The Joint Corp.

Today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. And to withdraw your question, please press star and then two. Please note that this event is being recorded. I would now like to turn the conference over to Kirsten Chapman, Alliance Advisors, Investor Relations. Please go ahead, ma'am.

Thank you, Nick. Good afternoon, everyone. This is Kirsten Chapman of Alliance Advisors Investor Relations. Joining us on the call today are President and CEO Sanjeev Razdan and CFO Jake Singleton. Please note we're using a slide presentation that can be found at ir.thejoint.com. Today, after the close of the market, the joint issued its results for the quarter and year ended December 31, 2024. If you do not already have a copy of this press release, it can be found in the investor relations section of the company's website. As provided on slide two, please be advised that today's discussions include 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 that 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 out 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 discussions 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 Form 10-K and 10-Q, as well as other reports the company files from time to time with the SEC. Finally, any forward-looking statements included in this earnings call that 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. The results of operations of the corporate clinics business segment have been classified as discontinued operations for all periods discussed. and the following comments represent continuing operations unless otherwise stated. Management uses EBITDA and adjusted EBITDA, which are non-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 impairments, costs related to restatement filings, restructuring costs, litigation expenses consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business, and other income related to the employee retention credits. Management also includes commonly discussed performance metrics. System-wide sales include revenues that all clinics, whether operated by the company or by franchisees. While franchise sales are not recorded as revenues by the company, management believes that information is important in understanding the company's 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. System-wide comp sales include revenues from both company-owned or managed clinics and franchise clinics that in each case have been open for at least 13 or 48 full months and exclude any clinics that have been closed. Turning to slide three is my pleasure to turn the call over to Sanjeev Razdan. Please go ahead, sir.

Thank you, Kirsten, and I welcome everyone to the call. Turning to slide four, I'm excited to join you for my second conference call with The Joint, in which I committed to sharing observations from my first 100 days and the strategy we have since devised as a team. I will outline our plan and the tactics we have already started deploying in 2025. We are on our way to strengthen our position as the leading chiropractic care provider, become a pure play franchisor, grow sales, reduce overhead, and improve profitability. During my comprehensive analysis of the company, I stepped back and holistically looked at our business from every angle. I also extensively studied the data on chiropractic care, adjacent industries, as well as from our own company. I found the joint to be a highly differentiated scale player with a strong core, albeit facing some near-term challenges, which is actually encouraging news. We can leverage our core competencies and brand strengths while we systematically address these concerns, increasing profitability and creating shareholder value. In a moment, Jake will review our 2024 KPIs. Yet, I'd like to call out that we serve close to a million new patients last year, 950,000 to be exact. Having worked in franchising for decades, I can tell you to achieve almost one million new users in one year for a business of our scale is outstanding. The joint is clearly making a difference in the health and wellness industry in general and the chiropractic profession in particular. And I'm so incredibly proud to have joined the cause. Our strengths include size, originality, and longevity. Capitalizing on our first mover advantage, we have over 960 clinics making the joint larger than our next 10 competitors combined. The magnitude of our scale yields brand awareness and easy consumer access, as well as provides economies of scale in management and marketing. And we believe there are more opportunities for clinic growth with white space for an additional 1,000 clinics here in the U.S. alone, in addition to international opportunities. We stand alone in our operating model with convenient retail locations, adjustment-only chiropractic care available without appointments, with affordable cash pay, with clinics open on weekends and evenings. Our unique position enables both students single unit and large multi-unit franchisees to be successful, which is pretty uncommon among franchise systems. And we have proven that our model works very well at our average clinic volumes and delivers healthy cash flow for our franchisees. That said, we have been clear over the last couple of years, we have endured some consumer headwinds and inconsistencies in execution. These include variability in the quality of patient experience, inefficiencies in regional co-op and local clinic marketing execution, strains in franchisee relationships, challenges in retention of doctors or chiropractic, playing catch-up on the tech platform, and lower-volume bottom quartile clinics. As a result, the time for a new clinic to break even has extended, and more clinics than we would like are comping negative. We have robust tactics in place to address these issues, some of which we have already begun implementing, and all of which are to grow revenue or improve profitability for both our franchisees and our company. Turning to slide five, we will absolutely double down on our mission of improving the quality of life through routine and affordable chiropractic care. We also have a new big bold vision to become America's most accessible health and wellness services company. I repeat, to become America's most accessible health and wellness services company. Before I share with you how we intend to do this, I'll provide a quick review of our progress to date. Turning to slide six, I am pleased to report we have growing sales momentum. For 2024, system-wide sales increased to $530.3 million, up 9% in Q4 2024, compared to 8% in Q3 2024. System-wide comp sales for all clinics opened 13 months, with 6% in Q4 2024, compared to 4% in Q3 2024. System-wide comp sales for mature clinics open 48 months were modestly positive for Q4 2024 compared to negative 2% in Q3 2024. Revenue for our continuing operations increased 14% in Q4 2024 up from 10% in Q3 2024. Consolidated adjusted data was $3.3 million for Q4 2024 and $11.4 million for 2024. We believe 2025 will be a year in transition financially as clinics shift from 100% accounted for as corporate owned or managed to franchise clinic model of royalties and fees. Additionally, we have plans to reduce unallocated expenses as we shed corporate clinics. Turning to slide seven, We have constructed a multi-year phased approach. In our next phase of growth, or joint 2.0, we will focus on strengthening our core, reigniting growth, and improving both clinic and company-level profitability. We will re-franchise, enabling us to be focused on becoming a world-class pure-play franchisor, reduce overhead, and increase operating leverage. We will drive revenue growth by initiating dynamic revenue management strengthening our digital marketing and promotional calendar, and catching up on patient-facing technology. Altogether, we believe that this phase will take us about 12 to 18 months to complete, and while we do all this, in the spirit of being an agile, innovative organization, we will begin building infrastructure and test and validate elements of other revenue drivers that would shape the joint 3.0. In the next phase, which we are referring to as Joint 3.0, we will capture new revenue streams by creating additional sales channels and growing in new markets. Possibilities under evaluation include expanding into system-wide enterprise or business accounts. In other words, building a B2B business to complement our currently pure B2C business. Shifting from playing catch-up on patient-facing technology to building a tech-differentiated competitive moat, unlocking dense urban markets, monetizing new clinical service or services even, and chiropractic usage occasions, and exploring opportunities to sell retail products in our clinics. Turning to slide 8... To strengthen our core and reignite growth, we are placing patients at the heart of everything we do. Our strategic priorities in 2025 as part of Joint 2.0 begin with building our people capability and culture to support our clinics, our team, our franchisees, and our growth. We will focus on nurturing talent, strengthening engagement, attracting and retaining the best doctors of chiropractic, and shifting our mindset to being a pure-play, world-class franchisor. Strong people and culture, both at our clinic support center and at our franchisee clinics, will enable us to excel in the patient experience. By optimizing care delivery and patient touchpoints, we expect to increase both patient engagement and membership longevity. This will fuel our most effective and cost efficient patient acquisition tool, referrals. More advocacy amongst our patients gives us the foundation to turbocharge sales and profits for both our franchisees and the company. Also, as we re-franchise, we will significantly reduce unallocated overhead expenses that will improve the bottom line. In parallel, With working on sales and profits, we will reignite clinic network growth. We are updating our key development processes to ensure stronger new clinic performance so that as we complete re-franchising, we pivot to driving sustainable new clinic growth in the massive white space we have. We will also simultaneously innovate and broaden our relevance by refreshing our brand communications and brand architecture start to replatform the tech stack, and explore new chargeable options for patient clinical care. Turning to slide nine, we are upgrading our commitment to re-franchising and are striving to be a world-class pure play franchisor. This will sharpen management focus by reducing the distraction and expense of operating corporate owned or managed clinics, Additionally, we are leveraging the opportunity of re-franchising to bring into our system some strong new multi-site operators. I am excited about our progress. We are in the final stages of executing letters of intent for the vast majority of our corporate portfolio. We will deploy capital to improve our profitability profile, upgrade our tech stack, and create shareholder value. By acquiring regional developer territories, we could reduce RD commissions and expand our operating margin. The board will also evaluate means to drive further growth and return value to shareholders in other ways, which may include stock repurchase. Turning to slide 10, let's review our revenue drivers. Through dynamic revenue management and thoughtful pricing, We expect to optimize the price per visit for all of our product offerings while still offering our patients the best value. By strengthening digital marketing, we expect to improve organic leads and brand awareness, increase co-op effectiveness and spending to drive brand consideration, and develop effective targeting strategy for our core patient targets. By strengthening our promotional calendar, we expect to deliver profitable sales growth for our clinics. By upgrading patient-facing technology, we expect to better engage and satisfy our patient members. Our new mobile app, anticipated to be in the App Store by the end of Q2 2025, will provide a more frictionless experience with features like Clinic Finder, See Which Doctor is Working Today, In-Clinic Check-In, and push notifications. With that, I'll turn the call to Jake.