The Joint Corp. Reports Second Quarter 2021 Record

– Grows Revenue 61%, System-wide Sales 64%, and 
System-wide Comp Sales 53%, Compared to Q2 2020 – 
– Reports Operating Income of $2.0 Million, Up 687% Compared to Q2 2020 – 
– Posts Adjusted EBITDA of $3.8 Million, Up 237% Compared to Q2 2020 –

SCOTTSDALE, Ariz., Aug. 05, 2021 (GLOBE NEWSWIRE) — The Joint Corp. (NASDAQ: JYNT), a national operator, manager, and franchisor of chiropractic clinics, reported its financial results for the quarter ended
June 30, 2021.

Financial Highlights: Q2 2021 Compared to Q2 2020

  • Grew revenue 61% to $20.2 million.
  • Increased system-wide sales1 by 64%, to $87.8 million.
  • Reported system-wide comp sales2 of 53%.
  • Posted operating income of $2.0 million, compared to $259,000.
  • Reported Adjusted EBITDA of $3.8 million, compared to $1.1 million.

Q2 2021 Operating Highlights

  • Sold 63 franchise licenses, compared to 11 in Q2 2020.
  • Increased total clinics to 633 at June 30, 2021, 555 franchised and 78 company-owned or managed, up from 592 at March 31, 2021.
    • Opened 36 new franchised clinics, compared to 12 in Q2 2020.
    • Opened 5 greenfield clinics, compared to 1 in Q2 2020.
    • Acquired 8 previously franchised clinics, compared to no activity in Q2 2020.

“Our business model continues to deliver strong financial results,” said Peter D. Holt, President and Chief Executive Officer of The Joint Corp. “In the second quarter, we broke records in franchise license sales, clinic openings, and system-wide sales driving all-time highs for the first half of the year. The six-month total for franchise license sales rose to 89, up from 35 and 75 for 2020 and 2019, respectively. The clinic openings for the first six months of the year increased to 54, up from 30 and 29 in 2020 and 2019, respectively. Additionally, system-wide sales reached 64% year-over-year, up from 2% and 34% in the second quarters of 2020 and 2019, respectively.”

“More importantly, our future is even brighter. These trends support long-term growth, which we expect to continue to accelerate and build upon our financial foundation. Already, we have opened 6 greenfield clinics in 2021, and we anticipate a faster pace in the latter half of the year. Based on performance and activity, we raised every element of our guidance. We continue to march toward our goal of 1,000 open clinics by the end of 2023, which we expect to be a tipping point for national brand recognition to drive growth at an even faster pace. Combined with the large and expanding chiropractic care market opportunity, we believe in our long-term ability to increase stakeholder value.”

1 System-wide sales include sales at all clinics, whether operated or managed by the company or by franchisees. While franchised sales are not recorded as revenues by the company, management believes the information is important in understanding the company’s financial 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. 
2 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.

Financial Results for the Three Months Ended June 30: 2021 Compared to 2020

Revenue was $20.2 million in the second quarter of 2021, compared to $12.6 million in the second quarter of 2020, reflecting a greater number of clinics, continued organic growth and the favorable comparison to revenues during the beginning of the pandemic in the prior year period. Cost of revenue was $2.0 million, compared to $1.4 million in the second quarter of 2020, reflecting the increase in franchised clinics and the associated higher regional developer royalties and commissions.

Selling and marketing expenses were $3.1 million, up 76%, driven by an increase in advertising fund expenditures from a larger franchise base and the timing of the national marketing fund spend as well as an increase in local marketing expenditures by the company-owned or managed clinics. General and administrative expenses were $11.6 million, compared to $8.5 million in the second quarter of 2020, primarily due to an increase in payroll and related expenses to support revenue growth and a greater number of clinics. As a percentage of revenue, general and administrative expenses during the second quarter of 2021 and 2020 were 57% and 68%, respectively, reflecting improved leverage in the operating model. The improvement is not expected to continue at that level in following quarters due to the opening of four greenfields at the end of June, the anticipated pace of more greenfields openings in the latter half of the year, and the related up-front expense of those openings.

Operating income was $2.0 million, compared to $259,000 in the second quarter of 2020. Income tax benefit was $666,000, compared to an expense of $118,000 in the second quarter of 2020. The income tax benefit was primarily driven by excess tax benefits from the exercise of stock options. Net income was $2.7 million, or $0.18 per diluted share, compared to $116,000, or $0.01 per diluted share, in the second quarter of 2020.

Adjusted EBITDA was $3.8 million, compared to $1.1 million in the second quarter of 2020. The company defines Adjusted EBITDA, a non-GAAP measure, as EBITDA before acquisition-related expenses, bargain purchase gain, net (gain)/loss on disposition or impairment, and stock-based compensation expenses. The company defines EBITDA as net income before net interest, tax expense, depreciation, and amortization expenses.

Financial Results for the Six Months Ended June 30: 2021 Compared to 2020

Revenue was $37.8 million for the first half of 2021, compared to $26.2 million in the same prior year period. Operating income and net income were $4.0 million and $5.0 million, compared to $1.0 million and $931,000 in the first half of 2020, respectively. Adjusted EBITDA was $7.2 million, compared to $2.8 million in the same prior year period.

Balance Sheet Liquidity

Unrestricted cash was $18.5 million at June 30, 2021, compared to $20.6 million at December 31, 2020. The change reflects net cash provided by operating activities of $9.0 million offset by $8.9 million of investing activities consisting of acquisitions, greenfield developments, and IT capital expenditures, as well as the $2.7 million repayment of the Paycheck Protection Program loan in March 2021.

Raised 2021 Guidance

Due to strong second quarter 2021 revenues, as well as increased franchise openings and greenfield activity, management raised all elements of its 2021 financial guidance.

  • Revenue is now expected to be between $77.0 million and $79.0 million, up from the May 6, 2021 guidance of between $73.5 million and $77.5 million. The updated mid-point reflects a 33% increase compared to $58.7 million in 2020.
  • Adjusted EBITDA – which includes the impact of a greater number of greenfields that will be more heavily weighted in the second half of the year – is expected to be between $12.5 million and $13.5 million, up from prior guidance of between $11.0 million and $12.5 million. The updated mid-point reflects a 43% increase compared to $9.1 million in 2020.
  • The expected number of franchised clinic openings has increased to be between 90 and 110, up from 80 to 100. The updated mid-point reflects a 57% increase compared to 70 in 2020.
  • The expected number of company-owned or managed clinic increases, through a combination of both greenfields and buybacks, has increased to be between 25 and 35, up from 20 to 30 clinics. The updated mid-point is 7.5 times greater than 4 opened in 2020.

Conference Call
The Joint Corp. management will host a conference call at 5 p.m. ET on Thursday, August 5, 2021, to discuss the second quarter 2021 results. Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 765-507-2604 or 844-464-3931 and referencing code 5959205 approximately 15 minutes prior to the start time. The accompanying slide presentation will be in the IR section of the website under Presentations and in Events. A live webcast of the conference call will also be available on the IR section of the company’s website at https://ir.thejoint.com/events. An audio replay will be available two hours after the conclusion of the call through August 13, 2021. The replay can be accessed by dialing 404-537-3406 or 855-859-2056. The passcode for the replay is 5959205.

Non-GAAP Financial Information
This release includes a presentation of non-GAAP financial measures. System-wide sales include sales at all clinics, whether operated by the company or by franchisees. While franchised sales are not recorded as revenues by the company, management believes the information is important in understanding the company’s financial 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. 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.

EBITDA and Adjusted EBITDA are presented because they are important measures used by management to assess financial performance, as management believes they provide a more transparent view of the company’s underlying operating performance and operating trends. Reconciliation of net income/(loss) to EBITDA and Adjusted EBITDA is presented in the table below. The company defines Adjusted EBITDA as EBITDA before acquisition-related expenses, bargain purchase gain, net (gain)/loss on disposition or impairment, and stock-based compensation expenses. The company defines EBITDA as net income before net interest, tax expense, depreciation, and amortization expenses.

EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or cash flows from operations, as determined by accounting principles generally accepted in the United States, or GAAP. While EBITDA and Adjusted EBITDA are used as measures of financial performance and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. EBITDA and Adjusted EBITDA should be reviewed in conjunction with the company’s financial statements filed with the SEC.

Forward-Looking Statements
This press release contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of industry trends, our future financial and operating performance and our growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that could contribute to these differences include, but are not limited to, the continuing impact of the COVID-19 outbreak on the economy and our operations (including temporary clinic closures, shortened business hours and reduced patient demand), our failure to develop or acquire company-owned or managed clinics as rapidly as we intend, our failure to profitably operate company-owned or managed clinics, and the other factors described in “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC for the year ended December 31, 2020, as updated or revised for any material changes described in any subsequently-filed Quarterly Reports on Form 10-Q or other SEC filings. Words such as, “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives,” “intends,” “may,” “opportunity,” “plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,” “could,” “would,” “will,” and similar expressions are intended to identify such forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors. We assume no obligation to update or revise any forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

About The Joint Corp. (NASDAQ: JYNT)
The Joint Corp. (NASDAQ: JYNT) revolutionized access to chiropractic care when it introduced its retail healthcare business model in 2010. Today, the company is making quality care convenient and affordable, while eliminating the need for insurance, for millions of patients seeking pain relief and ongoing wellness. With more than 600 locations nationwide and over eight million patient visits annually, The Joint is a key leader in the chiropractic industry. Named on Franchise Times “Top 200+ Franchises” and Entrepreneur’s “Franchise 500®” lists, The Joint Chiropractic is an innovative force, where healthcare meets retail. For more information, visit www.thejoint.com. To learn about franchise opportunities, visit www.thejointfranchise.com.

Business Structure
The Joint Corp. is a franchisor of clinics and an operator of clinics in certain states. In Arkansas, California, Colorado, District of Columbia, Florida, Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Washington, West Virginia and Wyoming, The Joint Corp. and its franchisees provide management services to affiliated professional chiropractic practices.

Media Contact: Margie Wojciechowski, The Joint Corp., [email protected]
Investor Contact: Kirsten Chapman, LHA Investor Relations, 415-433-3777, [email protected]

– Financial Tables Follow –

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

  June 30,
2021
  December 31,
2020
ASSETS (unaudited)    
Current assets:      
Cash and cash equivalents $ 18,521,042        $ 20,554,258     
Restricted cash 313,303        265,371     
Accounts receivable, net 2,805,387        1,850,499     
Deferred franchise and regional development costs, current portion 973,224        897,551     
Prepaid expenses and other current assets 1,590,448        1,566,025     
Total current assets 24,203,404        25,133,704     
Property and equipment, net 12,418,496        8,747,369     
Operating lease right-of-use asset 15,232,136        11,581,435     
Deferred franchise and regional development costs, net of current portion 5,042,889        4,340,756     
Intangible assets, net 6,176,429        2,865,006     
Goodwill 5,128,302        4,625,604     
Deferred tax assets 9,388,264        8,007,633     
Deposits and other assets 474,782        431,336     
Total assets $ 78,064,702        $ 65,732,843     
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 2,160,642        $ 1,561,648     
Accrued expenses 1,143,858        770,221     
Co-op funds liability 313,304        248,468     
Payroll liabilities 4,624,414        2,776,036     
Debt under the Credit Agreement 2,000,000        —     
Operating lease liability, current portion 3,605,458        2,918,140     
Finance lease liability, current portion 79,752        70,507     
Deferred franchise and regional developer fee revenue, current portion 3,162,710        3,000,369     
Deferred revenue from company clinics ($2.9 million and $2.6 million attributable to VIEs) 4,366,186        3,905,200     
Debt under the Paycheck Protection Program —        2,727,970     
Other current liabilities 551,035        707,085     
Total current liabilities 22,007,359        18,685,644     
Operating lease liability, net of current portion 14,297,918        10,632,672     
Finance lease liability, net of current portion 99,772        132,469     
Debt under the Credit Agreement —        2,000,000     
Deferred franchise and regional developer fee revenue, net of current portion 14,708,216        13,503,745     
Other liabilities 27,230        27,230     
Total liabilities 51,140,495        44,981,760     
Commitments and contingencies      
Stockholders’ equity:      
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of June 30, 2021 and December 31, 2020 —        —     
Common stock, $0.001 par value; 20,000,000 shares authorized, 14,406,148 shares issued and 14,375,362 shares outstanding as of June 30, 2021 and 14,174,237 shares issued and 14,157,070 outstanding as of December 31, 2020 14,405        14,174     
Additional paid-in capital 43,142,391        41,350,001     
Treasury stock 30,786 shares as of June 30, 2021 and 17,167 shares as of December 31, 2020, at cost (761,265 )     (143,111 )  
Accumulated deficit (15,471,424 )     (20,470,081 )  
Total The Joint Corp. stockholders’ equity 26,924,107        20,750,983     
Non-controlling Interest 100        100     
Total equity 26,924,207        20,751,083     
Total liabilities and stockholders’ equity $ 78,064,702        $ 65,732,843     

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)

  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2021   2020   2021   2020
Revenues:              
Revenues from company-owned or managed clinics $ 11,433,072        $ 6,856,807        $ 20,903,933        $ 14,151,102     
Royalty fees 5,332,618        3,268,653        10,101,862        6,986,883     
Franchise fees 623,655        523,964        1,319,082        1,036,716     
Advertising fund revenue 1,518,908        930,795        2,893,650        1,988,413     
Software fees 786,037        631,198        1,546,574        1,276,922     
Regional developer fees 214,434        213,424        432,390        421,066     
Other revenues 310,074        164,952        569,271        373,177     
Total revenues 20,218,798        12,589,793        37,766,762        26,234,279     
Cost of revenues:              
Franchise and regional development cost of revenues 1,786,833        1,275,191        3,411,404        2,692,682     
IT cost of revenues 251,705        92,450        392,450        161,115     
Total cost of revenues 2,038,538        1,367,641        3,803,854        2,853,797     
Selling and marketing expenses 3,132,715        1,783,666        5,622,043        3,838,954     
Depreciation and amortization 1,443,018        693,400        2,612,884        1,347,649     
General and administrative expenses 11,614,444        8,541,108        21,701,047        17,235,358     
Total selling, general and administrative expenses 16,190,177        11,018,174        29,935,974        22,421,961     
Net (gain) loss on disposition or impairment (44,260 )     (54,606 )     20,508        (53,413 )  
Income from operations 2,034,343        258,584        4,006,426        1,011,934     
Other expense, net (16,373 )     (25,243 )     (37,909 )     (29,581 )  
Income before income tax (benefit) expense 2,017,970        233,341        3,968,517        982,353     
Income tax (benefit) expense (665,992 )     117,756        (1,030,140 )     51,821     
Net income $ 2,683,962        $ 115,585        $ 4,998,657        $ 930,532     
Earnings per share:              
Basic earnings per share $ 0.19        $ 0.01        $ 0.35        $ 0.07     
Diluted earnings per share $ 0.18        $ 0.01        $ 0.34        $ 0.06     
Basic weighted average shares 14,290,697        13,980,984        14,234,929        13,935,829     
Diluted weighted average shares 14,927,451        14,491,639        14,901,863        14,487,083     

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

  Six Months Ended
June 30,
  2021   2020
Cash flows from operating activities:      
Net income $ 4,998,657        $ 930,532     
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 2,612,884        1,347,649     
Net loss on disposition or impairment (non-cash portion) 109,519        1,193     
Net franchise fees recognized upon termination of franchise agreements (81,196 )     (50,312 )  
Deferred income taxes (1,380,631 )     (2,756 )  
Stock based compensation expense 530,058        466,473     
Changes in operating assets and liabilities:      
Accounts receivable (954,888 )     635,605     
Prepaid expenses and other current assets (24,423 )     (35,789 )  
Deferred franchise costs (881,891 )     2,498     
Deposits and other assets (53,096 )     4,406     
Accounts payable (162,524 )     (141,327 )  
Accrued expenses 130,609        406,986     
Payroll liabilities 1,848,378        (784,505 )  
Deferred revenue 1,757,294        (317,053 )  
Other liabilities 565,779        572,795     
Net cash provided by operating activities 9,014,529        3,036,395     
       
Cash flows from investing activities:      
Acquisition of AZ clinics (1,925,000 )     —     
Acquisition of NC clinics (2,325,000 )     —     
Purchase of property and equipment (3,238,959 )     (1,986,367 )  
Reacquisition and termination of regional developer rights (1,388,700 )     —     
Payments received on notes receivable —        80,441     
Net cash used in investing activities (8,877,659 )     (1,905,926 )  
       
Cash flows from financing activities:      
Payments of finance lease obligation (38,593 )     (23,509 )  
Purchases of treasury stock under employee stock plans (618,154 )     (3,774 )  
Proceeds from exercise of stock options 1,262,563        387,920     
Proceeds from the Credit Agreement, net of related fees —        1,947,352     
Proceeds from the Paycheck Protection Program —        2,727,970     
Repayment of debt under the Paycheck Protection Program (2,727,970 )     —     
Net cash (used in) provided by financing activities (2,122,154 )     5,035,959     
       
(Decrease) increase in cash, cash equivalents and restricted cash (1,985,284 )     6,166,428     
Cash, cash equivalents and restricted cash, beginning of period 20,819,629        8,641,877     
Cash, cash equivalents and restricted cash, end of period $ 18,834,345        $ 14,808,305     
       
Reconciliation of cash, cash equivalents and restricted cash: June 30,
2021
  June 30,
2020
Cash and cash equivalents $ 18,521,042        $ 14,573,266     
Restricted cash 313,303        235,039     
  $ 18,834,345        $ 14,808,305     

Non-GAAP Financial Measures

The table below reconciles net income to Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020.

(unaudited) Three Months Ended
June 30,
  Six Months Ended
June 30,
  2021   2020   2021   2020
Non-GAAP Financial Data:              
Net income $ 2,683,962        $ 115,585        $ 4,998,657        $ 930,532     
Net interest expense 16,373        25,243        37,909        29,580     
Depreciation and amortization expense 1,443,018        693,400        2,612,884        1,347,649     
Income tax (benefit) expense (665,992 )     117,756        (1,030,140 )     51,821     
EBITDA 3,477,361        951,984        6,619,310        2,359,582     
Stock compensation expense 283,564        216,080        530,058        466,473     
Acquisition related expenses 39,373        —        45,346        —     
(Gain) loss on disposition or impairment (44,260 )     (54,606 )     20,508        (53,413 )  
Adjusted EBITDA $ 3,756,038        $ 1,113,458        $ 7,215,222        $ 2,772,642