Earnings call transcript: Regis Q3 2025 sees revenue rise, stock surges

Regis Corporation reported a 15.9% increase in revenue for the third quarter of fiscal year 2025, reaching $57 million. The company’s stock surged by 14.94% in premarket trading, hitting $22, following the announcement. According to InvestingPro analysis, Regis is currently undervalued, with a Fair Value suggesting potential upside. The stock has demonstrated remarkable strength, delivering a 193.86% return over the past year. Investors responded positively to the company’s operational improvements and strategic initiatives, despite some challenges in same-store sales.

Key Takeaways

• Revenue increased by 15.9% year-over-year to $57 million.
• Operating income grew by 22% to $5 million.
• The stock price rose by 14.94% in premarket trading.
• The company closed 49 net salons in the quarter.
• Cash generation from operations improved significantly.

Company Performance

Regis Corporation demonstrated strong financial performance in Q3 2025, with a notable increase in revenue and operating income. The company continues to optimize its salon portfolio, which includes the acquisition of approximately 300 salons from Align Salon Group. InvestingPro data shows the company maintains a healthy gross profit margin of 39.41% and an attractive P/E ratio of 0.62, though its current ratio of 0.4 indicates some liquidity challenges. Despite a modest decline in same-store sales, Regis remains focused on enhancing its brand and operational efficiency. For deeper insights into Regis’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: $57 million, up 15.9% year-over-year.
• Operating income: $5 million, a 22% increase.
• Adjusted EBITDA: $7.1 million, up from $5.4 million last year.
• Cash from operations: $6.2 million, with a year-to-date improvement of $14.1 million.

Market Reaction

The stock price of Regis Corporation increased by 14.94% in premarket trading, reaching $22. This significant rise reflects investor confidence in the company’s strategic direction and recent financial performance. InvestingPro highlights that the stock has been notably volatile, with a beta of 1.58, and has shown strong momentum with an 8% return over the past six months. The stock’s movement towards its 52-week high of $35.50 suggests a positive outlook from the market. InvestingPro subscribers have access to 10 additional ProTips and detailed technical analysis for more informed trading decisions.

Outlook & Guidance

Regis expects positive cash generation for the remainder of fiscal year 2025 and plans to announce potential guidance updates in August or November 2025. The company aims to prioritize debt reduction and strategic capital allocation, with adjusted G&A expenses projected to be approximately $40.5 million for FY2025.

Executive Commentary

CEO Matthew Doctor expressed confidence in the company’s strategic actions, stating, "We are confident that the decisive actions we are taking today, combined with the progress that we have made, will position Regis to emerge stronger, more competitive, and better aligned with the future of the salon industry." CFO Kirsten Zupfer added, "We continue to expect positive cash generation for the remainder of fiscal year 2025."

Risks and Challenges

• Continued decline in same-store sales, particularly in SmartStyle.
• Potential impact of salon closures on revenue growth.
• Macroeconomic factors that could affect consumer spending in the salon industry.
• The challenge of integrating newly acquired salons from Align Salon Group.
• Maintaining competitive advantage in a rapidly changing retail environment.

Q&A

During the earnings call, investor Bill Charters inquired about the economics of the Align acquisition and the company’s store closure strategies. Executives discussed the potential for store remodels and their impact on sales, highlighting ongoing efforts to improve the company’s operational efficiency and market presence.

Full transcript - Regis Corp (RGS) Q3 2025:

Kirsten Zupfer, Executive Vice President and Chief Financial Officer, Regis Corporation: Good morning, and thank you for joining the Regis third quarter twenty twenty five earnings conference call. I am your host, Kirsten Zupfer, Executive Vice President and Chief Financial Officer.

I am joined today by our President and Chief Executive Officer, Matthew Doctor. All participants are in a listen only mode, and this conference is being recorded. I would like to remind everyone that the language on forward looking statements included in our earnings release and eight ks filing also applies to our comments made on the call today. These documents can be found on our website, www.regiscorp.com/investorrelations, along with a reconciliation of any non GAAP financial measures mentioned on today’s call with their corresponding GAAP measures. With that, I will now turn the call over to Matt Docher.

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: Good morning everyone and thanks for joining. On today’s call, we’ll provide an update on the progress we are making towards key initiatives that are reshaping Regis for long term growth, as well as review our financial results for our third fiscal quarter. At Regis, we are in the midst of a comprehensive transformation aimed at building a more resilient, efficient, and future ready company. This transformation is centered on creating a sustainable business model that prioritizes operational stability and support, corporate and salon level profitability, and strong cash flow generation, ultimately positioning us for a return to long term growth. Our near term efforts are foundational to reversing a history of traffic declines, strengthening our core operations, and positioning Regis and our franchisees to thrive in a rapidly evolving market.

This has been and continues to be a multi year journey to stabilize and improve the business and return to growth that is both profitable and sustainable. We are continuing to see tangible results from the actions we have taken over the past year. We have strengthened our balance sheet, returned to profitability, and are now consistently generating positive operating cash flow and have paved a clear path to a brighter future. These are significant achievements that speak to the progress we have made in stabilizing our business, which is a testament to our team’s focus and execution. Regis is in a much stronger financial and operational position today than we were just a year ago, and we are confident the steps we are taking now will continue to build a healthier, more valuable company.

As our efforts progress, we believe the broader market will begin to recognize the value we are creating. While this transformation will take time, we are confident that the cumulative effect of our work will become increasingly evident and then it will generate meaningful long term benefits for our franchisees, guests, stylists, shareholders, and broader stakeholder base. The success of our efforts is further demonstrated by the results we are reporting today, as well as some green shoots we are seeing in the business. As compared to our fiscal third quarter of last year, adjusted EBITDA grew 33%. Operating income grew by 23%.

Both reported and adjusted earnings per share grew and shifted from negative to positive, and we generated more than $6,000,000 in cash from operations all during what is historically a weaker quarter from a seasonality perspective. Year to date cash from operations has improved $14,000,000 versus last year, We have now generated positive cash flow for the second consecutive quarter for the first time since the first fiscal quarter in 2018. This performance highlights the improving health of our business and demonstrates that the intentional steps we have taken to shape Regis with a more optimized corporate owned versus franchise salon mix, as well as our overall operational strategy is working. One element of our strategic plan has been the acquisition and integration of our largest franchisee, Align Salon Group, which we completed during last fiscal quarter. I received several questions on how this acquisition came about and I want to reiterate that this was a proactive strategy pursued by Regis and not one in which we had to be done for any other reason than we saw significant financial and strategic benefits of having a strong company owned portfolio.

This acquisition expands our growth and cash generation levers, it opens up new brand and operational improvement opportunities, and has contributed positively to our results immediately upon closing. For the quarter, the Align portfolio contribution to overall results was modest, which was expected as this quarter was primarily focused on integrating and planning our go forward strategy. Those efforts culminated with our first large scale strategic changes being implemented in the Align portfolio at the March. That said, we still saw a positive progression of same store sales throughout the quarter within Align, going from January when same store sales for the portfolio was down seven and a half percent versus prior year, driving improvement to March where same store sales were down 2.7%. As I mentioned earlier at the March, March thirtieth to be exact, we implemented some major strategic changes that included first and foremost a brand new pay plan for all stylists that is more transparent and better aligns incentives.

We wanna ensure we are providing a clear path for managers and stylists to earn more money for generating more service and retail sales as well as additional profitability. Rolling out a new compensation plan is absolutely no small effort, and I’m very proud of the entire team for executing this flawlessly. In addition to the revamped pay plan, we went through all service menus and pricing structures to clean up and bring more uniformity to the services offered and the requisite pricing. We saw an opportunity to take some price on core services like haircuts and color, while simultaneously price ancillary services at more attractive levels to enable our stylists and salons to build total ticket and deliver more sales. We have also begun to display our service pricing across all digital check-in channels.

We view these initial efforts as critical to further streamlining operations and providing the right foundation to align incentives and drive results. And we are encouraged by early results as in April, we did build off the momentum we saw throughout the quarter from a same store sales perspective, turning positive in the portfolio along with improved profit margins. Overall, we remain highly confident in the long term value this strategic transaction will deliver. As we turn back to review our total company performance this quarter, I want to acknowledge that consolidated same store sales saw a modest decline of 1.1%. For the third fiscal quarter, this decline was driven by several factors including the timing of Easter, which fell in the fourth fiscal quarter of this year, as well as the continued softness in overall overall salon traffic and new guest visits.

We estimate that the Easter timing shift had a negative 1.1% impact on sales, meaning we would have been roughly flat for the quarter when excluding the estimated impact. As further evidence of the sales shift, April same store sales came in stronger versus last year with Supercuts delivering a 4.5% increase and the entire consolidated system demonstrating a 2.8% increase over last year’s April. While this is one month and I want to be cautious not to represent an expectation for this to be a new baseline, we felt it was important to share these results given the context of the holiday’s effect on our third quarter results. In addition, I also think it is important to point out the various brand contributions and focus areas we have as an organization as it relates to driving sales. Our largest brand Supercuts saw a same store sales increase of 1.1% for the third quarter.

While this is certainly not what we were aiming for and believe our efforts should ultimately drive an increase higher than that, the flow through Supercuts has an overall same store sales results is roughly 55%. SmartStyle, which saw a 7.4% same store sales decline for the quarter, represents a contribution of 20%. And SmartStyle, as we’ve stated before, our collective efforts there have been rationalizing and remodeling to get down to a healthier go forward salon base. And these figures represent why a number of our resources are deployed towards driving results at the Supercuts brand at this moment. It is a brand that has a long operating history coming up on 50 this year, combined with high awareness and scale, and the impact on overall Regis results given the level of contribution the brand has is by far the most significant.

All that being said, we’re not satisfied with this level of performance and we are acutely aware that we need to increase traffic to our salons, especially new guest traffic, and improve franchisee profitability in order to achieve that outsized growth that we believe is possible across all of our brands. We also believe that while same store sales is a critical metric, it is one of many defining metrics during this phase of our transformation. While driving traffic and sales growth remain top priorities, there is a tremendous amount of work to be done to return to growth. And our focus right now is on improving our foundation and utilizing data driven analytics to better inform our decision making. Importantly, even with the slight decline in same store sales and store count, the financial impact remains manageable to Regis due in large part to our relentless efforts and focus on disciplined cost management and capital allocation, which gives us the resilience and flexibility continue moving forward with our transformation.

Some data points that underscore the resilience of our business is for each 1% of annual same store sales decrease. Royalty revenue is impacted by approximately $550,000. Regarding closures, the stores that have been closing average roughly a hundred and 20,000 in annual sales. And in our average royalty rate of five and a half percent, each closure at this average is roughly $6,500 of royalty revenue. And while I’m certainly not trying to minimize the impact of salon closures, as many of these have been looked after with great care by our franchisees and all have dedicated staff that may be impacted.

I do want to point out the overall impact to our business in this context. We have several operational levers at our disposal to manage and overcome these headwinds should they continue or arise again. A few examples to point out would be a 1% increase in salon level profit margin and our company owned portfolio represents $750,000 of incremental store level profitability. In addition, we have our corporate g and a expense, which we have proven to manage strategically to this point and are continuously monitoring closely, as well as the continued runoff of legacy items that require cash to service today, Rent we are paying on dark salons that have historically closed and workers compensation claims related to when Regis was self insured during previous operating company days. Now taking an illustrative example of running an annual same store sales decrease of 1% combined with a hundred closures, a 1.6% increase in profit margin in our company owned business alone negates this effect, assuming all else being.

Now there are several permutations that get us to the same profitability and cash generating results in that scenario. But I just wanted to provide one example here. These factors give us confidence in our ability to navigate the time to turn around the top line and have been the key elements in growing our profitability and cash flow over the last several years despite the headwinds. Now to wrap up on the quarter before touching on our go forward priorities, I believe we continue to advance our transformation strategy forward while executing on the business and delivering growth across all profitability metrics. I also wanna reiterate that the Align acquisition along with the broader moves that we’ve made have been very intentional to set this business up to turn around our top line with the proper financial foundation and runway to do so, which is a major step forward from where we were just one year ago.

Now in terms of our company’s specific go forward priorities, we have two primary areas of focus. One is optimizing and growing the sales and profitability of our company owned salon portfolio, and two is the holistic Supercuts brand transformation agenda. Given how much change has occurred in Regis over the last twelve months, including a refinancing, the completion of our point of sale migration, the rollout of brand excellence standards visits, the rollout of our Supercuts rewards loyalty program, further rightsizing of our G and A, the acquisition of Alliance Salon portfolio. We wanted to put some stakes in the ground and be clear, but rather the critical areas we felt most relevant to discuss in the short to medium term to drive future growth and value creation. On our company owned salon portfolio, our ultimate goals here are to increase sales, EBITDA, and cash flow.

I mentioned earlier about the progress we have been making in stabilizing sales, as well as the execution of our first major strategic efforts around a new pay plan and menu pricing structure. Looking ahead, we’ll continue to bring more uniformity to operations and data to decision making while upholding our own standards and sharing out best practices to the system. From a business building standpoint, we will spend the remainder of the calendar year focused on hiring and rehiring efforts, leveraging our new pay plan, testing opening up larger pre booking windows and re visitation incentives to drive frequency trial and retention, refreshing and remodeling select salons, and launching brand level promotional calendars. In addition to being a growth driver, our company owned portfolio is a great complement to our broader Supercuts transformation work stream as we have around a hundred company owned Supercuts to provide a valuable testing ground for anything we wanna prove out as part of the strategy work. And I want to again reiterate the value of this portfolio brings to Regis and the belief we have in this segment as a growth catalyst for the future.

Our second key focus area is finalizing a comprehensive strategy roadmap for our flagship brand Supercuts, which will serve as a cornerstone in our efforts to reverse traffic trends, drive outside same store sales growth, increase franchisee profitability, and get back to the path of net salon growth. The roadmap will encompass three strategic pillars that are entirely interconnected and ladder up to a North Star plan. While I’ve spoken about these pillars in the past in some form or fashion, we wanted to bring some more definitive structure around each of these pillars that include first, evolving the brand strategy where we will utilize insights and the legacy foundation we have to reshape perceptions and further build a beloved brand for existing and prospective guests, stylists and franchisees. This encompasses deep research that will drive the brand building strategy and differentiation, ultimately leading to a refreshed brand expression, including a personality and voice, visual identity, storytelling and customer experience that reflects the brand’s purpose, mission, values, promise, and positioning. Second pillar, unlocking omnichannel growth, which is to elevate, pilot, and scale innovation across all touch points to fuel a marketing flywheel effect.

We’ll utilize unified guest data, which is now made even more possible by being on a single point of sale system and enriched by our rewards program to fuel personalized marketing and customer acquisition initiatives through performance marketing, digital bookings, CRM, and loyalty membership. We’ve discussed Supercuss Rewards at length over the last year and a half, and we are pleased with the performance of the program thus far and the opportunity that lies ahead. Rewards member sales as a percentage of total sales is up to over 30% and it is driving the behaviors we’re looking for, such as decreased times between hair services as well as higher overall retention. The top two quartiles is measured by membership sales as a percentage of total, each demonstrate over 40% of sales coming from members. And we see that 40% mark as an initial inflection point.

With those salons at 40% or more member sales demonstrating 1.8% higher traffic versus those that are less than 20%. Well, this has been and is a key initiative. It forms just a piece of the overall omnichannel experience. Albeit a critical one and a big differentiator in the industry. And we’re excited at the prospects of how much we can do with the rewards program and how this fits into the context of our broader digital ecosystem.

Third strategic pillar, scaling operational excellence. All of these efforts fall flat if they cannot be operationalized and if there is a poor in salon experience. Key elements to supporting this pillar is the brand excellence standards and subsequent assessment visits we’ve rolled out at the end of calendar twenty twenty four, as well as our technical education training prowess. We have completed our first wave of standards visits, identified a baseline of opportunities, and are now in our second wave and addressing quick wins with franchisees. For the purposes of today’s call, I just wanted to continue to call this entire work stream out as its priority and highlight what we are aiming to achieve.

The Regis team and our thought partners are in Dallas as we speak to meet with the Supercuts Franchise Council to discuss progress and insights on this important work stream. And while I work on this strategy, there’s continuous work being done to optimize current programs and drive quick wins along the way. We plan on sharing more specifics of this holistic strategy when we have stakeholder alignment, likely during either our fourth fiscal quarter and full fiscal year results in August of twenty twenty five or our first quarter fiscal twenty twenty six call in November 2025. As we move forward, our key priorities and focus remain clear. Deliver operational and digital excellent excellence, improve salon perception and performance, and invest in areas that will drive long term stakeholder value.

We are confident that the decisive actions we are taking today, combined with the progress that we have made, will position Regis to emerge stronger, more competitive, and better align with the future of the salon industry in order to deliver value creation for all stakeholders. I will now turn the call over to Kirsten for a more detailed review of our third quarter financials. Kirsten?

Kirsten Zupfer, Executive Vice President and Chief Financial Officer, Regis Corporation: Thanks, Matt. As a quick note, before going through the results, our fiscal two thousand twenty five third quarter results include the results of approximately 300 salons that we acquired from Align in February during our second quarter of fiscal year twenty twenty five. As a reminder, our results for the quarter reflect contributions from Align, but prior year results do not. As Matt discussed, we are focused on improving profitability and generating cash from operations as we implement key foundational changes designed to reignite growth. Our third quarter results demonstrate meaningful progress on both fronts.

For the third quarter, we delivered a 23% increase in operating income and generated approximately 6,200,000 in cash from operations. Total third quarter revenue was $57,000,000, an increase of 15.9% or $7,800,000 compared to the prior year. This increase was primarily driven by an increase in revenue from company owned salons as a result of the Align acquisition. This increase was partially offset by declines in franchise revenues stemming from the closure of unprofitable franchise locations. The closures, along with a modest 1.1% decline in same store sales, resulted in lower franchise rental income and lower advertising fund revenues, which provide no contribution margin and royalty revenues.

To put the change in same store sales in perspective, as Matt noted, we estimate that a 1% change in franchise same store sales represents an annual EBITDA impact of approximately $585,000, underscoring that a modest decline in same store sales has a relatively minor effect on our profitability on an EBITDA basis. During the third quarter, we had 49 net closures primarily related to underperforming stores, each with significantly lower trailing twelve month sales volumes than our top performing locations. The performance gap between these closed stores and our highest performing units was approximately $350,000, underscoring the strong potential within our system and highlighting the opportunity we have to further enhance profitability margins and cash flow generation as we continue executing our transformation strategy. As we have discussed in the past, we expect calendar two thousand twenty five to be the last year of closures in the order of magnitude compared to previous years. One additional item to note as it relates to salon count as part of our disclosures is the shift of approximately 300 locations from franchise to corporate salon counts as a result of the Align acquisition.

So while we are showing 761 less franchise salons, these do not all represent closures, but rather a mix of closures and franchise to company owned shift. In terms of profitability, we reported GAAP operating income of $5,000,000, an increase of 22% compared to $4,100,000 in the year ago quarter. This increase was primarily driven by operating income contribution from the Align salons, shuttering of underperforming franchise locations, and diligent management of our general and administrative expenses. As a percentage of revenue, g and a was 22.8% in the third quarter of fiscal year twenty twenty four to 19.6% in the current year quarter. This decrease in the g and a as a percentage of revenue was primarily due to an increase in revenue from the Align acquisition.

Income from continuing operations was $250,000 compared to a loss from continuing operations of $2,400,000 in the year ago quarter. This improvement was driven primarily by lower interest expense. Turning to our adjusted results. As a reminder, the first quarter of fiscal year twenty twenty five, we made a change to our methodology to exclude stock based compensation expense when presenting our adjusted results. All adjusted results in the current year and prior years have been adjusted to reflect this presentation.

We believe our adjusted results are more representative a more representative view of the business. Reconciliations of our GAAP results to our adjusted non GAAP results can be found in our press release. For the third quarter, our consolidated adjusted EBITDA was $7,100,000 compared to $5,400,000 in the prior year quarter. The $1,700,000 improvement was primarily due to favorable Align salon EBITDA, lower G and A expenses, sublease revenue and currency gains, partially offset by a decline in royalties. Our adjusted g and a was $10,200,000 in the third quarter of fiscal year twenty twenty five, down from $10,700,000 in the year ago quarter.

Adjusted g and a, excluding $1,100,000 of g and a associated with the Align salons, was $9,100,000, an improvement of $1,600,000 year over year. We remain committed to diligent management of our corporate g and a expenses. The Align acquisition adds approximately 4,500,000.0 to $5,000,000 in incremental annual g and a expense. For fiscal year twenty twenty five, we expect adjusted g and a, including Align, to be approximately $40,500,000 We expect our run rate for G and A to be in the range of 43,000,000 to $45,000,000 Adjusted EBITDA for our Franchise segment was $6,300,000 in the quarter, a hundred and $57,000 increase compared to $6,100,000 in the prior year quarter. Adjusted EBITDA for our company owned salons segment improved $1,600,000 year over year to 843,000 for the quarter, primarily as a result of an increased number of salons from the Align acquisition.

Turning to cash flows. For the three months ended 03/31/2025, we generated $6,200,000 in cash from operations, which is an improvement of $6,500,000 compared to the third quarter of fiscal year twenty twenty four. This brings our year to date total for cash from operations to $7,000,000, an improvement of $14,100,000 compared to the first nine months of fiscal year twenty twenty four. The increase in cash generation was driven by aligned operating profitability, lower use of working capital, and lower cash interest. It is important to note that our cash from operations includes $2,400,000 and $5,800,000 of cash related to the advertising fund for the three and nine months ended 03/31/2025, respectively.

These amounts are restricted and not available for general corporate use. However, our recent quarter results are starting to reflect our cash generating potential. We continue to expect positive cash generation for the remain remainder of fiscal year 2025. Now that we are generating cash after several several years of cash usage, we are thoughtfully evaluating capital allocation strategies. In the near term, this includes paying down our debt in connection with the excess cash flow sweep provision of our credit agreement, building a cash balance while also identifying opportunities to deploy capital in ways that we believe will create long term value.

In terms of liquidity, as of 03/31/2025, we had $19,000,000 of available liquidity, which consists of our availability under our revolving credit agreement and $13,300,000 of unrestricted cash and cash equivalents. The $19,000,000 of available liquidity is net of our $10,000,000 minimum liquidity covenant. As of the end of the third quarter, we had a hundred and $27,400,000 in outstanding debt, excluding deferred financing costs and the value of warrants plus accrued paid in kind interest. As a reminder, in accordance with GAAP, our balance sheet includes approximately $255,900,000 of operating lease liabilities related to franchise salon leases. These leases have a weighted average remaining term of less than five years, and the obligations are serviced by our franchisees.

So so as long as the franchisees continue to meet their lease payments as they historically have, it is our view that these amounts should not be considered part of our debt position. We expect these liabilities will continue to decrease as the leases mature and as we continue to move away from franchise leases. As Matt discussed, our third quarter performance reflects meaningful progress in our transformation journey With improved profit profitability and positive cash generation, we are building momentum and laying the groundwork for long term value creation. Thank you for your continued support and interest in Regis. We look forward to updating you on our progress next quarter.

Please feel free to reach out to investorrelationsregiscorp dot com to discuss any questions related to the business or quarterly results. This concludes the Regis third quarter fiscal year twenty twenty five earnings call, and we will now take questions that were submitted as well as some live q and a. Please use the raise hand function to ask questions. Good morning, Bill Charters. Please introduce yourself and take your computer off of mute.

Bill Charters, Investor, Sable Capital Management: Hi. Yeah. It’s Bill Charters with Sable Capital Management, and thanks for taking my my question. A great quarter. The first question that I have is understanding the accounting for a line.

So I see the royalty fees down, and and I just wanna understand the owned economics, including the line, are up about $800,000. So does this mean that the royal fees go down, but the company owned EBITDA is more like $9,800,000 from that? And I’m just including the the royalty fees plus that original 5,800,000.0 that you had in guidance when you did the deal. Mhmm. I just wanna understand that.

But

Kirsten Zupfer, Executive Vice President and Chief Financial Officer, Regis Corporation: Sure. I can take that. No. That’s exactly right. You will see royalties come down in the franchise segment, and then, the EBITDA go up in the company owned segment.

So that that’s exactly how that works.

Bill Charters, Investor, Sable Capital Management: So then so then that that 800,000 of positive, that must have had a a lot of one time items or something included in it because it’s it’s you know, it seems kind of kind of low. Or or were there a lot of company owned stores that, you know, outside of Align that were a massive cash drag this quarter? Just trying to understand that a little better.

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: Yeah. Sure. Hey, Dylan. It’s Matt. Thanks for the question.

I can give more insights onto Align for the quarter. Okay. You know, as I mentioned, a lot of q one related to that portfolio was planning, launching strategy and sales stabilization efforts. I think I discussed last quarter, they did lag the system a bit from a sale. So, you know, we did see that nice progression from the quarter from January to March and then ultimately turning in April.

So that was a factor in the results. The other factors were, you know, as it related to the pay plans and price adjustment changes. You know, they were, you know, lapping a a lack in price increase. So there’s an opportunity to take price. And, really, the the pay plans were not only the right thing to do for the business, but also were intentional to counter minimum wage pressures.

So given that all those things launched at the March, literally kind of the day before the March, We lived with the sales pressures. We lived with the minimum wage increases. We lived with, lapping, pricing changes that were taken a year and a half ago. And all those things were kind of factors that hit the quarter. And given the implementation of that at the end and seeing the change in April, I think that it’ll be, we’re starting to build on sales and profit margins.

And I think you’ll start seeing that EBITDA rise. It just also is just historically, you know, a seasonally low quarter, from profitability results perspective with January and February, being some of the lower months. And in addition, you know, we just got hammered by, weather, especially in the Midwest in February, that kind of had an impact on the entire system, for the quarter. But really, the Midwest kind of Northeast regions really saw that weather impact. So a number of things that happened there that contributed to the quarter, but seeing a lot of that positive momentum and the changes, you know, given we want to make sure that they were launched the right way, kind of lived with that quarter and made sure we got it implemented properly at the end.

Bill Charters, Investor, Sable Capital Management: Okay. Great. Then the other question I have is quarter to quarter, it looks like the stores went from forty two forty eight to 4,087. So net, a 61 store decline, and I think almost 90 something stores are just from the smart style. Do you have any updates on the store closings for for this year?

I mean, that’s kind of in line what you said, you know, in the beginning of the fiscal quarter to get down to around 4,000 or a little bit lower. Do you have any updates on that number for this year and and, you know, and in and next year?

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: Yeah. I I think not much more to add on that front. I mean, that’s right in line. You know, we kind of mentioned the anticipated closures. We’re seeing it kind of come in at around that pace.

Don’t have much to add, beyond that and as well as going forward that we anticipate an order of magnitude less. I just also want to point back to earlier in the call when I mentioned the levers and the resilience of the business to mitigate and overcome as we continue to grow and advance the business. I know there’s a question on, hey, what’s the closures look like? I’ve gotten a lot of questions on broader guidance, and I’ll just use this as an opportunity to say that those are things that, you know, we’re continuing to think through here, on what to give and when as it relates to. And we think that that that should happen at some point.

As as you know, like, this business has gone through just a ton of changes over the past year, two years, three years. So really wanna get our feet under us and understand before coming out with something like this. But I think to get all of us kind of onside and to recognize where this is going collectively, whether it be annual guidance or just some sort of bigger picture guidance of what this business can look like executing on the strategy or executing. We are I don’t want to just say, hey, we’re not giving guidance. It’s going to be less.

But I do want to just put out there that we are thinking through, markers and things to put out of what this business looks like in the future. And we’ll do that probably, you know, we’re trying to think about the right time to do it. You know, perhaps even, you know, the next quarter during our fiscal year end results could be a a logical time for something like that with some more with some more business traction underneath us.

Bill Charters, Investor, Sable Capital Management: Yeah. I mean, I think that’d be great, especially in light of the fact that you don’t have sell side coverage. That type of guidance would be greater range, you know, for for EBITDA. I I think that would really help the market understand the drivers because, I mean, that 800,000 in number of the company owned stores being depressed, I mean, you’re you’re doing very well. This is a a very good quarter because of that.

I mean, considering it’s almost, 10,000,000 from the alignment company on EBITDA. So that’s great. The the other question I have is, can you give us more color on the the impact of the remodeled stores on same store sales? Like, what what is the impact, and how quickly does that happen when these stores go through the refresh or remodel period?

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: You know, I’ll take this in kind of in two parts. Because really the the majority of the remodel that has been done over the course of the past few years has really been more concentrated to one brand, which is SmartStyle. And and that’s really because of just the, structures of the lease and all the Walmart stores themselves that have been remodeling, which in turn, drives our stores to have to remodel as well. So that’s really the brand where the majority of the remodels have been done. You know, for for those kind of 350 to 400 that have remodeled, we’ve seen a modest lift, you know, call it 5% from the time of remodel.

But I also kind of wanna put this in broader context of, you know, not only this brand where you think you could further optimize that and grow the sales of that portfolio over time. But as it relates to other brands, you know, this especially in Supercuts, when we talk about a holistic transformation agenda, you know, a a refresh and a remodel effort is certainly a piece of those pillars. And coming up with the right prototype right now is where a lot of the efforts are being put towards as part of

Bill Charters, Investor, Sable Capital Management: that

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: overall brand refresh. I guess two interesting data points that I know some of us have talked about, but I don’t think we’ve talked about it on on calls. Maybe regarding a couple of salons that we remodeled in our corporate portfolio maybe close to a couple years ago in Chicago, where we tested to see that if we could elevate, you know, salons that really had strong underlying factors, like tenured dedicated staff, high traffic, high volume. If we could elevate the look and feel of the salon and enable us into a price increase, that was a theory that we had. And I know we just did it in two, but in those two, we saw, you know, 20 plus percent sustained price increases there.

And, again, it’s just two data points. But it’s a theory that if we can replicate elsewhere, for, like, a top tier remodel leveraging a strong base, you know, it’s something we’re gonna explore. So right now, there’s just a whole effort going on, of this piece regarding the transformation agenda, and we’re gonna look to pilot some of the work coming out of that effort in the Align salons in the back half of this calendar year, across all the brands there, not just Supercuts.

Bill Charters, Investor, Sable Capital Management: Okay. Sounds good. I guess the the last question I have is is, Kenny, you alluded to before. So I see the cash has just increased on on the balance sheet. You could pay down debt.

And and then and then you alluded to something, you know, redeploy it. And I know you can’t buy stock due to the credit agreement in this as of right now. But are would you be tucking in further franchisees? What what would be the use, and how’s your priorities? Is it number one to pay down debt?

Number two, look for these one offs? If you could just provide more color on just, you know, what are you gonna do with the cash as it starts coming in?

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: Yeah. No. Absolutely. I appreciate that question. You know, we we take being stewards of capital very seriously.

You know, as as Kirsten mentioned, there is a portion of this where it does make sense to delever, where it’s contractually obligated, given our relationship with our lender partner that will be using cash to delever. So that’ll be, you know, a a quick one that is that is a given and absolutely one that we’re gonna do. Beyond that, I think having a cash balance and liquidity is prudent, in this environment, especially as we continue to navigate. And, really, I kinda want to continue to see as we move through the align and supercut strategies. We wanna see what gets unlocked there and see where we should invest and ensure we have dry power to do just that as well as explore other value creation avenues.

So I guess what I’m saying is really wanna have the business dictate the capital allocation needs. And I think we’re pretty early in that given, as I mentioned, kind of this road map strategy work that has been underway, but it’s really still ongoing. Align, we we’ve had five months now. We got a lot of interesting things we wanna do there. So let’s let’s evaluate what the business needs to drive growth between Align and Supercuts may be.

And and if we see something where we can get outsized returns, we’ll absolutely deploy it there. So I think the the the good news is, yeah, we’re starting to generate cash and, you know, which is extremely encouraging because that hasn’t necessarily been the case over the last three years. So I think we’re still early in this. We want the business to dictate. We’ll continue to delever.

I don’t think broader franchise acquisition is on the table. I think I’ve said that in the past. We’re very happy with this portfolio that we have and getting our arms around and, like, that happened to be the right portfolio at the right time. So we’ll stick with optimizing and running that for now. But, you know, just as we’ve done in the past, we’ll ensure that whatever we do with this, we take seriously, and we’ll put it into the highest, you know, ROI cases.

Bill Charters, Investor, Sable Capital Management: Okay. Great. Yeah. I mean, it was a great quarter. Hopefully, this is the inflection point, and and you can add from here.

But, all of these initiatives and stuff seem to be starting to to take hold. So good job, and thanks. I don’t have any other questions.

Matthew Doctor, President and Chief Executive Officer, Regis Corporation: Great. Thanks.

Kirsten Zupfer, Executive Vice President and Chief Financial Officer, Regis Corporation: Thanks, Phil. This concludes the q and a session of the call today. We appreciate your interest in Redis Corporation, and have a nice day. Thanks.

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