AP NEWS

The Joint Corp. Reports Third Quarter 2018 Financial Results

November 8, 2018

- Increases Annual System-Wide Gross Sales 31%, Compared to Third Quarter 2017 - - Grows Revenue 23%, Compared to Third Quarter 2017 -- Sells 60 Franchise Licenses January through September 2018, up from 37 in 2017 - - Appoints Jake Singleton Chief Financial Officer -

SCOTTSDALE, Ariz., Nov. 08, 2018 (GLOBE NEWSWIRE) -- The Joint Corp. (NASDAQ: JYNT), a national operator, manager and franchisor of chiropractic clinics, reported financial results for the three months ended September 30, 2018.

Third Quarter Highlights: 2018 Compared to 2017

-- Increased gross system-wide sales 31%, to $42.2 million. -- Grew system-wide comp sales1 26%. -- Increased revenue 23%, to $8.1 million. -- Reported net loss of $152,000, an improvement of $280,000. -- Posted positive Adjusted EBITDA of $665,000, an improvement of $386,000.

Other Notable Achievements

-- Achieved positive Adjusted EBITDA for the fifth consecutive quarter. -- Increased total clinics to 422 as of September 30, 2018: Opened 10 franchised clinics and closed one franchised clinic. -- Sold 26 franchise licenses, increasing the total to 60 as of September 30, compared to 37 licenses for the full year 2017. -- Appointed Jake Singleton as the new Chief Financial Officer. Singleton served as The Joint’s corporate controller for three years, prior to which he worked at Ernst & Young in the Assurance and Capital Markets practices.

____________________________________________1 Comp sales refers to the amount of sales a clinic generates in the most recent accounting period, compared to sales in the comparable period of the prior year, and (i) includes sales only from clinics that have been open at least 13 full months and (ii) excludes any clinics that have closed.

“Our franchised and corporate clinics continue to provide accessible and affordable, quality chiropractic care for pain management and improved health and wellness and once again delivered strong quarterly results,” stated Peter D. Holt, president and chief executive officer of The Joint Corp. “Strategic execution and increasingly effective marketing have yielded more clinics, more new patients and more visits from existing patients, fueling a 26% increase in same store sales and 23% revenue growth in the third quarter, compared to the same period last year. We continue to generate cash flow, and our strengthened balance sheet shows our expansion strategy is working.”

Holt continued, “Now, we have entered the fourth quarter, which historically has been the strongest quarter for both gross sales and clinic openings, and we expect the same this year, keeping us on track to achieve our full-year 2018 financial guidance. Focused on sustainable, long-term expansion, we continue to grow our regional developer (RD) program and reached a count of 20 RDs in early October. RDs are a key growth driver. In the first nine months of 2018, RDs accounted for 83% of our 60 franchise license sales, compared to 49% of 37 in all of 2017. Our augmented foundation of RDs, combined with our efforts to expand our corporate clinics portfolio within clustered locations and to enhance individual clinic performance, is amplifying our growth potential in 2019 and beyond.”

Third Quarter Financial Results: 2018 Compared to 2017

Revenue grew 23% to $8.1 million, compared to $6.5 million in the third quarter of 2017, due primarily to increased sales at company-owned or managed clinics and a greater number of franchised clinics.

Cost of revenue was $1.1 million, up 29% compared to the third quarter of 2017, reflecting higher commissions and royalties paid to regional developers for an increased number of franchised locations opened.

Gross profit was $7.0 million, increasing 22% from $5.7 million in the third quarter of 2017.

Selling and marketing expenses were $1.2 million, or 15% of revenue, compared to $1.2 million, or 18% of revenue, in the third quarter of 2017 reflecting increased leverage with marketing expenses related to the increase in the number of company-owned or managed clinics. General and administrative expenses were $5.2 million, or 65% of revenue, compared to $4.5 million, or 68% of revenue, in the third quarter of 2017. During the third quarter of 2018, management entered into a license agreement with a software-as-a-service IT platform, which will replace the current proprietary IT platform and provide long-term sustainable benefits. As a result, the company recorded a one-time non-cash loss on impairment of $343,000 related to previously capitalized in-house IT development. Net loss was $152,000, or $0.01 per share, compared to a net loss of $432,000, or $0.03 per share, in the third quarter of 2017.

Adjusted EBITDA was $665,000, an improvement of $386,000 compared to Adjusted EBITDA of $279,000 in the same quarter last year. The company defines Adjusted EBITDA, a non-GAAP measure, as EBITDA before acquisition-related expenses, bargain purchase gain, loss on disposition or impairment, and stock-based compensation expenses. The company defines EBITDA as net income (loss) before net interest, tax expense, depreciation, and amortization expenses.

Balance Sheet Liquidity Cash and cash equivalents were $5.6 million at September 30, 2018, compared to $4.2 million at December 31, 2017, increasing primarily from cash flow from operations. Pursuant to the terms of the company’s credit agreement, during the first quarter of 2017, the company borrowed a required $1.0 million on its line of credit, which remains unused as part of cash and cash equivalents on the balance sheet as of September 30, 2018.

2018 Financial Guidance

Management reaffirmed its full year 2018 financial guidance and franchise opening guidance and narrowed its corporate clinic opening expectations as set forth below:

-- Revenue is expected to be between $31 million and $32 million, up from $25.0 million in 2017. -- Adjusted EBITDA income is expected to range between $2.5 million and $3.5 million. The company reported Adjusted EBITDA loss of $(274,000) in 2017. -- Total new clinic openings are expected to be in the range of 40 to 50, representing the originally forecasted new franchised clinics range of 40 to 50 plus the corporate clinic purchased from a franchisee earlier this year that was neutral to the total clinic count.

Conference Call

The Joint Corp. management will host a conference call at 5 p.m. ET on Thursday, November 8, 2018, to discuss the third quarter 2018 results. The conference call may be accessed by dialing 765-507-2604 or 844-464-3931 and referencing conference code 9399566. A live webcast of the conference call will also be available on the investor relations section of the company’s website at https://ir.thejoint.com/events. An audio replay will be available two hours after the conclusion of the call through November 15, 2018. The replay can be accessed by dialing 404-537-3406 or 855-859-2056. The passcode for the replay is 9399566.

Non-GAAP Financial Information

This earnings release includes a presentation of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. These are presented because they are important measures used by management to assess financial performance, as management believes they provide a more transparent view of the company’s underlying operating performance and operating trends. Reconciliation of net loss to EBITDA and Adjusted EBITDA is presented in the table below. The company defines Adjusted EBITDA as EBITDA before acquisition-related expenses, bargain purchase gain, loss on disposition or impairment, and stock-based compensation expenses. The company defines EBITDA as net income (loss) before net interest, tax expense, depreciation, and amortization expenses.

EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or cash flows from operations, as determined by accounting principles generally accepted in the United States, or GAAP. While EBITDA and Adjusted EBITDA are used as measures of financial performance and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. EBITDA and Adjusted EBITDA should be reviewed in conjunction with the company’s financial statements filed with the United States Securities and Exchange Commission (“SEC”).

Forward-Looking Statements

This press release contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of industry trends, our future financial and operating performance and our growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements, and you should not place undue reliance on such statements. Factors that could contribute to these differences include, but are not limited to, our failure to develop or acquire corporate clinics as rapidly as we intend, our failure to profitably operate corporate clinics, and the factors described in “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC for the year ended December 31, 2017. Words such as, “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives,” “intends,” “may,” “opportunity,” “plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,” “could,” “would,” “will,” and similar expressions are intended to identify such forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors. We assume no obligation to update or revise any forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

About The Joint Corp. (NASDAQ: JYNT)

Based in Scottsdale, Arizona, The Joint is an emerging growth company that is reinventing chiropractic by making quality care convenient and affordable for patients seeking pain relief and ongoing wellness. Its no-appointment policy and convenient hours and locations make care more accessible, and affordable membership plans and packages eliminate the need for insurance. With over 400 clinics nationwide and nearly 5 million patient visits annually, The Joint is a key leader in the chiropractic profession. For more information, visit www.thejoint.com or follow the brand on Twitter, Facebook, YouTube and LinkedIn.

Business Structure

The Joint Corp. is a franchisor of clinics and an operator of clinics in certain states. In Arkansas, California, Colorado, Florida, Illinois, Kansas, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Tennessee and Washington, The Joint and its franchisees provide management services to affiliated professional chiropractic practices.

Media Contact: Jason Greenwood, The Joint Corp., jason.greenwood@thejoint.com Investor Contact: Kirsten Chapman, LHA Investor Relations, 415-433-3777, thejoint@lhai.com

-- Financial Tables Follow --

THE JOINT CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2018 2017 - ----------- - - ----------- - ASSETS (unaudited) (as adjusted) Current assets: Cash and cash equivalents $ 5,611,008 $ 4,216,221 Restricted cash 185,396 103,819 Accounts receivable, net 1,204,957 1,138,380 Notes receivable - current portion 145,677 171,928 Deferred franchise costs - current portion 573,893 498,433 Prepaid expenses and other current assets 702,233 542,342 - ----------- - - ----------- - Total current assets 8,423,164 6,671,123 Property and equipment, net 3,269,739 3,800,466 Notes receivable, net of current portion and reserve 167,466 351,857 Deferred franchise costs, net of current portion 2,668,493 2,312,837 Intangible assets, net 1,765,322 1,760,042 Goodwill 2,916,426 2,916,426 Deposits and other assets 593,009 623,308 - ----------- - - ----------- - Total assets $ 19,803,619 $ 18,436,059 - ----------- - - ----------- - LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 911,618 $ 1,068,669 Accrued expenses 103,801 86,959 Co-op funds liability 145,766 89,681 Payroll liabilities 1,288,436 867,430 Notes payable - current portion 100,000 100,000 Deferred rent - current portion 143,713 152,198 Deferred franchise revenue - current portion 2,165,112 1,994,182 Deferred revenue from company clinics 1,002,578 867,804 Other current liabilities 327,924 152,534 - ----------- - - ----------- - Total current liabilities 6,188,948 5,379,457 Notes payable, net of current portion 1,000,000 1,000,000 Deferred rent, net of current portion 724,651 802,492 Deferred franchise revenue, net of current portion 10,148,199 9,552,746 Deferred tax liability - 136,434 Other liabilities 407,028 411,497 - ----------- - - ----------- - Total liabilities 18,468,826 17,282,626 - ----------- - - ----------- - Commitments and contingencies Stockholders’ equity: Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of September 30, 2018, and December 31, 2017 - - Common stock, $0.001 par value; 20,000,000 shares authorized, 13,748,678 shares issued and 13,734,008 shares outstanding as of September 30, 2018 and 13,600,338 shares issued and 13,586,254 outstanding as of December 31, 2017 13,749 13,600 Additional paid-in capital 37,997,377 37,229,869 Treasury stock 14,670 shares as of September 30, 2018 and 14,084 shares as of December 31, 2017, at cost (90,856 ) (86,045 ) Accumulated deficit (36,585,477 ) (36,003,991 ) - ----------- - - ----------- - Total stockholders’ equity 1,334,793 1,153,433 Total liabilities and stockholders’ equity $ 19,803,619 $ 18,436,059 - ----------- - - ----------- -

THE JOINT CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------- 2018 2017 2018 2017 - ---------- - - ---------- - - ---------- - - ---------- - (as adjusted) (as adjusted) Revenues: Revenues and management fees from company $ 3,674,704 $ 2,929,850 $ 10,352,013 $ 8,106,121 clinics Royalty fees 2,588,666 1,958,249 7,283,839 5,518,409 Franchise fees 457,516 381,777 1,254,997 1,041,151 Advertising fund revenue 736,987 775,221 2,083,769 1,995,235 Software fees 324,250 290,250 947,635 839,788 Regional developer fees 142,651 99,215 415,075 262,102 Other revenues 137,776 103,336 379,970 282,289 - ---------- - - ---------- - - ---------- - - ---------- - Total revenues 8,062,550 6,537,898 22,717,298 18,045,095 - ---------- - - ---------- - - ---------- - - ---------- - Cost of revenues: Franchise cost of revenues 1,005,162 735,554 2,855,712 2,071,394 IT cost of revenues 79,545 103,590 252,911 227,903 Total cost of revenues 1,084,707 839,144 3,108,623 2,299,297 - ---------- - - ---------- - - ---------- - - ---------- - Selling and marketing expenses 1,194,595 1,172,559 3,590,562 3,189,489 Depreciation and amortization 389,269 468,800 1,181,661 1,550,013 General and administrative expenses 5,242,026 4,462,922 14,973,261 13,694,691 - ---------- - - ---------- - - ---------- - - ---------- - Total selling, general and administrative 6,825,890 6,104,281 19,745,484 18,434,193 expenses - ---------- - - ---------- - - ---------- - - ---------- - Loss on disposition or impairment 343,255 - 593,960 417,971 - ---------- - - ---------- - - ---------- - - ---------- - Loss from operations (191,302 ) (405,527 ) (730,769 ) (3,106,366 ) - ---------- - - ---------- - - ---------- - - ---------- - Other income (expense): Bargain purchase gain - - 75,264 - Other income (expense), net (10,672 ) 9,907 (33,556 ) (33,589 ) - ---------- - - ---------- - - ---------- - - ---------- - Total other income (expense) (10,672 ) 9,907 41,708 (33,589 ) Loss before income tax expense (201,974 ) (395,620 ) (689,061 ) (3,139,955 ) Income tax benefit (expense) 50,171 (36,085 ) 107,575 (79,277 ) - ---------- - - ---------- - - ---------- - - ---------- - Net loss and comprehensive loss $ (151,803 ) $ (431,705 ) $ (581,486 ) $ (3,219,232 ) - ---------- - - ---------- - - ---------- - - ---------- - Loss per share: Basic and diluted loss per share $ (0.01 ) $ (0.03 ) $ (0.04 ) $ (0.24 ) Basic and diluted weighted average shares 13,727,712 13,262,032 13,646,599 13,144,764 Non-GAAP Financial Data: Net loss $ (151,803 ) $ (431,705 ) $ (581,486 ) # $ (3,219,232 ) Net interest 10,672 20,093 32,581 67,944 Depreciation and amoritzation expense 389,269 468,800 - 1,181,661 # 1,550,013 Tax (benefit) expense penalties and interest (50,171 ) 36,085 (107,575 ) # 79,277 EBITDA $ 197,967 $ 93,273 $ 525,181 $ (1,521,998 ) - ---------- - - ---------- - - ---------- - - ---------- - Stock compensation expense 122,777 185,391 469,405 412,512 Acquisition related expenses 701 - 3,950 13,142 Loss on disposition or impairment 343,255 - 593,960 417,971 Bargain Purchase Gain - - (75,264 ) - Adjusted EBITDA $ 664,700 $ 278,664 $ 1,517,232 $ (678,373 ) - ---------- - - ---------- - - ---------- - - ---------- -

THE JOINT CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, ----------------------------- 2018 2017 - --------- - - ---------- - (as adjusted) Net loss $ (581,486 ) $ (3,219,232 ) Adjustments to reconcile net loss to net cash 1,847,452 2,366,723 Changes in operating assets and liabilities 622,447 (740,912 ) - --------- - - ---------- - Net cash provided by (used in) operating activities 1,888,413 (1,593,421 ) Net cash used in investing activities (698,770 ) (150,701 ) Net cash provided by financing activities 286,721 1,185,982 Net increase (decrease) in cash and restricted cash $ 1,476,364 $ (558,140 ) - --------- - - ---------- -

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