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Regis Corporation Reports Fourth Quarter and Full Year 2022 Results

MINNEAPOLIS, August 23, 2022--(BUSINESS WIRE)--Regis Corporation (NYSE: RGS), a leader in the haircare industry, today reported results for the fourth quarter and full year ended June 30, 2022. Highlights from the year include:

  • Fourth quarter and full year revenue of $66.1 million and $276.0 million, including royalty growth of 12.1% and 25.6%, respectively.

  • System-wide same-store sales increase of 7.1% in the quarter and 14.8% in fiscal year 2022.

  • Positive fourth quarter adjusted EBITDA, excluding salon sales, of $1.1 million, a $15.6 million improvement compared to a loss of $14.5 million during the fourth quarter 2021; Franchise EBITDA of $2.5 million, positive for the 3rd quarter in a row.

  • Positive fiscal year adjusted EBITDA, excluding salon sales, of $0.5 million compared to a $60.2 million loss in fiscal year 2021.

  • Efforts to renegotiate debt culminated in the successful amendment to our credit agreement and extension of the maturity date from March 2023 to August 2025.

  • Sold proprietary salon management system, Opensalon® Pro, for up to $39.0 million in proceeds and partnered with salon technology leader, Zenoti, to provide a best-in-class technology solution to franchisees.

  • Reduced loss-generating company-owned locations from 276 to 105, resulting in a $38.0 million year-over-year EBITDA improvement.

  • Well-positioned with strategy in place to deliver strong EBITDA growth in fiscal year 2023.

  • Earnings webcast scheduled for 9am CST on August 23, 2022 and will be accompanied by a slide presentation.

"When I stepped in as Interim CEO in December 2021, we identified refinancing our debt, providing the right technology solution to our franchisees, and continuing the wind down of our company-owned salons as our top priorities. I am pleased that in a short period of time, we successfully delivered on all three by renegotiating our credit agreement with our lender group, selling Opensalon Pro to our new point-of-sale technology partner, Zenoti, and winding down our company-owned salons from 276 to 105 locations," said Matt Doctor, Regis Chief Executive Officer. "In addition to these transformative efforts, our performance is continuing to improve with positive adjusted EBITDA, excluding salon sales, in Q4 and fiscal year 2022. With our fully-franchised business model and strategies in place that focus on stylist retention and recruiting, enhanced digital marketing, and a more robust salon management system, we are poised to deliver stronger results in fiscal 2023."

Three Months Ended June 30,

Twelve Months Ended June 30,

(Dollars in thousands)

2022

2021

2022

2021

Consolidated revenue

$

66,069

$

97,614

$

275,967

$

411,651

System-wide revenue (1)

316,838

293,981

1,228,464

1,086,024

System-wide same-store sales comps

7.1

%

4.2

%

14.8

%

(25.8

) %

Two-year system-wide same-store sales comps

7.4

%

(21.0

) %

(13.7

) %

(28.3

) %

Operating loss

$

(1,315

)

$

(22,844

)

$

(28,898

)

$

(94,677

)

Loss from continuing operations

(8,560

)

(29,755

)

(46,459

)

(103,206

)

Diluted loss per share from continuing operations

(0.19

)

(0.83

)

(1.07

)

(2.87

)

Loss from discontinued operations

(34,073

)

(4,584

)

(39,398

)

(10,125

)

Net loss

(42,633

)

(34,339

)

(85,857

)

(113,331

)

Diluted net loss per share

(0.93

)

(0.95

)

(1.97

)

(3.15

)

EBITDA (2)

(34,384

)

(27,140

)

(64,160

)

(70,824

)

as a percent of revenue

(52.0

) %

(27.8

) %

(23.2

) %

(17.2

) %

As adjusted (2)

Loss from continuing operations, as adjusted

$

(3,032

)

$

(25,483

)

$

(18,054

)

$

(101,685

)

Diluted loss per share from continuing operations, as adjusted

(0.07

)

(0.71

)

(0.41

)

(2.83

)

Net loss, as adjusted

(3,032

)

(25,483

)

(18,054

)

(101,685

)

Diluted net loss per share, as adjusted

(0.07

)

(0.71

)

(0.41

)

(2.83

)

EBITDA, as adjusted

959

(22,728

)

(1,799

)

(76,914

)

as a percent of revenue

1.5

%

(23.3

) %

(0.7

) %

(18.7

) %

EBITDA, as adjusted excluding loss on sale of salons

1,104

(14,495

)

535

(60,218

)

as a percent of revenue

1.7

%

(14.8

) %

0.2

%

(14.6

) %

_______________________________________________________________________________

(1)

Represents total sales within the system.

(2)

See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations."

Total revenue in the quarter of $66.1 million decreased $31.5 million, or 32.3% and full year revenue declined $135.7 million year-over-year. Both of these declines were driven primarily by exiting company-owned salons that generated significant revenue, but were loss generating. Partially offsetting the decline in revenue was an increase in royalty revenue due to higher franchise system sales.

Fourth quarter adjusted EBITDA of $1.0 million improved $23.7 million, versus an adjusted EBITDA loss of $22.7 million in the same period last year. On a full year basis, adjusted EBITDA loss of $1.8 million improved $75.1 million from fiscal 2021. The improvements were driven by an increase in royalty revenues; lower general and administrative expense; and the wind down of loss-generating company-owned salons during the last twelve months.

Regis reported a fourth quarter 2022 net loss from continuing operations of $8.6 million, or $0.19 loss per diluted share, compared to a net loss from continuing operations of $29.8 million, or $0.83 loss per diluted share, in the fourth quarter of 2021. Excluding discrete items, the Company reported fourth quarter 2022 adjusted net loss from continuing operations of $3.0 million, or $0.07 loss per diluted share, compared to adjusted net loss from continuing operations of $25.5 million, or $0.71 per diluted share for the same period last year. On a full year basis, the Company reported an adjusted net loss from continuing operations of $18.1 million or $0.41 loss per diluted share compared to an adjusted net loss from continuing operations of $101.7 million or $2.83 loss per share for the same period last year. The year-over-year improvement in adjusted net loss from continuing operations was driven primarily by improved sales leading to an increase in royalty revenues; lower general and administrative expense; and the Company winding down loss-generating company-owned salons during the last twelve months.

The Company reported a fourth quarter 2022 net loss of $42.6 million, or $0.93 loss per diluted share, compared to a net loss of $34.3 million, or $0.95 per diluted share for the same period last year. On a full year basis, the Company reported a net loss of $85.9 million, or $1.97 loss per diluted share, compared to a net loss of $113.3 million, or $3.15 loss per share, in fiscal 2021. The net loss in the quarter and in the year was driven by the loss from discontinued operations of $34.1 and $39.4 million in the quarter and full year, respectively, which includes a $38.4 million non-cash goodwill derecognition charge. Additionally, the twelve months results include a non-cash goodwill impairment charge of $13.1 million. The net loss improved year-over-year in both periods due to higher royalty revenues and lower general and administrative expense.

Fourth Quarter Segment Results

Franchise

Three Months Ended June 30,

Increase (Decrease)

Twelve Months Ended June 30,

Increase (Decrease)

(Dollars in millions) (1)

2022

2021

2022

2021

Royalties

$

17.2

$

15.4

$

1.8

$

65.8

$

52.4

$

13.4

Fees

3.0

2.6

0.4

11.6

10.2

1.4

Product sales to franchisees

3.3

15.6

(12.3

)

15.1

56.7

(41.6

)

Advertising fund contributions

8.4

7.2

1.2

32.6

22.0

10.6

Franchise rental income

30.6

31.5

(0.9

)

130.8

127.4

3.4

Total Franchise revenue

$

62.5

$

72.3

$

(9.8

)

$

255.8

$

268.7

$

(12.9

)

Franchise same-store sales comps

7.2

%

4.4

%

15.0

%

(24.5

) %

Franchise two-year same-store sales comps

7.5

%

(20.2

) %

(13.4

) %

(27.2

) %

EBITDA, as Adjusted

$

2.5

$

(9.4

)

$

11.9

$

7.7

$

(29.4

)

$

37.1

as a percent of revenue

4.1

%

(13.0

) %

3.0

%

(10.9

) %

as a percent of adjusted revenue (2)

10.8

%

(28.1

) %

8.4

%

(24.7

) %

Total Franchise salons

5,395

5,563

(168

)

as a percent of total Franchise and Company-owned salons

98.1

%

95.3

%

_______________________________________________________________________________

(1)

Variances calculated on amounts shown in millions may result in rounding differences.

(2)

Adjusted revenue excludes non-margin revenue. See Non-GAAP reconciliation

Fourth quarter Franchise revenue was $62.5 million, a $9.8 million, or 13.6% decrease, compared to the prior year quarter. Royalties were $17.2 million, a $1.8 million, or 11.7% increase, versus the same period last year. The increase in royalties is due to higher franchise system sales. Product sales to franchisees of $3.3 million decreased $12.3 million as a result of the transition out of the wholesale product business. Franchise adjusted EBITDA of $2.5 million improved $11.9 million year-over-year primarily due to an increase in royalty revenues and a decrease in general and administrative expense. Full year results followed the same trends.

Company-Owned Salons

Three Months Ended June 30,

(Decrease) Increase

Twelve Months Ended June 30,

(Decrease) Increase

(Dollars in millions) (1)

2022

2021

2022

2021

Total Company-owned salon revenue

$

3.6

$

25.3

$

(21.7

)

$

20.2

$

143.0

$

(122.8

)

Company-owned same-store sales comps

(0.8

) %

(7.0

) %

3.4

%

(33.4

) %

Company-owned two-year same-store sales comps

(27.1

) %

(30.4

) %

(32.1

) %

(35.2

) %

EBITDA, as adjusted

$

(1.6

)

$

(13.3

)

$

11.7

$

(9.5

)

$

(47.5

)

$

38.0

as a percent of revenue

(44.4

) %

(52.6

) %

(47.0

) %

(33.2

) %

Total Company-owned salons

105

276

(171

)

as a percent of total Franchise and Company-owned salons

1.9

%

4.7

%

_______________________________________________________________________________

(1)

Variances calculated on amounts shown in millions may result in rounding differences.

Fourth quarter revenue for the Company-owned salon segment decreased $21.7 million versus the prior year to $3.6 million and full year revenue declined $122.8 million. The year-over-year decline in revenue was expected and driven by 110 salons converted to the Company's franchise portfolio and the closure of 61 unprofitable salons over the past 12 months. Fourth quarter adjusted EBITDA loss improved $11.7 million, or 88.0%, and full year adjusted EBITDA loss improved $38.0 million, or 79.9%, versus the same period last year, driven primarily by current year closure of unprofitable salons and an inventory reserve charge in 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 to discuss fourth quarter and full year results on August 23, 2022 at 9 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 www.regiscorp.com/investor-relations.

About Regis Corporation

Regis Corporation (NYSE:RGS) is a leader in the beauty salon industry. As of June 30, 2022, the Company franchised, owned or held ownership interests in 5,576 worldwide locations. Regis’ franchised and corporate locations operate under concepts such as Supercuts®, SmartStyle®, Cost Cutters®, Roosters® and First Choice Haircutters®. Regis maintains an ownership interest in Empire Education Group in the U.S. For additional information about the Company, including a reconciliation of certain non-GAAP financial information and certain supplemental financial information, please visit the Investor Information 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 uncertainties include a potential material adverse impact on our business and results of operations as a result of the COVID-19 pandemic, including any adverse impact from variants; consumer shopping trends and changes in manufacturer distribution channels; changes in regulatory and statutory laws including increases in minimum wages; laws and regulations could require us to modify current business practices and incur increased costs; changes in economic conditions; changes in consumer tastes, 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; the return of sales at franchise locations to pre-pandemic levels; new merchandising strategy that utilizes third-party preferred supplier arrangements; our franchisees' ability to attract, train and retain talented stylists and salon leaders; the success of our franchisees, which operate independently; 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; failure to standardize operating processes across brands; exposure to uninsured or unidentified risks; the effectiveness of our enterprise risk management program; compliance with covenants in our financing arrangement, access to the existing revolving credit facility, and we may face an accelerated obligation to repay our indebtedness; our capital investments in technology may not achieve appropriate returns; premature termination of agreements with our franchisees; financial performance of 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 controls 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 could have an adverse effect on our business; or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A of 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 SHEET

(Dollars in thousands, except per share data)

June 30,

2022

2021

ASSETS

Current assets:

Cash and cash equivalents

$

17,041

$

19,191

Receivables, net

14,531

26,270

Inventories

3,109

20,639

Other current assets

13,984

17,017

Current assets related to discontinued operations

3,542

Total current assets

48,665

86,659

Property and equipment, net

12,835

16,906

Goodwill

174,360

188,257

Other intangibles, net

3,226

3,761

Right of use asset

493,749

610,599

Other assets

...