SEC Filing Report: The Joint Corp. (10-K)
Executive Summary
This report analyzes The Joint Corp.’s 10-K filing for the fiscal year ended December 31, 2024. The company is transitioning to a pure-play franchisor model, divesting company-owned clinics. Revenue growth is driven by franchise expansion and same-store sales increases. Key risks include labor shortages, inflation, and regulatory challenges related to the corporate practice of chiropractic. Opportunities exist in expanding the franchise network, improving operational efficiencies, and introducing new branded products. Overall, the company faces macroeconomic headwinds but is strategically positioned for long-term growth as a franchisor.
Overall Assessment: Hold. The strategic shift introduces uncertainty, but the franchise model offers potential for scalable growth.
Recommendations: Monitor the refranchising process, track same-store sales performance, and assess the impact of regulatory changes.
Company Overview
The Joint Corp. is a franchisor and operator of chiropractic clinics using a cash-based, non-insurance model. The company aims to be the leading provider of chiropractic care in its markets. As of December 31, 2024, The Joint Corp. had 967 clinics in operation across 41 states and the District of Columbia. The company is currently transitioning to a pure-play franchisor model by divesting its company-owned clinics.
Financial Statement Analysis
Revenue
Total revenues increased by 10.5% from $46.98 million in 2023 to $51.90 million in 2024, driven by growth in royalty fees, franchise fees, advertising fund revenue, and software fees.
| Revenue Component |
2024 (USD) |
2023 (USD) |
Change (USD) |
Change (%) |
| Royalty Fees |
32,144,796 |
29,160,832 |
2,983,964 |
10.2% |
| Franchise Fees |
2,997,850 |
2,882,895 |
114,955 |
4.0% |
| Advertising Fund Revenue |
9,180,281 |
8,321,043 |
859,238 |
10.3% |
| Software Fees |
5,687,326 |
5,086,562 |
600,764 |
11.8% |
| Other Revenues |
1,886,352 |
1,526,145 |
360,207 |
23.6% |
| Total Revenues |
51,896,605 |
46,977,477 |
4,919,128 |
10.5% |
Expenses
Operating expenses increased significantly, primarily due to higher selling and marketing expenses and general and administrative expenses.
| Expense Component |
2024 (USD) |
2023 (USD) |
Change (USD) |
Change (%) |
| Cost of Revenues |
11,516,655 |
10,480,645 |
1,036,010 |
9.9% |
| Selling and Marketing Expenses |
10,923,342 |
8,689,664 |
2,233,678 |
25.7% |
| General and Administrative Expenses |
29,833,570 |
26,231,615 |
3,601,955 |
13.7% |
| Depreciation and Amortization Expenses |
1,363,453 |
1,278,148 |
85,305 |
6.7% |
Profitability
The company reported a loss from operations of $1.76 million in 2024, compared to income from operations of $0.32 million in 2023. This decline is attributed to increased operating expenses.
Key Ratios
- Comparable Sales Growth: 4% (clinics open at least 13 months)
- Mature Clinic Comp Sales (clinics open >48 months): -2%
Management’s Discussion and Analysis (MD&A) Insights
Management emphasizes the transition to a pure-play franchisor model and the strategic divestiture of company-owned clinics. They express optimism about the long-term growth potential of the franchise network. However, they also acknowledge the challenges posed by labor shortages, inflation, and potential regulatory changes.
Red Flags: The decline in mature clinic comp sales (-2%) warrants attention. The ongoing refranchising effort introduces execution risk.
Uncommon Metrics: The report highlights the percentage of new patients who have never tried chiropractic care before (36%), indicating the company’s role in expanding the market.
Risk Assessment
- Labor Shortages: Difficulty in recruiting and retaining qualified chiropractors and other personnel.
- Inflation: Increased labor costs and potential reduction in discretionary spending.
- Franchisee Performance: Dependence on franchisees’ success in opening and operating clinics.
- Regulatory Risks: Potential challenges to the business model from state regulations on the corporate practice of chiropractic and evolving joint employer rules.
- Data Breaches: The company and its vendors are vulnerable to cybersecurity threats, potentially leading to civil liability and reputational damage.
Opportunity Assessment
- Franchise Expansion: Continued growth of the franchise network in key markets.
- Operational Efficiencies: Driving greater efficiencies across operations, development, and marketing programs.
- New Products and Services: Introducing selected and complementary branded products such as nutraceuticals or dietary supplements.
- Market Expansion: Attracting new patients who have never tried chiropractic care before.
Conclusion & Actionable Insights
The Joint Corp. is undergoing a significant strategic shift, transitioning to a pure-play franchisor model. While the company faces macroeconomic headwinds and regulatory challenges, it is well-positioned for long-term growth due to its established brand, scalable franchise model, and potential for market expansion. The decline in mature clinic comp sales and the execution risk associated with the refranchising effort warrant close monitoring.
Overall Assessment: Hold. The strategic shift introduces uncertainty, but the franchise model offers potential for scalable growth.
Recommendations:
- Monitor the refranchising process and track the performance of divested clinics.
- Closely track same-store sales performance, particularly in mature clinics.
- Assess the impact of regulatory changes related to the corporate practice of chiropractic and joint employer rules.
- Evaluate the potential for introducing new branded products and services to drive revenue growth.
Disclaimer: This report is for informational purposes only and should not be considered financial advice. The analysis is based on publicly available information and the author’s own assessment. Investors should conduct their own due diligence before making any investment decisions.