Divestitures

6 Months Ended

Jun. 30, 2025

Discontinued Operations and Disposal Groups [Abstract]

Corporate Clinic Segment Divestiture

In 2023, the Company initiated plans to refranchise the majority of its company-owned or managed clinics with plans to retain a small portion of high-performing clinics. During the third quarter of 2024, the Company expanded the refranchising plan to include additional clinic markets of company-owned or managed clinics, marketing the clinics in clusters grouped by proximity to larger private equity firms. Because the Company has formalized a plan to sell its entire corporate clinic reportable segment, the Company has concluded that the overall refranchising plan represents a strategic shift that will have a major effect on the Company’s operations and financial results.

As of December 31, 2024, the corporate clinics classified as held for sale or already sold under the refranchising plan represent, in the aggregate, a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, the results of the corporate clinic segment and its assets and liabilities are reported separately as discontinued operations in the condensed consolidated income statements and condensed consolidated balance sheets. As permitted, the Company elected not to adjust the condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 to exclude cash flows attributable to discontinued operations. Accordingly, the Company disclosed the depreciation and amortization, capital expenditures and significant operating and investing non-cash items related to the corporate clinic segment below.

The key components of Net income from discontinued operations that were included in the Company’s condensed consolidated income statements are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Revenues:
Revenues from company-owned or managed clinics	$	16,642,013	$	17,650,525	$	33,548,363	$	35,187,976
Total revenues	16,642,013		17,650,525		33,548,363		35,187,976
Cost of revenues:
IT cost of revenues	5,551		14,282		11,723		25,846
Total cost of revenues	5,551		14,282		11,723		25,846
Selling and marketing expenses	1,825,654		1,961,443		3,718,400		3,609,974
Depreciation and amortization	17,120		1,181,359		43,505		2,255,631
General and administrative expenses	11,857,995		14,777,444		24,128,217		27,701,829
Total selling, general and administrative expenses	13,700,769		17,920,246		27,890,122		33,567,434
Net loss on disposition or impairment from discontinued operations	1,752,494		1,434,658		2,885,852		1,796,486
Income (loss) from discontinued operations	1,183,199		(1,718,661)		2,760,666		(201,790)
Other expense, net	—		561		238		1,189
Income (loss) before income tax expense	1,183,199		(1,719,222)		2,760,428		(202,979)
Income tax expense from discontinued operations	100,201		167,153		203,613		337,498
Net income (loss) from discontinued operations	$	1,082,998	$	(1,886,375)	$	2,556,815	$	(540,477)

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in the Company’s condensed consolidated balance sheets:


	June 30, 2025		December 31, 2024
ASSETS
Accounts receivable	$	674,573	$	2,484,248
Prepaid expenses and other current assets	1,375,346		549,605
Assets held for sale	22,692,768		38,395,986
Property and equipment, net	156,288		208,074
Deferred tax assets (attributable to VIEs)	1,087,204		1,087,204
Deposits and other assets	303,506		425,938








Total assets, discontinued operations	$	26,289,685	$	43,151,055

LIABILITIES
Accounts payable	$	144,560	$	67,107
Accrued expenses	2,329,986		5,066,941
Payroll liabilities ($0.7 million and $0.9 million attributable to VIEs, respectively)	2,045,251		2,333,335
Operating lease liability, current portion	286,324		153,517
Finance lease liability, current portion	—		38,015

Other current liabilities (attributable to VIEs)	1,079,442		1,079,441
Liabilities to be disposed of ($4.8 million and $5.2 million attributable to VIEs, respectively)	19,492,223		28,629,103



Total liabilities, discontinued operations	$	25,377,786	$	37,367,459

The key components of cash flows from discontinued operations are as follows:


	Six Months Ended June 30,
		2025		2024
Depreciation and amortization		$	43,505	$	2,255,631
Capital expenditures

Purchase of property and equipment		73,535		245,486
Significant operating and investing non-cash items
Net loss on disposition or impairment		2,885,852		1,796,486

The clustered clinics are in varying stages of sales negotiations with approximately all of the Company’s corporate clinic portfolio expected to be recognized as a completed sale within one year with an estimated fair value of $6.4 million at June 30, 2025. Effective with the designation as held for sale, the Company discontinued recording depreciation on property and equipment, net, amortization of intangible assets, net and amortization of ROU assets for the clinics as required by GAAP. The Company reported the related assets and liabilities of the clinics as held for sale as discontinued operations in its June 30, 2025 and December 31, 2024 condensed consolidated balance sheets.

Long-lived assets that meet the criteria for the held for sale designation are reported at the lower of their carrying value or fair value less estimated cost to sell. As a result of its evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to the clinics estimated fair values, the Company recorded an estimated loss on disposal of $0.4 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively, and an estimated loss of $1.4 million and $0.7 million for the six months ended June 30, 2025 and 2024, respectively. A valuation allowance of $5.7 million and $5.1 million

was included in discontinued operations current assets in its condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024, respectively.

During the six months ended June 30, 2025, in connection with the sale of company-owned or managed clinics classified as held for sale as of December 31, 2024 for a combined sales price of $7.8 million, the Company sold $16.1 million assets held for sale, net of a valuation allowance of $1.0 million and $7.2 million of liabilities to be disposed of in the consolidated balance sheets as of December 31, 2024. As a result of the sales, the Company incurred $0.4 million in selling costs and recorded a loss of $0.6 million included in Income from discontinued operations before income tax expense on the condensed consolidated income statement for the six months ended June 30, 2025.

The principal components of the held for sale assets and liabilities to be disposed of as of June 30, 2025 and December 31, 2024 were as follows:


	June 30, 2025		December 31, 2024

Assets
Contract assets	$	1,220,767	$	—
Property and equipment, net	4,938,413		8,457,627
Operating lease right-of-use asset	14,184,353		19,643,917
Intangible assets, net	4,518,833		6,906,807
Goodwill	3,482,718		8,459,238
Valuation allowance	(5,652,316)		(5,071,603)
Total assets held for sale	$	22,692,768	$	38,395,986

Liabilities
Operating lease liability, current and non-current	$	13,970,185	$	20,526,714
Deferred revenue from company-owned or managed clinics	5,522,038		8,102,389
Total liabilities to be disposed of	$	19,492,223	$	28,629,103

The pre-tax income of the clinics designated as held for sale was $1.3 million and $0.7 million for the three months ended June 30, 2025 and 2024, respectively, the results of which exclude the allocation of overhead. The pre-tax income of the clinics designated as held for sale was $2.2 million and $2.2 million for the six months ended June 30, 2025 and 2024, respectively, the results of which exclude the allocation of overhead.