The Joint Corp. Price & Performance (JYNT)

As a result, we caution you against placing undue reliance on these forward looking statements. For our 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 in 10 Q as well as other reports the company files from time to time with the SEC. Finally, any forward looking statements, including included this earnings call that are made only as of the date of this call, and we do not undertake any obligation to revise our results or public 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 operation for all periods discussed And the following comments represent continuing operations unless otherwise stated. Management uses EBITDA and adjusted EBITDA, which are non financial 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 as 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 [indiscernible] 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 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 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's my pleasure to turn the call over to Sanjeev Rastan. 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 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 chiropract care 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 to be a highly differentiated scale player 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 twenty twenty four KPIs, Yet, I'd like to call out that we serve close to a million new patients last year. 950,000 to be exact. Having worked in franchising for decades, I can tell you to achieve almost million new users in one year of for a business of our scale, is outstanding. The Joint is clearly making a difference in the health and wellness industry [indiscernible] I'm so incredibly proud to have joined the cause.

Our strength include size, originality, and longevity. Capitalizing on our first mobile advantage, we have over nine sixty clinics making the joint larger than our next 10 competitors combined. The magnitude of our scale yields brand awareness and easy consumer access, as well as provides economies of scale and management and marketing. And we believe there are more opportunities for clinic growth with white space for an additional 1,000 clinics here in The U. S. Alone. In addition, 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 breakeven 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 The 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 the 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 $530,300,000 up 9% in Q4 twenty twenty four compared to 8% in Q3 twenty twenty four. System wide comp sales for all clinics opened thirteen months was 6% in Q4 twenty twenty four compared to 4% in Q3 twenty twenty four. System wide comp sales for mature clinics opened forty months forty eight months were modestly positive for Q4 twenty twenty four compared to negative 2% in Q3 twenty twenty four. Revenue for our continuing operations up from 10% in Q3 twenty twenty four. Consolidated adjusted EBITDA was $3,300,000 for Q4 twenty twenty four and $11,400,000 for 2024. We believe 2025 will be a year in transition financially as clinics shift from 100% 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 multi year phased approach [indiscernible] In our next phase of growth or joint two point zero, 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 three point zero.

In the next phase, which we are referring to as Joint three point zero, we will capture new revenue streams by creating additional sales channels and growing in new markets. Possibilities under evaluation include expanding The 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 two point zero 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 at our franchisee clinics, will enable us to excel in the patient experience. By optimizing care delivery and patient touch points, we expect to increase both patient engagement and membership longevity. This will fuel our most effective 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, [indiscernible] We are upgrading our commitment to refranchising and our striving to be a world class pure play franchisor. 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 multi site 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 10, 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 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 twenty twenty five 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 Sanjeev. Let's turn to Slide 12. And let's discuss our operating metrics.

During 2024, we performed 14,700,000 patient adjustments, 8% more than in 2023. We treated 1,900,000 unique patients during the year. Of which 957,000 new to the joint. Of that 30 of that thirty six percent, that were new to chiropractic care, many converted to membership and 85% of our system wide growth sales came from monthly membership. In 2024. System wide sales were up 9% in 2024 compared to 12% in 2023. System wide comp sales for all clinics opened thirteen months 4% for both years. Comp sales trended up from the second quarter and third quarters of twenty twenty four reaching 6% for the fourth quarter and demonstrating our positive momentum. System wide comp sales for mature clinics opened forty eight months were negative 2% for the full year, yet improved from negative 2% in Q3 to modestly positive for Q4. We are pleased with this upward trend. As previously indicated, we expected franchise sales to be impacted by our refranchising strategy. During 2024, we sold 46 franchise licenses, compared to 55 in 2023. At year end, we had 16 regional developers covering approximately 57% of the network, and we had 145 franchise licenses in active development. Turning to Slide 13, let's discuss our clinics.

In 2024, we opened 57 franchise clinics. Refranchised three clinics, and closed 18 franchise clinics including three relocations that will be reopened. And seven corporate clinics, including three non traditional corporate units on AirFort. Air force bases. At December thirty one, twenty twenty four, we had nine seven clinics of which eight forty two or 87% are franchise clinics. Turning to Slide 14, 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 $70,200,000 in associated revenue, $66,500,000 in associated SG and A, $10,400,000 in associated impairment, for a net loss from discontinued operations of $7,000,000 As Sanjeev 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 In addition, during these historical periods, we have not been able to fully reduce our unallocated G and A expense. We are critically focused on reducing the G and 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. [indiscernible] Now, I'll review our continuing operation financial results for Q4 twenty twenty four compared to Q4 twenty twenty three. [indiscernible] Revenue from franchised operations reached $14,400,000 compared to $12,700,000 The 14% increase reflects the greater number of clinics in operation and continued organic growth. Cost of revenues were $3,200,000 up 12% over the same period last year. Reflecting the associated higher regional developer royalties and commissions. [indiscernible] Selling and marketing expenses were $2,700,000 compared to $1,700,000 reflecting our strategic decision to continue to support our recently started effective marketing campaign by increasing our working media spend. Hosting our biennial franchise conference, and incurring carrying costs as we set up a new marketing agency. Depreciation and amortization expenses increased 5% compared to the prior year period.

G and A expenses were $7,200,000 compared to $6,900,000 in the same period last year. During the quarter, we accrued for a medical malpractice settlement of $1,500,000 The increase also includes employee bonuses, senior management search and restructuring costs, IT maintenance and support, and audit costs partially offset by The time expenses in 2023. Income tax expense was $37,000 compared to $11,300,000 in Q4 twenty twenty three. Net income from continuing operations was 986,000 or $0.06 per diluted share, improving from a loss of $10,200,000 or $0.69 per basic share in Q4 twenty twenty three I'll provide adjusted EBITDA for three categories. For continuing operations, discontinued operations and consolidated operations. Adjusted EBITDA for continuing operations was $2,100,000 compared to $2,200,000 Adjusted EBITDA for discontinued operations was $1,200,000 compared to $1,800,000 and adjusted EBITDA for consolidated operations were $3,300,000 compared to $4,000,000 On to Slide 15, I'll review our balance sheet and cash flow. At 12/31/2024, our unrestricted cash was $25,100,000 compared to $18,200,000 12/31/2023. Cash flow from both continuing and discontinued operations was $9,400,000 The net proceeds of the sale of three clinics were partially offset by by ongoing IT CapEx, and a $2,000,000 Q1 twenty twenty four repayment of the line of credit to JPMorgan Chase.

Through this facility, we've retained immediate access to $20,000,000 through February of twenty twenty seven.

Federal tax return net operating loss carry forward at 12/31/2024 was $9,100,000 On to Slide 16, 2024 compared to 2023. Revenue was $51,900,000 compared to $47,000,000 up 10%. Net loss from continuing operations was $1,500,000 or $0.1 per basic share compared to $10,800,000 or $0.73 per basic share. Adjusted EBITDA for continuing operations was $2,400,000 compared to $4,500,000 Adjusted EBITDA for discontinued operations including an adjustment of $1,500,000 for legal settlement, was $9,000,000 compared to $7,700,000 Adjusted EBITDA for consolidated operations were $11,400,000 compared to $12,200,000 On to Slide 17, we are presenting 2025 guidance. System wide sales are expected to be between $550,000,000 and $570,000,000 compared to $530,300,000 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 4% in 2024. Consolidated adjusted EBITDA to be between $10,000,000 and $11,500,000 compared to $11,400,000 in 2024. The 2025 consolidated adjusted EBITDA estimate includes an adjustment for approximately $4,400,000 related to stock based competent 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 compared to fifty seven twenty twenty four. In 2025, franchise license sales and clinic openings are likely to be less than 2024 as we're working through the impact of of our refranchising efforts.

Further, we see the impact of economic headwinds, stubborn inflation and a volatile consumer sentiment impacting The beginning of 2020. 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 and A expenses and the joint corp will be more I'll turn the call back over to you, Sanji. Thanks, Jake. Turning to Slide 19, 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 The. The annual spending on chiropractic care is $600,000,000 annually with out of pocket spending ranging from 37 to 42% of that total. The joint represents approximately 6% to 7% of that More importantly, with the belief of many that our current healthcare 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 fifty.

We are only 50% off the way there. And of course, we have the rest of the world to consider as well. Have an attractive asset light model This is true for the company as well as our franchisees. The joint has one of the lowest initial build outs amongst franchises compared to Pilates studios, saunas, gyms, and so on. Further, the joint 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 membership deliver strong recurring revenue. In 2024, 85% 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 20, 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 Nephew 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 Scho 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, 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 Doctor. Anthony Tramm, one of our multiunit franchisees for being named twenty twenty four 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 Doctor. Tran. Also in January, we announced we won another accolade Franchise Times recognized the joint as number 38 on the Fast and Furious 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 The, operator, I'm ready to begin Q and A. Thank you.

We will now begin the question and answer session. And your first question today will come from Jeff 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. 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.

Yes. As we think about the progression, and I'll focus the comments really on 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 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 Back 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 The, any thing, any color you can give us on kind of retention rates, churn, attrition, what you're seeing [indiscernible] and trends there with patients?

Yes, I can start and Sanjeev 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. [indiscernible] our attrition really stayed pretty flat to where we were seeing it for the most for the most part in Q4. We did start to implement some of our fringe pricing increases, right, What Sanjeev referred to is that dynamic revenue management really increasing our walk in rate at the tail end of fourth quarter. And really what we're seeing is that drive an increased conversion to our overall wellness plans, those 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. [indiscernible] 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? Can you just refresh our memory of how many are how many are to go or be under LOI and how many remain and then maybe what the timeframe is around that process? So we have 125 corporate clinics and our intent is to refranchise all 125. 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 Craig Hallum Capital Group. Please go ahead. Thanks and congrats on making progress here on the refranchising efforts. Want to come back to follow-up Jeff's question on kind of trends and impact that we're seeing across kind of consumer services companies.

First, your guidance for the year is for system same store sales to be up. Mid single digit. I wanted to get a sense for how you're trading kind of year to date if A, if your system same store sales are up, positive, year to date? 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.

Yes. 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 where we were trending at the tail end of last year.

Got it. That's helpful. And then just coming back to the refranchising effort and just is there any color you might be able to share in terms of valuation that you're seeing on those LOIs? I recognize that you're still working on a lot of them. But can you give us a sense from whether it's a a measure of EBITDA or sale revenue per clinic Any color you might be able to share on the kind of the value you expect to recognize from selling the 125 units?

Yes, Jeremy, since we're actively negotiating the LOIs right now, It's hard to provide 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.

Yes. I'll walk you through the construct in terms of how the majority of bidders are looking at the portfolio. Again, the vast majority of the units are profitable, right? So most of The 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 the royalty streams that they'll have to take on. So it's really an adjusted EBITDA number based on our corporate clinic pro form a and then they're applying a multiple against that and assuming because we're marketing them in larger clusters The there will be a slight outside the four wall G and A burden So The 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, revenues were up about $1,700,000 year over year. Your sales and marketing costs was up about $1,000,000 related to that $1,700,000 in revenue growth. And just coming back to how should we be thinking about the framework of kind of customer acquisition costs and what the kind of leverage points that you might expect to see for kind of future revenue growth? And the types of costs, especially sales and marketing The you would expect to have to generate every incremental dollar revenue growth?

Yes, 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 In the full year line, we had our biennial national conference So you're naturally seeing a little bit more flow through in the years that we have that conference. And then 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 what I'll call, initial kind of transitionary or startup costs as we look to onboard that new agency. And so those are some of the incremental incremental investments in the period.

I would tell you on a macro basis is I think where we're seeing some of the new 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 want to come back to the kind of pricing strategy here and just get a sense for 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 some of them may still be on plans going the way back to maybe 2017. I wanted to see if you could give us kind of the buckets for The how many of your customers are in each of the varying kind of let's call it pricing years. So how many are still on 2017 or 2019 pricing?

Versus three pricing, the last price increase?

Correct. Yes. In March of twenty twenty two is the last time we took a wholesale pricing 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 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 80% of our active members that were on our standard rate. And about 20% The we're on some level of a legacy rate.

And as you mentioned, it kind of cascades down, the majority of those being one tier down or about a $10.10 dollars discount to the posted rate today.

And it gets pretty small thereafter.

So the vast majority are on the standardized price but we do still have a good chunk of those legacy members around.

Just to add to that, what what we're how we're thinking about The differently in terms of dynamic revenue management is essentially solving for what you called out. The last time we took meaningful pricing on our wellness program 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 [indiscernible] 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 full levers within the pricing model. Example, we just took pricing on the walk in price, which has 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 $10 increments on our wellness plans. That could be happening in much smaller discrete numbers. And we could be also engaging our legacy, the 20% wellness plan members that are on legacy pricing to explore how much pricing we could take with them as well.

So this is going to be an ongoing process for us through 2025 and beyond.

Great. Thanks for taking all the The.

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 understand I understand you're in the final stages. It seems like you in the final stages for a couple of months.

So just wondering like 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. The As you know The we have now got the 125 corporate clinics bundled in five distinct bundles that we have been marketing. So as we're negotiating the LOIs, it is a little bit more complex because the size of which [indiscernible] involves more clinics. So 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 second half of the year. So that is that is what our intent is. [indiscernible] And then second question, Sanjeev, you talked to I think in response to one of the probably 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 it's the labor environment still challenging? And sort of [indiscernible] I guess what are you seeing in Fort Walton? [indiscernible] We're actively now collecting franchisee P and 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 and 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 The. In terms of the pricing, I think The we've got to be thoughtful and that's why we're just calling it a dynamic revenue management process which essentially means that the inflationary climate has been stubborn 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 visit value that we can through pricing, but also make sure that we're not creating a a value problem.

So that is why what we're doing is testing our pricing models in 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 pricing that allows us to just constantly keep improving clinic profit profile on a gentle basis just constantly optimizing our opportunity.

Yes. To put it in context of the comp guide, George, think you're looking at about 1.5% to maybe 2% 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, 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?

Yes.

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 two point zero.

And the main focus of Joint two point zero 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 three point zero will come maybe twelve to eighteen months later.

Which is where we anticipate adding on incremental revenue layers from additional [indiscernible] new category usage occasions, potentially retail opportunity, and potentially unlocking dense urban markets. And enterprise business accounts So those are the various levers and consideration for our three point zero 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 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. And your next question today will come from Anthony Vendetti with Maxim Group.

Okay. Thanks. So just to be I just want to look at The guidance statement, the first one that says between $550,000,000 and $570,000,000 in system wide sales.

And since all of the company owned clinics, the 100 plus are in discontinued ops. This is the system wide sales and then what you're going to recognize as revenues is going to be the service and royalty fees off of that $550,000,000 to $570,000,000 So I guess the question I have is what is the current percentage of royalty fees and service fees associated with that $550,000,000 to $570,000,000 or what do you expect it to be in 2025?

Yes.

I think couple of points to put out there because there's a lot of moving pieces, right? 2025 for us is still going to 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 kind of have a mixed year in terms of your overall GAAP revenues which is why we didn't put out a GAAP revenue guide just not having full line of sight into when the timing of those transactions will formally close.

So as you think about the fiscal twenty twenty four period, you can look at our discontinued operations kind of carve out schedule within the The. And you can see that we had $70,200,000 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 The the gross sales The slightly higher than that. But the easiest way to contextualize is just take that 70,000,000 from our corporate clinics and say, okay, that turns into roughly a 1010.5% royalty structure when you have your 7% royalty, your 2% NMF contribution and your technology fee, So that's a way to kind of get a semblance for the annualized rate of what we'll flip into that royalty stream I think the other thing that we want to critically call out is that all the historical presentations of the continuing operations don't reflect all the G and A rationalization that's still to come. That is the critical focus of management is to make sure that we're rightsizing the G and A so that we can at the end of the refranchising effort be a more profit the historical presentations, but those G and A figures 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 going to come out of corporate SG and A. We're not putting a forward guide out on that piece of it. The directional signal is that on an annualized basis, we expect to have more adjusted EBITDA than we did under our current kind of mixed structure.

Okay, great.

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 Sanjeev Razon for any closing remarks.

Thank you for joining us. I look forward to getting to know you at conferences and known deal roadshows Have a good day and know that at the joint we always have your back.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.