REGIS CORP Q3 FY2025 earnings call

• Regis is undergoing a multiyear transformation focused on stability, profitability, and cash flow. Significant achievements include a strengthened balance sheet, profitability, and positive operating cash flow. - Completed the acquisition of Alline Salon Group, with initial strategic changes implemented at the end of March, including a new stylist pay plan and menu pricing. - Key priorities include optimizing the company-owned salon portfolio (focusing on hiring, rehiring, testing, remodeling, and promotional calendars) and finalizing a Supercuts transformation strategy with three pillars: evolving brand strategy, unlocking omnichannel growth, and scaling operational excellence.

For the third quarter, total revenue was $57 million, an increase of 15.9% ($7.8 million) compared to the prior year. This was primarily driven by revenue growth from company-owned salons due to the Alline acquisition, offset by declines in franchise revenues from closed unprofitable locations. The franchise segment had adjusted EBITDA of $6.3 million in the quarter, a $157,000 increase from the prior year quarter. The company-owned salon segment saw adjusted EBITDA improve $1.6 million year-over-year to $843,000 for the quarter, largely due to the Alline acquisition. The consolidated same-store sales declined 1.1%, impacted by Easter timing and salon traffic softness. Supercuts had a 1.1% same-store sales increase, while SmartStyle saw a 7.4% decline.

• Expect positive cash generation for the remainder of fiscal 2025. - Adjusted G&A for fiscal 2025 is expected to be approximately $40.5 million, with a run rate of $43 million to $45 million. - Anticipate fewer store closures in 2025 compared to prior years, with ongoing evaluation for future guidance.

• Salon closures impact royalty revenue, with each closure averaging ~$6,500 in royalty loss. - Seasonality poses challenges, as the third quarter is historically weaker, and Easter timing shift negatively impacted sales. - Need to increase salon traffic, especially new guest traffic, and improve franchisee profitability to drive growth.

Q: Understanding the accounting for Alline, specifically the impact on royalties and company-owned EBITDA.

A: Kersten Zupfer and Matthew Doctor explained that royalties decrease in the franchise segment while company-owned EBITDA increases, with Alline's launch and various factors like sales stabilization and pay plan changes contributing.

Q: Updates on store closings and future guidance.

A: Matthew Doctor stated store closings are in line with expectations, with fewer closures anticipated, and ongoing evaluation for future guidance.

Q: Impact of remodeled stores on same-store sales.

A: Matthew Doctor mentioned modest lifts from remodels, especially in SmartStyle, with potential for further optimization in Supercuts' holistic transformation.

Q: Cash deployment and capital allocation.

A: Matthew Doctor said prioritization includes deleveraging, maintaining cash balance, and deploying capital based on business needs, with no immediate plans for broader franchise acquisition.