Annual General Meeting
2024 Annual General and Special Meeting
May 25, 2023 - 9:00 AM MST
Related Materials
Letter to the Stockholders
Dear Fellow Stockholders:
Advancing The Joint’s vision to be the
Champions of Chiropractic
The Joint continues to revolutionize access to chiropractic care with the business model we created: providing affordable, concierge-style, membership-based services in convenient retail settings.
In 2023, we achieved growth in system-wide sales, revenue, Adjusted EBITDA, patient visits, and patients treated, even with the impact of the ongoing uncertainties in our patient demographic. Additionally, we made significant strides in improving new patient conversion rates and reducing existing patient attrition. Also, in August 2023, we surpassed a significant milestone for any franchise concept – 900 units opened – which only 3.4 % of franchise systems have achieved according to FranDATA. During 2023, we expanded to 41 states and the District of Columbia and closed the year with 935 clinics in our total portfolio.
Leveraging Robust Foundation to Drive Sustainable, Profitable Growth
Yet, we continue to strive to do better for all our stakeholders - to drive greater growth, more sustainable growth and more profitable growth. Our foundation is robust, and we are positioned to achieve these objectives while pursuing our goal to be the Champions of Chiropractic.
- We have the market opportunity: The Joint is the category creator and leader in capturing the $8.1 billion out-of-pocket segment of the $20.5 billion and growing franchised chiropractic care industry.
- We have the team: Our dedicated doctors and wellness coordinators as well as our dynamic franchisees and regional developers consistently lead The Joint in winning numerous franchise awards.
- We have the assets: Our premier nationwide brand and clinic network combined with the largest digital footprint in the industry are attracting hundreds of thousands of patients new to chiropractic care annually.
- We have the business model: Starting our capital-lite franchise concept in 2003, we continued to evolve whereas today it consistently delivers around 85% recurring clinic revenue.
- And, we have the strategy: In the second half of 2023, we began implementing enhanced marketing initiatives to bolster new patient counts and increase existing patient engagement and later in the year, we introduced our plan to refranchise the vast majority of our corporate portfolio to increase number of franchises and to improve our profitability.
2023 Performance Highlights
Our financial and operating highlights for 2023, compared to 2022:
- 6 million patient visits, up from 12.2 million
- 75 million unique patients, up from 1.6 million
- ~932,000+ new patients, up from ~845,000
- 36% of new patients had never visited a chiropractor before The Joint, up from 35%
- 85% of system-wide gross sales from memberships, up from 84%
- 16% increase in revenue to $117.7 million
- 12% increase in system-wide sales1 grew to $488.0 million1
- $9.8 million net loss, including $10.8 million in a non-cash valuation allowance2, compared to net income of $627,000.
- $12.2 million in Adjusted EBITDA, up 6% compared to $11.5 million.
In 2023, we saw a 20-basis point improvement in attrition, lowering it to 11.0%. Additionally, our conversion rates increased by 160 basis points, reaching 52.1%. We remain dedicated to further increasing our new patient count. Our marketing endeavors are starting to show promising outcomes, especially with the support of our year-end campaigns.
1 System-wide sales include revenues 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 revenues are the basis on which the company calculates and records royalty fees and are indicative of the financial health of the franchisee base.
Executing Refranchising Strategy
In our ongoing efforts to optimize our operational structure and enhance shareholder value, we began implementing our refranchising strategy of the vast majority of our corporate clinic portfolio in late 2023.
It is important to underscore the inherent value within our corporate clinic portfolio. These clinics represent high-quality assets, and we are committed to realizing their full potential. Our dedicated team has crafted a robust framework for the sale of the vast majority of our corporate clinics. We began our outreach by prioritizing existing franchisees, which yielded over 100 requests for information. The second phase of our marketing was casting a wider net to attract potential buyers beyond our current Joint community.
Our corporate clinics are advancing through various stages of negotiations. While we are selling our assets of value, we are also selecting our next franchisees. Ultimately, our objective is to entrust these clinics to the hands of top-performing franchisees who can most effectively run the clinics. By doing so, we aim to unlock capital that can be deployed across various strategic avenues, including brand marketing initiatives, the acquisition of RD territories, and potential stock repurchases all of which are expected to be accretive for stakeholders.
Championing Chiropractic Care
As we entered 2024, we expanded our vision: To be the Champions of Chiropractic Care. Aligned with our mission to improve the quality of life for our patients, we provide consumers with expanded access to chiropractic services that meet their demands and enhance their health. Our strategic focus revolves around three key pillars: our brand, our people, and our performance.
Elevating Our Brand: Americans spend approximately $20.5 billion on chiropractic care annually, according to a report issued by IBIS World Chiropractors Market Research in November 2023. Of that total 41.6% is not with insurance, or $8.5 billion is spent by patients “out-of-pocket.” The Joint has an incredible first mover advantage, and frankly it is surprising how little competition there is in the marketplace. We estimate that our clinic count exceeds the aggregate of all of the other franchised chiropractic concepts altogether and is significantly larger than those who serve the “out-of-pocket” contingent.
Already The Joint is the thought leader in chiropractic care. In 2023, between our national marketing fund and local clinic marketing, The Joint system spent over $35 million educating consumers about the efficacy of chiropractic care. Additionally, much of the material is published online, establishing The Joint as one of the largest provider of digital content on chiropractic in the world.
To enhance our brand equity and bolster awareness, we are committed to increasing our active patient count. This will be achieved through enhancements in the intake process, testing new patient initial visit bookings, and optimizing local clinic marketing efforts. We aim to prolong patient engagement with The Joint and reactivate lapsed patients more quickly by leveraging new content, automated messaging, and promotional activities directed specifically at our lapsed patients. Additionally, we plan to launch new media campaigns to boost our new patient leads.
Strengthening Our Team: Our primary objective is to assemble and retain the highest-quality team possible. We are actively developing lead pipelines for Doctor of Chiropractic to share within our franchise system by nurturing professional relationships and mentorship programs in the chiropractic community. We are also exploring enhanced incentives and benefits, including the creation of The Joint’s proprietary continuing education platform for our doctors. Furthermore, we are implementing programs to align our staff more effectively with our patient experience vision.
Enhancing Performance: These initiatives are designed to drive performance improvements across the board. We anticipate driving total systems sales by increasing new patient counts and optimizing sales per patient. Moreover, we are evaluating opportunities for line extensions and ancillary products. Ultimately, our goal is to fortify our robust franchise base, enhance clinic economics, boost productivity, and expand margins at both the clinic and company levels.
Recognition of Excellence
As we look back on the achievements of 2023, I am proud of our entire team - from our committed doctors and wellness coordinators to our corporate staff, franchisees, and regional developers - for their steadfast commitment to our patients' well-being.
We are honored by The Joint's consistent recognition for excellence. Most recently, Entrepreneur Magazine ranked The Joint as the number 1 franchise for chiropractic services, number 61 for veterans, and number 83 among the top 500 franchises. Franchise Business Review named us “Most Profitable Franchises / Top Franchise for Veterans”. And, Franchise Times placed The Joint as 168 in the “Top 400” and “Fast & Serious”. FRANdata, which provides franchise business intelligence and is similar to a FICO score for consumers, revealed The Joint’s FUND score for 2023 was 910 out of 950, compared to the average 593. It is important to note that, in the history of The Joint not a single franchisee has defaulted on their Small Business Administration (SBA) loan, which in the industry is considered a remarkable achievement of the franchisor and a reflection of quality of investment.
Commitment to Governance, Diversity and Sustainability
We are firm in our belief that cultivating a culture of engagement and alignment is crucial for our continued success. Thus, we place great emphasis on attracting, developing, and retaining a diverse and engaged workforce across all levels of our organization. To achieve this, we are dedicated to creating a workplace where our employees feel a strong connection to our mission, take pride in our culture, and are actively engaged in their roles. We provide opportunities for growth and career development, supported by competitive compensation and benefits, to enhance talent attraction and retention.
We believe optimal performance is achieved through the strength of diversity within our teams. Therefore, diversity, equity, and inclusion hold paramount importance in our vision of cultivating a world-class organizational culture. We have reinforced our commitment to DEI by officially integrating it into the responsibilities of our senior leaders and identifying it as a pivotal strategic initiative crucial to the ongoing growth of franchised clinics and the enhancement of our brand.
The personal and professional growth of our employees is paramount to our business's success. Our performance and development strategy is crafted to inspire employees to enhance their skills, leverage their strengths, and foster a culture of coaching and feedback. We provide access to a wide range of online courses and actively encourage participation in conferences, training programs, and continuing education opportunities. Furthermore, we regularly assess talent needs and define growth paths to support our employees' development.
Furthermore, we are dedicated to fostering the performance and potential of our corporate staff. We have taken significant steps to formalize and implement resources for performance and compensation management. This included the establishment of a structured compensation framework and guidelines, as well as an expansion of training opportunities for both employees and managers. Through these measures, we aim to cultivate an environment where every individual can thrive and contribute to our collective success.
Commitment to Stakeholders and Appreciation for Support
In summary, our refranchising strategy is driven by a commitment to maximizing shareholder value while positioning our clinics for sustainable growth and success. We look forward to providing further updates as we progress on this exciting journey. Thank you for your continued support and confidence in our vision.
Stockholders, we realize you have a lot of choices when choosing where to invest. We appreciate your trust in The Joint.
On April 23, 2024, we mailed to our stockholders our 2023 Annual Report and proxy statement, along with the proxy card. The proxy card includes instructions on how to vote online, by phone, and by mail. Your vote is important regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting, we encourage you to consider the matters presented in the proxy statement and vote as soon as possible. We hope that you will be able to join us on May 22nd. Thank you for your ownership and support of The Joint Corp.
Peter D. Holt
President and Chief Executive Officer