Regis Corporation (NYSE: RGS), a leader in the haircare
industry, today announced financial results for the first fiscal
quarter ended September 30, 2023 and that its Board of Directors
(the “Board”) intends to evaluate a range of strategic alternatives
available to the Company.
Matthew Doctor, Regis Corporation’s President and Chief
Executive Officer, commented: "Our first quarter fiscal 2024
financial results reflect the continued improvements and progress
we are making in our business. Adjusted EBITDA improved to $7.5
million compared to $3.8 million in Q1 fiscal 2023, and we
demonstrated positive net income from operations for the first time
since fiscal 2018, with $1.2 million in the quarter.
In addition to the continued progress on profitability, we
announced today that we will be reviewing strategic alternatives
with the goal of strengthening our balance sheet and positioning
Regis for growth. We determined now is the proper time to launch
this process, and we’re doing so proactively during a time in which
we are not in default – nor projecting to be in default – of any of
our debt covenants, have ample liquidity, and can take control of
the process. The approximately $190 million of debt, including
letters of credit, net of cash we currently have is a direct result
of the disruption caused by the COVID-19 pandemic, which drove
adjusted EBITDA losses reaching $79 million in fiscal 2021 and
cumulative cash needs of $190 million between fiscal 2020 and
fiscal 2021. This net debt level compares to an equivalent figure
of $32 million in the fiscal quarter ended December 31, 2019. We
utilized our revolver to fund our cash needs due to the inability
of Regis to qualify for government funding given our size. Since
then, we have built the business back from those losses to
last-twelve-month adjusted EBITDA of $25 million; however, our
profitability in comparison to our capital structure that resulted
from the pandemic still represents a levered company. By
complementing the initiatives we have in place to drive
profitability with a strategic alternatives process aimed to
address our balance sheet, we are proactively covering our bases in
order to best position Regis for future growth and to maximize
value.”
Financial Highlights:
First quarter fiscal 2024 compared to first quarter fiscal
2023:
- System-wide revenue of $306.6 million decreased $9.4 million
from $316.0 million and system-wide same-store sales increased
1.8%;
- Operating income of $7.4 million increased $5.0 million from
$2.5 million in the 2023 first quarter;
- Franchise adjusted EBITDA of $8.0 million increased $3.0
million from $5.0 million in the 2023 first quarter;
- Net income from continuing operations of $1.2 million increased
$3.0 million from a net loss of $1.8 million in the 2023 first
quarter; and
- Adjusted EBITDA of $7.5 million increased $3.6 million from
$3.8 million in the 2023 first quarter.
Review of Strategic
Alternatives:
The Board, together with management and in consultation with our
financial advisor and legal counsel, will conduct a process to
review and evaluate strategic alternatives to assess proactively
the Company’s capital structure. The Board has established a
Special Committee to evaluate various strategic alternatives and
initiatives. The Company has not set a timetable for the conclusion
of its evaluation and does not intend to comment further on
developments or status of this process until it deems further
disclosure is appropriate or required by law. There can be no
assurances as to the outcome or timing of the process, or whether
any particular transaction may be pursued or consummated.
The Company is being advised by Jefferies, LLC as its financial
advisor and Weil, Gotshal & Manges LLP as its legal
advisor.
First Quarter Fiscal Year 2024
Consolidated Results
Three Months Ended September
30,
(Dollars in millions, except per share
data)
2023
2022
Consolidated revenue
$
53.4
$
61.9
System-wide revenue (1)
306.6
316.0
System-wide same-store sales comps
1.8
%
4.5
%
Operating income
$
7.4
$
2.5
Income (loss) from continuing
operations
1.2
(1.8
)
Diluted income (loss) per share from
continuing operations
0.03
(0.04
)
Income from discontinued operations
—
3.3
Net income
1.2
1.5
Diluted net income per share
0.03
0.03
Adjusted EBITDA (2)
7.5
3.8
_______________________________________________________________________________
(1)
Represents total sales within the
system.
(2)
See GAAP to non-GAAP
reconciliations within the attached section titled "Non-GAAP
Reconciliations."
Consolidated Revenue
Total consolidated revenue in the first quarter 2024 of $53.4
million decreased $8.5 million. The decrease was driven primarily
by a reduction in non-margin franchise rental income and the wind
down of loss-generating company-owned salons that generated
significant revenue.
Operating Income
Regis reported first quarter 2024 operating income of $7.4
million, compared to $2.5 million in the first quarter 2023. The
year-over-year improvement in operating income was driven primarily
by our lower general and administrative expense structure and the
wind down of loss-generating company-owned salons during the last
twelve months.
Income (Loss) from Continuing Operations
Regis reported first quarter 2024 net income from continuing
operations of $1.2 million, or $0.03 diluted income per share from
continuing operations, compared to a net loss from continuing
operations of $1.8 million, or $0.04 diluted loss per share from
continuing operations, in the first quarter 2023. The
year-over-year improvement was driven primarily by an increase in
operating income partially offset by an increase in interest
expense.
Net Income
The Company reported first quarter 2024 net income of $1.2
million, or $0.03 diluted income per share, compared to net income
of $1.5 million, or $0.03 diluted income per share, for the same
period last year. Net income decreased year-over-year due to a $3.9
million gain from discontinued operations in the prior year.
Adjusted EBITDA
First quarter adjusted EBITDA of $7.5 million improved $3.6
million, versus adjusted EBITDA of $3.8 million in the same period
last year. The improvement in the period was driven by our lower
general and administrative expense structure and the wind down of
loss-generating company-owned salons.
First Quarter Fiscal Year 2024 Segment
Results
Franchise
Three Months Ended September
30,
(Dollars in millions) (1)
2023
2022
Increase (Decrease)
Royalties
$
16.5
$
17.2
$
(0.7
)
Fees
2.6
2.6
—
Product sales to franchisees
0.4
0.4
—
Advertising fund contributions
7.2
8.3
(1.1
)
Franchise rental income
24.7
30.3
(5.6
)
Total Franchise revenue
$
51.4
$
58.8
$
(7.4
)
Franchise same-store sales comps
1.7
%
4.6
%
Franchise adjusted EBITDA
$
8.0
$
5.0
$
3.0
as a percent of revenue
15.5
%
8.5
%
as a percent of adjusted revenue (2)
40.7
%
24.7
%
Total Franchise salons
4,745
5,323
(578
)
as a percent of total Franchise and
Company-owned salons
98.6
%
98.2
%
_______________________________________________________________________________
(1)
Variances calculated on amounts
shown in millions may result in rounding differences.
(2)
Adjusted revenue excludes
non-margin revenue. See GAAP to non-GAAP reconciliations within the
attached section titled "Non-GAAP Reconciliations."
Franchise Revenue
First quarter franchise revenue was $51.4 million, a $7.4
million, or 12.6%, decrease compared to the prior year quarter.
Non-margin franchise rental income decreased $5.6 million due to
fewer franchise salons in the current year. Royalties were $16.5
million, a $0.7 million, or 4.1%, decrease versus the same period
last year due to fewer franchise salons.
Franchise Adjusted EBITDA
First quarter franchise adjusted EBITDA of $8.0 million improved
$3.0 million year-over-year, primarily due to a decrease in general
and administrative expense and rent.
Company-Owned Salons
Three Months Ended September
30,
(Dollars in millions) (1)
2023
2022
(Decrease) Increase
Total Company-owned salon revenue
$
1.9
$
3.1
$
(1.2
)
Company-owned same-store sales comps
6.4
%
(3.5
)%
Company-owned salon adjusted EBITDA
$
(0.5
)
$
(1.2
)
$
0.7
as a percent of revenue
(26.3
)%
(38.7
)%
Total Company-owned salons
66
95
(29
)
as a percent of total Franchise and
Company-owned salons
1.4
%
1.8
%
_______________________________________________________________________________
(1)
Variances calculated on amounts
shown in millions may result in rounding differences.
Company-Owned Salon Revenue
First quarter revenue for the Company-owned salon segment
decreased $1.2 million versus the prior year to $1.9 million. The
year-over-year decline in revenue was expected and driven by the
closure of 29 loss generating company-owned salons over the past
twelve months.
Company-Owned Salon Adjusted EBITDA
First quarter Company-owned salon adjusted EBITDA loss improved
$0.7 million year-over-year driven primarily by the closure of
loss-generating company-owned salons.
Balance Sheet and Cash
Flow
The Company ended the first quarter of fiscal year 2024 with
$9.3 million in cash and cash equivalents, $186.1 million in
outstanding borrowings and total liquidity of $42.4 million. Net
cash used in operating activities for the three months ended
September 30, 2023 totaled $2.8 million, an improvement of $2.2
million from the prior year.
Non-GAAP reconciliations
For GAAP to non-GAAP reconciliations, please refer to the
attached section titled "Non-GAAP Reconciliations." A complete
reconciliation of reported earnings to adjusted earnings is
included in this press release and is available on the Company’s
website at www.regiscorp.com.
Earnings Webcast
Regis Corporation will host a conference call via webcast
discussing first quarter results today, November 1, 2023, at 7:30
a.m. Central time. Interested parties are invited to participate in
the live webcast by registering for the event at
www.regiscorp.com/investor-relations.html. The webcast will include
a slide presentation. A replay of the presentation will be
available on our website at the same web address.
About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in the haircare
industry. As of September 30, 2023, the Company franchised or owned
4,811 locations. Regis’ franchised and corporate locations operate
under concepts such as Supercuts®, SmartStyle®, Cost Cutters®,
Roosters® and First Choice Haircutters®. For additional information
about the Company, including a reconciliation of certain non-GAAP
financial information and certain supplemental financial
information, please visit the Investor Relations section of the
corporate website at www.regiscorp.com.
This press release contains or may contain “forward-looking
statements” within the meaning of the federal securities laws,
including statements concerning anticipated future events and
expectations that are not historical facts. These forward-looking
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements in this document reflect management’s
best judgment at the time they are made, but all such statements
are subject to numerous risks and uncertainties, which could cause
actual results to differ materially from those expressed in or
implied by the statements herein. Such forward-looking statements
are often identified herein by use of words including, but not
limited to, “may,” “believe,” “project,” “forecast,” “expect,”
“estimate,” “anticipate,” and “plan.” In addition, the following
factors could affect the Company's actual results and cause such
results to differ materially from those expressed in
forward-looking statements. These factors include a potential
material adverse impact on our business and results of operations
as a result of changes in consumer shopping trends and changes in
manufacturer distribution channels; laws and regulations could
require us to modify current business practices and incur increased
costs; our potential responsibility for Empire Education Group,
Inc.'s liabilities; changes in general economic environment;
changes in consumer tastes, hair product innovation, fashion trends
and consumer spending patterns; compliance with New York Stock
Exchange listing requirements; reliance on franchise royalties and
overall success of our franchisees’ salons; our salons' dependence
on a third-party supplier agreement for merchandise; our
franchisees' ability to attract, train and retain talented stylists
and salon leaders; the success of our franchisees, which operate
independently; data security and privacy compliance and our ability
to manage cyber threats and protect the security of potentially
sensitive information about our guests, franchisees, employees,
vendors or Company information; the ability of the Company to
maintain a satisfactory relationship with Walmart; marketing
efforts to drive traffic to our franchisees' salons; the successful
migration of our franchisees to the Zenoti salon technology
platform; our ability to maintain and enhance the value of our
brands; reliance on information technology systems; reliance on
external vendors; the use of social media; the effectiveness of our
enterprise risk management program; ability to generate sufficient
cash flow to satisfy our debt service obligations; compliance with
covenants in our financing arrangement, access to the existing
revolving credit facility, and acceleration of our obligation to
repay our indebtedness; the completion and/or results of the
strategic alternatives review; limited resources to invest in our
business; premature termination of agreements with our franchisees;
financial performance of Empire Education Group, Inc.; our ability
to close the sale of our ownership stake in Empire Education Group,
Inc, the continued ability of the Company to implement cost
reduction initiatives and achieve expected cost savings; continued
ability to compete in our business markets; reliance on our
management team and other key personnel; the continued ability to
maintain an effective system of internal control over financial
reporting; changes in tax exposure; the ability to use U.S. net
operating loss carryforwards; potential litigation and other legal
or regulatory proceedings; or other factors not listed above.
Additional information concerning potential factors that could
affect future financial results is set forth under Item 1A on Form
10-K. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. However, your attention is directed to
any further disclosures made in our subsequent annual and periodic
reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K
and Proxy Statements on Schedule 14A.
REGIS CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited)
(Dollars in thousands, except
per share data)
September 30,
2023
June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
9,298
$
9,508
Receivables, net
9,697
10,885
Inventories, net
1,011
1,681
Other current assets
14,628
15,164
Total current assets
34,634
37,238
Property and equipment, net
6,336
6,422
Goodwill
173,291
173,791
Other intangibles, net
2,691
2,783
Right of use asset
337,481
360,836
Other assets
25,737
26,307
Total assets
$
580,170
$
607,377
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities:
Accounts payable
$
13,069
$
14,309
Accrued expenses
26,142
30,109
Short-term lease liability
78,006
81,917
Total current liabilities
117,217
126,335
Long-term debt, net
179,732
176,830
Long-term lease liability
271,942
291,901
Other non-current liabilities
46,543
49,041
Total liabilities
615,434
644,107
Commitments and contingencies
Shareholders' deficit:
Common stock, $0.05 par value; issued and
outstanding 45,579,248 and 45,566,228 common shares at September
30, 2023 and June 30, 2023, respectively
2,279
2,278
Additional paid-in capital
65,160
64,600
Accumulated other comprehensive income
8,734
9,023
Accumulated deficit
(111,437
)
(112,631
)
Total shareholders' deficit
(35,264
)
(36,730
)
Total liabilities and shareholders'
deficit
$
580,170
$
607,377
REGIS CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended
September 30, 2023 and 2022
(Dollars and shares in
thousands, except per share data)
Three Months Ended September
30,
2023
2022
Revenues:
Royalties
$
16,528
$
17,180
Fees
2,631
2,553
Product sales to franchisees
384
443
Advertising fund contributions
7,226
8,251
Franchise rental income
24,667
30,330
Company-owned salon revenue
1,936
3,114
Total revenue
53,372
61,871
Operating expenses:
Cost of product sales to franchisees
359
470
General and administrative
10,729
14,361
Rent
1,097
1,753
Advertising fund expense
7,226
8,251
Franchise rent expense
24,667
30,330
Company-owned salon expense (1)
1,490
2,985
Depreciation and amortization
370
1,251
Total operating expenses
45,938
59,401
Operating income
7,434
2,470
Other expense:
Interest expense
(6,188
)
(3,817
)
Other, net
(200
)
(463
)
Income (loss) from operations before
income taxes
1,046
(1,810
)
Income tax benefit (expense)
148
(28
)
Income (loss) from continuing
operations
1,194
(1,838
)
Income from discontinued operations
—
3,306
Net income
$
1,194
$
1,468
Net income per share:
Basic:
Income (loss) from continuing
operations
$
0.03
$
(0.04
)
Income from discontinued operations
0.00
0.07
Net income per share, basic (2)
$
0.03
$
0.03
Diluted:
Income (loss) from continuing
operations
0.03
(0.04
)
Income from discontinued operations
0.00
0.07
Net income per share, diluted (2)
$
0.03
$
0.03
Weighted average common and common
equivalent shares outstanding:
Basic
46,640
46,054
Diluted
47,243
46,054
_______________________________________________________________________________
(1)
Includes cost of service and product sold
to guests in our Company-owned salons. Excludes general and
administrative expense, rent and depreciation and amortization
related to Company-owned salons.
(2)
Total is a recalculation; line items
calculated individually may not sum to total due to rounding.
REGIS CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended
September 30, 2023 and 2022
(Dollars in thousands)
Three Months Ended September
30,
2023
2022
Cash flows from operating activities:
Net income
$
1,194
$
1,468
Adjustments to reconcile net income to
cash used in operating activities:
Gain from sale of OSP
—
(3,927
)
Depreciation and amortization
375
1,035
Deferred income taxes
(59
)
28
Non-cash interest
640
—
Stock-based compensation
630
531
Amortization of debt discount and
financing costs
747
648
Other non-cash items affecting
earnings
238
481
Changes in operating assets and
liabilities, excluding the effects of asset sales
(6,589
)
(5,321
)
Net cash used in operating activities
(2,824
)
(5,057
)
Cash flows from investing activities:
Capital expenditures
(163
)
(184
)
Proceeds from sale of OSP, net of fees
—
3,500
Net cash (used in) provided by investing
activities
(163
)
3,316
Cash flows from financing activities:
Borrowings on credit facility
2,000
6,357
Repayments of long-term debt
(162
)
(5,801
)
Debt refinancing fees
(152
)
(4,341
)
Taxes paid for shares withheld
(6
)
(13
)
Net cash provided by (used in) financing
activities
1,680
(3,798
)
Effect of exchange rate changes on cash
and cash equivalents
(42
)
(166
)
Decrease in cash, cash equivalents, and
restricted cash
(1,349
)
(5,705
)
Cash, cash equivalents and restricted
cash:
Beginning of period
21,396
27,464
End of period
$
20,047
$
21,759
REGIS CORPORATION
Same-Store Sales
SYSTEM-WIDE SAME-STORE SALES
(1):
Three Months Ended
September 30, 2023
September 30, 2022
Service
Retail
Total
Service
Retail
Total
Supercuts
2.5
%
(4.7
)%
2.2
%
9.7
%
(8.0
)%
8.9
%
SmartStyle
(0.8
)
(7.2
)
(2.0
)
1.0
(18.7
)
(3.2
)
Portfolio Brands
4.2
(1.5
)
3.7
5.1
(10.1
)
3.6
Total
2.4
%
(4.9
)%
1.8
%
6.6
%
(13.8
)%
4.5
%
_______________________________________________________________________________
(1)
System-wide same-store sales are
calculated as the total change in sales for system-wide franchise
and company-owned locations that were open on a specific day of the
week during the current period and the corresponding prior period.
Quarterly system-wide same-store sales are the sum of the
system-wide same-store sales computed on a daily basis. Franchise
salons that do not report daily sales are excluded from same-store
sales. System-wide same-store sales are calculated in local
currencies to remove foreign currency fluctuations from the
calculation.
REGIS CORPORATION
System-Wide Location
Counts
September 30,
2023
June 30, 2023
FRANCHISE SALONS:
Supercuts
2,060
2,082
SmartStyle/Cost Cutters in Walmart
Stores
1,373
1,388
Portfolio Brands
1,210
1,223
Total North American salons
4,643
4,693
Total International salons (1)
102
102
Total Franchise salons
4,745
4,795
as a percent of total Franchise and
Company-owned salons
98.6
%
98.6
%
COMPANY-OWNED SALONS:
Supercuts
7
7
SmartStyle/Cost Cutters in Walmart
Stores
48
48
Portfolio Brands
11
13
Total Company-owned salons
66
68
as a percent of total Franchise and
Company-owned salons
1.4
%
1.4
%
Grand Total, System-wide
4,811
4,863
_______________________________________________________________________________
(1)
Canadian and Puerto Rican salons are
included in the North American salon totals.
Non-GAAP Reconciliations:
This press release includes a presentation of adjusted EBITDA
and adjusted Franchise revenue, which are non-GAAP measures. The
non-GAAP measures are financial measures that do not reflect United
States Generally Accepted Accounting Principles (GAAP). We believe
our presentation of the non-GAAP measures provides meaningful
insight into our ongoing operating performance and a supplemental
perspective of our results of operations. Presentation of the
non-GAAP measures allows investors to review our core ongoing
operating performance from the same perspective as management and
the Board of Directors. These non-GAAP financial measures provide
investors an enhanced understanding of our operations, facilitate
investors’ analyses and comparisons of our current and past results
of operations and provide insight into the prospects of our future
performance. We also believe the non-GAAP measures are useful to
investors because they provide supplemental information that
research analysts frequently use to analyze financial
performance.
Items impacting comparability are not defined terms within U.S.
GAAP. Therefore, our non-GAAP financial information may not be
comparable to similarly titled measures reported by other
companies. We determine the items to consider as "items impacting
comparability" based on how management views our business, makes
financial, operating and planning decisions and evaluates the
Company's ongoing performance.
The following items have been excluded from our non-GAAP
adjusted EBITDA results: discontinued operations, one-time
professional fees and legal settlements, severance expense, the
benefit from lease liability decreases in excess of previously
impaired right of use asset, lease termination fees and asset
retirement obligation costs.
We present adjusted revenue to provide a meaningful Franchise
adjusted EBITDA margin, which removes non-margin revenue from total
revenue to arrive at an adjusted margin. Margin is a common metric
used by investors, however, the majority of our revenue is offset
by equal expense, so it does not contribute to our margin. We
remove the non-margin revenue from this metric in order to show a
meaningful margin rate.
The method we use to produce non-GAAP results is not in
accordance with U.S. GAAP and may differ from methods used by other
companies. These non-GAAP results should not be regarded as a
substitute for corresponding U.S. GAAP measures, but instead should
be utilized as a supplemental measure of operating performance in
evaluating our business. Non-GAAP measures do have limitations as
they do not reflect certain items that may have a material impact
upon our reported financial results. As such, these non-GAAP
measures should be viewed in conjunction with our financial
statements prepared in accordance with U.S. GAAP.
REGIS CORPORATION
Reconciliation of U.S. GAAP
Net Income to Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended September
30,
2023
2022
Consolidated reported net income, as
reported (U.S. GAAP)
$
1,194
$
1,468
Interest expense, as reported
6,188
3,817
Income taxes, as reported
(148
)
28
Depreciation and amortization, as
reported
370
1,251
EBITDA
$
7,604
$
6,564
Professional fees and legal
settlements
—
708
Severance
—
2
Lease liability benefit
(128
)
(602
)
Lease termination fees
(13
)
458
Discontinued operations
—
(3,306
)
Adjusted EBITDA, non-GAAP financial
measure
$
7,463
$
3,824
REGIS CORPORATION
Reconciliation of Reported
Franchise Adjusted EBITDA as a Percent of GAAP Franchise
Revenue
to Franchise Adjusted EBITDA
as a Percent of Adjusted Franchise Revenue
(Dollars in thousands)
(Unaudited)
Three Months Ended September
30,
2023
2022
Franchise adjusted EBITDA
$
7,960
$
4,993
GAAP Franchise revenue
51,436
58,757
Franchise adjusted EBITDA as a percent of
GAAP Franchise revenue
15.5
%
8.5
%
Non-margin revenue adjustments:
Franchise rental income
$
(24,667
)
$
(30,330
)
Advertising fund contributions
(7,226
)
(8,251
)
Adjusted Franchise revenue
$
19,543
$
20,176
Franchise adjusted EBITDA as a percent of
adjusted Franchise revenue
40.7
%
24.7
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101523222/en/
REGIS CORPORATION: Kersten Zupfer
investorrelations@regiscorp.com
Regis (NYSE:RGS)
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From Oct 2024 to Nov 2024
Regis (NYSE:RGS)
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From Nov 2023 to Nov 2024
