The Joint Corp.

Our corporate clinics are attracting investments from sophisticated multi-unit 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 six, 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 that 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 seven, 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 eight, 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 pick-up rates, which are gaining fraction 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 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, Anjiv. I would like to start by saying that I'm honored to be part of the team, and I'm excited about the opportunities as we execute our multi-phase strategy to reignite growth, introduce new revenue streams, and become America's most accessible health and wellness services company. 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 open 13 months were up 1.4%, and adjusted EBIT offer 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 Anjiv 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 franchise. We opened seven franchise clinics and closed six, and we closed three company-owned or managed clinics. At June 30th, 2025, our clinic count was 967, with 885 franchised, or 92% of the portfolio. 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. CNA 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 six cents per basic share, from a net loss of $1.7 million, or 11 cents 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 maintained our line of credit with JPMorgan Chase for $20 million, and had zero 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 discipline 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 cashflow 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 to $550 million, compared to prior guidance of $550 to $570 million. For comp sales, we now expect an increase in the low single-digit range, compared to prior guidance of an increase in the -single-digit range. Through diligent overhead reduction, we are increasing our consolidated adjusted EBITDA guidance to be in the range of $10.8 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 franchised, there will be a transformative financial impact. Our franchise royalties and fees will increase. We will continue to rationalize our unallocated GNA 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 Sanjeev. 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 multi-year strategy to strengthen our core, reignite growth, and improve both clinic and company-level profitability. To do that, we are fueling our growth flywheel. We are building our people capability and culture to support our clinics, our team, our franchises, 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 welcome two new directors increasing board membership to eight. Sandy Carman, our most recently senior vice president and chief human resources officer for Kimberly Clark brings over two decades of extensive experience with publicly traded healthcare companies and franchises, both in the US and globally. Chris Grandfray, an operating partner with MidOcean, charged with targeting franchise consumer business for investment brings over 30 years of experience leading multi-branded franchise companies and in M&A investment banking. Also, we will be conducting some non-deal road shows. Please contact Alliance Advisors Investor Relations if you would like to connect. With that, operator, I am ready to begin Q&A.