Earnings call transcript: The Joint Corp Q3 2025: Earnings Beat, Stock Falls

The Joint Corp (JYNT) reported a strong earnings performance for Q3 2025, with an EPS of $0.06, surpassing the forecast of $0.02, marking a 200% surprise. Revenue slightly exceeded expectations at $13.4 million. Despite these positive results, the stock fell sharply by 34.25% in after-hours trading, closing at $5.45, amid concerns over operational challenges and future guidance. This continues a challenging year for JYNT, which has seen a 24.93% price decline year-to-date according to InvestingPro data.

Key Takeaways

• EPS of $0.06 beats forecast by 200%.
• Revenue of $13.4 million, slightly above expectations.
• Stock price plummeted 34.25% in after-hours trading.
• Operational challenges include clinic closures and negative comp sales guidance.
• New product innovations and increased Adjusted EBITDA highlight potential growth areas.

Company Performance

The Joint Corp delivered a strong financial performance in Q3 2025, significantly exceeding EPS expectations. Revenue grew by 6% year-over-year, reaching $13.4 million. However, system-wide sales declined by 1.5%, reflecting operational challenges. The company continues to innovate with new product offerings and has shown resilience in financial metrics, such as a 36% increase in Consolidated Adjusted EBITDA.

Financial Highlights

• Revenue: $13.4 million, up 6% year-over-year.
• EPS: $0.06, beating forecast by 200%.
• System-wide sales: $127 million, down 1.5%.
• Consolidated Adjusted EBITDA: $3.3 million, up 36%.
• Unrestricted cash: $29.7 million.

Earnings vs. Forecast

The Joint Corp's EPS of $0.06 significantly exceeded the forecasted $0.02, marking a 200% surprise. Revenue of $13.4 million was slightly above the $13.36 million forecast, with a 0.3% surprise. This strong performance highlights the company's ability to outperform market expectations.

Market Reaction

Despite the earnings beat, The Joint Corp's stock fell 34.25% in after-hours trading, closing at $5.45. This decline brings the stock closer to its 52-week low of $7.69, indicating investor concerns. The sharp drop contrasts with the positive earnings report, suggesting operational challenges and future guidance weighed heavily on investor sentiment.

Outlook & Guidance

The company provided guidance for 2025, with system-wide sales expected to be between $530 million and $534 million, and Consolidated Adjusted EBITDA projected at $10.8 million to $11.8 million. However, comp sales are expected to be between -1% and flat, reflecting ongoing operational challenges. The company plans to open 30-35 new clinics and anticipates more profitable operations in 2026.

Executive Commentary

CEO Sanjiv Razdan stated, "We are on track to becoming a pure-play franchisor," emphasizing the company's strategic direction. CFO Scott Bowman added, "We expect 2026 continuing operations to be more profitable than 2025," highlighting future growth expectations. The focus on improving the quality of life through affordable chiropractic care remains central to The Joint Corp's mission.

Risks and Challenges

• Decline in system-wide sales presents a challenge to growth.
• Negative comp sales guidance indicates potential operational hurdles.
• Clinic closures and refranchising efforts may impact short-term performance.
• Competitive pressures in the chiropractic care market could affect market share.
• Economic uncertainties may influence consumer spending on healthcare services.

Q&A

During the earnings call, analysts inquired about the ongoing refranchising of corporate clinics and the company's three-tier pricing strategy. The focus on reducing break-even time for new clinics and enhancing the mobile app's patient experience were also discussed, reflecting strategic initiatives to drive future growth.

Full transcript - The Joint Corp (JYNT) Q3 2025:

Conference Operator: Today, and welcome to The Joint Corporation Third Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Richard Land from Alliance Advisors. Please go ahead.

Richard Land, Investor Relations, Alliance Advisors, Alliance Advisors: Thank you, operator. Good afternoon, everyone. This is Richard Land of Alliance Advisors Investor Relations. Joining us on the call today are President and CEO Sanjiv Razdan and CFO Scott Bowman. Please note we are using a slide presentation that can be found at ir.thejoint.com/events. This afternoon, The Joint Corp issued a press release for the third quarter ended September 30, 2025. If you do not already have a copy of this press release, it can be found in the Investor Relations section of the company's website. As provided on slide two, 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, and business prospects, and opportunities to differ materially from those expressed in or implied by these statements. Some 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 forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA, and system-wide sales.

A description of these non-GAAP financial measures is included in the press release issued this afternoon, and reconciliations of these non-GAAP financial measures to their 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. Turning to slide three, with that, it's now my pleasure to turn the call over to Sanjiv Razdan. Please go ahead.

Sanjiv Razdan, President and CEO, The Joint Corporation: Thank you, Richard. I welcome everyone to the call. Today, I will review the third quarter results and recent events. For those new to the call, we provide affordable, accessible, and approachable chiropractic care and help consumers relieve and manage their pain while supporting their ongoing wellness journey. There is a significant need for this, with Americans spending $20 billion a year on back pain. To capture a leading share of this market opportunity, we have been strengthening our management team and executing on our strategies to reignite growth and improve profitability. Although the full financial benefit of these strategies will take time to come to fruition, the following initiatives will improve the financial position of our franchisees and stockholders.

To drive new patient acquisition, we have shifted our brand marketing campaign to focus on pain relief, which we are amplifying by moving a portion of our advertising spend from local to national campaigns. We are strengthening our digital marketing campaigns with SEO and clinic microsites. To grow system-wide sales, we are conducting a three-tiered pricing pilot for our wellness plan. To elevate our patient experience, we continue to upgrade our patient-facing technology. Recently, we launched a second release of our mobile app with a range of new features. To become a pure-play franchisor, we continue to pursue the refranchising of our corporate clinic. To improve new clinic performance, we have implemented robust pre-opening protocols for new clinics to reduce time to break even and ensure a strong early sales volume.

Before I elaborate, for those of you who are new to The Joint, we are the largest franchisor of chiropractic care clinics. Our mission is to improve the quality of life through routine and affordable chiropractic care. Our big, bold vision is to become America's most accessible health and wellness services company. I'll summarize our Q3 2025 financial results compared to Q3 2024, and our CFO, Scott Bowman, will provide greater detail in a moment. Revenue from continuing operations increased 6%. Consolidated adjusted EBITDA increased 36%. This improvement reflects the impact of work done on right-sizing our costs, which have helped to offset a 1.5% decline in system-wide sales and negative comp sales of 2%. Since our last conference call in August, we have repurchased $5 million of stock, and the board recently authorized an additional $12 million of our stock repurchase plan.

At September 30, 2025, our unrestricted cash and cash equivalents remain strong at $29.7 million. Turning to slide five to discuss refranchising. We have entered into an initial agreement to sell 45 corporate clinics in Southern California for $4.5 million via an asset purchase agreement. We are continuing to negotiate certain terms and will update if and when we align on final terms. While microeconomic headwinds are resulting in a longer lead time due to lender-related dynamics, we are actively negotiating asset purchase agreements with potential buyers for our 33 remaining corporate clinics. Let's review our marketing efforts. Turning to slide six. For Q3, similar to Q2, our patient attrition was on par with last year, and conversions were better. However, Q3 sales comps were less than expected.

The main shortfall was due to lower new patient count, which we are addressing by initiating a national marketing refresh, SEO improvements, and advanced pricing tests. Our research identifies pain as the biggest trigger to seek chiropractic care. Our patient base proves this to be true, with 80% of our new patients citing aches and pains as the reason for coming to The Joint. In August, we launched our compelling new brand awareness campaign, Life Unpaused. We have shifted marketing content from broad wellness-focused communications to a message centered on chiropractic care for pain relief. Our goal is to drive stronger new patient demand and lead generation. While brand awareness initiatives tend to take longer to produce results, they are inclined to attract patients who remain with us longer.

We are moving a portion of our marketing efforts to target an earlier stage in the sales funnel, shifting from predominantly local spend to one that also leverages our national scale of 962 locations in 43 states and the District of Columbia, which is equivalent to approximately 57% of metro statistical areas in the U.S. This campaign will educate consumers much earlier on and before they experience pain. That The Joint offers an affordable solution to alleviate pain. The goal is to get individuals at the first sign of discomfort to think, "I should visit The Joint. It's convenient, affordable, and they can help." As alluded to last quarter, we have been actively engaging our franchisees regarding our new strategy.

I am pleased to report in October the franchisees elected to reallocate $500, or approximately 1% of their gross sales per clinic per month, from local advertising to this new national marketing effort. This adjustment does not increase the total amount contributed by franchisees. It simply redirects existing funds to enhance our national brand awareness and patient activation. We are also strengthening our digital strategy through accelerated SEO initiatives designed to improve search visibility, page authority, and discovery, including within AI-driven search environments. These are all key drivers of organic traffic and leads to our website. New microsites, or localized clinic pages, are demonstrating strong early performance. In September, a pilot rollout of 35 clinics averaged a 20%-40% increase in organic search traffic within the first two weeks of launch.

A phased refresh of all remaining clinic pages began earlier this week, with completion expected before the end of the year. In parallel, enhancements to local Google Business Profiles are increasing engagement. Together, these efforts are expanding our local search presence and improving conversion pathways from search to clinic. At the same time, updates to national website pages are enhancing visibility among early awareness audiences searching for topics such as back pain, neck pain, and mobility or lifestyle improvement. These tactics are broadening reach, bringing new users to our website, and positioning The Joint Corp as a credible, trusted authority at the beginning of the consumer decision process. Collectively, these initiatives are designed to reach audiences wherever they search and support the full marketing funnel, from awareness to lead generation to Wellness Plan purchase. These actions are intended to drive new patient counts, which in turn will help improve comps.

Turning to slide seven. We're happy to welcome our new Chief Marketing Officer, who will lead their implementation and further fortify our marketing. Debbie Gonzalez started at the beginning of October. She's experienced in transforming global brand strategies and strengthening marketing capabilities across multi-site retail and health and wellness businesses. Debbie has served as Chief Marketing Officer in publicly traded, private, and consulting companies, where she drove customer acquisition, brand development, performance marketing, digital initiatives, and innovation. Also, during her tenure at the franchisor Massage Envy, she led the development of the recurring revenue membership model. Turning to slide eight, we have unveiled dynamic revenue management initiatives to drive sales and long-term profitability. In July, we introduced our new Kickstart Plan. Our doctors prescribe tailored treatment plans to meet our patients' specific needs.

Often, new patients need multiple adjustments a week during the early phase of their care to get out of acute pain. Kickstart offers an attractively priced pack of four, eight, or twelve adjustments beyond the four included in the standard Wellness Plan. This offering is a real win-win, as it helps patients get rapid relief affordably and generates more revenue for clinics. Already, approximately 25% of new patients are taking advantage of these packages. Now, we are expanding our core Wellness Plan pricing analysis to better understand patient sensitivity for revenue optimization. Our latest pilot, launched early November, tests three different levels of price increase in three different diverse demographic areas. We will monitor performance metrics and analyze trends to help determine next steps for the rest of the system. Based on the results of these pilots, we will optimize our nationwide pricing structure and rollout adjustments across our system.

Turning to slide nine. We are focused on elevating our patients' experience through improved technology. We believe this will foster referrals and extend the length of time they maintain their wellness plan. In July, we officially launched our patient-facing mobile app with basic in-clinic check-in functionality. We are excited that the adoption rate among our wellness plan holders has reached 18% of new patients at the end of quarter three, with over 178,000 downloads. At the end of August, we released our second app version, enabling patients to look up their visit balance, plan type, cycle date, at a glance visit history, treatment plan, and progress report. Download records like receipts and visit notes, and complete a patient experience survey. Upcoming features will enable credit card updates and gamification, such as getting badges for adjustments, check-ins, or watching a video of the stretches that help with your condition.

With that, I will turn the call to Scott. Thanks, Angie. Turning to slide 11, let's discuss our operating metrics. In the third quarter, system-wide sales were down 1.5% to $127 million. Comp sales were down 2%, and adjusted EBITDA for consolidated operations grew 36%. Turning to slide 12, let's discuss our clinics and new clinic performance. We sold eight franchise licenses in the third quarter, compared to seven sold in Q3 of last year. At September 30, we had 149 franchise licenses in active development. In the third quarter, we opened nine franchise clinics, including our first in the state of Delaware, and closed 11. Of the 21 clinics opened in 2025, the break-even point has significantly improved versus clinics opened in recent years, which was due to pre-opening protocols implemented by our operations team.

We closed three company-owned or managed clinics, and we refranchised one clinic, bringing the year-to-date total to 40 refranchised clinics. At September 30, we had 884 franchise clinics, or 92% of the portfolio. We are also focused on improving new clinic performance through better training and marketing. For example, we are now requiring a minimum number of leads to be generated prior to opening to support strong opening sales momentum. This practice has helped improve our break-even timing from around two years to under one year. Turning to slide 13, let's discuss our financials. I'll review continuing operations for the third quarter compared to the same period last year. Revenue grew 6% to $13.4 million, mainly due to the greater number of franchise clinics in operation.

Cost of revenues was $2.7 million, down 6% compared to the prior year, reflecting lower regional developer royalties due to the repurchase of the Northwest Territory rights in the second quarter. Selling and marketing expenses were $2.8 million, up 13% compared to the prior year, reflecting our digital marketing transformation efforts. Depreciation and amortization increased $100,000, mainly due to software development for our new mobile app. G&A expenses decreased 3% to $7.3 million as we continue to right-size our cost structure, and income tax expense was $10,000 for the quarter, reflecting an effective tax rate of 3%. Q3 consolidated net income was $855,000. This compares to a net loss of $3.2 million at the same period last year, which was mainly due to impairment expenses related to refranchising. Net income from continuing operations was $290,000, or 2 cents per diluted share, compared to a loss of.

$414,000, or 3 cents per basic share in the same period last year. Adjusted EBITDA from consolidated operations improved 36% to $3.3 million, and for continuing operations, adjusted EBITDA was $1.4 million compared to $262,000 in the same period last year. Turning to slide 14, let's discuss our year-to-date financials for the nine months ended September 30, 2025, compared to the prior year period. Revenue grew 6% to $39.7 million. Consolidated net income increased $7.7 million to $1.9 million. Net loss from continuing operations improved $1.3 million to $1.2 million. Adjusted EBITDA from consolidated operations expanded $1.3 million to $9.4 million, while adjusted EBITDA from continuing operations improved $1.5 million, improved $21.5 million compared to $300,000 in the prior year period. Onto slide 15, I'll review our liquidity and stock repurchase plan.

At the end of the third quarter, unrestricted cash was $29.7 million compared to $25.1 million at the end of last year. We maintained our line of credit with JP Morgan Chase for $20 million and had zero funds drawn during the quarter. In addition, we extended the maturity of the facility an additional six months to August 2027. During the third quarter, we repurchased 228,000 shares for $2.3 million, averaging approximately $10 per share. Since quarter end, we bought back an additional 312,000 shares for approximately $2.7 million. Most recently, the board authorized an additional $12 million for repurchases, continuing to emphasize our confidence in the long-term growth strategy. Onto slide 16, we are revising our full year 2025 guidance as follows. We expect system-wide sales to range from $530-$534 million, which compares to prior guidance of $530-$550 million.

We expect comp sales to be in the range of -1% to flat, which compares to prior guidance of an increase in the low single-digit range. We are maintaining guidance for consolidated adjusted EBITDA to be in the range of $10.8-$11.8 million, and we are maintaining our new clinic openings guidance to be in the range of 30-35. Reflecting our refranchising efforts and realignment of our corporate cost structure, we have made significant progress reducing our operating costs. As a result, we expect 2026 continuing operations to be more profitable than 2025. When we report Q4 2025 results, we will provide annual 2026 guidance as well as the key attributes of our go-forward 100% franchised model. I'll turn the call back over to Angie. Thanks, Scott. Turning to slide 18. I am proud to report that The Joint continues to receive accolades.

We were recognized on the annual Franchise Times Top 400 for the sixth year in the top 200 listing of brands. In 2025, we jumped 11 spots, landing at position 139. We are part of two of the fastest-growing industry sectors for 2025: health and medical and personal services. In summary, we are on track to becoming a pure-play franchisor. Combined with our diligent cost-saving initiatives, we are confident this will lead to improved operating leverage going into 2026 and beyond. Our stock repurchase plan extension demonstrates our strong conviction in the progress we're making toward our long-term goals of growing system-wide sales, comp sales, net new clinic openings, and adjusted EBITDA. With that. Operator, I am ready to begin Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one 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 two. The first question comes from Jeff Van Sinderen from B. Riley FBR. Please go ahead. Hi, everyone. I just wanted to follow up on getting to the pure franchise. At this point, I realize I think you said you're in 40-some-odd units. You're in some sort of stage, it sounds like, due diligence. And then I think you have another 30-some-odd to go after that. What time frame do you think seems feasible to complete all of the refranchising at this point of the corporate clinics? Jeff, at this stage, like we mentioned on our prepared remarks, we have got an initial asset purchase agreement for 45 clinics in Southern California.

We are still negotiating some details around that. Then we've got 33 other clinics which remain that we are also negotiating asset purchase agreements for. I think as a result of the overall macro climate, we found that the lender dynamic was impacted, and it impacted our timing. As it related to buyers securing lending, it added some additional complexity. We feel confident that we're making progress. Whilst exact timing may be hard to predict, I think we're pretty confident that we'll be able to get this done. Okay. Just turning to the steps you're taking to turn around the same-store sales or comps. You mentioned the pricing plan pilot, I think it was. Can you speak more about that? I'm just curious about what you're doing there. Yeah, absolutely. As you know, we took pricing, any meaningful pricing, on our wellness plans.

Going back in March of 2022. It's been a minute since we've taken pricing. Inflation has gone up since then as a result, eroding some degree of clinic margin. We've got to figure out the right balance of making sure we're affordable and accessible whilst also taking a fair price increase in line with market. To make sure we understand that thoroughly, given the market dynamic, we have taken three different price increase levels, three different tiers that reflect three different levels of aggressiveness of price increase, if you will. Those tests or pilot markets went live in November itself. I think over the next few weeks, we expect to learn what is the optimum level of price increase that the market and our patients can bear at the moment. Learning from that, the plan is to then scale that out enterprise-wide. Okay.

I guess I'm a little bit. I'm not sure what the word is, but. It seems to me that if your comps are running slightly negative, that you might. I mean, it almost seems counterintuitive to be raising price into the comps running negative. I'm just wondering how you think about that, how you think about sort of the, I know you gave a new set of guidance for the year for comps and so forth, but how are you thinking about pricing versus driving comps? I think it is one of the many levels that we are contemplating. If I was to share with you or recap the levels that we've got that we talked about, I think one is to shift the external messaging to pain, which seems to be the most relevant trigger to bring patients in at the moment.

To amplify that message and our new brand campaign, we have worked with our franchisee and agreed that they will shift $500 per clinic per month from local investment in marketing to a national spend that allows us to advertise more effectively. We invest behind more high-impact media nationally. We have just started doing that. I think that will make a significant impact. We are also investing some of that money to accelerate some of the very critical work that needs to happen around addressing change in consumer search behaviors due to AI, which I just enumerated. In the context of some of the other things that we are talking about, including patient-facing technology, one of the levers, as you might expect, is also pricing. We think there is some room there just to determine what the right level of pricing is instead of doing that without due diligence.

That is exactly why we've got three different price increase tiers that we're testing to make sure that we're not getting ahead of our skis and the consumer is ready to bear that price increase. It is one of many other things that I think will help us get into positive comp. Okay. Thank you for taking my questions. Of course. The next question comes from George Kelly from Roth Capital Partners. Please go ahead. Hey, everyone. Thanks. A couple of questions for you. First, on, I guess, looking for a little more detail. You mentioned in your prepared remarks about certain initiatives aimed to improving the break-even point. Can you walk through what those look like? Absolutely, George. I think what we were referring to here is the new clinics, right, achieving that we open, reaching a break-even point rapidly, and then, of course.

From there on, we expect them to get to mature sales level also faster than they have historically done. We have opened 25 clinics thus far, and what we found is that we've used a more robust protocol, learning from best practices around our own system on what needs to happen in order to ensure that these clinics open right from day one at a higher sales volume and then ramp up faster. To give you an example, one of the things that we found that makes a very significant impact is to make sure that even before the clinic opens, our franchisees and our operators have achieved a few hundred, and there's a specific number that we target, potential leads. The moment you actually open the clinic, we already have a very significant amount of leads.

Very specific leads that we can then follow through and convert into patients very early in the opening phase of that clinic. That mechanically is done through tools like local tabling, where there are operators who sit within the community, set up these tables, and collect leads, educating our consumers. It is really very local community-level blocking and tackling that we are codifying, sharing as best practice, and enforcing that our clinics open following those protocols. As we have followed those protocols, we are very encouraged by the results we are seeing of the cohort of clinics opening in 2025. That is what we were referring to earlier in terms of reaching break-even sales pretty quickly. Okay. Thanks. I guess I have got a couple more. On comp growth, can you.

Explain it all or give us the trend that you saw during the quarter, and what have you seen post-quarter? It seems like your updated guide reflects a step down from 3Q in 4Q. Is that the case? Yeah. Let me give a couple of comments there. As we looked at current trends, as we ended the quarter, our comps were slightly softer than the average of the quarter. That was one thing that we considered. We also looked at last year. In the third quarter last year, our comps were up about 4%. In the fourth quarter, they were up about 6%. We have a much tougher comparison in the fourth quarter than we did in the third quarter. That is the other component. A little softer to the end of quarter, and then just tougher comparison up against last year. Okay.

Thank you. And just one last one for me. There was a comment about SG&A expense reductions next year that are planned, and I think you said that you expect to grow income from continuing operations versus 2025. Can you remind me what of your adjusted EBITDA guide is from continuing ops? And can you be more specific? It's been a long time. This plan has been underway for quite a while. I know there was a management change, but can you be more specific about what level of SG&A reductions you're targeting? Yeah. What I can tell you is we have taken a very close look at our G&A structure now versus what it should be post-refranchising. And so we've already started to make some adjustments there. And a good point of reference.

Is in our earnings presentation on slide 13, where it shows you kind of the breakdown of why our adjusted EBITDA was better for continued operations compared to last year. What is happening there is, as we refranchise these units, they come into the GAAP revenue stream with additional royalties and fees. That is why GAAP revenue is up 6% in the quarter. If you look at G&A costs, they were actually down 2% against that revenue increase. You can kind of see some of the right-sizing starting to happen. There is more to come, and we have the areas targeted that will give us the most reduction. We are starting to see some benefits come through, which is very encouraging. Also, I would point out that cost of revenues was actually down 6% as well against revenue up 6%. That certainly helps.

That's mainly because we bought back those regional developer territory rights in the Q2 timeframe that we mentioned on our last call. That's paying some benefits, right? We no longer have to pay those RD royalties, and our cost of revenues is less against higher revenue. Kind of to answer your question, the next steps that we're looking at is continuing to refranchise clinics. As we do that, we'll see some pretty big reductions in big categories like salaries and wages, employee benefits, insurance. If you think about workers' comp insurance, big reduction with fewer employees. Then other things like legal fees and travel and some other expenses. As we've kind of done a little bit deeper dive and analyzing line items, we have very good plans on how they should be reduced and when as we continue to.

Refranchise these units. Early days, we're seeing some really good signs. The bulk of it is yet to come. As we continue this transition process, things are fairly fluid. We kind of have our sights targeted on where the opportunity areas are. On our next call in Q4, we'll be able to lay that out in a good amount of detail in terms of what the outlook looks like in a more kind of fully franchised model. Okay. Thanks. The next question comes from Jeremy Hamblin from Craig-Hallum. Please go ahead. Hey, this is Will in for Jeremy. First, I wanted to go back to the pricing. I guess my question is, are you taking a blanket approach to raising price, or are you taking price on certain packages and plans maybe to drive customers to different categories? Yeah. I can.

Answer that for you, Will. Almost 80%-85% of our revenue comes to a recurring revenue model, right? So our patients are on membership plans that are recurring in nature. That is where the bulk of the opportunity is. Those wellness plans are where we are testing three different levels of price increase, right? They range anywhere between $2-$10 to try and understand what is going to be the patient sensitivity to those price increases. We are also testing them across a variety of different geographies. We have got approximately 200 clinics in those three pilot groups. It is a pretty comprehensive, well-thought-through test, three different price increase levels, lots of different geographies and demographics. We will learn from that on what the most appropriate level of price increase is given the current climate, and then we can scale that out nationally.

That is where we are looking at this pricing pilot. Will, does that clarify your question? Yep. Yep. Yep. That's helpful. Just one more for me, going back to the units in Southern California. I guess, are you able to kind of categorize just general performance of those 45 units? I mean, are they kind of average, better, kind of weaker-performing units? I'm just trying to get a sense of valuation. Yeah. I can start there. I think, in general, those clinics in Southern California are good-performing clinics overall as a group. As we look to refranchise those, it's critically important that we find good operators. That is one of the things that we're really focused on, and we want to make sure that we take the time to get good operators in those clinics because good locations and.

In the past, a lot of those clinics have performed quite well, but there's still opportunities there. It's a good position for a strong operator to step in and continue the good practices that they have, but also enhance what they do to make them even stronger. Understood. Thank you. The next question comes from Tom McCrohan from Maxim Group. Please go ahead. Yeah. Thank you, guys, for taking my question. This past quarter, you guys sold, I believe you said, eight franchise licenses compared to seven a year ago. Just trying to get an understanding of where the demand's coming from. Can you give us any insight on whether or not these licenses are being sold to maybe existing franchisees or if they're all new interests, new franchises? It's a mix, Tom, both existing franchisees as well as new franchisees. Understood.

The other question I had was on the app. It looks like you guys have some pretty strong initial data points there. It says in the slide, 178,000 downloads, and 18% of new patients are signing up for that. Do you guys have any metrics that you can provide for us now in terms of utilization or engagement through the app? Have you guys seen already an increase in those that have the app scheduling appointments, or is it just too early to tell? Tom, it's too early to tell. The feedback from those patients that we're seeing, because we're also, as I indicated, starting to measure patient experience through the app, we're seeing extremely high metrics coming back. We're encouraged with, whilst it's early signs, that the overall experience that they're having is very strong. Clearly, as we've seen.

A strong patient experience typically will lead to longevity. That is really what we are going after here, making sure that there is lifetime value because there is less friction in the experience. It is too early to be able to share data points that are demonstrating those metrics already. Gotcha. Appreciate that insight. Final thing for me. I just wanted to kind of piggyback on the pricing questions. I see in your slide as well that you guys plan to take pricing in 1Q 2026. Is that a steadfast plan, or is there any reason you might take pricing earlier than that if you have the right insights in the fourth quarter or anything that could possibly push that into the second quarter or later in 2026? I think at this point, considering that the pricing test just went—those pilot markets just went live earlier in November.

I think the most likely scenario is that we will read them. See the impact, and most likely, given the timeframes involved, that we should be able to activate against them for our system in quarter one. Now, should something emerge from that test that gives us pause and reflection and needs us to pivot and test some more, then, of course, we will consider that. At the moment, given that we have got three different options in test, we believe that one of them is more than likely going to be the right option for us to then scale out nationwide sometime in the first quarter. Understood. Again, I appreciate you guys taking the time to answer all my questions. Well done. This concludes our question-and-answer session. I would like to turn the conference back over to Sanjiv Razdan for closing remarks. Thank you for joining us.

Have a really good day and know that at The Joint, we always have your back. So appreciate everyone. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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