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The Joint Corp. Reports Second Quarter 2020 Financial Results

The Joint Corp.

- Grows Revenue 13%, Compared to Q2 2019 - 
- Increases Total Clinic Count to 539, Opening 13 Clinics in Q2 2020 - 
- Sells 11 Franchise Licenses in Q2 2020 -

SCOTTSDALE, Ariz., Aug. 06, 2020 (GLOBE NEWSWIRE) -- The Joint Corp. (NASDAQ: JYNT), a national operator, manager and franchisor of chiropractic clinics, reported its financial results for the quarter and six months ended June 30, 2020.

Second Quarter Financial Highlights: 2020 Compared to 2019

  • Increased system-wide sales1 2%, to $53.5 million.

  • Reported system-wide comp sales2 decrease of 6%.

  • Grew revenue 13%, to $12.6 million.

  • Posted net income of $116,000, compared to $462,000.

  • Reported Adjusted EBITDA of $1.1 million for both periods.

Operating Achievements Highlights

  • Sold 11 franchise licenses in the quarter.

  • Increased total clinic count to 539 as of June 30, 2020, up from 530 at March 31, 2020.

    • Opened 13 clinics for a total of 30 in the first half of 2020, one more compared to the first half of 2019.

      • Opened 12 and closed four franchised clinics during the quarter, resulting in 477 franchised clinics.

      • Opened one greenfield in June, resulting in 62 company-owned or managed clinics.

  • 99% of clinics were open as of June 30, 2020.

  • In July,

    • Increased system-wide comp sales2 10%;

    • Sold 14 franchise licenses; and

    • Opened 6 franchised clinics and one greenfield clinic, bringing the total clinic count to 546.

“Our solid financial performance in the second quarter of 2020 was driven by strong clinic operations, clinic openings and franchise license sales, demonstrating the resiliency of our business model especially in light of the COVID-19 pandemic,” said Peter D. Holt, President and Chief Executive Officer of The Joint Corp. “We provide convenient, affordable chiropractic care, which our patients validate as an essential healthcare service. The need for pain relief - particularly in a natural, holistic way - continues to grow. Our strategy to expand the market through retail clinics continues to build our brand, increase the awareness of chiropractic care and attract new patients. A recent marketing initiative successfully reengaged frozen memberships. A second promotion welcomed new patients, at no charge for their initial visit, resulting in converting those patients to packages and memberships at record levels.”

“Our franchise growth shows the strength of our value proposition. In 2020 through the end of July, we sold 49 franchise licenses and opened 37 clinics, which is both remarkable during this pandemic and indicative of the positive outlook of our business. We remain confident in our ability to adapt, to serve and to grow in this unique environment. We continue to march toward our target of opening 1,000 clinics by the end of 2023. To achieve our goal, we will focus on opening more greenfield clinics to complement franchised clinic growth. Our resilient hybrid business model remains a foundation for long-term growth and shareholder value.”

Financial Results for the Three Months Ended June 30: 2020 Compared to 2019

Revenue was $12.6 million in the second quarter of 2020, compared to $11.2 million in the second quarter of 2019, reflecting a greater number of clinics, which was partially offset by the impact of the pandemic.

Cost of revenue was $1.4 million, compared to $1.3 million in the second quarter of 2019. The increase was in line with the total increase in franchise sales and reflective of higher regional developer royalties and commissions.

Selling and marketing expenses were $1.8 million for both periods, reflecting the timing of advertising spending. General and administrative expenses were $8.5 million, compared to $7.2 million in the second quarter of 2019, primarily due to an increase in payroll and related expenses to support revenue growth and increased clinic count. The company continued to operate its corporate clinics and headquarters without any furloughs or lay-offs while working to increase sanitary measures to ensure patient and employee safety.

Net income was $116,000, or $0.01 per diluted share, compared to $462,000, or $0.03 per diluted share, in the second quarter of 2019.

Adjusted EBITDA was $1.1 million for both periods. 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/(loss) before net interest, tax expense, depreciation, and amortization expenses.

Financial Results for the Six Months Ended June 30: 2020 Compared to 2019

Revenue was $26.2 million in the first six months of 2020, increasing 20% compared to $21.8 million in the same period of 2019. This increase reflects a greater number of clinics and increased gross sales at both franchised and company-owned or managed clinics during the first quarter, which was partially offset by the negative impact of the pandemic during the second quarter.

Net income was $931,000, or $0.06 per diluted share, compared to $1.4 million, or $0.10 per diluted share, in the first six months of 2019.

Adjusted EBITDA was $2.8 million, compared to $2.6 million in the first six months of 2019.

Balance Sheet Liquidity
Unrestricted cash was $14.6 million at June 30, 2020, compared to $8.5 million at December 31, 2019, reflecting $2.7 million borrowed under the CARES Act U.S. Small Business Administration Payroll Protection Program, $2.0 million drawn on a revolving line of credit and $3.0 million in cash flow from operations. The increased liquidity enhances the company’s ability to maintain payroll and manage disruptions caused by the COVID-19 pandemic.

2020 Guidance for Financial Results and Clinic Openings Withdrawn
As announced on March 20, 2020, given the uncertainties of the potential impact from the COVID-19 pandemic, the company withdrew its 2020 financial and clinic opening guidance. The company is not providing an update at this time.

Conference Call
The Joint Corp. management will host a conference call at 5 p.m. ET on Thursday, August 6, 2020, to discuss the second quarter 2020 results. To gain immediate access to the call, bypass the operator and avoid the queue, you may preregister by clicking here. Upon registering, you will be emailed a dial-in number, direct passcode and unique PIN. Those who prefer to call-in directly, may do so approximately 20 minutes prior to the start time by dialing 706-643-5902 or 888-869-1189 and using reference code 3190497. 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, 2020. The replay can be accessed by dialing 404-537-3406 or 855-859-2056. The passcode for the replay is 3190497.

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/(loss) 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, 2019, 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 500 locations nationwide and over 7 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, Massachusetts, 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., margie.wojciechowski@thejoint.com
Investor Contact: Kirsten Chapman, LHA Investor Relations, 415-433-3777, thejoint@lhai.com


-Financial Tables Follow –



 

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

2020

 

 

 

2019

 

 

 

ASSETS

(unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

14,573,266

 

 

$

8,455,989

 

 

 

Restricted cash

 

235,039

 

 

 

185,888

 

 

 

Accounts receivable, net

 

2,009,480

 

 

 

2,645,085

 

 

 

Notes receivable, net - current portion

 

48,283

 

 

 

128,724

 

 

 

Deferred franchise costs - current portion

 

791,818

 

 

 

765,508

 

 

 

Prepaid expenses and other current assets

 

1,158,267

 

 

 

1,122,478

 

 

 

  Total current assets

 

18,816,153

 

 

 

13,303,672

 

 

 

Property and equipment, net

 

8,003,837

 

 

 

6,581,588

 

 

 

Operating lease right-of-use asset

 

12,181,547

 

 

 

12,486,672

 

 

 

Deferred franchise costs, net of current portion

 

3,549,512

 

 

 

3,627,225

 

 

 

Intangible assets, net

 

2,512,057

 

 

 

3,219,791

 

 

 

Goodwill

 

4,150,461

 

 

 

4,150,461

 

 

 

Deposits and other assets

 

394,500

 

 

 

336,258

 

 

 

 

$

49,608,067

 

 

$

43,705,667

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

1,456,234

 

 

$

1,525,838

 

 

 

Accrued expenses

 

629,067

 

 

 

216,814

 

 

 

Co-op funds liability

 

235,039

 

 

 

185,889

 

 

 

Payroll liabilities

 

2,059,602

 

 

 

2,844,107

 

 

 

Operating lease liability - current portion

 

2,700,024

 

 

 

2,313,109

 

 

 

Finance lease liability - current portion

 

68,273

 

 

 

24,253

 

 

 

Deferred franchise and regional developer fee revenue - current portion

 

2,818,607

 

 

 

2,740,954

 

 

 

Deferred revenue from company clinics

 

3,092,574

 

 

 

3,196,664

 

 

 

Debt under the Paycheck Protection Program - current portion

 

1,211,977

 

 

 

-

 

 

 

Other current liabilities

 

565,643

 

 

 

518,686

 

 

 

  Total current liabilities

 

14,837,040

 

 

 

13,566,314

 

 

 

Operating lease liability - net of current portion

 

11,484,267

 

 

 

11,901,040

 

 

 

Finance lease liability - net of current portion

 

168,290

 

 

 

34,398

 

 

 

Debt under the Credit Agreement and Paycheck Protection Program, net of current portion

 

3,515,993

 

 

 

 

 

Deferred franchise and regional developer fee revenue, net of current portion

 

11,986,489

 

 

 

12,366,322

 

 

 

Deferred tax liability

 

87,107

 

 

 

89,863

 

 

 

Other liabilities

 

27,230

 

 

 

27,230

 

 

 

  Total liabilities

 

42,106,416

 

 

 

37,985,167

 

 

 

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, 2020 and December 31, 2019

 

-

 

 

 

-

 

 

 

Common stock, $0.001 par value; 20,000,000 shares authorized, 14,042,854 shares issued and 14,026,841 shares outstanding as of June 30, 2020 and 13,898,694 shares issued and 13,882,932 outstanding as of December 31, 2019

 

14,043

 

 

 

13,899

 

 

 

Additional paid-in capital

 

40,309,186

 

 

 

39,454,937

 

 

 

Treasury stock 16,013 shares as of June 30, 2020 and 15,762 shares as of December 31, 2019, at cost

 

(114,815

)

 

 

(111,041

)

 

 

Accumulated deficit

 

(32,706,863

)

 

 

(33,637,395

)

 

 

  Total The Joint Corp. stockholders' equity

 

7,501,551

 

 

 

5,720,400

 

 

 

Non-controlling Interest

 

100

 

 

 

100

 

 

 

Total equity

 

7,501,651

 

 

 

5,720,500

 

 

 

  Total liabilities and stockholders' equity

$

49,608,067

 

 

$

43,705,667

 

 

 

 

 

 

 

 



THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

Revenues:

 

 

 

 

 

 

 

 

Revenues from company-owned or managed clinics

$

6,856,807

 

 

$

5,777,288

 

 

$

14,151,102

 

 

$

11,416,365

 

 

Royalty fees

 

3,268,653

 

 

 

3,263,530

 

 

 

6,986,883

 

 

 

6,290,346

 

 

Franchise fees

 

523,964

 

 

 

447,266

 

 

 

1,036,716

 

 

 

864,339

 

 

Advertising fund revenue

 

930,795

 

 

 

927,800

 

 

 

1,988,413

 

 

 

1,819,367

 

 

Software fees

 

631,198

 

 

 

377,125

 

 

 

1,276,922

 

 

 

742,361

 

 

Regional developer fees

 

213,424

 

 

 

200,524

 

 

 

421,066

 

 

 

384,381

 

 

Other revenues

 

164,952

 

 

 

176,446

 

 

 

373,177

 

 

 

332,197

 

 

  Total revenues

 

12,589,793

 

 

 

11,169,979

 

 

 

26,234,279

 

 

 

21,849,356

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Franchise cost of revenues

 

1,275,191

 

 

 

1,198,378

 

 

 

2,692,682

 

 

 

2,315,431

 

 

IT cost of revenues

 

92,450

 

 

 

100,771

 

 

 

161,115

 

 

 

189,659

 

 

  Total cost of revenues

 

1,367,641

 

 

 

1,299,149

 

 

 

2,853,797

 

 

 

2,505,090

 

 

Selling and marketing expenses

 

1,783,666

 

 

 

1,769,368

 

 

 

3,838,954

 

 

 

3,275,356

 

 

Depreciation and amortization

 

693,400

 

 

 

404,466

 

 

 

1,347,649

 

 

 

770,143

 

 

General and administrative expenses

 

8,541,108

 

 

 

7,227,662

 

 

 

17,235,358

 

 

 

13,780,566

 

 

  Total selling, general and administrative expenses

 

11,018,174

 

 

 

9,401,496

 

 

 

22,421,961

 

 

 

17,826,065

 

 

Net (gain) loss on disposition or impairment

 

(54,606

)

 

 

(18,266

)

 

 

(53,413

)

 

 

86,927

 

 

Income from operations

 

258,584

 

 

 

487,600

 

 

 

1,011,934

 

 

 

1,431,274

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Bargain purchase gain

 

-

 

 

 

-

 

 

 

-

 

 

 

19,298

 

 

Other expense, net

 

(25,243

)

 

 

(15,126

)

 

 

(29,581

)

 

 

(26,771

)

 

  Total other expense

 

(25,243

)

 

 

(15,126

)

 

 

(29,581

)

 

 

(7,473

)

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

233,341

 

 

 

472,474

 

 

 

982,353

 

 

 

1,423,801

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

117,756

 

 

 

10,214

 

 

 

51,821

 

 

 

8,896

 

 

 

 

 

 

 

 

 

 

 

Net income and comprehensive income

$

115,585

 

 

$

462,260

 

 

$

930,532

 

 

$

1,414,905

 

 

 

 

 

 

 

 

 

 

 

Less: income attributable to the non-controlling interest

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to The Joint Corp. stockholders

$

115,585

 

 

$

462,260

 

 

$

930,532

 

 

$

1,414,905

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.01

 

 

$

0.03

 

 

$

0.07

 

 

$

0.10

 

 

Diluted earnings per share

$

0.01

 

 

$

0.03

 

 

$

0.06

 

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares

 

13,980,984

 

 

 

13,797,497

 

 

 

13,935,829

 

 

 

13,774,474

 

 

Diluted weighted average shares

 

14,491,639

 

 

 

14,477,007

 

 

 

14,487,083

 

 

 

14,390,319

 

 

 

 

 

 

 

 

 

 

 




THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

 

 

 

2020

 

 

 

2019

 

Net income

 

$

930,532

 

 

$

1,414,905

 

Adjustments to reconcile net income to net cash

 

 

 

  provided by operating activities

 

 

1,762,247

 

 

 

1,183,708

 

Changes in operating assets and liabilities

 

 

343,616

 

 

 

238,167

 

Net cash provided by operating activities

 

 

3,036,395

 

 

 

2,836,780

 

Net cash used in investing activities

 

 

(1,905,926

)

 

 

(2,206,240

)

Net cash provided by financing activities

 

 

5,035,959

 

 

 

128,940

 

Net increase in cash

 

$

6,166,428

 

 

$

759,480

 

 

 

 

 

 



THE JOINT CORP. AND SUBSIDIARY AND AFFILATES

RECONCILIATION FOR GAAP TO NON-GAAP

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

Non-GAAP Financial Data:

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

Net income

$

115,585

 

 

$

462,260

 

 

$

930,532

 

 

$

1,414,905

 

 

Net interest

 

25,243

 

 

 

15,126

 

 

 

29,580

 

 

 

26,771

 

 

Depreciation and amortization expense

 

693,400

 

 

 

404,466

 

 

 

1,347,649

 

 

 

770,143

 

 

Tax expense

 

117,756

 

 

 

10,214

 

 

 

51,821

 

 

 

8,896

 

 

EBITDA

$

951,984

 

 

$

892,066

 

 

$

2,359,582

 

 

$

2,220,715

 

 

Stock compensation expense

 

216,080

 

 

 

178,953

 

 

 

466,473

 

 

 

350,724

 

 

Acquisition related expenses

 

 

 

3,200

 

 

 

 

 

3,200

 

 

Bargain purchase gain

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,298

)

 

Net (gain) loss on disposition or impairment

 

(54,606

)

 

 

(18,266

)

 

 

(53,413

)

 

 

86,927

 

 

Adjusted EBITDA

$

1,113,458

 

 

$

1,055,953

 

 

$

2,772,642

 

 

$

2,642,268

 

 

 

 

 

 

 

 

 

 

 


1
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. 

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.