Regis Corporation (NYSE:RGS) Q1 2024 Earnings Call Transcript

Regis Corporation (NYSE:RGS) Q1 2024 Earnings Call Transcript November 1, 2023

Regis Corporation beats earnings expectations. Reported EPS is $0.03, expectations were $-0.08.

Biz McShane: Good morning, and thank you for joining the Regis First Quarter Fiscal 2024 Earnings Conference Call. I'm your host Biz McShane, Vice President Corporate Controller. All participants are in listen-only mode. The prepared remarks by our President and Chief Executive Officer, Matthew Doctor and Executive Vice President and Chief Financial Officer, Kersten Zupfer are accompanied by slides to help participants follow along. After their prepared remarks, we will have time for questions. [Operator Instructions] As a reminder, this conference is being recorded. I would like to remind everyone that the language on forward-looking statements included in our earnings release, and 8-K filing also apply to our comments made on the call today.

These documents along with our presentation today, can be found on our website, www.regiscorp.com/investorrelations, along with reconciliation of any non-GAAP financial measures mentioned on today's call, with their corresponding GAAP measures. Today's slides are located in the investor presentations and supplemental financial statements section of the investor site. With that, I will now turn the call over to Matt.

Matthew Doctor: Thank you, Biz, and good morning everyone. On today's call, we will go through our Q1 fiscal 2024 results, a quarter in which we continue to make financial progress. In addition to our Q1 results, we announced the process, to evaluate strategic alternatives with the intent of strengthening our balance sheet and position Regis for future growth. We determined now is the proper time to launch this process. As 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. We have ample liquidity and we can take control of the process. We wanted to take advantage of this window of time, we have to go broad and maximize our optionality. As opposed to waiting until closer to maturity, or a regular way refinancing may prove more challenging.

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We believe this process is a solid way, to evaluate several potential structures and complement our current work streams, in order to best set Regis up for the future and maximize value. With this announcement, I also feel that it's appropriate to provide some more context as to how we got here, and why now. Whether you've been following Regis for a while, or you're a new follower or investor in the company, I believe it would be beneficial to recap the sequence of events leading up to the current state. Now Regis was in the middle of two major business model shifts when the COVID-19 pandemic disrupted the business. Those business model shifts being one, the transition from a company owned salon business to one that is fully franchised. And two, the in-house development and rollout of a proprietary point-of-sale technology product called OpenSalon Pro.

The pandemic was highly disruptive to Regis' business as over 1,800 company-owned salons remained as of March 31, 2020. During a time of government mandated salon shutdowns and restrictions, customer traffic was highly impaired and slow to recover, and the industry began experiencing significant labor issues. Due to our size, we were unable to qualify for government funding. And we had to draw on our revolver to fund the operational cash burn and manage through the uncertainty of the business. As of December 31, 2019. Regis had $32 million of debt including letters of credit, net of cash, due to adjusted EBITDA losses that reached $79 million in fiscal year 2021. In a cumulative cash use of $190 million in fiscal 2020 and fiscal 2021. Our debt including letters of credit, net of cash ended up around the $190 million dollar level that it is today, as a result of navigating through those times.

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