Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Date

May 7, 2026, 5 p.m. ET

Call participants

  • President and Chief Executive Officer — Sanjiv Razdan
  • Chief Financial Officer — Scott Justin Bowman

Need a quote from a Motley Fool analyst? Email [email protected]

Takeaways

  • Revenue -- $14.8 million from continuing operations, rising 13% year over year due to the transition to a franchisor model.
  • Adjusted EBITDA (continuing operations) -- $2.2 million, a substantial increase from $46 thousand in Q1 2025, reflecting efficiency gains from refranchising.
  • Net income (continuing operations) -- $1.1 million, compared to a net loss of $506 thousand in Q1 2025, showing marked improvement in profitability.
  • System-wide sales -- $126 million, down 4.9% year over year, attributed to macro headwinds and portfolio optimization.
  • Same-store sales (comp sales) -- Negative 4.2% for the quarter, tracking to negative 3% in April, with management expecting sequential improvement.
  • Free cash flow -- Improved by $2.3 million year over year, supported by a $2.2 million increase in cash flow from operating activities.
  • Clinic count -- 943 total clinics at quarter-end, down from 960 at year-end 2025 due to three openings and twenty closures (868 franchise, seventy-five company-owned or managed).
  • Refranchising activity -- Agreements signed to sell fifty company-owned clinics in March and April; only three clinics will remain company-owned post-closing, down from 135 at the start of the transformation.
  • Regional developer (RD) territory buybacks -- Three RD territories repurchased, reducing annual RD royalties by approximately $450 thousand and increasing long-term royalty retention.
  • Pricing initiatives -- $5 to $10 price increases implemented in approximately 300 clinics, with enterprise-wide rollout expected in Q3; management noted, "no meaningful patient pushback" and improved conversion and attrition rates.
  • B2B partnerships and new offerings -- First B2B partnership program signed and rollout of new CareCredit program began, opening access to 12 million CareCredit network members and offering deferred payment options.
  • Marketing and digital efforts -- AI visibility score improved to the 78-80 range (from about 70), local microsites fully migrated to an optimized template, driving increases in organic traffic and high-intent patient engagement.
  • Guidance (full-year 2026) -- System-wide sales expected at $519 million to $552 million, comp sales range of negative 3% to positive 3%, consolidated adjusted EBITDA of $12.5 million to $13.5 million, and thirty to thirty-five net new franchise clinic openings.
  • Share repurchases -- 137,000 shares bought back for $1.1 million ($8.35 average price), with $4.5 million remaining under the $12 million share repurchase authorization.
  • Balance sheet -- $20.7 million unrestricted cash at quarter-end; $20 million credit facility with JPMorgan Chase extended to August 2029 remained undrawn.
  • Cost structure improvements -- G&A expenses were $7.1 million, expected to decline further post-refranchising; $300 thousand related to expenses to be eliminated after transition, and most of a $600 thousand restructuring charge was added back for adjusted EBITDA.
  • Operational transition timeline -- Company expects the pure-play franchisor model and related cost/efficiency benefits to phase in during the back half of 2026 after refranchising clinics.
  • Profitability targets (post-refranchising) -- Anticipated gross margin of 83%-85% of revenues, G&A expense at 40%-42% of revenues, capex at about 3% of revenues, adjusted EBITDA margin of 19%-21%, net income margin of 13%-15%, and free cash flow conversion of 60%-70%.

Summary

The Joint (JYNT 1.48%) reported a rapid transition to a nearly pure franchisor model, signing agreements to reduce company-owned clinics from 135 to three. Management confirmed cash flow and profitability improved sharply, with refranchising and RD territory buybacks driving higher margins and free cash flow generation. Digital marketing and pricing optimization efforts produced sequential increases in active clinic membership, enhanced patient retention, and improved conversion metrics with no significant patient attrition. Cost structure benefits are expected to materialize in the back half of 2026, with full-year guidance reaffirmed for sales, adjusted EBITDA, and franchise clinic openings. Capital allocation priorities included share repurchases, strategic RD territory buybacks, and a focus on disciplined investment for growth initiatives.

  • CEO Razdan stated, "With our refranchising efforts effectively complete, The Joint is now, in every meaningful sense, a pure-play franchisor," highlighting the immediate transformation impact.
  • CFO Bowman outlined that only three company-owned clinics would remain post-transaction closing, emphasizing, "we should be very near completion of that lease assignment process" in the next few months.
  • Sequential comp sales improvement has already been observed from negative 4.2% to about negative 3% quarter-to-date in April, supported by ongoing national marketing and digital strategies.
  • New clinic openings are back-half weighted for 2026, with improved pre-opening protocols cited as the driver of faster break-even times and stronger initial performance.
  • Management reiterated a long-term clinic opportunity exceeding 1,800 U.S. franchise clinics and outlined the next strategic phase ("Joint 3.0") for growth in underpenetrated geographies, B2B, and international markets starting in 2027.

Industry glossary

  • RD (Regional Developer) territory: A contractual area managed by a third-party developer who recruits and supports franchisees in exchange for royalty-sharing; The Joint may repurchase these rights to realize greater direct royalty income.
  • CareCredit: A healthcare financing service providing patients with deferred payment options across a wide provider network.
  • FDD (Franchise Disclosure Document): A legally required document in franchising, disclosing financial performance and business details to prospective franchisees.
  • Comp sales (comparable sales): A metric comparing revenues generated by clinics open for at least a full fiscal year, excluding those opened or closed during the period.
  • Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain nonrecurring and noncash items, intended to represent ongoing operating performance.

Full Conference Call Transcript

Richard Land: Thank you, Danielle, and good afternoon, everyone. This is Richard Land with Alliance Advisors Investor Relations. Joining us on the call today are President and CEO, Sanjiv Razdan, and CFO, Scott Justin Bowman. Please note we are using a slide presentation that can be found on The Joint Corp.’s IR website. This afternoon, The Joint Corp. issued a press release for the first quarter ended 03/31/2026. If you do not already have a copy, it can also be found on the company’s website. Please be advised that today’s discussion, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws.

These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance, business prospects, and opportunities to differ materially from those expressed in or implied by these statements. Important factors that could cause such differences are discussed in the risk factor section of The Joint Corp.’s filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update them except to the extent required by applicable securities laws. Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA, free cash flow, and system-wide sales.

Descriptions of these measures are included in the press release issued earlier this afternoon and reconciliations to the most directly comparable GAAP measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website. With that, I will now turn the call over to Sanjiv Razdan. Sanjiv, please go ahead.

Sanjiv Razdan: Thank you, Richard. Good afternoon, everyone. Alongside the strong first quarter results we reported today, we continue to make meaningful progress with our Joint 2.0 initiative, the first phase of our transformation journey. In April, we entered into an agreement for the sale of 45 company-owned or managed clinics in Southern California. When combined with the two other signed refranchising agreements that are pending closing, just three clinics out of our entire portfolio remain company-owned or managed. That is down from 135 at the start of this process. This is a defining milestone. With our refranchising efforts effectively complete, The Joint Corp. is now, in every meaningful sense, a pure-play franchisor.

And as we continue to implement heightened cost discipline across our operations, our financial results are benefiting. These benefits include higher profitability and free cash flow conversion, which we are in part allocating for the benefit of our shareholders, including through our continued share repurchases, as well as through recent RD territory buybacks. On slide five, let me touch on the Q1 financial highlights before walking through the details of our transformation. Revenue from continuing operations grew 13% year-over-year to $14.8 million. Adjusted EBITDA from continuing operations was $2.2 million compared to $46 thousand in Q1 2025, underscoring the operating leverage we are generating as we shift toward more royalty- and fee-based franchise revenue.

Net income from continuing operations was $1.1 million compared to a net loss of $506 thousand in Q1 2025. And cash flow from operating activities improved by $2.2 million from 2025, helping to drive a $2.3 million improvement in free cash flow over the same period. On slide six, now I will walk through our recent refranchising activity in more detail. In March 2026, we signed a letter of intent for the sale of five company-owned or managed clinics. Then in April, subsequent to quarter end, we signed an asset purchase agreement for the sale of 45 company-owned or managed clinics for a total of $2.3 million.

When completed, these two transactions, along with the asset purchase agreement announced in December, will bring our company-owned clinic count down to just three, which compares to 135 corporate clinics at the start of our Joint 2.0 initiative. Completing this journey ahead of schedule is a testament to the strength of our operator relationships and the attractiveness of The Joint Corp. franchise model. In addition to our success with refranchising, we also recently completed buybacks of three regional developer territories, allowing us to capture a greater share of long-term royalty economics in those markets. Now that we have bought back these RD territories, it allows us to provide strong direct support to our franchisees and drive growth over time.

On slide seven, with The Joint Corp.’s 2.0 transformation efforts nearing completion, I want to share our thinking about what comes next. We are increasingly focused on The Joint Corp. 3.0, the next phase of our journey, which will begin in earnest in 2027. That phase will prioritize growth through new channels, including B2B, expansion into underpenetrated U.S. markets, and potential entry into our first international market. Underpinning this is a powerful set of consumer trends, including growing interest in longevity, health span, mindfulness, sleep quality, and noninvasive whole-body care. Chiropractic care and The Joint Corp.’s unique model are exceptionally well positioned against this backdrop.

We see significant opportunity to evolve our brand positioning not just around the theme of pain relief, but also around moving better, with quantifiable patient outcomes through the creation of the Joint Move Score feature. In line with this positioning, we are exploring signature treatments, nutritional supplements, and orthotics. On slide eight, now turning to our marketing efforts and how we are driving top-line momentum. Our messaging continues to center on chiropractic care for pain relief, helping patients improve their mobility and get back to doing the things they love. This message tends to attract patients who stay with us longer. Our national marketing and advertising program, which was launched in November, is now several months in.

We have seen sequential improvement in member growth each month since launch, which is encouraging. On the digital side, our ongoing SEO and AI visibility optimization work is driving higher organic traffic and lead quality, with our AI visibility score improving to between 78 and 80, up from about 70 at the beginning of the process. We now exceed the industry benchmark. Meanwhile, all local clinic microsites have been migrated to the new optimized template, and we are seeing continued positive trends in traffic and high-intent actions, including new inbound phone calls and form submissions.

During Q1, we benefited from new sales initiative tests, including the introduction of a new three-month minimum term commitment program and new, more flexible offerings to drive conversion and longer-term retention, and we signed our first B2B partnership program, which gives our partners’ employees access to care at The Joint Corp. In addition, we have started to roll out our new CareCredit program nationwide, which provides patients with deferred payment options on higher-ticket packages and plans, improving their access to care. It also enables access to 12 million members in the CareCredit program network.

Lastly, our pricing optimization efforts continued during the quarter, with $5 to $10 price increases now rolled out across approximately 300 clinics, with the rest of the portfolio starting to implement this pricing beginning in the third quarter. Feedback to date indicates no meaningful patient pushback, and we are using this data to ensure pricing changes support revenue optimization without impacting patient acquisition or retention. Turning to slide nine, I will speak to comp sales and patient engagement. Q1 comp sales of negative 4.2% reflected the impact of continued macro headwinds, such as general cost of living pressures across the entire market.

However, comp sales are expected to consistently improve throughout the balance of the year, as Scott will speak to shortly. Beginning with January, we have now had four consecutive months of month-on-month improvement in active member count per clinic. We expect comp sales trends to improve throughout the balance of the year as our national campaign matures, SEO improvements compound, and pricing optimization rolls out more broadly. Growing our active member base remains a central driver of comp sales improvement, and we will drive growth through stronger lead generation, better in-clinic conversion, and improved retention, along with the benefit of optimized pricing.

Our patient retention rate has improved over the prior year, supported by more flexible offerings and longer contract minimums. This gives us a stronger foundation from which to accelerate growth. With that, I will turn it over to Scott, our CFO.

Scott Justin Bowman: Thanks, Sanjiv. To start, let us discuss our operating metrics. System-wide sales in the first quarter were $126 million, a decline of 4.9% compared to the same period last year. Comp sales were negative 4.2%, consistent with the headwinds Sanjiv discussed earlier. Meanwhile, adjusted EBITDA from consolidated operations grew 22% to $3.5 million, demonstrating our profitability improvements. Turning to slide 12, I will review our results from continuing operations for the first quarter unless otherwise specified. Revenues grew 13% to $14.8 million, reflecting the early benefits of transitioning clinics to continuing operations as part of refranchising. Cost of revenues was $2.7 million, down 8% compared to the same period last year, primarily due to lower regional developer royalties.

Selling and marketing expenses were $3.7 million, up 6% compared to the same period last year, driven by the transition of clinics to continuing operations. Meanwhile, G&A expenses increased 2% to $7.1 million, of which approximately $300 thousand relates to expenses that will not be incurred upon the completion of our refranchising strategy. Overall, we expect G&A to decline as a percentage of revenue as we complete the transition of company-owned clinics to franchise clinics. Net income from continuing operations was $1.1 million compared to a net loss of $506 thousand in the same period last year, while consolidated net income was $1.3 million compared to $1 million in the prior-year period.

And lastly, adjusted EBITDA from continuing operations was $2.2 million compared to $46 thousand in the same period last year, a clear reflection of the operating leverage we will have in our pure franchise model. On slide 13, let us discuss our clinic count. Total clinic count was 943 at the end of the first quarter, compared to 960 at year-end 2025. During the first quarter, we opened three clinics and closed 20, resulting in 868 franchise clinics and 75 company-owned or managed clinics. This reflects our previously discussed strategy to optimize the portfolio for quality and performance.

As Sanjiv noted, the asset purchase agreement signed in April, combined with the letter of intent signed in March, will reduce our company-owned clinic count to just three when the transactions close. Meanwhile, our work to improve new clinic performance through enhanced preopening protocols continues to drive faster time to breakeven for new openings. Now I will review our balance sheet and capital allocation. Unrestricted cash at the end of the first quarter was $20.7 million compared to $23.6 million at year-end 2025. We maintain our $20 million line of credit with JPMorgan Chase, which remains fully undrawn and is available through August 2029.

In early May, we extended the maturity of our credit facility by two years from August 2027 to August 2029. During the quarter, we repurchased approximately 137 thousand shares for total consideration of $1.1 million at an average price of $8.35 per share. We now have $4.5 million remaining under the $12 million authorization approved in November 2025. As Sanjiv mentioned, we also completed three RD territory buybacks recently, which will further optimize our portfolio economics. Through these buybacks, we expect to realize approximately $450 thousand in reduced RD royalties on an annualized basis, partially offset by internal costs to manage these territories. On to slide 15, we are reiterating our full-year 2026 guidance, as originally provided in March 2026.

We expect system-wide sales of $519 million to $552 million, comp sales in the range of negative 3% to positive 3%, consolidated adjusted EBITDA in the range of $12.5 million to $13.5 million, and new franchise clinic openings in the range of 30 to 35. As Sanjiv noted, we expect comp sales trends to improve throughout the year, with a general cadence of slightly negative comps in Q2, followed by positive comps in Q3 and Q4, with the fourth quarter expected to be higher than the third quarter.

New clinic openings will continue to be offset by closures as we reshape the portfolio around stronger operators and healthier sites, meaning that on a net basis, our clinic count at the end of 2026 will be lower than 2025. This clinic portfolio optimization leaves us with a stronger foundation to grow from, and we continue to believe that there is potential for more than 1,800 franchise clinics in the U.S. alone. On slide 16, we continue to work towards our pure-play franchisor model, which will be capital-light with lower G&A expense and higher profitability margins. Once refranchising is complete, we expect to achieve this model starting in 2026. Keep in mind that these are not our long-term targets.

They are just a starting point once the full benefit of refranchising is realized, which we intend to build on in 2027 and beyond. For the model, gross margin is expected to be 83% to 85% of revenues, compared to 90% in 2025. G&A expense is expected to be 40% to 42% of revenues, compared to 64% in 2025. Capex is expected to be approximately 3% of revenues, and free cash flow conversion, which we define as free cash flow divided by adjusted EBITDA, is expected to be 60% to 70%. These assumptions would result in an estimated adjusted EBITDA margin of 19% to 21% and net income margin of 13% to 15%.

Finally, on slide 17, I will speak to our capital allocation. As highlighted by our activities in Q1, we remain committed to a disciplined capital allocation framework that prioritizes investments in growth initiatives, share repurchases, and opportunistic repurchase of RD territories. With that, I will turn it back over to Sanjiv. Thanks, Sanjiv.

Sanjiv Razdan: On slide 19, Q1 was another quarter of continued progress toward reigniting growth. The financial results, with 13% revenue growth from continuing operations and 22% consolidated adjusted EBITDA growth, are starting to reflect the franchisor model we have been building. The Joint Corp. 2.0 transformation is now nearing complete, and we are securing a strong foundation to launch The Joint Corp. 3.0 as a capital-light pure-play franchisor with a growing national brand, improving patient acquisition trends, and a pipeline of new B2B initiatives. Meanwhile, our capital allocation, including share repurchases, RD buybacks, and disciplined investment in growth initiatives, reflects our conviction in the long-term value of this business and our commitment to delivering returns for stockholders.

And finally, we are also building a business that is well aligned with where healthcare and wellness are heading. Consumer demand for longevity, health span, and noninvasive whole-body care is growing, and The Joint Corp. is uniquely positioned to meet that demand at scale. With that, operator, we are ready for Q&A.

Operator: We will now open the call for questions. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. The first question comes from Jeff Van Sinderen from B. Riley. Please go ahead.

Jeff Van Sinderen: Hi, everyone. Just wondering on the timeframe to close the refranchising transactions. I think you said second half, you expected those to be completed. So it sounds like they are closing in the next month or so, couple months?

Scott Justin Bowman: Yes. The timing on those is dependent on getting the leases assigned to the new owners, and so that is an ongoing process. Over the next couple of months, we should be very near completion of that lease assignment process.

Sanjiv Razdan: Jeff, in addition to that, what I want to make sure is clear is that all but six or seven of those clinics now are being operated by the buyers of these clinics. Either those leases have already been transferred to them and they are owning and operating those clinics, or they are operating them under a management services agreement, which, for all intents and purposes, mirrors the economics of a pure franchisor model. So the only mechanical piece that needs to be complete to conclude these deals is to reassign those leases, which we are confident will happen here in the next couple of months.

We do have one other small cluster of four or five clinics in Northern California that are under a letter of intent where an APA is expected to be signed shortly. And that then leaves us with three clinics that we are also addressing. I hope that clarifies.

Jeff Van Sinderen: I am sorry, that last cluster you mentioned, how many clinics is that?

Sanjiv Razdan: The last cluster is five.

Jeff Van Sinderen: Got it. And then I am just, I know you went through a bunch of different things in the prepared comments, but I am trying to get a better sense of what you think are the main drivers of getting the same-store sales turned around. It sounds like you feel like you are on the right path to that, but maybe you could just delve a little bit more into that and how you see that coming about.

Scott Justin Bowman: Yes, absolutely.

Sanjiv Razdan: First of all, I think what I did not say in my prepared comments, but I do not want this point to be lost. As we have now practically concluded refranchising, it is going to allow this entire team here to be single-mindedly focused on growth outcomes.

What gives us confidence that we will continue to see the sequential improvement we are seeing is based on the work that we started late last year, which, to recap: one was to pivot the external messaging to pain relief; secondly, we transferred $500 per clinic per month from local marketing to national advertising to invest more on the brand awareness side; three, we got caught up on search engine optimization and now have optimized for AI search where we are slightly ahead of the industry benchmark and we are being rated well there. So that is work that we have already done, and that impact is compounding. In addition, our patient retention is improving.

It is significantly better than last year. That is happening as a result of two things. One is that we have extended the minimum contract term from two months to three months, and we have had zero pushback from patients on that. The other thing we have done is create a new offering to help extend the lifetime value of patients. Patients who are on our wellness plan that gets them four visits a month, should they wish to cancel, we are offering them the option of a plan called AlignOne, which gives them one visit per month at $35 a month or $39 a month depending on what part of the country they are in.

That gets them one visit per month and then the ability to buy incremental visits. We find that people are, on balance, quite happy to extend their membership with us on that plan, and we are seeing significantly lower attrition on that plan. Even though it is a one-visit-per-month plan, we are seeing the actual uptake closer to two visits per month. Those are some of the things that are giving us confidence. Plus the pricing, Jeff, that was rolled out to 300 clinics — we now feel very confident extending that to the rest of the enterprise, and that is expected to happen early in the third quarter.

Jeff Van Sinderen: Okay, good to hear. And then can you just remind us how many RD rights you still have left to buy back if you wanted to buy those back?

Sanjiv Razdan: Yes, and just as a reminder, we have now bought back four RD rights in the last 12 months or so, which equate to about $1.3 million in RD royalties, which we are now going to be able to recover. One of those four was done last year, and three we have just concluded and shared with you on this call. I am going to let Scott answer what exactly how many RD territories are left.

Scott Justin Bowman: Yes. Remaining, we have 12 RD territories. We will continue to evaluate those opportunities and work with the RDs.

Jeff Van Sinderen: Okay, great. Thanks for taking my questions. I will take the rest offline.

Sanjiv Razdan: Thank you, Jeff.

Operator: The next question comes from Jeremy Hamblin from Craig-Hallum.

Analyst: This is Will on for Jeremy. Thanks for taking my questions. First, I was just wondering if you could give us a sense of the demand elasticity you have seen in geographies where you have taken the most price, and then also what you have seen in terms of comp impact from that $10 raise.

Scott Justin Bowman: Yes. It is interesting. We have done the analysis looking at the trends, and we coupled that with conversations with the local operators just to understand the dynamics of the price increases. One thing I will start off by saying is that these price increases are just for new patients. Everybody that was already on a plan continues at that same price. It is just for new patients. We have seen little or no pushback. Even with a little bit of an increase in price, we still provide tremendous value.

A couple of metrics that we look at are our conversion rate, to see if that has gone down — it has not; no meaningful movement in conversion — and our attrition rate has actually improved. The metrics tell us that it is working, the operators confirm that, and so that gives us the confidence to roll it out further.

Analyst: Okay, that is helpful. And then I was just wondering how we should be thinking about SG&A dollars here post-refranchise for the remainder of 2026, and when you would expect to hit stride with the new go-forward run rate.

Scott Justin Bowman: The go-forward run rate — we should be mostly on that new model in the back half of this year. As Sanjiv talked about, we signed some agreements late in the quarter making those transitions, which do take a little time to get fully transitioned over. In many ways, they are mimicking the franchise model with the services agreements that they are under, but it is going to be in the back half where we will start to see that model come into play, based on the model that I put out there. From a G&A standpoint, in the materials we show that we were $7.1 million in G&A for the quarter, and that is continuing operations.

We will likely see some reductions in that number for the remaining quarters. But keep in mind, that is a continuing operations number.

Sanjiv Razdan: In addition, Will, what I would like to add is that the slide that Scott shared on this call about where we expect to land in mid-2026 — that is exactly that. We expect to be there in the back half of this year. As we start to hit that run rate, we expect our ability to bring even more resources to drive growth on the top line and equally optimize our cost structure. Over time, we expect that those numbers we have shared for mid-2026 will only continue to strengthen as we get into 2027 and beyond.

Analyst: Okay, that is super helpful. And then just last one from me: wondering how the new clinic pipeline is shaping up — any new interest from new franchisees versus existing — and the cadence of openings for the remainder of the year to get to the guidance.

Sanjiv Razdan: Yes. Our guidance of 30 to 35 — we have confidence to get to that guidance, which is why we have reiterated it. The cadence of openings is skewed toward the back half of the year. In terms of when those openings are happening, they will be second half, more heavily loaded. What we are seeing is two things. One, the new openings we had in 2025 — if you recall, we had 29 openings — those 29 openings have outperformed our run rate of prior openings and are tracking to breakeven times at half the time of the run rate.

The two clinics that opened very early this year are tracking, at the moment — it is very early days — at an even faster run rate. We are very optimistic about the new clinic openings because of who is opening these clinics — stronger franchisees — strong diligence on site selection and approval, and very robust on-the-ground new clinic opening protocols, which we believe is yielding these results. We are seeing interest from new franchisees coming into the system as well as existing franchisees. An area of focus for us is to grow and develop in the Northeast, where we have been traditionally underpenetrated, and we have had some great early successes there.

And even our Southern California corporate clinic bundle we have just sold to a franchisee that is completely new to our system. So we are very excited and encouraged by existing franchisees doubling down on investing in the brand as well as new franchisees being attracted to the brand. Once we publish our franchise disclosure document, we will be able to share some of these numbers more publicly with potential franchisees, and we are optimistic about the impact that will have on our pipeline.

Analyst: Understood. Thanks for taking my questions.

Operator: As a reminder, if you have a question, please press star then 1. The next question comes from George Kelly from ROTH Capital. Please go ahead.

George Kelly: Hey, everyone. Thanks for taking my questions. First one is on pricing. Maybe I missed it in your prepared remarks, but did you settle on a $10 pricing increase? Do you expect to take some kind of price across the entire base by year end, or by Q3?

Scott Justin Bowman: We are leveraging a $10 price increase more, and looking at the analytics and working with the operators, that is the preferred increase that we have right now. We expect to take that price across the base by Q3.

George Kelly: And then you mentioned the four consecutive months of improved active members. Could you give a sort of comp trend over that same timeframe? Where did you exit the quarter, and what kind of comp growth did you generate? I think you said it was slightly negative. Could you just quantify where comps are trending currently?

Scott Justin Bowman: Yes. To end the quarter, they were similar to the full quarter, negative 4.2% — right in that range. However, once we got into April, we did see some improvement, and so quarter-to-date we are running about negative 3%. As Sanjiv mentioned, we are seeing some good signs and month-over-month improvement in our active member growth. That improvement is better trends in attracting new patients, the conversion of those patients, and improvement in our patient retention. Those three areas are what we look at as KPIs to drive active member growth, and we have seen improvement in all three.

George Kelly: Two other quick ones. Back to the prior question about your G&A, go-forward G&A. If I look at the $7.1 million in Q1, you mentioned that there was $300,000 of nonrecurring — post-refranchising — that is expected to come out. Was that a quarterly number? And there was also a $600,000 restructuring charge in the quarter — did that fully hit G&A? If I take those two amounts out, is the go-forward G&A run rate somewhere in the low six range?

Scott Justin Bowman: Yes, the $300 thousand — you are right — that was a quarterly number, which will go away with one portfolio we refranchise. The restructuring — most of that was in G&A and then was added back for adjusted EBITDA.

George Kelly: Last question for me. You mentioned the FDD and your optimism around messaging when that comes out, I presume shortly. If you could, the question I have is just on four-wall margin. Has that stabilized? Do you still hear a lot of input from your franchisees about labor inflation and other aspects of inflation, or do you have a sense that four-wall margin is holding in?

Sanjiv Razdan: George, two things. One, of course the FDD is due out shortly, so prospective franchisees and anybody who looks at it will get transparency to the Item 19 and some of the numbers there. What we are seeing now is stabilization. For quite some time — by which I mean several months, almost a year — the labor wage inflation that we were seeing in this business has stabilized, and that is not growing at the same rate that it was in the post-pandemic period. Our input cost structure is relatively stable.

As active members keep growing and our ability to transfer some of that cost that we have not transferred on to consumers — we found with these 300 clinics where we have taken the price increases, there has really been no impact to conversion or retention. We are optimistic that will help start to shore up some of the unit-level economics as the new pricing starts to kick in early Q3.

George Kelly: Okay. I appreciate it. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Sanjiv Razdan for closing remarks.

Sanjiv Razdan: Thank you all for joining us today. Have a great day. And remember, at The Joint Corp., we always have your back.

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