Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you comment on the potential impact of slower consumer behavior in Q1 and how we might model the quarterly progression this year? A: Sanjiv Razdan, President and CEO, noted that consumers are responding to inflation and macroeconomic uncertainty, which affects their target demographic with household incomes between $50,000 and $100,000. Jake Singleton, CFO, added that the sales cadence is expected to be similar to previous years, with major promotions driving incremental sales in Q4.
Q: What are the current trends in patient retention, churn, and attrition? A: Jake Singleton, CFO, stated that conversion rates ended strong in 2024, with attrition remaining flat. The company has implemented fringe pricing increases, which have driven increased conversion to wellness plans. January saw a slight uptick in attrition, typical for the period, but it leveled off in February.
Q: How many corporate clinics are under letters of intent (LOI) for refranchising, and what is the timeline for this process? A: Sanjiv Razdan, President and CEO, confirmed that all 125 corporate clinics are intended for refranchising, with the vast majority under LOI negotiations. The company aims to complete this process closer to the first half of the year.
Q: Can you provide insights into the valuation of the corporate clinics being refranchised? A: Jake Singleton, CFO, explained that most bidders are evaluating the clinics based on a multiple of EBITDA, adjusted for franchise-centric EBITDA, which includes royalty streams. The clinics are marketed in larger clusters, considering a slight outside G&A burden.
Q: How should we think about customer acquisition costs and the leverage points for future revenue growth? A: Jake Singleton, CFO, highlighted that the company increased media spend to support marketing campaigns and is onboarding a new marketing agency, which involves initial transition costs. The focus is on organic lead generation, with paid media dollars being used to address new patient pressure.
Q: What is the current pricing strategy, and how many customers are on legacy pricing plans? A: Jake Singleton, CFO, noted that 80% of active members are on the standard rate, with 20% on legacy rates. The company is exploring dynamic revenue management to optimize pricing without creating a value problem, testing pricing models in different markets.
Q: What is the timeline for introducing new services and retail products? A: Sanjiv Razdan, President and CEO, stated that the focus for 2025 is on strengthening the core business and reigniting growth. New services and retail products are part of the Joint 3.0 phase, expected to begin 12 to 18 months later, with exploration ongoing this year.
Q: What percentage of royalty and service fees do you expect from the $550 million to $570 million system-wide sales in 2025? A: Jake Singleton, CFO, explained that 2025 is a transition year with corporate clinics contributing to GAAP revenues for part of the year. The royalty structure is approximately 10% to 10.5%, including royalties, NMF contributions, and technology fees. The focus is on reducing G&A expenses to improve profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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