ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition for the years ended December 31, 2025 and 2024 should be read in conjunction with the consolidated financial statements and the notes thereto, and other financial information contained elsewhere in this Form 10-K.
Overview
We are a growing franchisor that uses a private pay, non-insurance, cash-based model. We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry. We delivered over 14.4 million patient visits in 2025, down from 14.7 million patient visits in 2024, generating over $532.4 million and $530.3 million
Table of Contents
of system-wide sales, respectively, across our highly franchised network. We will continue the franchise-focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad. We saw 797,100 new patients in 2025, and according to our patient survey conducted in 2024, approximately 36% of new patients were visiting a chiropractor for the first time. We are not only increasing our percentage of market share, but are also expanding the chiropractic market.
Key Performance Measures. We receive monthly performance reports from our system and our clinics, which include key performance indicators per clinic, including gross sales, Comp Sales, number of new patients, conversion percentage and member attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales and various earnings metrics in the aggregate and per clinic. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance. Comp Sales include the sales from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed. System-wide sales are neither required by, nor presented in accordance with, GAAP. System-wide sales are the sum of company-owned or managed clinics and clinics operated by our franchisees. Our GAAP total revenue in our consolidated statements of income is limited to company-owned or managed clinic revenue and franchise revenue from our franchisees. Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results reported under GAAP. Management believes the information is important in understanding the overall brand’s financial performance, because these sales are the basis on which we calculate and record royalty fees and are indicative of the financial health of the franchisee base.
For the year ended December 31, 2025:
• Comp Sales of clinics that have been open for at least 13 full months were flat.
• System-wide sales for all clinics open for any amount of time slightly increased to $532.4 million but remained flat on a percentage basis.
• We saw 797,100 new patients in 2025, compared with 957,000 new patients in 2024.
Key Clinic Development Trends . As of December 31, 2025, we and our franchisees operated or managed 960 clinics, of which 885 were operated or managed by franchisees and 75 were operated as company-owned or managed clinics. Our franchisees opened 29 clinics during 2025. This compares to 57 clinics opened in 2024, all of which were franchised clinics. Of the 75 company-owned or managed clinics at December 31, 2025, 30 were constructed and developed by us, and 45 were acquired from franchisees.
Our current strategy is to grow through the sale and development of additional franchises. After evaluating options for improvement, during 2023 the Board of Directors authorized management to initiate a plan to refranchise or sell the majority of our company-owned or managed clinics. During the third quarter of 2024, we, with the authorization of the Board of Directors, expanded the refranchising plan to include the full portfolio of our company-owned or managed clinics, marketing the clinics in large clusters grouped by geographic territory. This refined strategy will leverage our greatest strength — our capacity to build a franchise — to drive long-term growth for both our franchisees and The Joint as a public company. We have created a robust framework for the refranchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency. We had given initial preference to existing franchisees and in the third quarter of 2024 expanded the marketing efforts to larger multi-unit, multi-brand operators and certain private equity firms interested in purchasing and operating large market-based clinic clusters and have received significant interest to date in most markets. In early 2025, we received draft letters of intent for our full portfolio of company-owned or managed clinics.
On June 30, 2025, we closed on the sale of 31 company-owned or managed clinics and associated franchise licenses located in Arizona and New Mexico to an existing franchisee, Joint Ventures, LLC, in exchange for $8.3 million in cash and the regional developer territory rights of the Northwest region. We carried an upfront regional developer fee liability balance associated with the transaction of $42 thousand, representing the unrecognized fee collected upon the execution of the regional developer agreement. We accounted for the acquisition of the regional developer rights as a release of liability and were included as part of the total consideration received to calculate the gain or loss on the sale. Losses on the sale were included with the loss on the sale of assets included in Net loss on disposition or impairment from discontinued operations. As part of the sale, Joint Ventures, LLC agreed to open an additional 10 clinics in the same region. On June 23, 2025, we also closed the sale of five clinics along with future development rights located in Kansas and Missouri to an existing franchisee, 93 Chiro, LLC.
On December 5, 2025, we entered into an Asset Purchase Agreement with Addisco Value, LLC, a North Carolina limited liability company, Triangle Chiropractic Associates P.C., a North Carolina professional corporation, and Bluffton TJ, LLC, a South Carolina limited liability company, collectively as “buyers”, and Alex Klaus, an individual, Todd Wegerski, DC, an individual, Lisa Ezell, an individual, Andrew Michael Evec, an individual, and Susan Ruth Train, an individual, collectively as
Table of Contents
guarantors, pursuant to which we will sell the assets of, and grant franchise rights to, 22 company-owned or managed clinics located in Virginia, North Carolina and South Carolina for an aggregate purchase price of approximately $1.5 million, subject to certain adjustments. In mid-December 2025, the buyers assumed business operations under Management Service Agreements that will remain in effect until lease reassignments are completed to permit ownership transfer. As of December 31, 2025, the transaction had not officially closed and therefore, the net assets and liabilities of the 22 clinics remain in our consolidated balance sheets.
In March 2026, we signed a letter of intent with a new potential buyer for five corporate-owned or managed clinics located in northern California.
Our goal will be to generate significant proceeds that will provide us with value creating capital allocation opportunities. These opportunities could include, but are not limited to, reinvestment in the brand and related marketing, continued investment in our IT platforms, the repurchase of regional developer territories, certain merger or acquisition opportunities and/or further repurchases of our outstanding common stock.
The number of franchise licenses sold for the year ended December 31, 2025 was 31, compared with 46 and 55 licenses for the years ended December 31, 2024 and 2023, respectively. We ended 2025 with 15 regional developers who were responsible for 26% of the 31 licenses sold during the year. We will continue to leverage the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the country.
On June 24, 2024, we entered into an agreement pursuant to which we repurchased the right to develop franchises in various counties in Maryland. The total consideration for the transaction was $0.6 million. We carried an upfront regional developer fee liability balance associated with this transaction of $0.1 million, representing the unrecognized fee collected upon the execution of the regional developer agreement. We accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated upfront regional developer fee liability was netted against the aggregate purchase price. We recognized the net amount of $0.5 million as a general and administrative expense for the year ended December 31, 2024.
We believe that we continue to have a sound business concept and will benefit from the fundamental changes taking place in the manner in which Americans access chiropractic care and their growing interest in seeking effective, affordable natural solutions for general wellness. These trends join with the preference we have seen among chiropractic doctors to reject the insurance-based model produce a combination that benefits the consumer and the service provider alike. We believe that these forces create an important opportunity to accelerate the growth of our network.
Significant Events and/or Recent Developments
Recent developments that may impact our business include unfavorable global economic or political conditions, such as uncertainties that come with changes to the presidential administration, labor shortages, and inflation and other cost increases. We anticipate that 2026 will continue to be a volatile macroeconomic environment.
The primary inflationary factor affecting our operations is labor costs. In 2024 and 2025, clinics owned or managed by us or our franchisees were negatively impacted by labor shortages and wage increases, which increased our general and administrative expenses. Further, should we fail to continue to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our patient service to suffer. While we anticipate that these continued headwinds can be partially mitigated by pricing actions, there can be no assurance that we will be able to continue to take such pricing actions. A continued increase in labor costs could have an adverse effect on our operating costs, financial condition and results of operations.
In addition, the expectation that interest rates will continue to remain elevated may adversely affect patients’ financial conditions, resulting in reduced spending on our services. While the impact of these factors continues to remain uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition, or results of operations. These and other uncertainties with respect to these recent developments could result in changes to our current expectations.
Stock Repurchase Program
On June 3, 2025, our Board of Directors approved the 2025 SRP to repurchase up to $5.0 million of our common stock, par value $0.001 per share, from time to time until June 3, 2027 or such other date as we have exhausted, or the Board of Directors otherwise terminates, the repurchase authorization. On November 4, 2025, the Board of Directors authorized an additional $12.0 million under the 2025 SRP and extended the repurchase date through November 4, 2027.
Table of Contents
The timing, volume, price, and terms of the repurchases will depend on market and business conditions, applicable legal requirements, and other factors. The repurchases may be made on the open market, in privately negotiated transactions, or in such other manner (e.g., accelerated share repurchase transactions, block trades, derivatives, or otherwise) that complies with the terms of applicable federal and state securities laws and regulations.
During the year ended December 31, 2025, we repurchased $11.3 million of our common stock at an average price of $8.73 per share, excluding related costs and fees. As of December 31, 2025, we had a remaining $5.7 million authorized for repurchasing shares of our common stock. All shares of common stock that were repurchased are held as treasury stock.
Executive Officer Changes
Effective June 9, 2025, Jake Singleton resigned as our Chief Financial Officer.
Effective June 10, 2025, the Board of Directors appointed Scott J. Bowman as our Chief Financial Officer.
Effective October 10, 2024, Peter D. Holt resigned as our President and Chief Executive Officer and as a member of the Board of Directors.
Effective October 14, 2024, the Board of Directors appointed Sanjiv Razdan as our President and Chief Executive Officer and as a member of the Board of Directors.
Factors Affecting Our Performance
Our operating results may fluctuate significantly as a result of a variety of factors, including the timing of new clinic sales, openings, closures, markets in which they are contained and related expenses, general economic conditions, cost inflation, labor shortages, consumer confidence in the economy, consumer preferences, competitive factors, and disease epidemics and other health-related concerns, such as the COVID-19 pandemic.
Critical Accounting Polices and Estimates
The preparation of consolidated financial statements requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our accounting estimates on historical experience and other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. We have discussed the development and selection of critical accounting policies and estimates with our Audit Committee.
Acquisitions
We allocate the purchase price of acquired companies to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. When an acquisition is accounted for in accordance with the acquisition of assets rather than a business, goodwill is not recognized and instead, any excess of the cost of the acquisition over the fair value of net assets acquired is allocated to certain assets on the basis of relative fair values. The allocation of the purchase price requires us to make significant estimates and assumptions to determine the fair value of assets acquired and liabilities assumed and the related useful lives of the acquired assets, when applicable, as of the acquisition date.
Examples of critical estimates used in valuing certain intangible assets we have acquired or may acquire in the future include, but are not limited to, future expected cash flows and member relationships, revenue growth rates, the period of time the acquired member relationships will continue to be used, anticipated member attrition rates, and discount rates used to determine the present value of estimated future cash flows. We engage third-party valuation experts to assist in determining the fair value associated with our acquisitions and related identifiable intangible assets. These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition could be allocated to the acquired assets and assumed liabilities differently from the allocation that we have made.
Intangible Assets
Intangible assets consist primarily of reacquired franchise rights and customer relationships. We amortize the fair value of reacquired franchise rights over the remaining contractual terms of the reacquired franchise rights at the time of the acquisition,
Table of Contents
which range from one to ten years. The fair value of customer relationships is amortized over their estimated useful life which ranges from two to four years. Intangible assets are attributable entirely to discontinued operations.
Goodwill
Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisitions of franchises treated as a business combination under GAAP. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. As required, we perform an annual impairment test of goodwill as of the first day of the fourth quarter or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. No impairments of goodwill were recorded for the years ended December 31, 2025 and 2024. Goodwill is attributable entirely to discontinued operations.
Long-Lived Assets
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. We look primarily to estimated undiscounted future cash flows in the assessment of whether or not long-lived assets are recoverable. We record an impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value.
Stock-Based Compensation
We account for share-based payments by recognizing compensation expense based on the estimated fair value of the awards on the date of grant. We determine the estimated grant-date fair value of restricted shares using the closing price on the date of the grant and the grant-date fair value of stock options using the Black-Scholes-Merton model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. We recognize compensation costs ratably over the period of service using the straight-line method. Forfeitures are estimated based on historical and forecasted turnover, which is approximately 5%.
Revenue Recognition
We generate revenue through royalties, franchise fees, advertising fund contributions, IT-related income and computer software fees from our franchisees. Additionally, as we execute on our strategy to refranchise and divest from all of our company-owned or managed clinics, revenue generated through our company-owned or managed clinics is included in Income (loss) from discontinued operations before income tax expense.
Revenues from Company-Owned or Managed Clinics. We earn revenue from clinics that we own and operate or manage throughout the United States. In those states where we own and operate the clinic, revenues are recognized when services are performed. We offer a variety of membership and wellness packages which feature discounted pricing as compared with our single-visit pricing. Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed. Any unused visits associated with monthly memberships are recognized on a month-to-month basis. We recognize a contract liability (or a deferred revenue liability) related to the prepaid treatment plans for which we have an ongoing performance obligation. We recognize this contract liability, and recognize revenue, as the patient consumes his or her visits related to the package and we perform the services. If we determine that it is not subject to unclaimed property laws for the portion of the package that we do not expect to be redeemed (referred to as “breakage”), then we recognize breakage revenue in proportion to the pattern of exercised rights by the patient.
Franchise Fees. We require the entire non-refundable initial franchise fee to be paid upon execution of a franchise agreement, which typically has an initial term of 10 years. Initial franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement. Our services under the franchise agreement include training of franchisees and staff, site selection, construction/vendor management and ongoing operations support. We provide no financing to franchisees and offer no guarantees on their behalf. The services we provide are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.
Software Fees. We collect a monthly fee from our franchisees for use of our proprietary chiropractic software, computer support, and internet services support. These fees are recognized ratably on a straight-line basis over the term of the respective franchise agreement.
Table of Contents
Regional Developer Fees
We have a regional developer program where regional developers are granted an exclusive geographical territory and commit to a minimum development obligation within that defined territory. Regional developer fees are non-refundable and amortized on a straight-line basis over the term of the regional developer agreement and recognized as a decrease to franchise and regional developer cost of revenues.
In addition, we pay regional developers fees, which are funded by the initial franchise fees collected from franchisees upon the sale of franchises within their exclusive geographical territory, and a royalty of 3% of sales generated by franchised clinics in their exclusive geographical territory. Fees related to the sale of franchises within their exclusive geographical territory are initially deferred as deferred franchise costs and are recognized as an expense in franchise cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise agreement. Royalties of 3% of gross sales generated by franchised clinics in their regions are also recognized as franchise cost of revenues as franchisee clinic level sales occur, which is funded by the 7% royalties we collect from the franchisees in their regions. Certain regional developer agreements result in the regional developer acquiring the rights to existing royalty streams from clinics already open in the respective territory. In those instances, the revenue associated from the sale of the royalty stream is recognized over the remaining life of the respective franchise agreements.
Leases
The accounting guidance for leases requires lessees to recognize an ROU asset and a lease liability in the balance sheet for most leases. The lease liability is measured at the present value of the fixed lease payments over the lease term and the ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. Certain leases include one or more renewal options, generally for the same period as the initial term of the lease. The exercise of lease renewal options is generally at our sole discretion and, as such, we typically determine that exercise of these renewal options is not reasonably certain. As a result, we do not include the renewal option period in the expected lease term and the associated lease payments are not included in the measurement of the ROU asset and lease liability. When available, we use the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for substantially all of our leases. In such cases, we estimate our incremental borrowing rate as the interest rate we would pay to borrow an amount equal to the lease payments over a similar term, with similar collateral as in the lease, and in a similar economic environment. We estimate these rates using available evidence such as rates imposed by third-party lenders in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to our estimated creditworthiness.
For operating leases that include rent holidays and rent escalation clauses, we recognize lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. Pre-opening costs are recorded as incurred in general and administrative expenses. Variable lease payments, such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate taxes, any variable common area maintenance and any other variable costs associated with the leased property are expensed as incurred and are also included in general and administrative expenses on the consolidated income statements.
Income Taxes
We recognize deferred tax assets and liabilities for both the expected impact of differences between the financial statement amount and the tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards.
We record a valuation allowance against deferred tax assets when it is considered more likely than not that all or a portion of our deferred tax assets will not be realized. In making this determination, we are required to give significant weight to evidence that can be objectively verified. It is generally difficult to conclude that a valuation allowance is not needed when there is significant negative evidence, such as cumulative losses in recent years. Forecasts of future taxable income are considered to be less objective than past results. Therefore, cumulative losses weigh heavily in the overall assessment.
In addition to considering forecasts of future taxable income, we are also required to evaluate and quantify other possible sources of taxable income in order to assess the realization of our deferred tax assets, namely the reversal of existing temporary differences, the carry back of losses and credits as allowed under current tax law, and the implementation of tax planning strategies. Evaluating and quantifying these amounts involves significant judgments. Each source of income must be evaluated based on all positive and negative evidence; this evaluation involves assumptions about future activity. The actual realization of deferred tax assets may differ from the amounts we have recorded.
Table of Contents
Significant judgment is also required in evaluating our uncertain tax positions. We establish accruals for uncertain tax positions when we believe that the full amount of the associated tax benefit may not be realized. If we prevail in matters for which accruals have been established previously or pay amounts in excess of reserves, there could be an effect on our income tax provisions in the period in which such determination is made.
We regularly assess the tax risk of our tax return filing positions, and we have identified $0.6 million and $0.9 million in uncertain tax positions as of December 31, 2025 and 2024, respectively.
Loss Contingencie s
Accounting Standards Codification 450, Contingencies (“ASC 450”), governs the disclosure of loss contingencies and accrual of loss contingencies in respect of litigation and other claims. We record an accrual for a potential loss when it is probable that a loss will occur and the amount of the loss can be reasonably estimated. When the reasonable estimate of the potential loss is within a range of amounts, the minimum of the range of potential loss is accrued, unless a higher amount within the range is a better estimate than any other amount within the range. Moreover, if an accrual is not required, we provide additional disclosure related to litigation and other claims when it is reasonably possible (i.e., more than remote) that the outcomes of such litigation and other include potential material impacts on us. Legal costs to be incurred in connection with a contingency are expensed as such costs are incurred.
Results of Operations
The following discussion and analysis of our financial results encompasses our consolidated results and results of our business segment: Franchise Operations. All financial results and metrics discussed below are on a continuing operations basis.
As discussed further in Note 3, Divestitures, in the Notes to consolidated financial statements, since the fourth quarter of 2024, we have classified our corporate clinic business segment as held for sale. The results of operations of the corporate clinic business segment are reported in Income (loss) from discontinued operations before income tax expense in the consolidated income statements for all periods presented and the related assets and liabilities associated with discontinued operations are classified as discontinued operation assets and liabilities in the consolidated balance sheets for all periods presented. The consolidated statement of cash flows includes cash flows related to the discontinued operations and accordingly, cash flow amounts for discontinued operations are disclosed in Note 3, Divestitures in the Notes to consolidated financial statements .
Total Revenues
Components of revenues for the year ended December 31, 2025, as compared to the year ended December 31, 2024, were as follows:
Year Ended
December 31,
Change from
Prior Year
Percent Change
from Prior Year
Revenues:
Royalty fees
Franchise fees
Advertising fund revenue
Software fees
Other revenues
Total revenues
Total revenues increased by $2.7 million, primarily due to the continued expansion and revenue growth of our franchise base, and included:
• Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during 2025, along with continued sales growth in existing franchised clinics. As of December 31, 2025 and 2024, there were 885 and 842 franchised clinics in operation, respectively.
• Franchise fees increased due to the continued increase in active franchise licenses and the impact of accelerated revenue recognition resulting from terminated franchise license agreements, with 34 and 24 franchise license agreements terminated during the years ended December 31, 2025 and 2024, respectively.
Table of Contents
• Software fees increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described above.
Cost of Revenues
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Cost of Revenues
For the year ended December 31, 2025, as compared with the year ended December 31, 2024, the total cost of revenues decreased due to a reduction in regional developer royalties and sales commissions. We ended 2025 with 15 regional developers, as compared to 16 regional developers in 2024.
Selling and Marketing Expenses
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Selling and Marketing Expenses
Selling and marketing expenses increased $2.3 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024, driven by an increase in expenses associated with our digital marketing transformation efforts and the impact of a larger franchise base.
Depreciation and Amortization Expenses
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased $0.3 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to depreciation expenses related to internal use software enhancements and developments, including the launch of our official mobile app.
General and Administrative Expenses
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
General and Administrative Expenses
General and administrative expenses decreased during the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a decrease in professional fees, partially offset by an increase in payroll and related expenses. As a percentage of revenue, general and administrative expenses were 54% and 58% during the year ended December 31, 2025 and 2024, respectively.
Included in general and administrative expenses from continuing operations above are expenses of $1.2 million and $1.0 million related to workers’ compensation insurance for the years ended December 31, 2025 and 2024, respectively, of which we believe that approximately $1.1 million and $0.9 million, respectively, relate to expenses that will not be incurred upon the completion of our refranchising strategy.
Net Loss on Disposition or Impairment
Table of Contents
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Net Loss on Disposition or Impairment
Net loss on disposition or impairment decreased for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to lower disposals of property and equipment.
Loss from Continuing Operations
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Loss from Continuing Operations
Loss from continuing operations decreased by $1.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to the following:
• an increase of $2.7 million in total revenues;
• a decrease of $0.3 million in total cost of revenues;
• a decrease of $0.5 million in general and administration expenses; and
• a decrease of $0.1 million in loss on disposition or impairment; partially offset by
• an increase of $2.3 million in selling and marketing expenses, and
• an increase of $0.3 million in depreciation expenses.
Other Income, Net
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Other Income, net
Other income, net increased during the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to the deployment of additional cash and cash equivalents during the middle of 2025 into higher interest rate money market funds resulting in increased interest income.
Income Tax Expense
Year Ended December 31,
Change from
Prior Year
Percent Change
from Prior Year
Income Tax Expense
For the years ended December 31, 2025 and 2024, the effective tax rates were (16.8)% and (0.3)%, respectively. The fluctuation in the effective rate was primarily attributable to state income taxes (net of federal tax and permanent differences), changes in tax rates, stock-based compensation, shortfall/windfall on stock compensation expense, change in valuation allowance and uncertain tax positions during the year ended December 31, 2025, as compared to the year ended December 31, 2024.
Non-GAAP Financial Measures
The following table reconciles net income (loss) to Adjusted EBITDA for continuing operations, discontinuing operations and net operations for the years ended December 31, 2025 and 2024:
Table of Contents
Year Ended December 31,
from Continuing Operations
from Discontinued Operations
Net Operations
from Continuing Operations
from Discontinued Operations
Net Operations
Non-GAAP Financial Data:
Net (loss) income
Net interest (income) expense
Depreciation and amortization expense
Income tax expense
EBITDA
Stock-based compensation expense
Acquisition related expense
Net loss on disposition or impairment
Costs related to restatement filings
Restructuring Costs
Litigation expense
Adjusted EBITDA
Adjusted EBITDA from continuing, discontinuing and net operations and consists of net income (loss) before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, costs related to restatement filings, restructuring costs (consisting of non-recurring refranchising costs of all company-owned or managed clinics and non-recurring expenses related to changes to our executive leadership team), and litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business). We have provided Adjusted EBITDA, a non-GAAP measure of financial performance because it is commonly used for comparing companies in our industry. You should not consider Adjusted EBITDA as a substitute for operating profit as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. We may calculate Adjusted EBITDA differently from other companies.
We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other outpatient medical clinics, which may present similar non-GAAP financial measures to investors. In addition, you should be aware when evaluating Adjusted EBITDA, in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same manner.
Our management does not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of Adjusted EBITDA is that it excludes significant expenses and income that are required by GAAP to be recorded in our financial statements. Some of these limitations include the following:
• Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
• Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
Table of Contents
• Adjusted EBITDA does not reflect the (gain) loss on disposition or impairment, which represents the impairment of assets as of the reporting date. We do not consider this to be indicative of our ongoing operations; and
• While not included in the presented periods, Adjusted EBITDA would not reflect any bargain purchase gain, which would represent the excess of the fair value of net assets acquired over the purchase consideration.
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You should review the reconciliation of Net Income (Loss) to Adjusted EBITDA above and not rely on any single financial measure to evaluate our business.
Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2025, we had cash and short-term bank deposits of $23.6 million. We generated $1.8 million of cash flows from operating activities from both continuing and discontinued operations in the year ended December 31, 2025. While unfavorable global economic or political conditions create potential liquidity risks, as discussed further below, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our line of credit will be sufficient to fund our anticipated operating and investment needs for at least the next 12 months.
While the interruptions, delays and/or cost increases resulting from political instability and geopolitical tensions, adverse weather conditions, economic weakness, inflationary pressures, elevated interest rates and other factors have created uncertainty as to general economic conditions for 2026, as of the date of this Form 10-K, we believe we have adequate capital resources and sufficient access to external financing sources, upon the completion of our anticipated amendment to the fixed charge coverage ratio debt covenant under our 2022 Credit Facility in the first half of 2026, to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. For 2026, we expect to use or redeploy our cash resources to support our business within the context of prevailing market conditions, which, given the ongoing uncertainties described above, could rapidly and materially deteriorate or otherwise change. Our long-term capital requirements, primarily for corporate initiatives, could be dependent on our ability to access additional funds through the debt and/or equity markets. If the equity and credit markets deteriorate, including as a result of economic , political or war, or any other reason, it may make any necessary equity or debt financing more to obtain in a timely manner and on terms, if at all, and if obtained, it may be more or more dilutive. From time to time, we consider and evaluate transactions related to our portfolio and capital structure, including debt financings, equity issuances, purchases and sales of assets, and other transactions. Given the ongoing uncertainties described above, the levels of our cash flows from operations for 2026 may be impacted. There can be no assurance that we will be to generate sufficient cash flows or obtain the capital necessary to meet our short and long-term capital requirements.
Analysis of Cash Flows
Net cash provided by operating activities for both continuing and discontinued operations was $1.8 million for the year ended December 31, 2025, compared to net cash provided by operating activities for both continuing and discontinued operations of $9.4 million for the year ended December 31, 2024. The decrease in net cash provided by operating activities was primarily attributable to a change in accrued expenses of $3.4 million related to the settlement of a medical injury claim during the first quarter of 2025, which was partially offset by a related change in accounts receivable of $1.9 million for insurance recoveries, a decrease in payroll liabilities of $3.2 million primarily due to paid time off and payroll accruals related to employees no longer employed by us due to the divestiture and closures of company-owned or managed clinics during 2025, and $0.8 million related to a decrease in our deferred revenue liabilities due to the decrease in company-owned or managed clinics.
Cash provided by operating activities is subject to variability period over period as a result of the timing of collections and payments related to accounts receivable, accrued expenses, and other operating assets and liabilities. Royalties and other fees are collected from our franchisees semi-monthly, two working days after each sales period has ended.
Net cash provided by investing activities was $6.3 million and net cash used in investing activities was $0.6 million during the years ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, net cash provided by investing activities was driven by $7.8 million of proceeds from the sale of company-owned or managed clinics, partially offset by $1.5 million of purchases of property and equipment. For the year ended December 31, 2024, net cash used in investing activities was driven by $1.2 million of purchases of property and equipment, partially offset by $0.6 million of proceeds from the sale of company-owned or managed clinics.
Table of Contents
Net cash used in financing activities was $9.8 million and $2.0 million during the years ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, net cash used in financing activities was driven by $11.3 million of common stock purchases under the 2025 SRP, partially offset by cash receipts from stock option exercises of $1.5 million. For the year ended December 31, 2024, net cash used in financing activities was driven by the payoff of the outstanding balance on our Debt under the Credit Agreement of $2.0 million.
Capital Composition
In 2025, our Board of Directors approved the 2025 SRP to repurchase a total of $17.0 million of our common stock. During the year ended December 31, 2025, we repurchased 1,295,295 shares under the 2025 SRP. Refer to the “Significant Events and/or Recent Developments” section above for more information and Part III, Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters of this Form 10-K for our monthly repurchase activity during the quarter ended December 31, 2025.
The following table summarizes our material contractual obligations from continuing operations at December 31, 2025 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods:
Material Contractual Cash Requirements from Continuing Operations
Payments Due by Fiscal Year
Total
Thereafter
Operating leases
Recent Accounting Pronouncements
Please see Note 1, Nature of Operations and Summary of Significant Accounting Policies in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for information regarding recently issued accounting pronouncements that may impact our financial statements.
Off-Balance Sheet Arrangements
During the year ended December 31, 2025, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements.
