U.S. Markets open in 2 hrs 50 mins
  • S&P Futures

    3,923.00
    +19.25 (+0.49%)
     
  • Dow Futures

    31,591.00
    +170.00 (+0.54%)
     
  • Nasdaq Futures

    12,092.25
    +51.75 (+0.43%)
     
  • Russell 2000 Futures

    1,781.90
    +12.10 (+0.68%)
     
  • Crude Oil

    111.61
    +2.04 (+1.86%)
     
  • Gold

    1,825.90
    +1.10 (+0.06%)
     
  • Silver

    21.27
    +0.11 (+0.51%)
     
  • EUR/USD

    1.0586
    0.0000 (-0.0000%)
     
  • 10-Yr Bond

    3.1940
    0.0000 (0.00%)
     
  • Vix

    27.01
    -0.22 (-0.81%)
     
  • GBP/USD

    1.2261
    -0.0009 (-0.0772%)
     
  • USD/JPY

    136.1570
    +0.7110 (+0.5249%)
     
  • BTC-USD

    21,068.44
    -375.58 (-1.75%)
     
  • CMC Crypto 200

    460.02
    -1.77 (-0.38%)
     
  • FTSE 100

    7,341.14
    +82.82 (+1.14%)
     
  • Nikkei 225

    27,049.47
    +178.17 (+0.66%)
     

Regis Corporation Reports Third Quarter 2022 Results

  • Oops!
    Something went wrong.
    Please try again later.
·12 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

MINNEAPOLIS, May 10, 2022--(BUSINESS WIRE)--Regis Corporation (NYSE: RGS), a leader in the haircare industry, today reported results for the third fiscal quarter and nine months ended March 31, 2022 versus the prior year as noted below.

  • Total third quarter and nine months ended March 31, 2022 revenue of $64.7 million and $212.8 million includes Royalty growth of 23.1% and 31.2%, respectively.

  • System-wide same-store sales increased 8.6%.

  • Reported G&A of $15.6 million and adjusted G&A of $14.7 million, represented a decline of $9.0 million and $8.3 million compared to the third quarter 2021, respectively.

  • The Franchise segment posted adjusted EBITDA of $3.0 million compared to a loss of $7.0 million in third quarter 2021. Second consecutive quarter of positive adjusted EBITDA in the Franchise segment.

  • Third quarter adjusted EBITDA loss of $0.3 million improved by $19.5 million compared to a loss of $19.8 million in the third quarter 2021.

  • For the nine months ended March 31, 2022 adjusted EBITDA loss of $3.6 million improved significantly from a loss of $56.0 million during the same period of the prior year.

  • Earnings webcast scheduled for 9am CST on May 10, 2022 and will be accompanied by a slide presentation.

"Our third quarter results improved year over year, but were below our expectations due to a slower sales recovery and the continued wind down of our legacy businesses," said Matt Doctor, Regis Chief Executive Officer. "We continue to be affected by labor issues and lower customer counts stemming from the pandemic, but remain encouraged because our results reflect a business that has not yet benefited from the action steps we have identified in tandem with our franchisees to improve our performance, including a single technology platform for our entire system, more robust stylist education and events for a stronger talent brand, and a refocus of our marketing efforts toward digital. We are confident that our fully franchised business model and the measures we have underway will lead to stronger profitability going forward."

Three Months Ended

March 31,

Nine Months Ended

March 31,

(Dollars in thousands)

2022

2021

2022

2021

Consolidated revenue

$

64,749

$

100,267

$

212,761

$

315,983

System-wide revenue (1)

290,977

269,951

911,626

791,577

System-wide same-store sales comps

8.6

%

(20.7

) %

17.8

%

(28.7

) %

Two-year system-wide same-store sales comps

(13.7

) %

N/A

(16.1

) %

N/A

Operating loss

$

(25,444

)

$

(18,541

)

$

(32,372

)

$

(76,886

)

Net loss

(27,918

)

(10,847

)

(43,224

)

(78,991

)

Diluted net loss per share

(0.61

)

(0.30

)

(1.01

)

(2.20

)

EBITDA (2)

(23,461

)

(3,564

)

(28,160

)

(42,532

)

as a percent of revenue

(36.2

) %

(3.6

) %

(13.2

) %

(13.5

) %

As adjusted (2)

Net loss, as adjusted

$

(4,337

)

$

(25,340

)

$

(17,454

)

$

(79,172

)

Diluted net loss per share, as adjusted

(0.09

)

(0.70

)

(0.41

)

(2.20

)

EBITDA, as adjusted

(306

)

(19,812

)

(3,574

)

(55,981

)

as a percent of revenue

(0.5

) %

(19.8

) %

(1.7

) %

(17.7

) %

(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 $64.7 million decreased $35.5 million, or 35.4%, year-over-year, driven primarily by the Company exiting company-owned salons that generated significant revenue, but were loss making. Partially offsetting the decline in Company-owned revenue was an increase in royalty revenue due to higher franchise salon sales and an increase in franchise salon count.

Third quarter adjusted EBITDA loss of $0.3 million improved $19.5 million, versus an adjusted EBITDA loss of $19.8 million in the same period last year. The improvement was driven by an increase in royalties; a decrease in general and administrative expense; and the Company exiting loss making company-owned salons over the last twelve months.

Regis reported a third quarter 2022 net loss of $27.9 million, or $0.61 loss per diluted share, compared to a net loss of $10.8 million, or $0.30 loss per diluted share, in the third quarter of 2021. Net loss included a goodwill impairment charge and increased inventory reserve totaling $22.4 million. Excluding discrete items, the Company reported a third quarter 2022 adjusted net loss of $4.3 million, or $0.09 loss per diluted share, compared to an adjusted net loss of $25.3 million, or $0.70 loss per diluted share, for the same period last year. The year-over-year improvement in adjusted net loss was driven primarily by improved sales leading to an increase in royalties; a decrease in general and administrative expense; and the Company exiting loss making company-owned salons.

Third Quarter Segment Results

Franchise

Three Months Ended

March 31,

Increase

(Decrease)

Nine Months Ended

March 31,

Increase

(Decrease)

(Dollars in millions) (1)

2022

2021

2022

2021

Royalties

$

15.8

$

12.8

$

3.0

$

48.5

$

37.0

$

11.5

Fees

3.4

5.1

(1.7

)

11.5

9.6

1.9

Product sales to franchisees

1.3

13.1

(11.8

)

11.7

41.1

(29.4

)

Advertising fund contributions

8.1

5.6

2.5

24.2

14.8

9.4

Franchise rental income

32.7

31.3

1.4

100.2

95.9

4.3

Total Franchise revenue

$

61.2

$

67.9

$

(6.7

)

$

196.2

$

198.3

$

(2.1

)

Franchise same-store sales comps

8.8

%

(19.3

) %

18.0

%

(27.6

) %

Franchise two-year same-store sales comps

(13.4

) %

N/A

(15.8

) %

N/A

EBITDA, as adjusted

$

3.0

$

(7.0

)

$

10.0

$

4.4

$

(21.8

)

$

26.2

as a percent of revenue

4.8

%

(10.3

) %

2.2

%

(11.0

) %

as a percent of adjusted revenue (2)

14.5

%

(22.5

) %

6.1

%

(24.9

) %

Total Franchise salons

5,504

5,317

187

as a percent of total Franchise and Company-owned salons

97.9

%

86.6

%

(1)

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

(2)

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

Third quarter Franchise revenue was $61.2 million, a $6.7 million, or 9.9% decrease compared to the prior year quarter. Royalties were $15.8 million, a $3.0 million increase versus the same period last year. The increase in royalties is due to higher franchise system sales and the increase in franchise salons. Product sales to franchisees of $1.3 million decreased $11.8 million, as expected. The decrease in product sales will continue as the company transitions out of its wholesale product sales business. Franchise adjusted EBITDA of $3.0 million improved $10.0 million year-over-year primarily due to an increase in royalties and a decrease in general and administrative expense.

Company-Owned Salons

Three Months Ended

March 31,

(Decrease)

Increase

Nine Months Ended

March 31,

(Decrease)

Increase

(Dollars in millions) (1)

2022

2021

2022

2021

Total Company-owned salon revenue

$

3.5

$

32.3

$

(28.8

)

$

16.6

$

117.6

$

(101.0

)

Company-owned same-store sales comps

(3.0

) %

(28.8

) %

4.4

%

(33.8

) %

Company-owned two-year same-store sales comps

(31.1

) %

N/A

(32.2

) %

N/A

EBITDA, as adjusted

$

(3.3

)

$

(12.8

)

$

9.5

$

(8.0

)

$

(34.2

)

$

26.2

as a percent of revenue

(94.3

) %

(39.6

) %

(48.2

) %

(29.1

) %

Total Company-owned salons

117

826

(709

)

as a percent of total Franchise and Company-owned salons

2.1

%

13.4

%

(1)

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

Third quarter revenue for the Company-owned salon segment decreased $28.8 million, versus the prior year to $3.5 million. The year-over-year decline in revenue was expected and driven by a net 448 salons sold and converted to the Company's franchise portfolio over the past 12 months and the closure of a net 261 unprofitable salons over the past 12 months. Third quarter Company-owned salons adjusted EBITDA loss improved $9.5 million, versus the same period last year driven primarily by the elimination of EBITDA losses in the prior year period from the unprofitable salons now closed. The adjusted EBITDA loss of $3.3 million includes a $1.1 million inventory excess and obsolescence charge.

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 third quarter results on May 10, 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.html.

About Regis Corporation

Regis Corporation (NYSE:RGS) is a leader in the beauty salon industry. As of March 31, 2022, the Company franchised, owned or held ownership interests in 5,697 locations worldwide. 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 factors include a potential material adverse impact on our business and results of operations as a result of the uncertain duration and severity of the COVID-19 pandemic, including any adverse impact from Delta, Omicron and other variants; the impact of the COVID-19 pandemic on our key suppliers; 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 and fashion trends; the continued ability of the Company to implement its strategy, priorities and initiatives including the re-engineering of our corporate and field infrastructure; new merchandising strategy; our franchisees' ability to attract, train and retain talented stylists; financial performance of our franchisees; the ability to operate or sell the salons transferred back from TBG; our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, 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; 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; Opensalon® Pro may not yield the intended results; compliance with credit facility covenants and access to the existing revolving credit facility; ability to re-finance our existing credit facility, including the ability to re-finance at a similar rate, and our ability to raise additional debt or equity capital; our capital investments in technology may not achieve appropriate returns; premature termination of agreements with our franchisees; financial performance of Empire Education Group; 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 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 SHEET (Unaudited)

(Dollars in thousands, except per share data)

March 31,
2022

June 30,
2021

ASSETS

Current assets:

Cash and cash equivalents

$

25,630

$

19,191

Receivables, net

15,443

27,372

Inventories

8,606

22,993

Other current assets

13,254

17,103

Total current assets

62,933

86,659

Property and equipment, net

21,922

23,113

Goodwill

213,362

229,582

Other intangibles, net

3,420

3,761

Right of use asset

525,429

611,880

Other assets

35,712

41,388

Total assets

$

862,778

$

996,383

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

14,319

$

27,157

Accrued expenses

36,469

54,857

Short-term debt, net

193,814

Short-term lease liability