10-K: The Joint Corp. Reports Fiscal Year 2024 Results, Focuses on Franchise Growth

The Joint Corp. announces its fiscal year 2024 results, highlighting a shift towards a pure-play franchisor model and continued system-wide sales growth.

Summary

• The Joint Corp. reported over 14.7 million patient visits in 2024, an increase from 13.6 million in 2023.
• System-wide sales reached $530.3 million in 2024, up from $488 million in 2023.
• The company is transitioning to a pure-play franchisor business by divesting company-owned or managed clinics.
• As of December 31, 2024, The Joint Corp. had 967 clinics in operation, with 842 owned or managed by franchisees and 125 company-owned or managed.
• The company sold 46 franchise licenses in 2024, compared to 55 in 2023.
• System-wide comparable same-store sales growth was 4% for 2024.
• The company received draft letters of intent for its full portfolio of company-owned or managed clinics in January 2025.
• The company expects to use cash resources to support the business within the context of prevailing market conditions in 2025.
• The company believes that its existing cash and cash equivalents, anticipated cash flows from operations and amounts available under its line of credit will be sufficient to fund its anticipated operating and investment needs for at least the next 12 months.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While revenue and system-wide sales have increased, the company experienced a net loss and faces several risks related to labor shortages, inflation, and competition. The transition to a pure-play franchisor model could be a positive strategic move, but it also introduces uncertainty.

Positives

• System-wide sales increased to $530.3 million in 2024, a 9% increase year-over-year.
• The Joint Corp. delivered over 14.7 million patient visits in 2024.
• Comparable same-store sales growth was 4% for clinics open at least 13 months.
• The company is transitioning to a pure-play franchisor model by divesting company-owned or managed clinics.
• The company received draft letters of intent for its full portfolio of company-owned or managed clinics in January 2025.
• The company saw 957,000 new patients in 2024, with approximately 36% of new patients having never been to a chiropractor before.

Negatives

• Comparable same-store sales growth was -2% for clinics open 48 months or more.
• The number of franchise licenses sold decreased from 55 in 2023 to 46 in 2024.
• The company experienced a net loss from continuing operations of $1.5 million in 2024.
• The company experienced a net loss from discontinued operations of $6.9 million in 2024.

Risks

• The nationwide labor shortage has negatively impacted the ability to recruit chiropractors and other qualified personnel.
• Inflation has led to increased labor costs and interest rates and may lead to reduced discretionary spending.
• New clinics may not reach the point of profitability.
• The chiropractic industry is highly competitive.
• State administrative actions and rulings regarding the corporate practice of chiropractic may jeopardize the business model.
• Expected new federal regulations and state laws and regulations regarding joint employer responsibility could negatively impact the franchise business model.
• IT security systems and those of third-party service providers may be breached.

Future Outlook

The company expects to drive greater efficiencies across operations, development and marketing programs and further leverage its technology and existing support infrastructure. The company believes it will be able to control corporate costs over time to enhance margins as general and administrative expenses grow at a slower rate than its clinic base and sales. The company expects to use cash resources to support the business within the context of prevailing market conditions in 2025.

Management Comments

• The company believes that it continues to have a sound business concept and will benefit from the fundamental changes taking place in the manner in which Americans access chiropractic care and their growing interest in seeking effective, affordable natural solutions for general wellness.
• The company has created a robust framework for the refranchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency.

Industry Context

The chiropractic industry is highly fragmented, with the top 50 industry practices accounting for only 4% of total industry revenue. The Joint Corp. is the largest chiropractic franchisor in the United States.

Comparison to Industry Standards

• The Joint's average fee as of December 31, 2024 was approximately $36, approximately 52% lower than the industry average price of $76 for a chiropractic treatment involving spinal manipulation in a cash-based practice in the United States.
• The Joint attracted an average of 992 new patients per clinic (for all clinics open for the full 12 months of 2024) during the year ended December 31, 2024, as compared to the most recent chiropractic industry average of 468 new patients per year for traditional insurance-based non-multidisciplinary or integrated practices.
• The Joint's clinics see an average of 301 patient visits per week (for clinics open for the full 12 months of 2024), as compared to the most recent chiropractic industry average of 113 patients per week for non-multidisciplinary or integrated practices.
• The Joint's chiropractic brand is approximately six times larger than the next largest chiropractic chain, as of December 2024.
• The company's four largest multi-unit competitors are Airrosti, HealthSource Chiropractic, 100% Chiropractic and ChiroOne all of which are insurance-based models.

Management Changes

Legal Proceedings

• During the second quarter of 2024, the Company entered into settlement agreements from litigation related to employment matters of $1.5 million that was outside the normal course of business which the Company has accrued for in discontinued operations current liabilities as of December 31, 2024.
• Ongoing litigation related to a medical injury claim between a patient (the Claimant) and the Company filed on September 5, 2023 reached a settlement agreement on February 25, 2025.
• Per the terms of the settlement agreement, the Company and the Company's insurance will pay the claimant $3.4 million.

Related Party Transactions

• In December 2020, the company sold two franchise licenses at $39,900 and $29,900 each (which reflects the $10,000 multi-unit discount for the second license per the Franchise Disclosure Document) to Marshall Gramm, who is a family member of Mr. Jefferson Gramm.
• In April 2020 and 2021, the company sold two franchise licenses at $39,900 and $29,900, respectively (which reflects the $10,000 multi-unit discount for the second license per the Franchise Disclosure Document), to a franchisee of which Mr. Jefferson Gramm is a 50% co-partner in the business.
• In October 2020, Mr. Gramm loaned approximately $370,000 to an unaffiliated franchisee that owns and operates one franchise clinic.

Stakeholder Impact

• Shareholders may be impacted by the company's financial performance and strategic decisions.
• Employees may be impacted by the company's restructuring and cost-saving measures.
• Franchisees may be impacted by the company's transition to a pure-play franchisor model.
• Patients may be impacted by changes in the company's service offerings and pricing.

Next Steps

• Continue the rapid and franchise focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad.
• Continue to support franchisees and regional developers to open clinics and to achieve sustainable performance as rapidly as possible.
• Drive greater efficiencies across operations, development and marketing programs and further leverage technology and existing support infrastructure.
• Continue to consider introducing selected and complementary branded products such as nutraceuticals or dietary supplements and related additional services.

Key Dates

Keywords

franchise, chiropractic, clinics, sales, patients, The Joint Corp, refranchising, system-wide