# JOINT Corp: Form 10-Q for the period ended Sep 30, 2024

- Company: [JOINT Corp](/companies/jynt.md) (CIK 1612630)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 00:52 ET
- Period: 2024-09-30
- Accession: 0001628280-24-046464
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1612630/000162828024046464/jynt-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1612630/000162828024046464/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $30.2m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $90.2m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $2.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $8.4m | us-gaap:CostOfRevenue |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $26.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $81.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$3.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$5.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $62.6k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $419.8k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$3.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$5.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.21 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.39 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.21 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.39 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 15,192,379 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 15,138,148 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $5.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $901.4k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $9.6k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $20.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $55.2m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $79.6m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $38.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $59.1m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $20.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,364 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 8, 2024.*

### Overview

Our principal business is to develop, own, operate, support and manage chiropractic clinics through direct ownership, management arrangements, franchising and regional developers throughout the United States.

We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry through the rapid and focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad.

*Key Performance Measures.* We receive monthly performance reports from our system and our clinics that include key performance indicators per clinic, including gross sales, comparable same-store sales growth, or “Comp Sales,” number of new patients, conversion percentage and membership attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales, adjusted EBITDA and various earnings metrics in the aggregate and per clinic. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance. Comp Sales include the sales from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed. System-wide sales include sales at all clinics, whether operated by us or by franchisees. While franchised clinic sales are not recorded as revenues by us, management believes the information is important in understanding the overall brand’s financial performance, because these sales are the basis on which we calculate and record royalty fees and are indicative of the financial health of the franchisee base. Adjusted EBITDA consists of net income before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, 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 ERC. There were no costs related to bargain purchase gain for the three and nine months ended September 30, 2024 and 2023.

*Key Clinic Development Trends*. As of September 30, 2024, we and our franchisees operated or managed 963 clinics, of which 838 were operated or managed by franchisees and 125 were operated as company-owned or managed clinics. Of the 125 company-owned or managed clinics, 58 were constructed and developed by us, and 67 were acquired from franchisees.

Our current strategy is to grow through the sale and development of additional franchises. After evaluating options for improvement, during 2023 the board authorized management to initiate a plan to re-franchise or sell the majority of our company-owned or managed clinics. During Q3 2024, the Company expanded the re-franchising plan to include the full portfolio of company-owned and company-managed clinics, marketing the clinics in clusters grouped by proximity to larger private equity firms. This refined strategy will leverage our greatest strength - our capacity to build a franchise - to drive long-term growth for both our franchisees and The Joint as a public company. We have created a robust framework for the re-franchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency. We have given initial preference to existing franchisees and in Q3 2024 have expanded the marketing efforts to larger private equity firms interested in purchasing and operating large market-based clinic clusters and have received significant interest to date in most markets. Our goal will be to generate significant processes that will provide us with value creating capital allocation opportunities. These opportunities could include, but are not limited to, reinvestment in the brand and related marketing, continued investment in our IT platforms, the repurchase of RD territories, and/or a stock repurchase program.

The number of franchise licenses sold for the year ended December 31, 2023 was 55, compared with 75 and 156 licenses for the years ended December 31, 2022 and 2021, respectively. We ended the first nine months in 2024 with 16 regional developers who were responsible for 38% of the 29 licenses sold during the period. This strong result reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the United States.

We believe that we continue 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. These trends join with the preference we have seen among chiropractic doctors to reject the insurance-based model to produce a combination that benefits the consumer and the service provider alike. We believe that these forces create an important opportunity to accelerate the growth of our network.

### Recent Events

Recent events that may impact our business include unfavorable global economic or political conditions, such as the Ukraine War, the Israel-Gaza conflict, labor shortages, and inflation and other cost increases. We anticipate that 2024 will continue to be a volatile macroeconomic environment.

The primary inflationary factor affecting our operations is labor costs. In 2023 and 2024, clinics company-owned or managed by us were negatively impacted by labor shortages and wage increases, which increased our general and administrative expenses. Further, should we fail to continue to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our patient service to suffer. While we anticipate that these continued headwinds will be partially mitigated by pricing actions, there can be no assurance that we will be able to continue to take such pricing actions. A continued increase in labor costs could have an adverse effect on our operating costs, financial condition and results of operations.

In addition, the increase in interest rates and the expectation that interest rates will continue to remain elevated may adversely affect patients’ financial conditions, resulting in reduced spending on our services. While the impact of these factors continues to remain uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition, or results of operations. These and other uncertainties with respect to these recent events could result in changes to our current expectations.

### Other Significant Events and/or Recent Developments

For the three months ended September 30, 2024, compared to the prior year period:

- System-wide comp sales of clinics that have been open for at least 13 full months increased 4%.
- System-wide comp sales for mature clinics open 48 months or more decreased (2)%.
- System-wide sales for all clinics open for any amount of time increased 8%.

On June 24, 2024, we entered into an agreement pursuant to which we repurchased the right to develop franchises in various counties in Maryland. The total consideration for the transaction was $0.6 million. We carried an upfront regional developer fee liability balance associated with this transaction of $0.1 million, representing the unrecognized fee collected upon the execution of the regional developer agreement. We accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated upfront regional developer fee liability was netted against the aggregate purchase price. We recognized the net amount of $0.5 million as a general and administrative expense for the nine months ended September 30, 2024.

Effective October 10, 2024, Peter D. Holt resigned as Chief Executive Officer of the Company and as a member of the Company's Board of Directors.

Effective October 14, 2024, the Board of Directors of the Company appointed Sanjiv Razdan as President and Chief Executive Officer of the Company and as a member of the Company's Board of Directors.

### Factors Affecting Our Performance

Our operating results may fluctuate significantly as a result of a variety of factors, including the timing of new clinic sales, openings, closures, markets in which they are contained and related expenses, general economic conditions, cost inflation, labor shortages, consumer confidence in the economy, consumer preferences, competitive factors, and disease epidemics and other health-related concerns.

### Critical Accounting Estimates

There were no changes in our critical accounting estimates during the nine months ended September 30, 2024 from those set forth in “Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Results of Operations

The following discussion and analysis of our financial results encompasses our consolidated results and results of our two business segments: Corporate Clinics and Franchise Operations.

### Total Revenues - Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Components of revenues were as follows:

| Revenues: | Three Months Ended September 30, 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Revenues from company-owned or managed clinics | $17,544,658 | $17,882,303 | $(337,645) | (1.9)% |
| Royalty fees | 7,870,033 | 7,143,791 | 726,242 | 10.2% |
| Franchise fees | 697,688 | 754,029 | (56,341) | (7.5)% |
| Advertising fund revenue | 2,247,663 | 2,050,106 | 197,557 | 9.6% |
| IT related income and software fees | 1,431,321 | 1,301,577 | 129,744 | 10.0% |
| Other revenues | 407,127 | 342,143 | 64,984 | 19.0% |
| Total revenues | $30,198,490 | $29,473,949 | $724,541 | 2.5% |

#### Consolidated Results

Total revenues increased by $0.7 million, primarily due to the continued expansion and revenue growth of our franchise base.

#### Corporate Clinics

Revenues from company-owned or managed clinics decreased, primarily due to the divestitures of our company-owned or managed clinics in 2024. As of September 30, 2024 and 2023, there were 125 and 136 company-owned or managed clinics in operation, respectively.

#### Franchise Operations

- Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics. As of September 30, 2024 and 2023, there were 838 and 778 franchised clinics in operation, respectively.
- Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described above.
- Other revenues primarily consisted of merchant income associated with credit card transactions.

### Total Revenues - Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Components of revenues were as follows:

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Revenues from company-owned or managed clinics | $52,730,898 | $52,813,098 | $(82,200) | (0.2)% |
| Royalty fees | 23,303,907 | 21,181,973 | $2,121,934 | 10.0% |
| Franchise fees | 2,072,665 | 2,179,822 | $(107,157) | (4.9)% |
| Advertising fund revenue | 6,654,974 | 6,043,563 | $611,411 | 10.1% |
| IT related income and software fees | 4,233,133 | 3,746,394 | $486,739 | 13.0% |
| Other revenues | 1,185,640 | 1,117,103 | $68,537 | 6.1% |
| Total revenues | $90,181,217 | $87,081,953 | $3,099,264 | 3.6% |

#### Consolidated Results

Total revenues increased by $3.1 million, primarily due to the continued expansion and revenue growth of our franchise base.

#### Corporate Clinics

Revenues from company-owned or managed clinics decreased slightly, primarily due to the divestitures of our company-owned or managed clinics in 2024, partially offset by improved same-store sales growth in newer clinics. As of September 30, 2024 and 2023, there were 125 and 136 company-owned or managed clinics in operation, respectively.

#### Franchise Operations

- Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics. As of September 30, 2024 and 2023, there were 838 and 778 franchised clinics in operation, respectively.
- Franchise fees decreased due to the impact of accelerated revenue recognition resulting from the terminated franchise license agreements in the current period compared to the prior period.
- Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described in Note 1, *Nature of Operations and Summary of Significant Accounting Policies—Revenue Recognition*, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
- Other revenues primarily consist of merchant income associated with credit card transactions.

### Cost of Revenues

| Cost of Revenues | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Three Months Ended September 30, | $2,823,267 | $2,604,100 | $219,167 | 8.4% |
| Nine Months Ended September 30, | $8,366,014 | $7,674,296 | $691,718 | 9.0% |

34

For the three months ended September 30, 2024, as compared with the three months ended September 30, 2023, the total cost of revenues increased primarily due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics in regional developer regions. For the nine months ended September 30, 2024, as compared with the nine months ended September 30, 2023, the total cost of revenues increased primarily due to an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics in regional developer regions.

### Selling and Marketing Expenses

| Selling and Marketing Expenses | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Three Months Ended September 30, | $4,762,395 | $4,301,017 | $461,378 | 10.7% |
| Nine Months Ended September 30, | $14,050,343 | $13,169,079 | $881,264 | 6.7% |

For the three months ended September 30, 2024, as compared with the three months ended September 30, 2023, selling and marketing expenses increased due to increase in advertising fund expenditures from a larger franchise base and an increase in local marketing expenditures by the company-owned or managed clinics. For the nine months ended September 30, 2024, as compared with the nine months ended September 30, 2023, the selling and marketing expenses increase was driven by the in-person national franchise conference held in 2024 as well as by increased advertising fund expenditures from a larger franchise base and an increase in local marketing expenditures by the company-owned or managed clinics.

### Depreciation and Amortization Expenses

| Depreciation and Amortization Expenses | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Three Months Ended September 30, | $1,239,233 | $2,349,206 | $(1,109,973) | (47.2)% |
| Nine Months Ended September 30, | $4,166,952 | $6,893,529 | $(2,726,577) | (39.6)% |

Depreciation and amortization expenses decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to no depreciation and amortization expenses recorded during the three and nine months ended September 30, 2024 related to the assets held for sale at September 30, 2024.

### General and Administrative Expenses

| General and Administrative Expenses | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Three Months Ended September 30, | $20,754,264 | $20,212,750 | $541,514 | 2.7% |
| Nine Months Ended September 30, | $63,588,864 | $60,156,022 | $3,432,842 | 5.7% |

General and administrative expenses increased for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due (i) an increase in payroll and related expenses of $0.5 million to support continued clinic count and revenue growth in both operating segments and the re-franchising efforts in the corporate clinic segment and (ii) an increase in professional and legal fees of $0.5 million mostly due to the costs incurred from the chief executive search partially offset by (iii) a decrease of $0.5 million utilities and facilities expense due to the discontinuance of amortization expense on ROU assets held for sale. General and administrative expenses increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to the litigation expenses, including settlement costs related to employment matters that were outside the normal course of business of $1.5 million, an increase in professional and legal fees of $0.5 million due to the chief executive search, and increases in the following to support continued clinic count and revenue growth in both operating segments and to support the re-franchising efforts in the corporate clinic segment: (i) payroll and related expenses of $2.2 million; (ii) professional and advisory fees of $0.7 million; and (iii) legal and accounting fees of $0.4 million partially offset by a decrease in utilities and facilities expenses in the corporate clinic segment of $1.9 million due to the discontinuance of amortization expense on ROU assets held for sale. As a percentage of revenue, general and administrative expenses during the nine months ended September 30, 2024 and 2023 were 71% and 69%, respectively.

### Loss from Operations - Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

| Three Months Ended September 30, | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Loss from Operations | $(3,185,887) | $(898,047) | $(2,287,840) | 254.8% |

#### Consolidated Results

Consolidated loss from operations increased by $2.3 million for the three months ended September 30, 2024 compared with the three months ended September 30, 2023, primarily due to the re-franchising efforts in the corporate clinics segment.

#### Corporate Clinics

Our corporate clinics segment had loss from operations of $2.7 million for the three months ended September 30, 2024, a decrease of $1.8 million compared to loss from operations of $931,366 for the prior year period. The decrease was primarily due to:

- decrease in revenues of $0.3 million from company-owned or managed clinics; plus
- $1.5 million net increase in operating expenses due to the re-franchising efforts with changes in the following: (i) an increase in net loss on disposition or impairment of $2.9 million, (ii) an increase in selling and marketing expenses of $0.2 million, (iii) a decrease in depreciation and amortization expense of $1.1 million, (iv) and a decrease in utilities and facilities expenses of $0.5 million.

#### Franchise Operations

Our franchise operations segment had income from operations of $5.6 million for the three months ended September 30, 2024, an increase of $0.5 million, compared to income from operations of $5.1 million for the prior year period. This decrease was primarily due to:

- increase of $1.1 million in total revenues; partially offset by
- increase in cost of revenue of $0.2 million driven primarily by an increase in the number of franchised clinics in operation during the current period, along with continued sales growth in existing franchised clinics in regional developer regions,
- increase in selling and marketing expenses of $0.3 million driven by an increase in advertising fund expenditures from a larger franchise base; and
- increase of $0.1 million in payroll-related expenses.

#### Unallocated Corporate

Unallocated corporate expenses for the three months ended September 30, 2024 increased by $0.9 million compared to the prior year period, primarily due to an increase of $0.7 million of professional services primarily related to the chief executive search and IT support plus increases in payroll-related expenses of $0.3 million partially offset by decrease in accounting and legal fees of $0.1 million.

### Loss from Operations - Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

| Nine Months Ended September 30, | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Loss from Operations | $(5,593,597) | $(1,925,711) | $(3,667,886) | 190.5% |

#### Consolidated Results

Consolidated loss from operations increased by $3.7 million for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023, primarily due to an increase in unallocated corporate expenses partially offset by increased total revenues of $3.1 million for the nine months ended September 30, 2024.

#### Corporate Clinics

Our corporate clinics segment had loss from operations of $1.5 million for the nine months ended September 30, 2024, a decrease of $0.2 million compared to loss from operations of $1.3 million for the prior year period. The decrease was primarily due to:

- decrease in revenues of $0.1 million from company-owned or managed clinics; plus
- $0.5 million increase in payroll-related expenses; offset by
- $0.2 million decrease in selling and marketing expenses; and
- $0.2 million net decrease in operating expenses due to the re-franchising efforts with changes in the following: (i) a decrease in depreciation and amortization expense of $2.8 million, (ii) a decrease in utilities and facilities expenses of $1.9 million, and (iii) an increase in net loss on disposition or impairment of $4.5 million.

#### Franchise Operations

Our franchise operations segment had income from operations of $14.9 million for the nine months ended September 30, 2024, an increase of $1.0 million, compared to income from operations of $13.9 million for the prior year period. This increase was primarily due to:

- increase of $3.2 million in total revenues; plus
- decrease of general and administrative expenses related to reacquired regional developer rights of $0.3 million; partially offset by
- increase of $0.7 million in cost of revenues primarily due to an increase in regional developer royalties; and
- increase of $1.5 million in operating expenses, primarily due to an increase in: (i) selling and marketing expenses resulting from a larger franchise base of $1.1 million, (ii) payroll-related expenses of $0.7 million, partially offset by (iii) reacquired franchise rights of $0.3 million in 2023.

#### Unallocated Corporate

Unallocated corporate expenses for the nine months ended September 30, 2024 increased by $4.5 million compared to the prior year period, primarily due to litigation expenses, including settlement costs related to employment matters that were outside the normal course of business of $1.5 million incurred for the nine months ended September 30, 2024 and no comparable costs for the same period in 2023 plus increases in state and local taxes of $0.1 million, increases in insurance costs of $0.1 million and increases in the following to support the re-franchising strategy efforts: (i) payroll and related expenses of $1.1 million; (ii) professional and advisory fees of $1.2 million; (iii) and legal and accounting fees of $0.5 million.

### Other Income (Expense), Net

| Three Months Ended September 30, | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Other income (expense), net | $83,333 | $(6,244) | $89,577 | 1,434.6% |

Other income (expenses), net increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to decreased interest expense due to the pay down of the outstanding balance on our Debt under the Credit Agreement in 2024.

| Nine Months Ended September 30, | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Other income (expense), net | $198,873 | $3,708,399 | $(3,509,526) | 94.6% |

Other income (expenses), net decreased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to the recognition and receipt of the $3.8 million of ERC, net of the consulting fee, in the first quarter of 2023, partially offset by net interest income (expense) of $0.3 million.

### Income Tax Expense

| Income Tax Expense (Benefit) | 2024 | 2023 | Change from Prior Year | Percent Change from Prior Year |
| --- | ---: | ---: | ---: | ---: |
| Three Months Ended September 30, | $62,585 | $(188,018) | $250,603 | (133.3)% |
| Nine Months Ended September 30, | $419,834 | $493,286 | $(73,452) | (14.9)% |

Income tax expense increased during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to increased earnings in the variable interest entities partially offset by a change in the valuation allowance assessment as of December 31, 2023 at the Joint Corp.

Income tax expense decreased during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to decreased earnings before income tax expense and a change in the valuation allowance assessment as of December 31, 2023 at the Joint Corp, which was partially offset by increased earnings at the variable interest entities.

### Non-GAAP Financial Measures

The table below reconciles net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023.

| Non-GAAP Financial Data: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net (loss) income | $(3,165,139) | $(716,273) | $(5,814,558) | $1,289,402 |
| Net interest expense | (83,333) | 6,244 | (198,873) | 70,905 |
| Depreciation and amortization expense | 1,239,233 | 2,349,206 | 4,166,952 | 6,893,529 |
| Tax expense (benefit) | 62,585 | (188,018) | 419,834 | 493,286 |
| EBITDA | (1,946,654) | 1,451,159 | (1,426,645) | 8,747,122 |
| Stock compensation expense | 430,250 | 526,069 | 1,475,710 | 1,209,296 |
| Acquisition related expenses | — | 15,222 | 478,710 | 873,214 |
| Loss on disposition or impairment | 3,805,218 | 904,923 | 5,602,641 | 1,114,738 |
| Restructuring costs | 153,182 | — | 454,457 | — |
| Litigation expenses | (9,000) | — | 1,481,000 | — |
| Other income related to the ERC | — | — | — | (3,779,304) |
| Adjusted EBITDA | $2,432,996 | $2,897,373 | $8,065,873 | $8,165,066 |

Adjusted EBITDA consists of net income (loss) before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, 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 ERC. There were no costs related to restatement filings or bargain purchase gain for the three and nine months ended September 30, 2024 and 2023. We have provided Adjusted EBITDA because it is a non-GAAP measure of financial performance commonly used for comparing companies in our industry. You should not consider Adjusted EBITDA as a substitute for operating profit as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. We may calculate Adjusted EBITDA differently from other companies.

We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other outpatient medical clinics, which may present similar non-GAAP financial measures to investors. In addition, you should be aware when evaluating Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same manner.

### Liquidity and Capital Resources

As of September 30, 2024, we had unrestricted cash and short-term bank deposits of $20.7 million and $20 million of available capacity under the Line of Credit. While unfavorable global economic or political conditions create potential liquidity risks, as discussed further below, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, our anticipated cash flows from investments as we execute our re-franchising strategy and amounts available under our Line of Credit will be sufficient to fund our anticipated operating and investment needs for at least the next 12 months.

While the interruptions, delays and/or cost increases resulting from, political instability and geopolitical tensions, economic weakness, inflationary pressures, increase in interest rates and other factors have created uncertainty as to general economic conditions for 2024 and beyond, as of the date of this Quarterly Report on Form 10-Q, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. For the remainder of 2024, we expect to use or redeploy our cash resources to support our business within the context of prevailing market conditions, which, given the ongoing uncertainties described above, could rapidly and materially deteriorate or otherwise change. Our long-term capital requirements could be dependent on our ability to access additional funds through the debt and/or equity markets. If the equity or debt markets deteriorate, including as a result of economic weakness, political unrest or war, or any other reason, it may make any necessary equity or debt financing more difficult to obtain in a timely manner and on favorable terms, if at all, and if obtained, it may be more costly or more dilutive. From time to time, we consider and evaluate transactions related to our portfolio and capital structure, including debt financings, equity issuances, purchases and sales of assets, and other transactions. There can be no assurance that we will be able to generate sufficient cash flows or obtain the capital necessary to meet our short and long-term capital requirements.

### Analysis of Cash Flows

Net cash provided by operating activities decreased by $6.0 million to $5.3 million for the nine months ended September 30, 2024, compared to $11.3 million for the nine months ended September 30, 2023. The decrease was primarily attributable to the receipt of the $4.8 million ERC in the prior period, in addition to an increase in general and administrative expenses over the prior year period.

Net cash used in investing activities was $0.5 million and $4.9 million for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, this included proceeds from sales of clinics of $0.4 million, and purchases of property and equipment of $0.9 million. For the nine months ended September 30, 2023, this included acquisitions of $1.1 million, and the purchases of property and equipment of $3.8 million.

Net cash used in financing activities for the nine months ended September 30, 2024 was $2.0 million, compared to $0.2 million in net cash provided by financing activities for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, this included paying down the outstanding balance on its Debt under the Credit Agreement of $2.0 million.

### Recent Accounting Pronouncements

See Note 1, *Nature of Operations and Summary of Significant Accounting Policies,* to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information regarding recently issued accounting pronouncements that may impact our financial statements.

### Off-Balance Sheet Arrangements

During the nine months ended September 30, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.

## Market risk

As filed, 293 characters.

As of September 30, 2024, there have been no material changes to the quantitative and qualitative disclosures about market risk appearing in Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2023.

## Controls and procedures

As filed, 1,851 characters.

### Evaluation of Disclosure Controls and Procedures

Our management evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures were designed to provide reasonable assurance of achieving such objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our management concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 232 characters.

We documented our risk factors in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our risk factors since the filing of that Annual Report on Form 10-K.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-046464. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.