourth quarter results and provide an update on the progress we have achieved over the last year. On our 2024 fourth quarter results conference call a year ago, I introduced the key strategies underlying Joint 2.0, the first phase of our transformation journey to reignite growth and improve profitability. I noted at that time that completing this first phase would take 18 to 24 months, and I'm pleased to report that we are on track to complete our work on Joint 2.0 on schedule by the end of this year.

Among the key progress points we have achieved to date are: we have significantly strengthened our management team, with 6 of our senior leaders having extensive health care industry experience and a number of us having franchise management experience. We have made significant progress with our refranchising efforts as we now have 48 corporate-owned clinics remaining in our portfolio compared to 135 at the start of this process. We are in active conversations with multiple parties about the refranchising of the remaining corporate clinics.

As evidenced by the better-than-expected adjusted EBITDA performance in Q4 and for the full year, we are making progress with improving our operating leverage. As we complete the transition to a pure-play franchise-owned model, our operating leverage will continue to significantly improve, which Scott will review later on this call. We have also focused on strengthening our marketing activities to drive new patient acquisition and strengthen the returns we generate on our marketing investments.

Progress on this initiative includes centering our message on chiropractic care for pain relief to improve mobility and get patients back to doing the things they love. And finally, we wanted to optimize our capital allocation, which we are achieving through more diligent return-focused growth investments and opportunistic share repurchases. While the full financial benefit of these strategies will take time, these initiatives are improving the financial position of our franchisees and stockholders. And as we complete our transformation journey, The Joint will be a highly efficient, capital-light pure-play franchisor with more consumer touch points and with strong free cash flow generation.

Turning to Slide 5 now. I'll summarize our Q4 2025 financial results compared to Q4 2024, and our CFO, Scott Bowman, will provide greater detail in a moment. Revenue from continuing operations increased 3.1%, and consolidated adjusted EBITDA increased 7.8%. This improvement reflects the benefit of rightsizing our costs. In the fourth quarter, we repurchased 1.1 million shares for total consideration of $9 million. And for 2025, we repurchased 1.3 million shares for total consideration of $11.3 million. At December 31, 2025, our unrestricted cash and cash equivalents remained strong at $23.6 million.

Turning to Slide 6. I will review the progress we have made with refranchising our remaining company-owned clinics. Towards the end of the 2025 fourth quarter, we signed an asset purchase agreement for the sale of 22 corporate-owned or managed clinics for $1.5 million to 3 buying groups. The buyers have assumed business operations via management service agreements, pending the completion of the lease reassignments, which we expect to be completed in the second quarter.

All 3 of the buying groups are either current franchisees or have several years of experience operating within our system. In March, we entered into a letter of intent for the sale of 5 corporate-owned or managed clinics. This leaves us with 48 remaining company-owned clinics, or just 5% of our total clinic portfolio, all but 2 of which are in California.

We continue to be in active dialogue with buyers for the sale of our corporate clinics and remain confident we will complete our refranchising initiative and become a pure-play franchisor this year. Given how close we are to completing this process, later on this call, Scott will provide an overview of what our operating and financial model looks like as a pure-play franchisor.

Let's review our marketing efforts. Turning to Slide 7. As we have noted previously, to drive stronger new patient demand and lead generation, we have shifted marketing content from broad wellness-focused communications to a message centered on chiropractic care for pain relief, so that patients can improve their mobility and get back to doing the things they love to do. While brand awareness initiatives take longer to produce results, we are inclined to attract patients who remain with us for longer.

As noted on our Q3 call, we have shifted a portion of our marketing investment to target an earlier stage in the sales funnel. We are shifting from predominantly local spend to one that also leverages our national scale. The goal is to increase awareness of The Joint, so that when individuals first experience discomfort, they are predisposed to think of us to alleviate their pain. This high-impact national media program started in November.

We also previously discussed the updates we are making in our digital marketing efforts. These efforts are focused on improving search visibility, including within AI-driven search environments. These are key drivers of organic traffic and leads to our new microsites or localized clinic pages. All of our clinic microsites have now been migrated to the new template and have returned to growth with overall traffic and organic traffic continuing to trend up.

Importantly, high-intent actions have strengthened, with phone calls and overall submissions, both also continuing to increase. At the same time, we launched a redesigned national blog in January with fresh content and digital linkage. Overall -- and organic traffic are reflecting early benefit from our ongoing SEO work and awareness investment.

In addition, updates to national website pages are enhancing visibility among early awareness audiences, searching for topics such as back pain, neck pain and mobility or lifestyle improvement. As a result of shifting to more national advertising and our improving SEO, we have seen improvement in our new patient acquisition trends each month since program launch, indicating that these efforts are driving consideration and new patients, albeit at a rate that remains lower than last year.

Turning to Slide 8. We are making progress with sales driving initiatives to reignite system-wide sales growth and drive long-term profitability. To recap, we are working to improve comp sales by growing our active member base. This will be accomplished by stronger lead generation, better conversion within our clinics to drive new patients, improved retention of our existing patients and optimized pricing. For Q4, similar to the last several quarters, we improved our patient attrition rate through the introduction of an offering for low-frequency patients. We are now maintaining patient attrition at a level that provides a solid foundation from which we can drive growth as comp sales begin to improve. That said, Q4 sales comps were lower than expected, largely due to lower new patient count.

One of our initiatives targets taking pricing in the near term. To give some perspective on this, we last took meaningful enterprise-wide pricing in 2022. Since November, we have been piloting 3 different levels of price increases across 3 diverse demographic areas. We continue to test and optimize pricing in approximately 300 clinics before we roll out adjustments across our system. We expect comp sales trends will improve during the course of the year as our new national brand awareness campaign continues to roll out as we benefit from improvements to SEO and implement the optimized pricing structure nationally.

Turning to Slide 9. We are focused on elevating our patients' experience through improved technology. We are continuing to introduce feature updates for our patient-facing mobile app. In addition, more than 23,000 patients have shared app feedback through our survey, giving us an average rating of 4.9 out of the -- 4.91 out of 5. 75% of patients reported waiting less than 5 minutes, while 17% waited less than 10. Lastly, our intent to recommend is 9.7 on a 10-point scale, indicating that patients are having consistently positive experiences.

With that, I will turn the call to Scott.

Thanks, Sanjiv.

Turning to Slide 11. Let's discuss our operating metrics. In the fourth quarter, system-wide sales were down 3.9% to $140 million. Comp sales were down 3.8%, and adjusted EBITDA for consolidated operations grew 7.8% to $3.6 million. For the full year, system-wide sales of $532 million were flat compared to the prior year. Comp sales declined 0.4%, and adjusted EBITDA from consolidated operations rose 13.9% to $13 million.

Turning to Slide 12. Let's discuss our clinic count and new clinic performance. Our total clinic count of 960 at year-end compares to 967 clinics in the prior year. During 2025, we opened 29 clinics, refranchised 41 and closed 36 clinics for a total clinic count of 885 franchised clinics and 75 company-owned clinics. This includes the 27 clinics that are currently under an asset purchase agreement or letter of intent for their sale. Our efforts to improve new clinic performance through improved pre-opening protocols have resulted in clinics reaching a breakeven point in half the time compared to prior years.

Turning to Slide 13. Let's discuss our financials. I'll review continuing operations for the fourth quarter unless otherwise specified. Revenue grew 3% to $15.2 million, mainly due to additional marketing funding for national advertising. Cost of revenues was $2.8 million, down 11%, reflecting lower regional developer royalties. Selling and marketing expenses were $3.5 million, up 25% due to enhanced national marketing and one-off costs associated with transitioning to a new marketing agency.

G&A expenses increased 2% to $7.7 million, mainly due to increased payroll costs and other costs that will decline as we complete refranchising. Consolidated net income was $1 million for the quarter, and adjusted EBITDA from consolidated operations improved 8% to $3.6 million, and adjusted EBITDA for continuing operations was $1.6 million compared to $2 million in the same period last year.

Turning to Slide 14. Let's discuss our full-year financials compared to the prior year. Revenue was $54.9 million compared to $52.2 million in 2024. Consolidated net income increased $8.7 million to $2.9 million, which compares to a $5.8 million loss in 2024. Net loss from continuing operations was $268,000 compared to a loss of $1.6 million in 2024. Adjusted EBITDA from consolidated operations increased 14% to $13 million, while adjusted EBITDA from continuing operations improved to $3.1 million compared to $2.3 million in 2024.

On to Slide 15, I'll review our liquidity and stock repurchase plan. At the end of the fourth quarter, unrestricted cash was $23.6 million compared to $25.1 million in the prior year. We maintained our line of credit with JPMorgan Chase for $20 million and had 0 funds drawn during the quarter.

During the fourth quarter, we repurchased 1.1 million shares for $9 million, averaging $8.45 per share. For the full year, we repurchased 1.3 million shares for total consideration of $11.3 million, averaging $8.73 per share. At the end of 2025, we had $5.7 million remaining on our share repurchase plan that was authorized in November 2025.

On to Slide 16, we are initiating our full-year 2026 guidance as follows. We expect system-wide sales to range from $519 million to $552 million. We expect comp sales to be in the range of negative 3% to positive 3%. We expect consolidated adjusted EBITDA to be in the range of $12.5 million to $13.5 million. And on a net basis, we expect our clinic count at the end of 2026 will be lower than at the end of 2025 as new clinics opened this year will be offset by closures as we reshape our portfolio, with a focus on stronger operators and healthier sites.

We continue to believe that over time, there is potential for more than 1,800 clinics in the U.S. alone. This short-term optimization of our portfolio will leave us with a stronger foundation to grow from. Due to our refranchising efforts and realignment of corporate costs, we expect 2026 continuing operations to be more profitable than 2025. Given the progress of our refranchising efforts, the next few slides will provide you certain key attributes of our go-forward model as a pure-play franchisor starting in mid-2026.

Slide 17 shows that our revenue target as a pure-play franchisor will be approximately 11% of system-wide sales, which compares to 10.3% in 2025.

On Slide 18, we are showing our expected run-rate financials once we complete refranchising in mid-2026. In this case, gross margin would be between 83% and 85% of revenues, which compares to 90% in 2025. G&A expense would be between 40% and 42% of revenues, which compares to 64% in 2025. CapEx would be approximately 3% of revenues, and free cash flow conversion would be between 60% and 70%.

For this purpose, we define free cash flow conversion as free cash flow divided by adjusted EBITDA. These assumptions result in an estimated adjusted EBITDA margin of 19% to 21% compared to 12% in 2025, and net income margin of 13% to 15% compared to 3% in 2025. For CapEx, our internal IRR target for growth projects is 25%. Keep in mind that these estimates are what we believe will be the starting point once refranchising is complete, and we intend to build on these returns over time.

To further illustrate how our model works as we generate revenue growth, I will review some assumptions for our run-rate financials in the future based on a couple of growth examples. If we were to generate 5% revenue growth, this would result in an estimated adjusted EBITDA margin of 20% to 22%, and an estimated net income margin of 14% to 16%. And if we were to generate 10% revenue growth, this would result in an estimated adjusted EBITDA margin of 22% to 24%, and an estimated net income margin of 16% to 18%.

Finally, on Slide 19, I will highlight that with the expected strong free cash flow we will generate, we will remain committed to disciplined capital allocation with current priorities being investments in growth initiatives, share repurchases and the repurchase of RD territories where feasible.

And with that, I will turn the call back over to Sanjiv.

Thanks, Scott.

Turning to Slide 21. With the full financial benefit of our strategies -- while the full financial benefit of our strategies will take time to come to fruition, we are making consistent progress with improving the financial position of our franchisees and stockholders. Phase 1 of our transformation journey has us on track to become a pure-play franchisor. We continue to drive forward with our cost savings initiatives, which are beginning to drive improved operating leverage. And our allocation of capital towards stock repurchases highlights our strong conviction that we will achieve our long-term goals of growing system-wide sales, comp sales, net new clinic openings and adjusted EBITDA.

I noted at the top of the call that we are on track to complete the first phase of our transformation journey, The Joint 2.0, by the end of this year. As we move closer to this goal, we are beginning to focus more time and attention on Joint 3.0, the next phase of this journey, which will begin in earnest in 2027. That phase will prioritize growth through expansion of our operations into new channels, B2B and entering new markets in the U.S. where we are underpenetrated as well as into our first international markets.

We are seeing secular trends around longevity, health span, mindfulness, sleep quality and non-invasive whole body care. Hence, we see significant opportunity to further define and activate our brand promise around the notion of moving better and feeling better. This means deepening our focus on clear differentiated proof points like creating options for signature-integrated treatments, nutrition, orthotics and finding ways to integrate data from wearable technology to shape treatment plans, while we also establish new ways to measure quantifiable positive patient outcomes.

With that, operator, I'm ready to begin Q&A.

[Operator Instructions] The first question today comes from Jeff Van Sinderen with B. Riley Securities.

I'm just wondering if you can share the attrition and new patient add metrics maybe sequentially and year-over-year. Any color or any metrics you can share there would be helpful.

Yes, I can start off on that one. We typically don't give the specific metrics. But what I can tell you is what we're focused on is active member growth. And so when you think of active member growth, you have to draw in new patients, you have to convert those new patients to a plan and then you have to retain them. And so of those 3 different components of active member growth, new patient flow has been the weakest for us.

And so the new marketing that we have out there to create brand awareness as well as improve our SEO is helping. But as you can imagine, it does take time to build, but the early signs that we're seeing are positive. When we look at conversion and when we look at attrition, those numbers were actually slightly better than last year. Not to say that there's not room for improvement, but new patients is our largest focus right now.

Okay. That's helpful. And then maybe you can touch on how -- I know you gave some color in your prepared comments, but any more you can add on how you're evolving marketing initiatives for 2026?

Yes, I'm happy to take that one, Jeff. I think the focus continues to remain where we've been. So, let's break that down. Number one, we believe that we continue to make -- shift investment from local to national in order to amplify brand awareness and activation. We are seeing positive outcomes as a result of that. So, we will continue to double-down on that, together with our franchisees. We will continue to evolve creative messaging to make sure that, that message cuts through is on point and is in keeping with the consumer needs.

The second thing that has worked well for us that we continue to work on is addressing the shift in search behaviors as a result of AI. We made a massive amount of progress in that in quarter 4 and made a significant investment to do that, and we will continue to work because that is just a moving target. So, we will continue to focus on making sure that we are relevant when it comes to shifting search behaviors.

The third thing that we're working on is then around the whole conversion piece of it. We got on a new operations leader, Ron Stilwell, who joined us in the first week of January, and he's already working with our franchisees on very specific in-clinic training on making sure our wellness coordinators are focused on converting leads. They have the right scripts. They have the right things to say to our patients in terms of what is their benefit and converting them to a plan. So, that is a huge area of focus for us, the whole conversion activity.

And last but certainly not the least, like we are finding ways of addressing the reasons for attrition, right? So where we have patients that may be looking for reduced frequency treatment because they're already feeling they're no longer in pain as when they came to us or may feel like they don't have the time, we introduced a package for them called Align 1, which gets them a minimum of 1 adjustment per month at the cost of $35 and allows them to add on incremental visits on a flexible and discounted basis. We've also just gone into test with something that we're calling Align 2, which is 2 visits per month, right?

So, I think we're recognizing that there may be patients who are not able to afford the time or the cost or need the 4 visits of on plan and testing various options. In fact, the Align 1 is already live. So, we're attacking the full fulcrum, bringing on new leads, making sure we're visible, right message, converting strongly and coming up with plans that help our wellness coordinators to prevent attrition when patients feel a whole lot better and are no longer in pain. So hopefully, that gives you a sense, Jeff, for what we're doing on the marketing front.

Yes. That's really helpful. And then just one last one, if I could squeeze it in. How did the 3-tiered pricing pilot go? And then how do you evolve that going forward?

Yes. So, we have some pricing tests out there, as you know, at the $2, $5 and $10 increase. $2 increase didn't really show us much. I don't think it was really big enough to cause a big difference. So, we're focused more on the $5 and $10. And I would say, overall, the $10 increases are showing a little bit more benefit. And so we're going to continue to test. We just launched some new markets a few weeks ago to get a read on some additional markets to give this a little bit broader perspective. But overall, we feel pretty good about it. But at the same time, we want to give it a little bit more time before we roll it out further. But we think that will be a component of our growth going forward for sure.

Just in addition to what Scott has shared, I think I'd like to add to that perspective. Our patients -- 70% of our patients really are in the average household income of somewhere in the range of $60,000 to $110,000 a year. That patient base or that consumer base has felt the impact of the macroeconomic climate probably most significantly than some others. So as we're testing and optimizing for this price increase, we're being very mindful of timing, regional impacts, and that is why we're being very, very purposeful and thoughtful about this test and reading these results very carefully before we extend it beyond the 300 clinics that it's already in.

The next question comes from Jeremy Hamblin with Craig-Hallum.

This is Will on for Jeremy. I'm just wondering if you could give us a sense for how the comp progressed throughout the quarter and then what you've kind of seen here quarter-to-date. I know you're facing a little bit easier comp in Q1, but just trying to get a sense for where things are.

Yes. Sure. Our comps were down the most in the month of November, and they were the best in December as we closed the year. Now, some of that is we had a little bit of a timing change in some of our year-end promotions. And so -- but I think on balance, December was slightly better than the other 2 months.

Got it. And then I was just wondering if you could give us a sense for the relative performance of the remaining 50-ish clinics compared to those in the Southeast that were sold. I think those California clinics might be a little bit higher in productivity, but I guess anything you could share there would be helpful.

Yes, Will. The California clinics on the balance are better performers than the clinics in the Southeast.

The next question comes from Nick Sherwood with Maxim Group.

So, what specific leading indicators give you confidence that comps will improve in 2026? And when do you think we can expect an inflection point?

Yes, it's a good question. So, 2 things that I think about on that question. Number one, just the initiatives that we're working on right now do take some time, but we're encouraged just on some of the early signs that we're seeing that could help us in the coming months. So, I think that's number one. And then number two is just the comps that we saw this past year and just the distribution of those comps. We were positive about 2% in the first half of the year last year and negative 3% for the back half of the year. And so we have some easier compares in the back half. So that, plus more traction on our initiatives leads us to believe that second half should be quite a bit better.

Okay. And then 2 follow-ups. Can you elaborate on some of those positive early signs that you're seeing? And then looking at comps, it was down this past year. Was that more due to higher rates of attrition from repeat customers, or an inability to bring in new customers to replace people that are leaving?

Yes. So, I'll answer the last question first. The key issue for us is just fewer new customers coming in. And so that's why our marketing efforts are so important right now, creating brand awareness, improving our SEO, being more visible on AI searches. And so that is the key focus right now. But we're still working on conversion and attrition because even though they were slightly better than last year, there's still opportunity there. And so just broadly from a marketing standpoint, Sanjiv can tag on as well, what we're seeing is we've been at work for a while now on improving SEO and that takes some time to actually get traction. And so we expected that.

But we're starting to see some good signs in terms of our measurement of SEO effectiveness was quite a bit under the average, and now it's at or even slightly above average. And so good progression there. And then as we look at our website activity and our leads coming in, we've seen steady improvement in the leads being generated from that new marketing and from the SEO improvement. Now, that has also led to some degree of improved run rate, sequential run rate in new patients, still negative, but less negative, but it's been a steady trend over the last few weeks. So, we're still relatively cautious there. But those things are kind of lining up for us, saying that it is working to some extent, although it will take time to really show through on inflection in comps.

Okay. And then my last question is this new AI SEO marketing investment. Is this something that costs significantly more than your old marketing? Or is this more so just reallocating resources and it's not actually going to be increasing your marketing spend substantially? Or is there some sort of upfront or higher investment required with this?

Yes. So it is an incremental spend. And so we're doing that while we are also spending money on brand awareness and more top of funnel. And so we have shifted some of the local marketing being spent by the franchisees to national marketing, okay? And so that has given us more funding to fund some more brand awareness campaigns and in SEO. And so on balance, we're not spending really any more net dollars because we're getting more NMF funds from the franchisees to spend on these additional initiatives.

Nick, just to recap, so everybody on the call understands what we're doing because, obviously, this is an important topic for us. We're going after it in 3 different ways, right? Generating more leads, converting those leads to active members and then preventing attrition by improving retention. What are we doing to improve lead generation? Number one, we pivoted our messaging from general wellness to pain. We refreshed all our creative. 82% of our patients cite discomfort of pain as a reason for why they come to us, so it becomes a much more compelling reason to use The Joint.

Now that we have that message pivoted to pain, we did 2 things. We shifted some local marketing dollars to national. The bulk of those dollars were invested behind high-impact media purchases on the demographic that we believe gives us the highest yield and comes to us most often. That's the -- the benefit of that, what we're seeing is sequential improvement in lead generation and new patients.

SEO to offset search behaviors due to AI was the other investment that, that shift went into and the combined impact of pain-related message, higher impact media with search optimized for AI is what is giving us that. And the early indicators on the search, as Scott indicated, was we are actually now able to measure benchmarks, measure our effectiveness on search against benchmarks, and we're finding that we are actually slightly ahead of the benchmarks after the catch-up that we've had to do. So, that's number one.

Number two is once the patient is in, how we're getting after converting them to active members, which we're tackling more through operations and training, which we have initiated and expect to see even more traction as time goes by. Our conversion year-on-year has remained more or less flat. Our attrition or retention has actually improved. Retention of patients is improving because we are finding ways to keep those patients longer and are putting in place offers that allow patients whose needs shift and are no longer in pain, require lower frequency, lower-cost solutions to stay with us. We have put that in place and doing more around that. So, that is what is giving us confidence that we will see an improvement in our comps and are already seeing sequential underlying metrics improve.

Our next question comes from George Kelly with ROTH Capital Partners.

First one for you -- or I guess, first couple for you on your comp guide. I was curious if you could at least directionally help us with what you've seen in January and February. Just curious if there has been an improvement there from what you reported in Q4? And then secondly, I'm wondering if you included a pricing increase in your guide.

Yes, George. This is Scott. So, what we've seen so far is similar trends than what we saw in Q4, okay? And so like I said, we're seeing some early signs on the leads and new patients, but still the comps are about where they were. We are rolling over some higher comps from last year. So, I think that's part of it. And so that's why I said I think the second half of the year, we should see more of an inflection in comps. And between now and then, we should see some incremental improvement as well because of the traction we see right now, we will accelerate and we have easier comps in the back half.

And does your guide include a pricing increase?

No, it doesn't include any pricing increase right now because we were just in -- just because we would have some tests out in the market, we didn't know for sure what the result of that would be. And so we were a little cautious and did not include that in the guide.

Okay. Okay. Understood. And then a question on your capital allocation priorities. The slide, I think it's 19, you just -- you list the 3 different key priorities. And so I guess, on 2 of them on investing in growth initiatives, I'm just a little unsure on what that might include. So, could you highlight some of the different investments you're contemplating and size of those?

And then secondly, on the buyback RD territories, I was curious if you could give us an update just on the status of those kind of ongoing negotiations. Do you feel like you're getting closer on any RD buybacks?

Sure. Yes. So the first question on investing in growth initiatives. So, we want to be prudent in that category, but still invest in the business. And I mentioned a target of about 3% of revenues for that category with a target IRR of about 25%, and that's an average. And so when we look at initiatives like that, we have things, a lot of in the technology area where we can rework our whole martech stack, make it more efficient as we capture leads and as we use those leads to fuel the marketing engine that we have. And so lots of opportunities there, and we're doing some good work there to improve that platform and to bring it in-house. And so that's one good example.

Another example is where we're making a lot of improvements for kind of the front-facing user interface for each of our wellness coordinators in our clinics. So as you can imagine, with each individual customer and all the plans and packages that we have, there's a lot of different options. And so doing some really good work there to really consolidate that user interface. And so it's much easier for the wellness coordinator to communicate the different plans available and to transact with that patient seamlessly. And so that will be a big win from an operations standpoint in our clinic. So, those are just 2 examples. But I think the major theme here is how can we invest in technology or other areas to grow the business and that have a positive ROI for those projects.

Okay. Okay. But it sounds like those are fairly modest investments. And then the RD stuff, any update on those negotiations?

Yes. So, we are in active negotiations on some of those RD territories. And so some of them are getting fairly close, but we'll continue those conversations and making sure that we understand kind of the value in those buybacks and understanding what improvements that we can make. And so those will be ongoing. And as we make further progress, we'll report back on what that's going to look like going forward.

Okay. Okay. And then one last one for me. The previous slide, I guess, it's 18, where you go through the post-refranchising run-rate profitability and everything. Is the margin target there -- the 19% to 21% EBITDA margin target, I'm just struggling a little bit to triangulate with your gross margin target and your G&A target. Is there a marketing investment beyond the fund that's incorporated in that 19% to 21% guide? Or is there something else that maybe I'm missing? Just trying to kind of bridge the different OpEx lines to get there.

No, that's a good question. So, that is the main difference there because marketing expense is not in G&A. It's a separate line item.

I guess I'm just wondering if you're overinvesting. Do you plan to spend more marketing dollars than you're bringing in?

No, we do not. We will -- no, it's a good question. We will spend more dollars, but the extra dollars that we're spending are being funded by the franchisees as they shift some of the local dollars into our national campaign.

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

Thank you for joining us. Have a good day. And know that at The Joint, we always have your back.

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

Good day, and welcome to the Joint Corporation Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Richard Land from Alliance Advisors. Please go ahead.

Thank you, operator, and good afternoon, everyone. This is Richard Land of Alliance Advisors Investor Relations. Joining us on the call today are President and CEO, Sanjiv Razdan; and CFO, Scott Bowman. Please note, we are using a slide presentation that can be found at ir.thejoint.com/events. This afternoon, the Joint Corp. issued a press release for the third quarter ended September 30, 2025. If you do not already have a copy of this press release, it could be found in the Investor Relations section of the company's website.

As provided on Slide 2, please be advised that today's discussion, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some important factors that could cause such differences are discussed in the Risk Factors section of the Joint Corp's filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA and system-wide sales. A description of these non-GAAP financial measures is included in the press release issued this afternoon and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website.

Turning to Slide 3. With that, it's now my pleasure to turn the call over to Sanjiv Razdan. Please go ahead.

Thank you, Richard, and I welcome everyone to the call. Today, I will review the third quarter results and recent events. For those new to the call, we provide affordable, accessible and approachable chiropractic care and help consumers relieve and manage their pain while supporting their ongoing wellness journey.

There is a significant need for this with Americans spending $20 billion a year on back pain. To capture a leading share of this market opportunity, we have been strengthening our management team and executing on our strategies to reignite growth and improve profitability. Although the full financial benefit of these strategies will take time to come to fruition, the following initiatives will improve the financial position of our franchisees and stockholders.

To drive new patient acquisition, we have shifted our brand marketing campaign to focus on pain relief, which we are amplifying by moving a portion of our advertising spend from local to a national campaign. And we are strengthening our digital marketing campaigns with SEO and clinic microsite. To grow system-wide sales, we are conducting a 3-tiered pricing pilot for our wellness plan. To elevate our patient experience, we continue to upgrade our patient-facing technology. Recently, we launched the second release of our mobile app with a range of new features. To become a pure-play franchisor, we continue to pursue the refranchising of our corporate clinics. And to improve new clinic performance, we have implemented robust preopening protocols for new clinics to reduce time to breakeven and ensure a strong early sales volume.

Before I elaborate, for those of you who are new to The Joint, we are the largest franchisor of chiropractic care clinics. Our 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. I'll summarize our Q3 2025 financial results compared to Q3 2024, and our CFO, Scott Bowman, will provide greater detail in a moment.

Revenue from continuing operations increased 6%. Consolidated adjusted EBITDA increased 36%. This improvement reflects the impact of work done on rightsizing our costs, which has helped to offset a 1.5% decline in system-wide sales and negative comp sales of 2%. Since our last conference call in August, we have repurchased $5 million of stock, and the Board recently authorized an additional $12 million of our stock repurchase plan. At September 30, 2025, our unrestricted cash and cash equivalents remained strong at $29.7 million.

Turning to Slide 5 to discuss refranchising. We have entered into an initial agreement to sell 45 corporate clinics in Southern California for $4.5 million via an asset purchase agreement. We are continuing to negotiate certain terms, and we'll update if and when we align on final terms. While macroeconomic headwinds are resulting in a longer lead time due to lender-related dynamics, we are actively negotiating asset purchase agreements with potential buyers for our 33 remaining corporate clinics.

Let's review our marketing efforts. Turning to Slide 6. For Q3, similar to Q2, our patient attrition was on par with last year, and conversions were better. However, Q3 sales comps were less than expected. The main shortfall was due to lower new patient count, which we are addressing by initiating a national marketing refresh, SEO improvements and advanced pricing test. Our research identifies pain as the biggest trigger to seek chiropractic care. Our patient base proves this to be true with 80% of our new patients citing patient pain as the reason for coming to The Joint.

In August, we launched our compelling new brand awareness campaign, Life, Unpaused. We have shifted marketing content from broad wellness-focused communications to a message centered on chiropractic care for pain relief. Our goal is to drive stronger new patient demand and lead generation. While brand awareness initiatives tend to take longer to produce results, they are inclined to attract patients who remain with us longer. We are moving a portion of our marketing efforts to target an earlier stage in the sales funnel, shifting from predominantly local spend to one that also leverages our national scale of 962 locations in 43 states and the District of Columbia, which is equivalent to approximately 57% of metro statistical areas in the U.S. This campaign will educate consumers much earlier on. And before we experience pain that The Joint offers an affordable solution to alleviate pain. The goal is to get individuals at the first sign of discomfort to think, I should visit The Joint, it's convenient, affordable and they can help.

As alluded to last quarter, we have been actively engaging our franchisees regarding our new strategy. I am pleased to report in October, the franchisees elected to reallocate $500 or approximately 1% of their gross sales per clinic per month from local advertising to this new national marketing effort. This adjustment does not increase the total amount contributed by franchisees. It simply redirect existing funds to enhance our national brand awareness and patient activation.

We are also strengthening our digital strategy through accelerated SEO initiatives designed to improve search visibility, page authority and discovery, including within AI-driven search environment. These are all key drivers of organic traffic and leads to our website.

New microsites or localized clinic pages are demonstrating strong early performance. In September, a pilot rollout of 35 clinics averaged a 20% to 40% increase in organic search traffic within the first 2 weeks of launch. A phased refresh of all remaining clinic pages began earlier this week with completion expected before end of the year. In parallel, enhancements to local Google business profiles are increasing engagement. Together, these efforts are expanding our local search presence and improving conversion pathways from search to clinic. At the same time, updates to national website pages are enhancing visibility among early awareness audiences searching for topics such as back pain, neck pain and mobility or lifestyle improvement. These tactics are broadening reach, bringing new users to our website and positioning The Joint chiropractic as a credible trusted authority at the beginning of the consumer decision process. Collectively, these initiatives are designed to reach audiences wherever they search and support the full marketing funnel from awareness to lead generation to wellness plan purchase. These actions are intended to drive new patient count, which, in turn, will help improve cost.

Turning to Slide 7. We are happy to welcome our new Chief Marketing Officer, who will lead their implementation and further fortify our marketing. Debbie Gonzalez started at the beginning of October. She is experienced in transforming global brand strategies and strengthening marketing capabilities across multisite retail and health and wellness businesses. Debbie has served as Chief Marketing Officer in publicly traded, private and consulting companies, where she drove customer acquisition, brand development, performance marketing, digital initiatives and innovation. Also, during her tenure at the franchisor, Massage MV, she led the development of the recurring revenue membership model.

Turning to Slide 8. We have unveiled dynamic revenue management initiatives to drive sales and long-term profitability. In July, we introduced our new Kickstart plan. Our doctors prescribe tailored treatment plans to meet our patients' specific needs. Often, new patients need multiple adjustments a week during the early phase of their care to get out of acute pain. Kickstart offers an attractively priced pack of 4, 8 or 12 adjustments beyond the 4 included in the standard wellness plan. This offering is a real win-win-win as it helps patients get rapid relief affordably and generates more revenue for clinics. Already, approximately 25% of new patients are taking advantage of these packages.

Now we are expanding our core wellness plan pricing analysis to better understand patient sensitivity for revenue optimization. Our latest pilot launched early November test 3 different levels of price increase in 3 different diverse demographic areas. We will monitor performance metrics and analyze trends to help determine next steps for the rest of the system. Based on the results of these pilots, we will optimize our nationwide pricing structure and roll out adjustments across our system.

Turning to Slide 9. We are focused on elevating our patients' experience through improved technology. We believe this will foster referrals and extend the length of time they maintain their wellness. In July, we officially launched our patient-facing mobile app with basic in-clinic check-in functionality. We are excited that the adoption rate among our wellness plan holders has reached 18% of new patients at the end of quarter 3 with over 178,000 downloads. At the end of August, we released our second app version, enabling patients to look up their visit balance, plan type, cycle date, at-a-glance visit history, treatment plan and progress report; download records like receipts and visit and complete a patient experience survey. Upcoming features will enable credit card updates and gamification such as getting badges for adjustments, check-ins or watching a video of the stretches that help with your condition.

With that, I will turn the call to Scott.

Thanks, Sanjiv. Turning to Slide 11, let's discuss our operating metrics. In the third quarter, system-wide sales were down 1.5% to $127 million. Comp sales were down 2%, and adjusted EBITDA for consolidated operations grew 36%.

Turning to Slide 12. Let's discuss our clinics and new clinic performance. We sold 8 franchise licenses in the third quarter compared to 7 sold in Q3 of last year. And at September 30, we had 149 franchise licenses in active development. In the third quarter, we opened 9 franchise clinics, including our first in the state of Delaware and closed 11. Of the 21 clinics opened in 2025, the breakeven point has significantly improved versus clinics opened in recent years, which was due to preopening protocols implemented by our operations team. We closed 3 company-owned or managed clinics, and we refranchised 1 clinic, bringing the year-to-date total to 40 refranchised clinics. At September 30, we had 884 franchised clinics or 92% of the portfolio.

We are also focused on improving new clinic performance through better training and marketing. For example, we are now requiring a minimum number of leads to be generated prior to opening to support strong opening sales momentum. This practice has helped improve our breakeven timing from around 2 years to under 1 year.

Turning to Slide 13. Let's discuss our financials. I'll review continuing operations for the third quarter compared to the same period last year. Revenue grew 6% to $13.4 million, mainly due to the greater number of franchise clinics in operation. Cost of revenues was $2.7 million, down 6% compared to the prior year, reflecting lower regional developer royalties due to the repurchase of the Northwest territory rights in the second quarter. Selling and marketing expenses were $2.8 million, up 13% compared to the prior year, reflecting our digital marketing transformation efforts. Depreciation and amortization increased $100,000, mainly due to software development for our new mobile app. G&A expenses decreased 3% to $7.3 million as we continue to rightsize our cost structure. And income tax expense was $10,000 for the quarter, reflecting an effective tax rate of 3% Q3 consolidated net income was $855,000. This compares to a net loss of $3.2 million at the same period last year, which was mainly due to impairment expenses related to refranchising. Net income from continuing operations was $290,000 or $0.02 per diluted share compared to a loss of $414,000 or $0.03 per basic share in the same period last year. Adjusted EBITDA from consolidated operations improved 36% to $3.3 million. And for continuing operations, adjusted EBITDA was $1.4 million compared to $262,000 in the same period last year.

Turning to Slide 14. Let's discuss our year-to-date financials for the 9 months ended September 30, 2025, compared to the prior year period. Revenue grew 6% to $39.7 million. Consolidated net income increased $7.7 million to $1.9 million. Net loss from continuing operations improved $1.3 million to $1.2 million. Adjusted EBITDA from consolidated operations expanded $1.3 million to $9.4 million, while adjusted EBITDA from continuing operations improved $1.5 million -- improved to $1.5 million compared to $300,000 in the prior year period.

On to Slide 15, I'll review our liquidity and stock repurchase plan. At the end of the third quarter, unrestricted cash was $29.7 million compared to $25.1 million at the end of last year. We maintained our line of credit with JPMorgan Chase for $20 million and had 0 funds drawn during the quarter. In addition, we extended the maturity of the facility an additional 6 months to August 2027. During the third quarter, we repurchased 228,000 shares for $2.3 million, averaging approximately $10 per share. Since quarter end, we bought back an additional 312,000 shares for approximately $2.7 million. Most recently, the Board authorized an additional $12 million for repurchases, continuing to emphasize our confidence in the long-term growth strategy.

On to Slide 16, we are revising our full year 2025 guidance as follows: We expect system-wide sales to range from $530 million to $534 million, which compares to prior guidance of $530 million to $550 million. We expect comp sales to be in the range of negative 1% to flat, which compares to prior guidance of an increase in the low single-digit range. We are maintaining guidance for consolidated adjusted EBITDA to be in the range of $10.8 million to $11.8 million, and we are maintaining our new clinic openings guidance to be in the range of 30 to 35.

Reflecting our refranchising efforts and realignment of our corporate cost structure, we have made significant progress reducing our operating costs. As a result, we expect 2026 continuing operations to be more profitable than 2025. When we report Q4 2025 results, we will provide annual 2026 guidance as well as the key attributes of our go-forward 100% franchise model.

And with that, I'll turn the call back over to Sanjiv.

Thanks, Scott. Turning to Slide 18. I am proud to report that The Joint continues to receive accolades. We were recognized on the Annual Franchise Times Top 400 for the sixth year in the top 200 listing of brands. In 2025, we jumped 11 spots, landing at position 139. We are part of 2 of the fastest-growing industry sectors for 2025, health and medical and personal services.

In summary, we are on track to becoming a pure-play franchisor. Combined with our diligent cost-saving initiatives, we are confident this will lead to improved operating leverage going into 2026 and beyond. And our stock repurchase plan extension demonstrates our strong conviction in the progress we're making toward our long-term goals of growing system-wide sales, comp sales, net new clinic openings and adjusted EBITDA.

With that, operator, I am ready to begin Q&A.

[Operator Instructions] The first question comes from Jeff Van Sinderen from B. Riley FBR.

Just wanted to follow up on getting to the pure franchise. At this point, I realized I think you said you're in 40-some-odd units, you're in some sort of stage, it sounds like due diligence. And then I think you have another 30-some-odd to go after that. What time frame do you think seems feasible to complete all of the refranchising at this point of the corporate clinics?

Jeff, at this stage, like we mentioned on our prepared remarks, we have got an initial asset purchase agreement for 45 clinics in Southern California. We are still negotiating some details around that. And then we've got 33 other clinics which remain that we are also negotiating asset purchase agreements for. I think as a result of the overall macro climate, we found that the lender dynamic was impacted and it impacted our timing as it related to buyers securing lending, added some additional complexity, but we feel confident that we're making progress. And whilst exact timing may be hard to predict, I think we're pretty confident that we'll be able to get this done.

Okay. And then just turning to the steps you're taking to turn around the same-store sales or comps. You mentioned the pricing plan pilot, I think it was. Can you speak more about that? I'm just curious about what you're doing there.

Yes, absolutely. So as you know, we took pricing, any meaningful pricing on our wellness plans going back in March of 2022. So it's been a minute since we've taken pricing. Inflation has gone up since then as a result, eroding some degree of clinic margin. So we've got to figure out the right balance of making sure we're affordable and accessible whilst also taking a fair price increase in line with market. To make sure we understand that thoroughly, given the market dynamic, we have taken 3 different price increase levels, 3 different tiers that reflect 3 different levels of aggressiveness of price increase, if you will. We have -- those tests went -- or pilot markets went live in November itself. And I think over the next few weeks, we expect to learn what is the optimum level of price increase that the market and our patients can bear at the moment and learning from that, the plan is to then scale that out enterprise-wide.

Okay. I guess I'm a little bit -- I'm not sure what the word is, but it seems to me that if your comps are running slightly negative that you might -- that -- I mean, it almost seems counterintuitive to be raising price into the comps running negative. So I'm just wondering how you think about that, how you think about sort of the -- I know you gave a new set of guidance for the year for comps and so forth. But how are you thinking about pricing versus driving comps?

I think it is one of the many levels that we are contemplating. If I was to share with you or recap the levels that we've got that we talked about, I think one is to shift the external messaging to pain, which seems to be the most relevant trigger to bring patients in at the moment. To amplify that message and our new brand campaign, we have worked with our franchisee and agreed that they will shift $500 per clinic per month from local investment in marketing to a national spend that allows us to advertise more effectively and invest behind more high-impact media nationally. So we've just started doing that. I think that will make a significant impact. We are also investing some of that money to accelerate some of the very critical work that needs to happen around addressing change in consumer search behaviors due to AI, which I just enumerated.

And then in the context of some of these other things that we're talking about, including patient and technology, one of the levers, as you might expect, is also pricing. We think there's some room there just to determine what the right level of pricing is instead of doing that without due diligence. That is exactly why we've got 3 different price increase tiers that we're testing to make sure that we're not getting ahead of our skis and the consumer is ready to bear that price increase. So it is one of many other things that I think will help us get into positive comp.

The next question comes from George Kelly from ROTH Capital.

A couple of questions for you. First, on -- I guess, looking for a little more detail. You mentioned in your prepared remarks about certain initiatives aimed to improving the breakeven point. Can you walk through what those look like?

Absolutely, George. I think what we were referring to here is the new clinics, right, achieving that we open, reaching a breakeven point rapidly. And then, of course, from there on, we expect them to get to mature sales level also faster than they have historically done. We have opened 25 clinics thus far. And what we found is that we've used a more robust protocol learning from best practices around our own system on what needs to happen in order to ensure that these clinics open right from day 1 at a higher sales volume and then ramp up faster. So to give you an example, one of the things that we found that makes a very significant impact is to make sure that even before the clinic opens, our franchisees and our operators have achieved a few hundred, and there's a specific number that we target, potential leads. And so the moment we actually open the clinic, we already have a very significant amount of leads, very specific leads that we can then follow through and convert into patients very early in the opening phase of that clinic. That mechanically is done through tools like local tabling where basically our operators who sit within the community set up these tables and collect leads, educating our consumers. So it's really very local community level blocking and tackling that we are codifying, sharing as best practice and enforcing that our clinics open, following those protocols. As we have followed those protocols, we are seeing -- very encouraged by the results we're seeing of the cohort of clinics opening in 2025. So that is what we were referring to earlier in terms of reaching breakeven sales pretty quickly.

Okay. And then I guess I've got a couple more. On comp growth, can you explain at all or give us the trends that you saw during the quarter? And what have you seen post quarter? It seems like your updated guide reflects a step down from 3Q in 4Q. So is that the case?

Yes. Let me give a couple of comments there. So as we looked at current trends, as we ended the quarter, our comps were slightly softer than the average of the quarter. So that was one thing that we considered. But we also looked at last year. So in the third quarter last year, our comps were up about 4%. In the fourth quarter, they're up about 6%. So we have much tougher compares in the fourth quarter than we did in the third quarter. So that's the other component. So a little softer at the end of the quarter and then just tougher compares up against last year.

Okay. And just one last one for me. There was a comment about SG&A expense reductions next year that are planned. And I think you said that you expect to grow income from continuing operations versus 2025. Can you remind me what of your adjusted EBITDA guide is from continuing ops? And can you be more specific? It's been a long time. This plan has been underway for quite a while. I know there was a management change, but can you be more specific about what level of SG&A reductions you're targeting?

Yes. What I can tell you is we have taken a very close look at our G&A structure now versus what it should be post refranchising. And so we've already started to make some adjustments there. And a good point of reference is in our earnings presentation on Slide 13, where it shows you kind of the breakdown of why our adjusted EBITDA was better for continued operations compared to last year. So what's happening there is as we refranchise these units, they come into the GAAP revenue stream with additional royalties and fees. And so that's why revenue -- GAAP revenue was up 6% in the quarter. But if you look at G&A costs, they were actually down 2% against that revenue increase. And so you can kind of see some of the rightsizing starting to happen. There's more to come, and we have the areas targeted that will give us the most reduction. So we're starting to see some benefits come through, which is very encouraging.

Also, I'd point out that cost of revenues was actually down 6% as well against revenue up 6%. So that certainly helps. And that's mainly because we bought back those territory -- regional developer territory rights in the Q2 time frame that we mentioned on our last call. And so that's paying some benefits, right? So we no longer have to pay those RD royalties. And so our cost of revenues is less against higher revenue.

So kind of to answer to your question, so the next steps that we're looking at is continuing to refranchise clinics. As we do that, we'll see some pretty big reductions in big categories like salaries and wages, employee benefits, insurance. If you think about workers' comp insurance, big reduction with fewer employees and then other things like legal fees and travel and some other expenses. And so as we've kind of done a little bit deeper dive in analyzing line items, we have very good plans on how they should be reduced and when as we continue to refranchise these units.

So early days, we're seeing some really good signs, but the bulk of it is yet to come. And so as we continue this transition process, things are fairly fluid, but we kind of have our sights target on where the opportunity areas are. And on our next call in Q4, we'll be able to lay that out in a good amount of detail in terms of what the outlook looks like in a more kind of fully franchised model.

The next question comes from Jeremy Hamblin from Craig-Hallum.

This is Will on for Jeremy. First, I wanted to go back to the pricing. I guess my question is, are you taking a blanket approach to raising price? Or is it -- are you taking price on certain packages and plans maybe to drive customers to different categories?

Yes, I can answer that for you, Will. Almost 80% to 85% of our revenue comes to a recurring revenue model, right? So our patients are on membership plans that are recurring in nature. So that is where the bulk of the opportunity is. That -- those wellness plans are where we are testing 3 different levels of price increase, right? And they range anywhere between $2 to $10 to try and understand what is going to be the patient sensitivity to those price increases, and we're also testing them across a variety of different geographies. We've got approximately 200 clinics in those 3 pilot group. So it's a pretty comprehensive, well-thoughtful test, 3 different price increase levels, lots of different geographies and demographics. We will learn from that on what the most appropriate level of price increases given the current climate, and then we can scale that out nationally. So that is where we are looking at this pricing pilot. Will, does that clarify your question?

Yes, that's helpful. And then just one more for me, going back to the units in Southern California. I guess, are you able to kind of categorize just general performance of those 45 units? I mean, are they kind of average, better, kind of weaker performing units? I'm just trying to get a sense of valuation.

Yes, I can start there. I think in general, those clinics in Southern California are good performing clinics overall as a group. And so as we look to refranchise those, it's critically important that we find good operators. And so that is one of the things that we're really focused on, and we want to make sure that we take the time to get good operators in those clinics because good locations. And in the past, a lot of those clinics have performed quite well, but there's still opportunities there. So it's a good position for a strong operator to step in and continue the good practices that they have, but also enhance what they do to make it even stronger.

The next question comes from Tom McGoverns from Maxim Group.

So this past quarter, you guys sold, I believe you said 8 franchise licenses compared to 7 a year ago. Just trying to get an understanding of where the demand is coming from. Can you give us any insight on whether or not these licenses are being sold to maybe existing franchisees or if they're all new interest, new franchisees?

It's a mix, Tom, both existing franchisees as well as new franchisees.

Understood. The other question I had was on the app. So it looks like you guys have some pretty strong initial data points there. It says in the slide, 178,000 downloads and 18% of new patients are signing up for that. Do you guys have any metrics that you can provide for us now in terms of utilization or engagement through the app? Have you guys seen already an increase in those that have the app scheduling appointments? Or is it just too early to tell?

Tom, it's too early to tell. But the feedback from those patients that we're seeing because we're also, as I indicated, starting to measure patient experience through the app, we're seeing extremely high metrics coming back. So what we're encouraged with, whilst it's early signs that the overall experience that they're having is very strong, and clearly, as we've seen, a strong patient experience typically will lead to longevity, and that's really what we're going after here, making sure that there is lifetime value because there's less friction in the experience. So -- but too early to be able to share data points that are demonstrating those metrics already.

Got you. Appreciate that insight. And final thing for me. So just wanted to kind of piggyback on the pricing question. I see in your slide as well that you guys plan to take pricing in 1Q '26. Is that a steadfast plan? Or is there any reason you might take pricing earlier than that if you have the right insights in the fourth quarter or anything that could possibly push that into the second quarter or later in 2026?

I think at this point, considering that the pricing test just went -- those pilot markets just went live earlier in November, I think the most likely scenario is that we will read them, see the impact and most likely, given the time frames involved that we should be able to activate against them for our system in quarter 1. Now should something emerge from that test that gives us pause and reflection and needs us to pivot and test them more, then of course, we will consider that. But at the moment, given that we have got 3 different options in test, we believe that one of them is more than likely going to be the right option for us to then scale out nationwide sometime in the first quarter.

This concludes our question-and-answer session. I would like to turn the conference back over to Sanjiv Razdan for closing remarks.

Thank you for joining us. Have a really good day. And know that at The Joint, we always have your back. So I appreciate everyone. Thank you.

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

Hello, and welcome to the Joint Corp Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Barnard with Alliance Advisors Investor Relations. Please go ahead.

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. Please note, we are using a slide presentation that can be found at https:ir.thejoint.com under Events. Today, after the close of market, the Joint Corporation issued a press release about the quarter ended June 30, 2025. 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. As provided on Slide 2, 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.

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. 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-K 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.

As announced on July 30, 2025, we intend to restate our previously issued financial statements for our 2024 annual report Form 10-K and our quarter ended Q1 2025 Form 10-Q due to material errors identified by management related to the original valuation methodology for the noncash impairment recorded for clinics held for sale within discontinued operations. 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. 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 of 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 3 months ended June 30, 2025 and 2024, respectively, and the unrestricted cash and cash balance as of June 30, 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. 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.

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 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 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. 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 full months and exclude any clinics that have been closed. Turning to Slide 3. It's now my pleasure to turn the call over to Sanjiv Razdan.

Thank you, David, and I welcome everyone to the call. Turning to Slide 4. Today, I'm excited to review our increasing momentum in becoming a pure-play franchisor and our pursuit of the Joint 2.0. We are strengthening our core, 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. 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. I'll summarize our Q2 2025 financial results compared to Q2 2024, and Scott Bowman, our new CFO, will provide greater detail in a moment.

System-wide sales were $129.6 million, up 2.6%. 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, up 52% compared to quarter 2 2024. On June 30, 2025, unrestricted cash and equivalents reached $30 million. Let's review our refranchising efforts. Turning to Slide 5. Momentum is increasing. Our corporate clinics are attracting investments from sophisticated multiunit franchisees, both existing and new to our system. 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%. In Arizona and New Mexico, we sold 31 corporate clinics for an aggregate purchase price of $11.1 million to our largest franchisee, Joint Ventures. We are excited to expand our partnership with Joint Ventures to 96 clinics with 10 more committed over time. We received $8.3 million in cash and, as part of this deal, bought the regional developer rights to the Northwest region for $2.8 million.

This transaction also reduced our annual royalties and commissions obligation, which in 2024 was $855,000. This territory consists of 46 existing franchise clinics and holds significant opportunity for growth with 30 sites planned for future clinic development. In Kansas City, we sold the five corporate clinics, and we are all actively engaged in refranchising the balance of the corporate portfolio. Turning to Slide 6. Let's review our long-term profitability improvement initiatives, starting with how we are enhancing our brand positioning and strengthening our digital marketing. 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. 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.

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. 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. 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. 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. 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 the Joint is an incredibly affordable pain relief option. 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. Both of these actions are intended to drive new patient count, which in turn will help improve comps. Turning to Slide 7. Let's review our long-term profitability improvement initiatives, starting with dynamic revenue management. 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. 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. 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. We are taking other measures to extend the length of time patients maintain their wellness plans. Turning to Slide 8. Part of our strategy to enrich our patient experience is by updating patient-facing technology.

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. 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. So our next evolution of features will personalize information to our patients, such as details of their wellness plans. reminders, they have adjustments remaining in their usage period, et cetera. 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. As a business transformation and growth expert, Scott is a great fit for the Joint. He has over three decades of experience in finance, including serving as CFO at four companies, three of which were publicly traded. 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. Please go ahead, Scott.

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 multiphase strategy to reignite growth introduce new revenue streams and become America's most accessible health and wellness services company. Most immediately, I'm focused on completing our refranchising effort to become a pure-play franchisor and on executing our capital allocation strategy. We started in June on this strategy with the purchase of the redevelopment rights in the Northwest region and have established the infrastructure needed to execute our share repurchase program. 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% and adjusted EBITDA for consolidated operations grew 52%. Turning to Slide 11.

Let's discuss our clinics. We sold 13 franchise licenses in the second quarter compared to seven sold in the second quarter of last year. 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. 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 franchised. We opened seven franchise clinics and closed six, and we closed three company-owned or managed clinics. At June 30, 2025, our clinic count was 967 with 885 franchised or 92% of the portfolio. 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, mainly due to the greater number of franchised clinics in operation. Cost of revenues was $2.8 million, which was consistent with the prior year. Selling and marketing expenses were also consistent with the prior year. Depreciation and amortization expenses increased 18% to $402,000, which was mainly due to development of software, which was made available for use in the first half of 2025. 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 reflected an effective tax rate of negative 1% Consolidated net income was $93,000 compared to a net loss of $3.6 million in the same period last year. Net loss from continuing operations improved $720,000 to $990,000, or $0.06 per basic share, from a net loss of $1.7 million, or $0.11 per basic share, in the same period last year. Adjusted EBITDA for consolidated operations improved $1.1 million, or 52% to $3.2 million. For continuing operations, adjusted EBITDA improved $468,000 to $88,000. On Slide 13, I'll review our liquidity and stock repurchase plan.

At the end of the second quarter, unrestricted cash was $29.8 million compared to $25.1 million at the end of last year. Proceeds from the sale of clinics totaled $11.2 million, while cash used to acquire the Northwest regional developer rights was $2.8 million. We maintain a line of credit with JPMorgan Chase for $20 million and had 0 funds drawn during the quarter. In June, the Board authorized a stock repurchase program under which the company may repurchase up to $5 million of our outstanding common stock through June 2027. 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 projected cash flow generation. 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 the remainder of the year and are revising our 2025 guidance.

For system-wide sales, we now expect the range to be $530 million to $550 million compared to prior guidance of $550 million 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. Through diligent overhead reduction, we are increasing our consolidated adjusted EBITDA guidance to be in the range of $10.8 million to $11.8 million versus prior guidance of $10 million to $11.5 million. 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 shift from corporate-owned or managed, to franchise, there will be a transformative financial impact. Our franchise royalties and fees will increase. We will continue to rationalize our unallocated G&A expenses, and we will increase our cash position as we sell the remainder of our corporate-owned or managed clinics. And with that, I'll turn the call back over to Sanjiv.

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. At the beginning of 2025, we laid out our multiyear strategy to strengthen our core, reignite growth and improve both clinic and company level profitability. To do that, we are fueling our growth flywheel. 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 the finance function. 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, 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 in approximately 12 months, we expect to enter the next phase of our evolution, Joint 3.0, 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. We welcomed two new directors, increasing Board membership to eight. Sandi Karrmann, most recently Senior Vice President and Chief Human Resources Officer for Kimberly-Clark, brings over two decades of extensive experience with publicly traded health care companies and franchises, both in the U.S. and globally. Chris Grandpre, an operating partner with Mid-Ocean 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. 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.

[Operator Instructions] Your first question comes from George Kelly from ROTH Capital.

The first one is just on the lowered comp guide. I was wondering if you could give more detail behind that change.

Yes, I can start off on that, George, and then I can hand it over to Sanjiv for any further comments. When we looked at the guide, we looked at a couple of things. Number one, we looked at our recent trends. And recent trends were a little bit softer. And so that had a part to play. And as we look at that softness, it's mainly in new patients, right? And so as we look at our conversion rate, our conversion rate is actually up year-over-year and attrition is in line with last year. And so you couple that and you also look at our comparables from last year in the back half, especially in the fourth quarter, and we have some tougher compares. So that was a data point as well. And just looking at kind of the macro headwinds that are out there, weaker consumer sentiment getting a little better, but coming off of a bottom. So there was a couple of data points from a macro view that we took into account as well, okay? And so that's really what colored our decision on the guidance and the main reason why we're a little bit softer in the quarter.

But we are addressing those headwinds, we're looking at a few things that we think will help, not immediately, but over time, we think it will help. Number one is we're shifting more of our marketing dollars into top-of-funnel brand awareness to capture more of those customers and cast a wider net. We also see some opportunity in SEO optimization. There are some very tangible actions there that we can take and we're starting to execute on that we think will help that organic search component. And then we're exploring some additional programs. In some of the survey work that we've done, I think just consumers in general out there, they're looking for value, they're looking for affordability. And we think we give great day-to-day value. 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. And so we're looking for some options to buy now, pay later. And so that can take different forms. But we're exploring that because we think that could be an unlock for some of those customers that want to buy those longer-term packages, but the higher price point may be an issue.

Okay, that's helpful, thank you. And so it sounds like you're kind of backing off the planned broader pricing increase that was previously anticipated for the back half?

George, this is Sanjiv. I think part of our strategy remains what we're calling dynamic revenue management. We have already taken some pricing actions. December of last year, we increased our walk-in price, which has helped overall increase our conversions as well as 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 4, 6 or 8 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. 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 aspect of our value proposition.

Okay. And then last questions are just on the EBITDA guide. So two questions on that. First, can you break down the guidance by continuing versus discontinued ops? And then secondly, your expense structure in the first half, if I look at selling and marketing, you're overspending your ad fee collections and your G&A in 2Q was -- I know it was down a little bit year-over-year, but still at almost record quarterly levels. 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?

Right. So first off, we don't really -- we don't typically split out continuing and discontinued on our guidance. And I think, keep in mind, too, when you look at 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 that number a bit. Number one is we don't record rent for those clinics held for sale, and we also don't include depreciation, okay? And so that can distort that number a little bit on discontinued ops.

So I would just caution you on making any significant kind of assumptions on that because we do have some accounting that distorts that a little bit. As we look at the G&A for the remainder of the year, we have some initiatives that have helped us so far. We think as we get further down the path on refranchising, we'll see even more favorability there. We want to make sure that we maintain a balance there as we transition and not get ahead of ourselves. And so as we get closer to the end on refranchising, we should see some more benefit there.

Your next question comes from Jeremy Hamblin from Craig-Hallum Capital Group.

And I wanted to kind of explore a bit more on the change in the system's -- the total system sales and just understand how much of the total change -- I guess you could call it maybe 300 basis point change in same-store sales is due to traffic, 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 of new patient acquisition and whether or not would you plan on testing potentially lowering price and seeing what that does for the system or for a portion of the system?

I'll start off on the traffic piece of it, and then Sanjiv can chime in as well on the price increases. So first off, on the traffic, it's a good question. I see it as mainly a traffic problem when we think about new patients. once we get the patients in the door, we have a -- we really do a good job on converting. And like I said, the attrition year-over-year is about -- it's about the same. So it's all about attracting 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 work that we want to do, but also really beef up our SEO and maximize that capability for organic search. So we're really focused on those two areas to get new patients in the door. Once we do that, we have a pretty good chance of converting them. And then -- I'll start off on the price increase.

The sticker shock comment hits home for us because that goes back to where -- to Sanjiv's comment about making sure that we're balancing the affordability of our pricing. And so we're really careful and kind of keep within the guardrails of what we think is reasonable, but still giving a good value. Part of that also includes some test and learn work, right? And so if we have some ideas about pricing, in many cases, we will test those first, to make sure that our assumptions are correct. And then if they're not correct, then we have a chance to adjust before we push it out for a broader group of clinics.

Yes. 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. 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. 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 noninvasive holistic pain care. 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. So in terms of over that period of time, the value proposition has only strengthened because we've held our wellness plan pricing from March of 2022. How much longer we're able to hold at that same price point remains to be seen, but we are keeping a close eye on the situation. 80% of our sales come from wellness plans and packages. So 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 3.5 years to take meaningful pricing. 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 working to address that. And then finding ways of working with 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 comes 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 2 months free, 5 plus 1, you buy for 5 months, you get 1 month free. 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 are actively exploring as well. So we're feeling quietly confident about our approach for the back half of this year.

Got it. And then I want to explore a little bit of the deals, the refranchising, that you've done. So I think you said for Arizona, New Mexico, 31 units, $8.3 million that those were sold for. I think that would imply the other 6 locations, you realized about $2.9 million for those. I wanted to get a sense for kind of the sales volumes and the profitability of the collective of the 37 locations. Are those fairly typical? Are they slightly better locations, slightly worse locations? What kind of color can you share with us on that?

Yes, I can start on that. So if you think about the 31 locations in Arizona and New Mexico, many of those locations are higher performers, okay? Kansas City had five clinics, they were lower performers. And so I think it -- I think you bring up a good question because as we look at the remainder of the clinics, there is a range of -- based on geography and volume and profitability that will influence the proceeds from the sale. And so, when we sold the 37 clinics in total, there's actually about $11.2 million in gross proceeds, and then we used $2.8 million of that to buy back some RD territory rights in the Northwest, okay? And so that's kind of how you get that $8.3 million - $8.4 million net effect. But the total proceeds for the sale of clinics was about $11 million. So that's going to vary based on those criteria that I just mentioned. And so you can't necessarily extrapolate that number over the remaining clinics and come to a number. But I think 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.

I see. So just clarifying, the total cash received for all of the 37 was about $8.3 million?

Yes, $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 Northwest.

Got it. All right. And then just a follow-up on the prior question around sales and marketing, right? So in terms of thinking about total sales and marketing costs in the second half of the year, it sounds like you're making some investment in that. 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?

It could be slightly higher. And part of that depends on what results that we see. And so as we spend some dollars and focus on upper funnel marketing, if we see good results coming from that, then that could change our opinions on if we spend more, maybe we can get a good return on those dollars. So it will be somewhat variable based on the performance of the dollars we're putting towards upper funnel marketing.

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 -- upper in the marketing funnel. So not necessarily sort of signaling incremental investment, but shifting where we're spending the money or what we're spending the money on.

Got it. Thanks so much for taking the questions, and best wishes.

[Operator Instructions] Your next question comes from Nick Sherwood from Maxim Group.

Can you -- kind of talking about the effect of those recent clinic sales, how is that going to affect your back-office expenses? Should we be expecting any restructuring expenses in the near term? And then what are some of those long-term savings you'll have moving those clinics from the corporate side to the franchise side?

Yes. So near term, we want to make sure that we get a good transition over to the franchise clinics. And so. probably. we'll continue to see some reduction in G&A because of that, that unallocated piece. Longer term, there's other areas of spend that we can also look at from the payroll side, from other categories like insurance and software costs and legal fees and travel. So there's quite a few line items that we're taking a look at, being careful not to cut too soon, but to identify what the opportunity is, and then over time, tightening up those expense line items as we continue to transition.

Okay. Thank you for the detail. And then, talking about the dynamic revenue management system, are you trying out -- are you piloting certain price points in certain locations to get a better idea of that like price elasticity of demand, so that you know when to change prices in certain areas? Or can you kind of talk about how you're testing prices in this dynamic revenue system?

Yes. So if we take a step back, I want to provide some context again, right? I think traditionally, what the Joint has done has taken our prices for our wellness plans that tiered at $59, $69 and $79 packages depending on the part of the country that you're in. And when we have taken pricing historically, it's gone up from whatever price band you were in by $10. So if you were at $59, you go up to the $69 and $69 to $79 and so on. And back in March of 2022, that is what we did. And prior to that, that is also what we did. Those substantive percentage price increases meant that you could take those higher percentage increases, but very infrequently.

In our assessment, the consumer climate has shifted, and we no longer have permission from the consumers to take such significant price increases. As a result of which, we have to find ways of offsetting our input cost inflation at clinic level. In order to do that, while still not pushing our new patients away, right, in any shape or form, we are finding ways of taking much more nominal price increases. That we think we may be able to come back 6 or 8 or 10 months later and then take another nominal price increase instead of waiting 3 years to do that. So we have various options of what that might look like, how do we find ways of taking some price increase without eroding our core value proposition. And then we work with our franchisees to shape them, test them, validate them and implement them. So that's what we mean by dynamic revenue management.

Your next question comes from Jeff Van Sinderen from B. Riley.

Sanjiv, I know you made 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, maybe more comprehensively as an enterprise and as a pain management destination? Maybe you could just touch on sort of exploration of adding other products and services to the Joint and, I guess, where you are in contemplating actions you might take there?

Yes. Jeff, thank you 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, 80% 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, our language that we're using to help our consumers, our patients, understand that we are a great option for pain relief.

Once they do become patients, right from day one, 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 philosophy of chiropractic profession through the doctors, through education and over time, using the electronic methods we have at our disposable example, the mobile app, right? So that's what we're trying to do here.

As far as the pain management piece relates to does that now allow us the ability to provide incremental products or services, we believe it does. 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 franchisor, reignite growth, shed our 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 10-12 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. It's on the road map, but we want to crawl, walk, run in this regard.

Okay. Fair enough. And then just your latest thoughts on timing of completing the remaining corporate clinic refranchises. And then also, can you remind us which -- I know you just repurchased the, I guess, the Northwest RD rights. Which RD rights remain to be -- or are you targeting reacquiring at this juncture?

So let me first take the refranchising question. We have now refranchised about 1/3 of our corporate clinics, and we are actively engaged in refranchising the other 2/3. Our intent and effort is to exit 2025 as a pure-play franchisor. So we're doing everything possible to make that happen. As far as RDs go, we have now got 15 RDs left in our system that represent coverage of about 52% of our system, down from about 57% of the system. So we were 16 RDs, 57%. We are now at 15 RDs, 52% of system coverage. And we will continue to explore with our RDs that option and continue to work with our Board on RD buybacks as an appropriate vehicle for capital allocation and shareholder value creation. That is an ongoing dialogue that we're having both with our RDs and our Board at the same time. So no time lines on that. That's just -- if the deal is right, if there's a value creation opportunity, if the RDs are willing to sell at a price that makes sense for the Joint shareholders, that is what will lead to those outcomes.

Thanks for taking my questions, I'll take the rest offline.

There are no further questions at this time. I now hand the call back over to Sanjiv 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-deal roadshows. 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.