JYNT - NASDAQ

Good afternoon, and welcome to The Joint Corp. Fourth Quarter and Year End 2024 Financial Results Conference Call. All participants will be in a listen-only mode. 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, Sanjiv Razdan, and CFO, Jake Singleton. Please note, we are using a slide presentation that can be found at ir.thejoint.com. Today, after the close of the market, The Joint Corp. 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 these 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-Ks and 10-Q as well as other reports the company files from time to time with the SEC. Finally, any forward 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. 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 nonfinancial 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 the 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 thirteen or forty-eight full months and exclude any clinics that have been closed. Turning to slide three, it is my pleasure to turn the call over to Sanjiv 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 Corp. in which I committed to sharing observations from my first one hundred 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 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 Corp. 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 served close to a million new patients last year. Nine hundred and fifty thousand 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 Corp. 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 call. Our strengths include size, originality, and longevity. Capitalizing on our first mover advantage, we have over nine hundred and sixty clinics making The Joint Corp. larger than our next ten 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 one thousand 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 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 of 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 quality of life through routine and affordable chiropractic care. Now 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 thirteen months was 6% in Q4 2024, compared to 4% in Q3 2024. System-wide comp sales for mature clinics opened forty-eight 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 EBITDA 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 one hundred percent 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 shared corporate clinics. Turning to Slide seven. We have constructed a multiyear 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 refranchise, 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 twelve to eighteen 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 eight, 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 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 among our patients gives us the foundation to turbocharge sales and profits for both our franchisees and the company. Also, as we refranchise, 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 refranchising, 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 refranchising and are striving to be a world-class pure play franchiser. 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 refranchising to bring into our system some strong new multisite 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 ten. 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, would 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.

Thanks, Sanjiv. Let's turn to slide twelve. And let's discuss our operating metrics. During 2024, we performed fourteen point seven million patient adjustments, eight percent more than in 2023. We treated one point nine million unique patients during the year, of which nine hundred and fifty-seven thousand were new to The Joint Corp. Of that thirty percent of that thirty-six percent, that were new to chiropractic care, many converted to membership and eighty-five percent of our system-wide growth sales came from monthly membership in 2024. System-wide sales were up nine percent in 2024, compared to twelve percent in 2023. System-wide comp sales for all clinics opened thirteen months were four percent for both years. Comp sales trended up from the second quarter and third quarters of 2024 reaching six percent for the fourth quarter and demonstrating our positive momentum. System-wide comp sales for mature clinics opened forty-eight months were negative two percent for the full year, yet improved from negative two percent in Q3 to modestly positive for Q4. And we are pleased with this upward trend. As previously indicated, we expected franchise license sales to be impacted by our refranchising strategy. During 2024, we sold forty-six franchise licenses, compared to fifty-five in 2023. At year-end, we had sixteen regional developers, covering approximately fifty-seven percent of the network. And we had a hundred and forty-five franchise licenses in active development. Turning to slide thirteen. Let's discuss our clinics. In 2024, we opened fifty-seven franchise clinics. Refranchised three clinics, and closed eighteen franchise clinics, including three relocations that will be reopened. And seven corporate clinics, including three nontraditional corporate units on air force bases. At December thirty-first 2024, we had nine hundred and sixty clinics, of which eight hundred and forty-two or eighty-seven percent are franchise clinics. Turning to slide fourteen, I'll review our financial results. At year-end, we recorded the corporate owned or managed clinics as discontinued operations for 2024 and recast 2023 for an apples-to-apples comparison. In 2024, this resulted in the elimination of seventy point two million dollars in associated revenue, sixty-six point five million dollars in associated SG&A, ten point four million dollars in associated impairment, for a net loss from discontinued operations of seven million dollars. As Sanjiv mentioned, 2025 will be a year of transition, as we conclude the refranchising efforts. Financially, for the historical periods presented, we have not yet experienced the benefit from our corporate clinic revenues transitioning to royalties and fees from franchise clinics. In addition, during these historical periods, we have not been able to fully reduce our unallocated G&A expense. We are critically focused on reducing the G&A profile, which will improve the bottom line greatly in the coming years. Essentially, what we're trying to signal is that we will shed more overhead compared to what is currently reported in our continued operations. And we expect to make meaningful expense reductions and improve our profitability profile. In 2026, we expect to further grow net new clinic openings, system-wide sales, comp sales, and adjusted EBITDA. Now I'll review our continuing operation financial results, for Q4 2024, and compared to Q4 2023. Revenue from franchised operations reached fourteen point four million dollars compared to twelve point seven million dollars. The fourteen percent increase reflects the greater number of clinics in operation continued organic growth. Cost of revenues were three point two million dollars up twelve percent over the same period last year. Reflecting the associated higher regional developer royalties and commission. Selling and marketing expenses were two point seven million dollars compared to one point seven million dollars reflecting our strategic decision to continue to support our recently started effective marketing campaign, and by increasing our working media spend. Hosting our biennial franchise conference, and incurring carrying cost as we set up a new marketing agency. Depreciation and amortization expenses increased five percent compared to the prior year period. G&A expenses were seven point two million dollars compared to six point nine million dollars in the same period last year. During the quarter, we accrued for a medical malpractice settlement of one point five million dollars. The increase also includes employee bonuses, senior management search and restructuring costs, IT maintenance and support, and audit costs. Partially offset by one-time expenses in 2023. Income tax expense was thirty-seven thousand dollars compared to eleven point three million dollars in Q4 2023. Net income from continuing operations was nine hundred and eighty-six thousand dollars or zero point zero six dollars per diluted share, improving from a loss of ten point two million dollars or zero point six nine dollars per basic share in Q4 2023. I'll provide adjusted EBITDA for three categories. For continuing operations, discontinued operations, and consolidated operations. Adjusted EBITDA for continuing operations was two point one million dollars compared to two point two million dollars. Adjusted EBITDA for discontinued operations was one point two million dollars compared to one point eight million dollars and adjusted EBITDA for consolidated operations were three point three million dollars compared to four million dollars. Onto slide fifteen. I'll review our balance sheet and cash flow. At December thirty-first 2024, our unrestricted cash was twenty-five point one million dollars compared to eighteen point two million dollars at December thirty-first 2023. Cash flow from both continuing and discontinued operations was nine point four million dollars. The net proceeds of the sale of three clinics were partially offset by ongoing IT CapEx, and a two million dollar Q1 2024 repayment of the line of credit to JPMorgan Chase. Through this facility, we've retained immediate access to twenty million dollars through February of 2027. Federal tax return net operating loss carry forward at December thirty-first 2024 was nine point one million dollars. On to slide sixteen, for a review of our financial results for 2024 compared to 2023. Revenue was fifty-one point nine million dollars compared to forty-seven million dollars up ten percent. Net loss from continuing operations was one point five million dollars or zero point one zero dollars per basic share, compared to ten point eight million dollars or zero point seven three dollars per basic share. Adjusted EBITDA for continuing operations was two point four million dollars compared to four point five million dollars. Adjusted EBITDA for discontinued operations, including an was nine million dollars compared to seven point seven million dollars. Adjusted EBITDA for consolidated operations were eleven point four million dollars compared to twelve point two million dollars. On to slide seventeen, we are presenting 2025 guidance. System-wide sales are expected to be between five hundred and fifty and five hundred and seventy million dollars compared to five hundred and thirty point three million dollars in 2024. System-wide comp sales for all clinics opened thirteen months or more, are expected to be in the mid-single digits compared to an increase of four percent in 2024. Consolidated adjusted EBITDA to be between ten million dollars compared to eleven point four million dollars in 2024. The 2025 consolidated adjusted EBITDA estimate includes an adjustment for approximately four point four million dollars related to stock-based compensation and depreciation and amortization and the company will factor in additional impairment or restructuring charges related to the refranchising should they occur. New franchise clinic openings, excluding the impact of refranchised clinics, are expected to be between thirty and forty compared to fifty-seven in 2024. In 2025, franchise license sales in clinic openings are likely to be less than 2024, as we're working through the impact of our refranchising efforts. Further, we see the impact of economic headwinds, stubborn inflation, a volatile consumer sentiment impacting the beginning of 2025. That said, as clinics shift from corporate-owned or managed to franchised, there will be a transformative financial impact. Our franchise royalties and fees will increase and we will rationalize our unallocated G&A expenses. The Joint Corp. will be more profitable. And with that, turn the call back over to you, Sanjiv.

Thanks, Jake. Turning to Slide nineteen, we have quite a bit about which to be excited. In addition to having a large and growing market, there is a significant white space. And we have only scratched the surface. The annual spending on chiropractic care is estimated to be twenty point six billion dollars annually with out-of-pocket spending raising from thirty-seven percent to forty-two percent of that total. The Joint Corp. represents approximately six to seven percent of that. More importantly, with the belief of many that our current health care and insurance system is broken. In this backdrop, our mission to improve the quality of life through routine and affordable chiropractic care is incredibly relevant. Our concierge-style service model in convenient retail locations at an affordable price resonates with patients seeking health and wellness. Further, within the U.S, looking at our demographic projections, we have room to more than double our clinic base to approximately nineteen hundred and fifty. We are only fifty percent of the way there. And, of course, we have the rest of the world to consider as well. We have an attractive asset-like model. This is true for the company as well as our franchisees. The Joint Corp. has one of the lowest initial build-outs amongst franchises compared to pilates studios, saunas, gyms, and so on. Further, The Joint Corp. as a company will benefit economically as we shift to a pure franchise concept and no longer carrying the cost of operating clinics. Third, our positive patient experience and affordable memberships deliver strong recurring revenue. In 2024, eighty-five percent of our revenue was contributed by memberships. And we are determinedly enhancing the experience and working to elongate the average time of a membership. All of which support this positive metric. Fourth, as the first to revolutionize access to affordable quality chiropractic care, we have built a premier brand scale, and first mover advantages. And now we have a new detailed strategic plan. In 2025, we have already begun. We will strengthen our core and reignite growth through patient-facing technology, dynamic revenue management, and advanced marketing. We will improve profitability through our refranchising and cost rationalization. Turning to slide twenty, while we may not have a material public update for each initiative every quarter, I can assure you we will be doing plenty on a daily basis. We are committed to driving success, which we will define as growth in new clinic openings, system-wide sales, comp sales, and adjusted EBITDA. We have a very talented and committed team focused on execution, and I'm confident we will emerge as a stronger company. Before we open for questions, I would like to welcome Craig Sherwood, our new Senior Vice President of Development with over twenty-five years experience in franchise development in the health and wellness and QSR industries, Craig's expertise spans the full development lifecycle including franchise recruitment, market planning and real estate strategy site selection, and design and construction. At The Joint Corp., he will be responsible for leading franchise sales and new clinic development as well as building our enterprise accounts business. I would like to congratulate Dr. Anthony Tramm, one of our multi-unit franchisees, for being named 2024 Franchisee of the Year by the International Franchise Association at their sixty-fifth IFA convention in Las Vegas last month. The Franchisee of the Year awards are given to the top franchisees from IFA member brands across industries from around the country and the world. Well done, Dr. Tramm. Also, in January, we announced we won another accolade. Franchise Times recognized The Joint Corp. as number thirty-eight on the Fast and Serious 2025, the annual list of the smartest growing franchises. Last, and certainly not least, I would like to invite you to meet us at the thirty-seventh Annual ROTH Conference next week. With that, operator, I'm ready to begin Q&A. Thank you.

We will now begin the question and answer session. And your first question today will come from Jeffrey Van Sinderen with B. Riley Securities. Please go ahead.

Hi, everyone. I guess I wanted to start with any comments you have around potentially maybe seeing a little bit slower consumer behavior in Q1 metrics. And then as a follow-up to that, any thoughts on how we might model the quarterly progression this year?

Jeff, yes. I'll play tag with Jake on this one. Yep. I think we are seeing indications of consumers responding to the stubborn inflation and the continued uncertainty in the macros. Our target patient, their household income is somewhere between $50,000 and $100,000 annually, which makes us somewhat susceptible to that impact. With that said, we've just provided you with guidance and I'll turn that over to Jake to add any additional color.

Yeah. As we think about the progression, and I'll focus the comments really on the top line system-wide growth sales. Looking at the promotional calendar, we don't have too much shake-up in terms of our large-scale promotions. So I would expect the cadence of our sales to be very similar to years past. Really, our two largest promotions are still our package promotion, our Black Friday promotion in November, as well as our annual wellness drive in December. And those always drive incremental sales in the fourth quarter. But I would expect the cadence to be very similar to years past.

Okay. Great. And then any color you can give us on kind of retention rates, churn, attrition, what you're seeing and trends there with patients?

Yeah. I can start, and Sanjiv tackle in? I think as we look at our core metrics, new patients, conversion onto our and attrition. I think we ended the year on a strong note as it relates to conversion. Our attrition really stayed pretty flat to where we were seeing it for the most part in Q4. We did start to implement some of our fringe pricing increases. Right? What Sanjiv referred to is that dynamic revenue management really increasing our walk-in rate at the tail end of the fourth quarter. And really what we're seeing is that drive an increased conversion to our overall wellness plans, those active members in our system, which we're finding encouraging. So far in January and February, our attrition is slightly January for us is always a slight uptick. Compared to the run rates in the fourth quarter, so not out of the ordinary there. And we saw it start to level off in February. So conversion remains strong. I think we need to stay critically focused on our new patients. And make sure we're continuing to drive clinics into our system.

Yeah. You've captured everything, Jake. Nothing to add to that.

Okay. Great. And then if I could squeeze in one more. Just I know you said the vast majority of corporate clinics are under LOI. Is there a number we can put you back and you just refresh our memory of how many are how many are to go away or be under LOI and how many remain and then maybe what the time frame is around that process?

So we have a hundred and twenty-five corporate clinics. And our intent is to refranchise all a hundred and twenty-five. The vast majority of them, Jeff, are under LOI negotiations at this point. The ones that are not, we're actively addressing that situation as well.

Okay. Great. Thanks for taking my questions. I'll get the rest offline.

Okay. And your next question today will come from Jeremy Hamblin with Craig Hallum Capital Group. Please go ahead.

Thanks, and congrats on making progress here on the refranchising efforts. I wanna come back to follow-up Jeff's question on kind of trends and, you know, impact that we're seeing across kind of consumer services companies. You know, first, your guidance for the year is for system same-store sales to be up. You know, mid-single digit. I wanted to get a sense for you know, how you're trending kind of year to date if you know, a, if your system same-store sales are up positive, year to date and and then kind of related to that, are they kind of at or below the full year guidance of mid-single digit just given that your compares are quite a bit tougher in the second half of the year than they are in the first half of the year.

Sure. Yeah. So far, the trends in January are consistent. With the figures that we saw in the tail end of Q4. So that run rate continued. February was a little bit odd for us in that we're rolling over a leap year, so one additional day of sales last year. As well as we ran a small incremental new member promotion, which provided a slight discount to the first month of fees. And then as they come back for that second month, they jump back onto the standard rate. So not a great comparative in terms of February period over period. But so far, we're seeing consistency, and I would expect Q1 to be consistent with kinda where we were trending at the tail end of last year.

Got it. That's helpful. And then just coming back to, you know, to the refranchising efforts and, you know, just is there any color you might be able to share in terms of, you know, valuation that you're seeing on those, you know, LOIs. I recognize that you're still working on a lot of them. But you know, can you give us a sense from, you know, whether it's a measure of EBITDA or a you know, sale revenue per clinic any color you might be able to share on on the kind of the value you expect to recognize from selling a hundred and twenty-five units?

Yeah, Jeremy, since we're actively negotiating the LOIs right now, it's hard to provide you know, a lot of detail around the multiple that we are negotiating. But I think I'll let Jake add any color if you'd like to to that.

Yeah. I'll walk you through the construct in terms of you know, how the majority of bidders are looking at the portfolio. Again, the vast majority of the units are profitable. Alright? So most of the bidders are looking at it as a multiple of EBITDA. They're looking at it through a lens of what would be a franchise-centric EBITDA. Right? So our corporate clinic multiple does not or our corporate clinic EBITDA doesn't factor in, you know, the royalty streams that they'll have to take on. So it's really an adjusted EBITDA number based on our corporate clinic pro portfolio. Pro formas, and then they're applying a multiple against that and assuming because we're marketing them in larger clusters that there will be a slight outside the four-wall G&A burden. So really, that's the construct in terms of how a lot of the people viewed the valuation.

Got it. And then wanted to come back to a question I there's a little bit of noise here, obviously, with continuing versus discontinued operations. But if we look at just continuing operations, the revenues were up about one point seven million year over year. Your sales and marketing cost was up about a million dollars. Related to that one point seven million dollars in revenue growth. And you know, just coming back to you know, how should we be thinking about the framework of you know, kind of customer acquisition costs and and what the kind of leverage points that you might expect to see know, for kind of future revenue growth and know, the types of costs, especially sales and marketing that you would expect to have to generate know, every incremental dollar of revenue growth.

Yeah. A couple dynamics there. I think the first that I would point out is we did make the strategic investment to increase our working media spend to try to provide some tailwind to some of the marketing campaigns that we launched. So I think you're seeing that slight incremental investment. You know, in the full year line, you know, we had our biennial national conference. So you're, you know, naturally seeing a little bit more flow through in the years that we have that conference. And then, you know, finally, at the end of the day, we went through an RFP process and are in the process of onboarding a new marketing agency. And so right now, we've got some know, what I'll call initial kinda transitionary or startup costs as we as we look to onboard that new agency. And so those are some of the incremental investments in the period. What I would tell you on a macro basis is you know, I think where we're seeing some of the new patient pressure is in that organic lead. And so what that's causing is a slight shift to have to put those paid media dollars to work and I think you're seeing some of that impact as well.

Got it. Got it. And then I wanna come back to the kind of pricing strategy here. And just get a sense for you know, you have I think you've taken maybe three or possibly four price increases over the last seven to eight years. In total. But I believe that most of your legacy customers, you know, some of them may still be on plans going the way back to maybe 2017. Wanted to see if you could give us you know, kind of the buckets for the how many of your customers are in each of the varying kind of what's called pricing years. You know? So how many are still on 2017 or 2019 pricing?

Versus 2018? Correct. Yeah. And March of 2022 is the last time we took a wholesale price increase in terms of all of our tiers across the country. And that's really on that wellness plan figure. As I mentioned in Q4, we increased the walk-in rate. But, you know, we'll continue to tinker with that pricing model throughout the year. As we think about the membership for 2024, I'll break it into two buckets for you. By the end of the year, we had about eighty percent of our active members were on our standard rate. And about twenty percent. And as you mentioned, you know, it kinda cascades down, the majority of those being one tier down or about a ten dollar discount to the posted rate today. And it gets pretty small thereafter. So you know, the vast majority are on the standardized price but we do still have, you know, a good chunk of those legacy members around.

Yeah. Just to add to that, what we're how we're thinking about this differently and in terms of dynamic revenue management is essentially solving for what you called out. The last time we took meaningful pricing on our wellness programs is March 2022. We continue to see inflation in the model. And as I had mentioned on our last call, that has put pressure not taking pricing to offset the inflationary pricing. Inflationary cost has shrunk clinic level margins. So what we're pivoting towards is this dynamic revenue management concept, which means that we do not need to have this one rip the band-aid and take pricing on all other pricing bands? We are actively testing and learning how to take all levers within the pricing model. Example, we just took pricing on the walk-in price, which has had a very positive effect for us by increasing conversion rates. And we also don't think that we always need to take that sort of pricing in ten dollars increments on our wellness plans. That could be happening in much smaller discrete numbers. And we could be also engaging our legacy, the twenty percent wellness plan members that are on legacy pricing to explore how much pricing we could take with them as well. So now this is going to be an ongoing process for us. Through 2025 and beyond.

Great. Thanks for taking all the questions, and good luck this year.

Thanks, Jeremy. Thank you.

And your next question today will come from George Kelly with ROTH Capital Partners. Please go ahead.

Everyone, thanks for taking my questions. Maybe if we could start just as a follow-up on the refranchising. Discussion. Any way you can help us under just the timing I understand you're in the final stages. It seems like you've been in the final stages there for a couple months. So just wondering, like, it should this be something that's mostly wrapped up in the first half or just any kind of context there would be helpful.

George, absolutely. As you know that we have now got the one hundred and twenty-five corporate clinics bundled in five distinct bundles that we have been marketing. So as we're negotiating the LOI, it is a little bit more complex because the size of it each bundle involves more clinics. So it's it it's just taking time in terms of due diligence, etcetera. We hope that we will be able to wrap this up closer to the first half, than in the first than in the second half of the year. So that is what our intent is.

Okay. Okay. And then second question, Sanjiv, you talked to I think in response to one of the part maybe Jeremy's question about four-wall margin dynamics. And I guess the question is just have you seen any stability there? And how aggressively do you plan to take pricing this year to help stabilize that line? Or is it still you know, is the labor environment still challenging and sort of well, I guess, what are you seeing in four-wall?

Yeah. So we're actively now collecting franchisee P&Ls for 2024. So we'll get once we have them in those submissions, we'll have a much more informed view of what is happening in our franchisee P&Ls. But I can give you our current understanding. I think the labor market has been relatively stable through 2024. We are seeing the cost of hiring our doctors of chiropractic remain pretty stable. As the cost of our wellness coordinators, which is really what drives the main variable cost in our clinic economic model. So we're seeing stability there. In terms of the pricing, I think we've got to be thoughtful, and that's why we're just calling it a dynamic revenue management process. Which essentially means that you know, the inflationary climate has been stubborn. And even though we haven't taken meaningful pricing in three years, we've got to be cautious about striking the right balance between optimizing the per visit value that we can through pricing, but also make sure that we're not creating a value problem. So that is why what we're doing is testing our pricing models in a few different markets with our franchisees to see how much permission we have. I wouldn't say that our plan is to take aggressive pricing, but to take ongoing price just constantly keep improving the clinic profit profile. On a gentle basis, just constantly optimizing our opportunity.

Yeah. To put it in context to the comp guide, George, I think you're looking at about one and a half to maybe two percent on the high side. Being comp or price influenced.

Okay. Okay. That's helpful. And then last one for me is on a comment from your prepared remarks about new services and retail products as just different things that you're exploring. How far along is that exploration? Is that something we could see this year? And can you talk a little bit about more what services and retail products are under consideration?

Yeah. So as I explained in my prepared remarks, George, the 2025, the vast majority of this year and going into some period of 2026 as well, we're calling it a Joint 2.0. And the main focus of Joint 2.0 is to strengthen our core and reignite growth. For that, I've outlined the various revenue drivers and strengthening clinic economic drivers that we're focusing on. Joint 3.0 will come maybe twelve to eighteen months later. Which is where we anticipate adding on incremental revenue layers from additional service, stroke services, new category usage occasions, potentially retail opportunity, and potentially unlocking dense urban markets. And enterprise business accounts. So those are the various levels and for our 3.0 phase. But to give you a real-life example of what we mean by some kind of a service, I'll give you the an easier one for us relatively easy one for us is to potentially go and optimize in a meaningful way the opportunity to be a provider of chiropractic treatment for pediatrics. And create a meaningful usage occasion from our patients around that. Or it could so that is just a use education broadening and incremental revenue. But also we could look at providing clinical care an additional treat one that takes, let's say, a two to three-minute incremental over the current adjustment time and something that the patients would benefit from that we can charge for. So all of that will be explored this year. But we're not advanced and to an extent of being ready to launch anything. I think the management energy and focus is going to go to just strengthen our core and reignite growth this year.

Okay. That's great. That's all I had. Thank you.

And your next question today will come from Anthony Vendetti with Maxim Group. Please go ahead.

Okay. Thanks. So just to be I just want to look at the guidance statement. The first one that says between five hundred and fifty and five seventy million dollars in system-wide sales, and since all of the company-owned clinics, the hundred plus, are in discontinued ops. This is the system-wide sales, and then what you're gonna recognize as revenues is going to be the service and royalty fees off of that five hundred and fifty, five hundred and seventy million. So I guess the question I have is what is the current percentage of royalty fees and service fees associated with that five hundred and fifty to five hundred and seventy million. Or what do you expect it to be in twenty-five?

Yeah. I think a couple points to put out there because there's a lot of moving pieces. Right? Twenty twenty-five for us is still gonna be that transitionary year where you've got your corporate clinics around for about half the year. And then, incrementally flipping to those franchise royalties and fees, kind of in the back half of the year as we complete that refranchising effort. So you'll still kinda have a mixed year in terms of your overall GAAP revenues, which is why we didn't put out a GAAP revenue guide just, you know, not having full line of sight into when the timing of those transactions will formally close. So as you think about the fiscal 2024 period, you can look at our discontinued operations. It's kinda carve-out schedule within the deck. And you can see that we had seventy point two million of GAAP revenues related to those corporate clinics. It's closely correlated to the gross sales from those clinics. We do have to defer a portion of it for GAAP purposes. So, you know, maybe the gross sales were slightly higher than that. But the easiest way to contextualize is just take that seventy million from our corporate clinics and say, okay, that turns into roughly a ten a ten and a half percent royalty structure. When you have your seven percent royalty, your two percent NMF contribution, and your technology fee. So that's a way to kinda get a semblance for the annualized rate of what we'll flip into that royalty stream. I think the other thing that we wanna critically call out is that you know, all the historical presentations of the continuing operations don't reflect all the G&A rationalization that's still to come. That is the critical focus of management to make sure that we're rightsizing the G&A so that we can, at the end of the refranchising effort, be a more profitable rationalization in the historical presentations but those G&A figures you know, we will take a pretty good swing at as we conclude the refranchising effort.

Do you have an estimate just as a follow-up on there of once the refranchising effort is complete, whether it's a dollar amount or percent that's gonna come out of corporate SG&A?

We're not putting a forward guide out on that piece of it. The directional signal is that you know, on an annualized basis, we expect to have more adjusted EBITDA than we did under our current kind of mixed structure.

Okay. Great. Alright. Thanks so much. I'll hop back in the queue. Appreciate it.

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. I look forward to getting to know you at conferences, and non-deal roadshows. Have a good day, and know that at The Joint Corp. we always have your back.