Financial Data and Key Metrics Changes - The company reported fourth quarter revenues of $60 million, representing a 76% decrease from the prior year due to government-mandated salon closures [31] - The operating loss for the quarter was $69 million, primarily driven by the economic disruption caused by the pandemic [33] - Fourth quarter consolidated adjusted EBITDA loss was $34 million, which was $73 million or 186% unfavorable compared to the same period last year [35] Business Line Data and Key Metrics Changes - Franchise segment fourth quarter royalties and fees decreased by $19 million or 72% year-over-year to $7 million, driven by the pandemic [39] - Company-owned salon segment revenue decreased by $195 million or 93% year-over-year to $15 million, primarily due to COVID-19 and the conversion of salons to the franchise model [43] - Fourth quarter adjusted EBITDA for company-owned salons decreased by $44 million year-over-year to a loss of $22 million [46] Market Data and Key Metrics Changes - Approximately 82% of the company's salons were open at the end of the quarter, with nearly 90% of salons open when excluding California locations [32][15] - Franchise same-store sales were down 20% due to reduced customer traffic during the pandemic [40] Company Strategy and Development Direction - The company is focused on completing its transformation to a capital-light franchise platform and enhancing technology investments [13][23] - The launch of OpenSalon Pro, a cloud-based salon management system, is part of the strategy to improve franchisee operations and customer engagement [24][60] - The company anticipates completing its refranchising efforts by the end of fiscal year 2021, slightly delayed due to the pandemic [21][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term sustainability of consumer interest in grooming despite current challenges [18] - The company is adapting to a post-COVID reality by implementing new operational ideas and safety protocols [16] - Management acknowledged the uncertainty surrounding the pandemic's impact on salon traffic and revenue recovery [74] Other Important Information - The company amended its revolving credit facility in May 2020, which is expected to provide long-term flexibility amid pandemic uncertainties [10][54] - The liquidity position as of June 30 was $210 million, down from $241.5 million as of March 31 [53] Q&A Session Summary Question: Fate and time horizon for mall-based salons - Management indicated that the approach to mall-based salons will mirror the overall strategy for company-owned salons, with plans to address them by the end of the fiscal year [65][66] Question: Financial impact of the new POS system - Management views the investment in technology as a long-term strategy to enable franchisees and improve customer relationships [68][69] Question: Comparable performance and revenue recovery - Management noted that recovery has not yet met expectations, with variability in traffic levels due to ongoing pandemic effects [74] Question: Digital initiatives and technology transformation - Management emphasized that the company is undergoing a digital revolution, which will take time for franchisees to fully embrace [76][77] Question: Rent deferrals for franchisees - Management is closely monitoring franchisee performance and assisting them in obtaining favorable rent deals from landlords [78][80]

Financial Impact of COVID-19 - The pandemic has caused temporary closure of all company-owned salons and almost all franchise locations for most of Q4 FY 2020 [92]. - The company anticipates a material adverse impact on its financial position and results of operations due to COVID-19 [97]. - Franchisees have requested reductions or modifications to their royalty payments, which may critically impact the company's revenues and cash flows [94]. - The company has experienced a loss of stylists and customers due to the temporary closure of salons, affecting the value and timing of future salon ownership transfers [99]. - The company is facing challenges in estimating future performance due to the unprecedented uncertainty surrounding COVID-19 [93]. - The ongoing efforts to address rent obligations during the pandemic are crucial for the company's future success [103]. - The company has not experienced material losses from franchisee subleases, but the COVID-19 pandemic may increase defaults [269]. Franchise Operations and Revenue - The company is now substantially dependent on franchise royalties and product sales, which may adversely impact revenue and profitability during the transition phase [100]. - As of June 30, 2020, approximately 76.1% of the salons operated by the company were franchised locations [110]. - The financial results of franchisees are critical, as a deterioration could lead to decreased royalty payments and fees for the company [113]. - The transition to a fully-franchised model is expected to reduce consolidated revenues but increase royalty revenue and decrease operating costs [115]. - The company is dependent on Walmart for its SmartStyle salons, and any changes in Walmart's operations could materially impact salon revenues [120]. Lease and Real Estate Liabilities - The company has residual real estate lease liability of $817.7 million for company-owned and nearly all franchise stores [95]. - The total lease liability related to the salons reacquired from TBG is approximately $23 million as of June 30, 2020 [105]. - The company is attempting to renegotiate lease obligations for the salons, but the outcome of those negotiations is currently uncertain [105]. - The company has long-term operating lease obligations totaling $933.1 million, with payments due over various periods [265]. Financial Performance and Debt - As of June 30, 2020, the company had $177.5 million in outstanding borrowings under a $295 million revolving credit facility, with a minimum liquidity covenant of $75 million [261]. - The debt to capitalization ratio increased to 62.0% as of June 30, 2020, compared to 26.8% in 2019, primarily due to increased borrowings [263][264]. - The Company recorded long-lived asset impairment charges of $22.6 million during fiscal year 2020, with $17.4 million allocated to right of use assets and $5.2 million to salon property and equipment [286]. Operational Risks and Challenges - The company faces risks related to employee attrition and customer losses due to significant changes in salon operations in recent years [106]. - The company operates 6,923 locations with approximately 9,000 employees worldwide, making it vulnerable to regulatory changes that could increase operational costs [122]. - Recent increases in minimum wage and overtime pay have raised costs, with limited ability to offset these through price increases [123]. - The company faces potential adverse effects from changes in labor laws, including increased unionization risks that could impact financial results [124]. - Consumer shopping trends and alternative distribution channels are negatively impacting service and product revenues, particularly in strip mall locations [133][134]. - Competition for prime real estate remains challenging, affecting the company's ability to secure suitable locations [137]. Technology and Management Systems - The company has made significant investments in a new back office salon management system, which may not yield expected results due to the pandemic [101]. - The company has made strategic investments in technology, including the OpenSalon mobile application and OpenSalon Pro salon management system, launched in 2019 and August 2020 respectively [117]. - The company relies heavily on management information systems for operations, and any interruptions could negatively affect business performance [129]. - The company is dependent on external vendors for critical products and services, exposing it to operational and financial risks [130]. Economic and Market Conditions - Changes in the economic environment, such as recession or inflation, may adversely impact consumer spending and salon visitation patterns [145]. - The company's revenue may be impacted by changes in consumer tastes, hair product innovation, fashion trends, and consumer spending patterns [146]. Asset Valuation and Impairment - The Company established a valuation allowance of $14.7 million against U.S. net operating losses (NOLs) generated during fiscal year 2018 due to the CARES Act [291]. - An additional valuation allowance of $17.0 million was recorded on U.S. federal indefinite-lived deferred tax assets due to insufficient taxable temporary differences [291]. - The Company recognized a capital loss and established a valuation allowance of $14.9 million on previously impaired investment outside basis [291]. - Impairment assessments for long-lived assets are conducted at the individual salon level, considering factors like significant under-performance and economic trends [286]. - The Company utilizes discounted cash flow estimates for calculating fair values of reporting units, incorporating annual revenue and service margins [285]. - The fair value of long-lived assets is estimated using a market participant model based on salon-level revenues and expenses [286]. - The Company engages third-party valuation consultants to assist in evaluating estimated fair value calculations [285]. - Judgments regarding the expected useful lives of salon long-lived assets are influenced by maintenance, economic conditions, and operating performance [287].

Regis Corporation (NASDAQ:RGS) Q3 2020 Earnings Conference Call June 18, 2020 10:00 AM ET Company Participants Biz McShane - Associate Vice President Consolidations, Technical Accounting Hugh Sawyer - President and Chief Executive Officer Kersten Zupfer - Executive Vice President, Chief Financial Officer Eric Bakken - Executive Vice President, President of Franchise Conference Call Participants Stephanie Wissink - Jefferies Operator Ladies and gentlemen, thank you for standing by. Welcome to the Regis Corpo ...

REGISCORPORATION Fiscal Year 2020 Third Quarter Earnings Presentation June 18, 2020 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 manag ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 (952) 947-7777 (Registrant's telephone number, including area code) For the transition period from to Commission file number 1-12725 Regis Corporation (Exact name of registrant as specified in its charter) Minnesota 41-0749934 (State or other jurisdiction of incorporation or organiz ...

Regis Corp (NASDAQ:RGS) Q2 2020 Earnings Conference Call February 4, 2020 10:00 AM ET Company Participants Biz McShane - AVP Finance Hugh Sawyer - President, CEO & Director Kersten Zupfer - EVP & CFO Eric Bakken - EVP & President of Franchise Conference Call Participants Sebastian Barbero - Jefferies Laura Champine - Loop Capital Markets Operator Ladies and gentlemen, thank you for standing by. Welcome to the Regis Corporation Second Quarter Fiscal 2020 Earnings Call. My name is Britney, and I will be your ...

REGISCORPORATION Fiscal Year 2020 Second Quarter Earnings Presentation February 4, 2020 This presentation 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 ma ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Minnesota 41-0749934 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-12725 ...

Regis Corporation (NASDAQ:RGS) Q1 2020 Results Conference Call October 29, 2019 10:00 AM ET CompanyParticipants Kersten Zupfer - Senior Vice President of Finance Hugh Sawyer - CEO Andrew Lacko - CFO Eric Bakken - President of Franchise Amanda Rusin - General Counsel Conference Call Participants Ashley Helgans - Jefferies Laura Champine - Loop Capital Operator Ladies and gentlemen, thank you for standing by. Welcome to the Regis Corporation First Quarter Fiscal 2020 earnings call. My name is Cassidy and I wi ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) This section provides the unaudited condensed consolidated financial statements and management's analysis of financial condition [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and detailed notes on accounting policies and segment information [Condensed Consolidated Balance Sheet](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheet (Thousands USD) | ASSETS | September 30, 2019 (Thousands USD) | June 30, 2019 (Thousands USD) | | :------------------------ | :-------------------------------- | :----------------------------- | | Cash and cash equivalents | $58,902 | $70,141 | | Total current assets | $194,454 | $210,822 | | Property and equipment, net | $71,442 | $78,090 | | Goodwill | $313,251 | $345,718 | | Right of use asset (Note 10) | $930,784 | — | | Total assets | $1,556,717 | $682,837 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $276,867 | $128,283 | | Long-term debt, net | $90,000 | $90,000 | | Long-term lease liability (Note 10) | $781,134 | — | | Total liabilities | $1,272,978 | $358,592 | | Total shareholders' equity | $283,739 | $324,245 | | Total liabilities and shareholders' equity | $1,556,717 | $682,837 | - Total assets significantly increased from **$682.8 million** to **$1,556.7 million**, primarily due to the recognition of Right of Use assets upon adoption of new lease accounting standards[10](index=10&type=chunk) - Total liabilities increased from **$358.6 million** to **$1,273.0 million**, mainly driven by the new lease liabilities recognized[10](index=10&type=chunk) [Condensed Consolidated Statement of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations) This section details the company's financial performance, including revenues, operating results, and net loss for the period Condensed Consolidated Statement of Operations (Thousands USD) | Item | Three Months Ended September 30, 2019 (Thousands USD) | Three Months Ended September 30, 2018 (Thousands USD) | | :----------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Revenues: | | | | Service | $141,941 | $207,848 | | Product | $45,656 | $57,591 | | Royalties and fees | $28,017 | $22,396 | | Franchise rental income (Note 10) | $31,424 | — | | Total Revenues | $247,038 | $287,835 | | Operating (loss) income | $(9,906) | $3,429 | | Loss from continuing operations before income taxes | $(17,034) | $(1,177) | | Income tax benefit | $2,856 | $714 | | Loss from continuing operations | $(14,178) | $(463) | | Income (loss) from discontinued operations, net of income taxes (Note 3) | $373 | $(264) | | Net loss | $(13,805) | $(727) | | Net loss per share (Basic and Diluted) | $(0.38) | $(0.02) | - Total revenues decreased by **$40.8 million (14.2%)** year-over-year, from **$287.8 million** in Q3 2018 to **$247.0 million** in Q3 2019[11](index=11&type=chunk)[89](index=89&type=chunk) - The company shifted from an operating income of **$3.4 million** in Q3 2018 to an operating loss of **$(9.9) million** in Q3 2019[11](index=11&type=chunk) - Net loss significantly increased from **$(0.7) million** in Q3 2018 to **$(13.8) million** in Q3 2019[11](index=11&type=chunk) [Condensed Consolidated Statement of Comprehensive (Loss) Income](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20(Loss)%20Income) This section presents the company's net loss and other comprehensive income components, leading to total comprehensive (loss) income Condensed Consolidated Statement of Comprehensive (Loss) Income (Thousands USD) | Item | Three Months Ended September 30, 2019 (Thousands USD) | Three Months Ended September 30, 2018 (Thousands USD) | | :----------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Net loss | $(13,805) | $(727) | | Foreign currency translation adjustments | $(403) | $1,081 | | Comprehensive (loss) income | $(14,208) | $354 | - Comprehensive income shifted from a gain of **$354 thousand** in Q3 2018 to a loss of **$(14.2) million** in Q3 2019[14](index=14&type=chunk) [Condensed Consolidated Statement of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Shareholders'%20Equity) This section outlines changes in shareholders' equity, including net loss and stock repurchase activities Condensed Consolidated Statement of Shareholders' Equity (Thousands USD) | Item | Balance, June 30, 2019 (Thousands USD) | Balance, September 30, 2019 (Thousands USD) | | :-------------------------- | :------------------------------------ | :--------------------------------------- | | Total Shareholders' Equity | $324,245 | $283,739 | | Net loss | — | $(13,805) | | Stock repurchase program | — | $(26,356) | - Total shareholders' equity decreased by **$40.5 million** from **$324.2 million** at June 30, 2019, to **$283.7 million** at September 30, 2019[16](index=16&type=chunk) - The company repurchased **$26.4 million** of common stock during the three months ended September 30, 2019[16](index=16&type=chunk)[48](index=48&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This section details cash inflows and outflows from operating, investing, and financing activities for the period Condensed Consolidated Statement of Cash Flows (Thousands USD) | Cash Flow Activity | Three Months Ended September 30, 2019 (Thousands USD) | Three Months Ended September 30, 2018 (Thousands USD) | | :----------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Net cash used in operating activities | $(13,480) | $(17,164) | | Net cash provided by investing activities | $32,027 | $25,781 | | Net cash used in financing activities | $(30,303) | $(21,255) | | Decrease in cash, cash equivalents, and restricted cash | $(11,753) | $(12,250) | | End of period cash, cash equivalents, and restricted cash | $80,626 | $136,524 | - Net cash used in operating activities decreased by **$3.7 million**, from **$(17.2) million** in Q3 2018 to **$(13.5) million** in Q3 2019[18](index=18&type=chunk)[123](index=123&type=chunk) - Net cash provided by investing activities increased by **$6.2 million**, from **$25.8 million** in Q3 2018 to **$32.0 million** in Q3 2019, primarily due to proceeds from salon asset sales[18](index=18&type=chunk)[124](index=124&type=chunk) - Net cash used in financing activities increased by **$9.0 million**, from **$(21.3) million** in Q3 2018 to **$(30.3) million** in Q3 2019, mainly due to common stock repurchases[18](index=18&type=chunk)[125](index=125&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies, significant estimates, and specific financial statement line items [1. Basis of Presentation and Significant Accounting Policies](index=9&type=section&id=1.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This section outlines the basis of financial statement presentation and key accounting policies, including recent standard adoptions - The company adopted ASU 2016-02, 'Leases (Topic 842)' on July 1, 2019, using the modified retrospective method, resulting in the recognition of a Right of Use Asset of **$980.8 million** and a Lease Liability of **$993.7 million**[29](index=29&type=chunk)[30](index=30&type=chunk) Goodwill (Millions USD) | Goodwill (Millions USD) | September 30, 2019 | June 30, 2019 | | :--------------------- | :----------------- | :------------ | | Franchise reporting unit | $227.8 | $227.9 | | Company-owned reporting unit | $85.4 | $117.8 | - Non-current assets held for sale, representing the corporate headquarters land and buildings, totaled **$5.276 million** as of September 30, 2019[28](index=28&type=chunk) [2. Revenue Recognition](index=11&type=section&id=2.%20Revenue%20Recognition) This section details the company's revenue streams and recognition policies, including the impact of new accounting standards - Franchise rental income of **$31.4 million** was recognized in Q3 2019 due to the adoption of Topic 842, which now requires gross presentation of these revenues[31](index=31&type=chunk)[34](index=34&type=chunk) Revenue Type (Thousands USD) | Revenue Type (Thousands USD) | Q3 2019 Franchise | Q3 2019 Company-owned | Q3 2018 Franchise | Q3 2018 Company-owned | | :-------------------------- | :---------------- | :-------------------- | :---------------- | :-------------------- | | Service | — | $141,941 | — | $207,848 | | Product | $13,105 | $32,551 | $15,629 | $41,962 | | Royalty and other franchise fees | $17,592 | — | $14,420 | — | | Advertising fund fees | $10,425 | — | $7,976 | — | | Franchise rental income | $31,424 | — | — | — | | Total Revenue | $72,546 | $174,492 | $38,025 | $249,810 | Estimated Future Revenue from Deferred Franchise Fees (Open Salons, Thousands USD) | Estimated Future Revenue from Deferred Franchise Fees (Open Salons, Thousands USD) | | :---------------------------------------------------------------- | | Remainder of 2020 | $3,327 | | 2021 | $4,498 | | 2022 | $4,378 | | 2023 | $4,202 | | 2024 | $3,967 | | Thereafter | $12,922 | | Total | $33,294 | [3. TBG Restructuring and Discontinued Operations](index=13&type=section&id=3.%20TBG%20Restructuring%20and%20Discontinued%20Operations) This section discusses restructuring charges related to TBG and the financial impact of discontinued operations - The company recorded **$1.5 million** in TBG restructuring charges in Q3 2019 to assist The Beautiful Group (TBG) with operating expenses and mitigate default risk on TBG's lease obligations[39](index=39&type=chunk)[101](index=101&type=chunk) - Regis Corporation remains liable for up to **$35 million** associated with remaining TBG salon lease commitments[40](index=40&type=chunk) Income (Loss) from Discontinued Operations (Thousands USD) | Item | Three Months Ended September 30, 2019 (Thousands USD) | Three Months Ended September 30, 2018 (Thousands USD) | | :----------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Income (loss) from discontinued operations, net of income taxes | $373 | $(264) | [4. Earnings Per Share](index=13&type=section&id=4.%20Earnings%20Per%20Share) This section presents the basic and diluted earnings per share calculations, including the impact of discontinued operations Earnings Per Share | Item | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Loss from continuing operations | $(0.39) | $(0.01) | | Income (loss) from discontinued operations | $0.01 | $(0.01) |\n| Net loss per share (Basic and Diluted) | $(0.38) | $(0.02) | | Weighted average common and common equivalent shares outstanding | 36,249 | 44,730 | - **902,478** common stock equivalents were excluded from diluted EPS calculations in Q3 2019 due to the net loss from continuing operations[42](index=42&type=chunk) [5. Shareholders' Equity](index=14&type=section&id=5.%20Shareholders'%20Equity) This section details changes in shareholders' equity, including stock-based compensation and share repurchase activities Shareholders' Equity (Thousands USD) | Item | Three Months Ended September 30, 2019 (Thousands USD) | Three Months Ended September 30, 2018 (Thousands USD) | | :-------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Stock-based compensation | $1,807 | $2,335 | | Stock repurchase program | $(26,356) | $(19,337) | - The company repurchased **1.5 million shares** for **$26.4 million** in Q3 2019, compared to **1.1 million shares** for **$19.3 million** in Q3 2018[48](index=48&type=chunk) - **$54.6 million** remains outstanding under the approved stock repurchase program as of September 30, 2019[48](index=48&type=chunk) [6. Income Taxes](index=14&type=section&id=6.%20Income%20Taxes) This section provides information on income tax benefits and the effective tax rate, highlighting factors influencing tax expense Income Taxes (Thousands USD) | Item | Three Months Ended September 30, 2019 (Thousands USD) | Three Months Ended September 30, 2018 (Thousands USD) | | :----------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Income tax benefit | $2,856 | $714 | | Effective tax rate | 16.8% | 60.7% | - The effective tax rate decreased significantly from **60.7%** in Q3 2018 to **16.8%** in Q3 2019, primarily due to the impact of the deferred tax valuation allowance and global intangible low-taxed income (GILTI)[49](index=49&type=chunk) [7. Commitments and Contingencies](index=14&type=section&id=7.%20Commitments%20and%20Contingencies) This section outlines the company's legal commitments and potential liabilities from ongoing lawsuits and claims - The company is a defendant in various lawsuits and claims, including allegations of class-wide consumer and wage and hour violations, with outcomes that are inherently unpredictable and could have a material adverse effect on results of operations[51](index=51&type=chunk) [8. Cash, Cash Equivalents, and Restricted Cash](index=15&type=section&id=8.%20Cash,%20Cash%20Equivalents,%20and%20Restricted%20Cash) This section details the composition of cash and cash equivalents, including restricted cash balances and their purposes Cash, Cash Equivalents, and Restricted Cash (Thousands USD) | Item | September 30, 2019 (Thousands USD) | June 30, 2019 (Thousands USD) | | :----------------------------------- | :-------------------------------- | :----------------------------- | | Cash and cash equivalents | $58,902 | $70,141 | | Restricted cash, included in other current assets | $21,724 | $22,238 | | Total cash, cash equivalents and restricted cash | $80,626 | $92,379 | - Restricted cash primarily relates to consolidated advertising cooperatives funds and contractual obligations to collateralize the company's self-insurance programs[52](index=52&type=chunk) [9. Goodwill and Other Intangibles](index=15&type=section&id=9.%20Goodwill%20and%20Other%20Intangibles) This section provides details on goodwill and other intangible assets, including changes from derecognition events Goodwill, net (Thousands USD) | Goodwill, net (Thousands USD) | Franchise | Company-owned | Consolidated | | :--------------------------- | :-------- | :------------ | :----------- | | At June 30, 2019 | $227,928 | $117,790 | $345,718 |\n| Derecognition related to sale of salon assets to franchisees | — | $(32,083) | $(32,083) | | At September 30, 2019 | $227,843 | $85,408 | $313,251 | - Goodwill derecognition of **$32.1 million** was primarily due to the sale of salon assets to franchisees[53](index=53&type=chunk) Other Intangible Assets (Net, Thousands USD) | Other Intangible Assets (Net, Thousands USD) | September 30, 2019 | June 30, 2019 | | :------------------------------------------ | :----------------- | :------------ | | Brand assets and trade names | $3,169 | $3,250 | | Franchise agreements | $1,633 | $1,726 | | Lease intangibles | $3,254 | $3,425 | | Other | $360 | $360 |\n| Total | $8,416 | $8,761 | [10. Right of Use Asset and Lease Liabilities](index=16&type=section&id=10.%20Right%20of%20Use%20Asset%20and%20Lease%20Liabilities) This section details the company's Right of Use assets and lease liabilities, reflecting the adoption of new lease accounting standards - The weighted average remaining lease term for salon operating leases was **6.87 years**, with a weighted-average discount rate of **3.95%** as of September 30, 2019[57](index=57&type=chunk) Future Operating Lease Commitments (Thousands USD) | Future Operating Lease Commitments (Thousands USD) | | :------------------------------------------------ | | Total future obligations | $1,077,965 | | Less amount representing interest | $135,424 | | Present value of lease liabilities | $942,541 | | Less: current lease liabilities | $161,407 | | Long-term lease liabilities | $781,134 | - A new corporate headquarters lease, commencing October 1, 2019, with total expected payments of **$13.5 million** over **10.75 years**, is not yet reflected in the tables[58](index=58&type=chunk) [11. Financing Arrangements](index=17&type=section&id=11.%20Financing%20Arrangements) This section outlines the company's long-term debt and financing liabilities, including available credit and covenant compliance Long-term Debt (Thousands USD) | Long-term Debt (Thousands USD) | September 30, 2019 | June 30, 2019 | | :---------------------------- | :----------------- | :------------ | | Revolving credit facility | $90,000 | $90,000 | - The company had **$183.5 million** of unused available credit under its **$295.0 million** revolving credit facility as of September 30, 2019[59](index=59&type=chunk) Long-term Financing Liabilities (Thousands USD) | Long-term Financing Liabilities (Thousands USD) | September 30, 2019 | June 30, 2019 | | :--------------------------------------------- | :----------------- | :------------ | | Financial liability- Salt Lake City Distribution Center | $17,187 | $17,354 | | Financial liability- Chattanooga Distribution Center | $11,532 | $11,556 | | Total Long-term financing liability | $28,719 | $28,910 | - The company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended September 30, 2019[63](index=63&type=chunk) [12. Fair Value Measurements](index=19&type=section&id=12.%20Fair%20Value%20Measurements) This section discusses the fair value of financial instruments and reports on impairments of long-lived assets - The estimated fair value of the company's cash, cash equivalents, restricted cash, receivables, accounts payable, debt, and long-term financial liabilities approximated their carrying values[65](index=65&type=chunk) Impairments (Thousands USD) | Impairments (Thousands USD) | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | | :------------------------- | :------------------------------------ | :------------------------------------ | | Long-lived assets | $1,517 | $1,831 | [13. Segment Information](index=19&type=section&id=13.%20Segment%20Information) This section provides financial data segmented by salon type, including salon counts, revenues, and operating income Salon Type | Salon Type | September 30, 2019 | June 30, 2019 | | :----------------------------------- | :----------------- | :------------ | | Total Franchise Salons | 4,456 | 3,951 | | Total Company-owned salons | 2,551 | 3,108 | | Franchise salons as a percent of total | 63.6% | 56.0% | Segment Revenues (Thousands USD) | Segment Revenues (Thousands USD) | Q3 2019 Franchise | Q3 2019 Company-owned | Q3 2018 Franchise | Q3 2018 Company-owned | | :------------------------------ | :---------------- | :-------------------- | :---------------- | :-------------------- | | Total Revenues | $72,546 | $174,492 | $38,025 | $249,810 | | Operating income (loss) | $10,209 | $5,401 | $9,720 | $19,576 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, results of operations, and liquidity, focusing on the asset-light franchise model transition [Management's Overview](index=23&type=section&id=Management's%20Overview) This section provides an overview of the company's business model and strategic direction, including its salon operations - Regis Corporation franchises, owns, and operates **7,092 beauty salon locations** worldwide as of September 30, 2019[74](index=74&type=chunk) - The company is transitioning to an **asset-light franchise platform**, which will increasingly impact its financial results through system-wide sales[80](index=80&type=chunk) [Critical Accounting Policies](index=23&type=section&id=Critical%20Accounting%20Policies) This section highlights key accounting policies and estimates that significantly impact the company's financial reporting - Critical accounting policies include the valuation of goodwill, long-lived assets, and estimates related to tax liabilities and deferred taxes[76](index=76&type=chunk) - The company adopted the amended leasing guidance, Topic 842, on July 1, 2019, using the modified retrospective method[77](index=77&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, expenses, and profitability drivers [Impact of salons sold to franchisees on operations](index=24&type=section&id=Impact%20of%20salons%20sold%20to%20franchisees%20on%20operations) This section examines the operational and financial effects of selling company-owned salons to franchisees Salons Sold to Franchisees (Thousands USD) | Item (Thousands USD) | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Increase (Thousands USD) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | :----------------------- | | Salons sold to franchisees | 545 | 124 | 421 | | Cash proceeds received in quarter | $37,945 | $12,422 | $25,523 | | Loss on sale of salon assets to franchisees, net | $(5,860) | $(3,960) | $(1,900) | - The company sold **545 company-owned salons** to franchisees in Q3 2019, a significant increase from **124** in Q3 2018[79](index=79&type=chunk) [System-wide results](index=24&type=section&id=System-wide%20results) This section provides an overview of system-wide sales performance across different salon concepts System-wide Same Store Sales | Concept | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | | :-------------- | :------------------------------------ | :------------------------------------ | | SmartStyle | (2.2)% | 1.0% | | Supercuts | 0.2% | 0.8% | | Signature Style | (1.7)% | 0.6% | | Consolidated system-wide same store sales | (1.1)% | 0.8% | - Consolidated system-wide same-store sales decreased by **(1.1)%** in Q3 2019, a decline from a **0.8%** increase in Q3 2018[81](index=81&type=chunk) [Condensed Consolidated Results of Operations (Unaudited)](index=25&type=section&id=Condensed%20Consolidated%20Results%20of%20Operations%20(Unaudited)) This section presents a summary of the unaudited consolidated operating results, including key revenue and expense items Condensed Consolidated Results of Operations (Millions USD) | Item | Q3 2019 (Millions USD) | Q3 2018 (Millions USD) | Q3 2019 % of Total Revenues | Q3 2018 % of Total Revenues | | :------------------------------------------ | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Service revenues | $141.9 | $207.8 | 57.5% | 72.2% | | Product revenues | $45.7 | $57.6 | 18.5% | 20.0% | | Royalties and fees | $28.0 | $22.4 | 11.3% | 7.8% | | Franchise rental income | $31.4 | — | 12.7% | — | | Operating loss (income) | $(9.9) | $3.4 | (4.0)% | 1.2% | | Loss on sale of salon assets to franchisees, net | $(5.9) | $(4.0) | (2.4)% | (1.4)% | - Consolidated revenues decreased by **14.2%** year-over-year, while operating income shifted to a loss of **(4.0)%** of total revenues[84](index=84&type=chunk) [Consolidated Revenues](index=26&type=section&id=Consolidated%20Revenues) This section analyzes the drivers of consolidated revenue changes, including service, product, and franchise income - Consolidated revenue decreased by **$40.8 million** in Q3 2019, primarily due to a **$65.9 million** decrease in service revenue and an **$11.9 million** decrease in product revenue, largely resulting from the sale of salons to franchisees[89](index=89&type=chunk) - The decline was partially offset by a **$5.6 million** increase in royalty and fee revenue due to an increased number of franchised locations, and a **$31.4 million** increase in franchise rental income due to the adoption of Topic 842[89](index=89&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) Consolidated Revenues by Salon Type (Thousands USD) | Salon Type | Q3 2019 Revenue (Thousands USD) | Q3 2018 Revenue (Thousands USD) | | :-------------------------- | :----------------------------- | :----------------------------- | | Total Franchise salons | $72,546 | $38,025 | | Total Company-owned salons | $174,492 | $249,810 | | Consolidated revenues | $247,038 | $287,835 | | Percent change from prior year | (14.2)% | (8.8)% | [Cost of Service](index=27&type=section&id=Cost%20of%20Service) This section examines the factors contributing to changes in the cost of service as a percentage of service revenues - Cost of service as a percent of service revenues increased by **520 basis points** in Q3 2019, driven by higher minimum wages, commissions, and health insurance claims[94](index=94&type=chunk) [Cost of Product](index=27&type=section&id=Cost%20of%20Product) This section analyzes the changes in cost of product as a percentage of product revenues and factors influencing product margins - Cost of product as a percent of product revenues increased by **180 basis points** in Q3 2019, primarily due to a shift into lower margin wholesale product sales and product discounting in salons[95](index=95&type=chunk) Product Margins | Product Margins | Q3 2019 | Q3 2018 | | :---------------- | :------ | :------ | | Retail product sales | 50.7% | 52.9% | | Wholesale product sales | 21.6% | 20.6% | [Site Operating Expenses](index=28&type=section&id=Site%20Operating%20Expenses) This section discusses the changes in site operating expenses, influenced by salon counts and advertising campaigns - Site operating expenses decreased by **$3.9 million** in Q3 2019 due to a net reduction in salon counts, partially offset by costs associated with a new SmartStyle advertising campaign[96](index=96&type=chunk) [General and Administrative](index=28&type=section&id=General%20and%20Administrative) This section analyzes changes in general and administrative expenses, including salaries, bonuses, and stock compensation - General and administrative expenses decreased by **$7.1 million** in Q3 2019, primarily due to lower administrative and field management salaries and bonuses, and lower stock compensation[97](index=97&type=chunk) [Rent](index=28&type=section&id=Rent) This section details the decrease in rent expense, primarily driven by a reduction in company-owned salon counts - Rent expense decreased by **$11.7 million** in Q3 2019, primarily due to the net reduction in company-owned salon counts, partly offset by rent inflation[98](index=98&type=chunk) [Franchise Rent Expense](index=28&type=section&id=Franchise%20Rent%20Expense) This section explains the increase in franchise rent expense due to the adoption of new lease accounting standards - The increase in franchise rent expense is due to the adoption of Topic 842 in fiscal year 2020, which requires gross reporting of franchise rental income and expense[99](index=99&type=chunk) [Depreciation and Amortization](index=28&type=section&id=Depreciation%20and%20Amortization) This section analyzes the decrease in depreciation and amortization, primarily due to a reduced salon base and lower impairment charges - Depreciation and amortization decreased by **$0.8 million** in Q3 2019, primarily due to the reduced salon base and lower fixed asset impairment charges[100](index=100&type=chunk) [TBG Restructuring](index=28&type=section&id=TBG%20Restructuring) This section details the restructuring charges incurred to support The Beautiful Group (TBG) and mitigate lease default risks - The company incurred **$1.5 million** in TBG restructuring charges in Q3 2019 to assist TBG with operating expenses and mitigate the risk of default associated with TBG's lease obligations[101](index=101&type=chunk) [Interest Expense](index=28&type=section&id=Interest%20Expense) This section explains the increase in interest expense, driven by long-term financing liabilities and higher credit facility rates - Interest expense increased by **$0.4 million** in Q3 2019, primarily due to interest charges associated with long-term financing liabilities and a higher interest rate on the credit facility[102](index=102&type=chunk) [Loss on sale of salon assets to franchisees, net](index=28&type=section&id=Loss%20on%20sale%20of%20salon%20assets%20to%20franchisees,%20net) This section analyzes the net loss from selling salon assets to franchisees, including the impact of goodwill derecognition - The net loss on sale of salon assets to franchisees increased in Q3 2019 due to a **$21.0 million** increase in non-cash goodwill derecognition, partially offset by higher sales proceeds[103](index=103&type=chunk) [Interest Income and Other, net](index=28&type=section&id=Interest%20Income%20and%20Other,%20net) This section discusses the decrease in net interest income and other income, primarily due to a prior-year life insurance gain - Interest income and other, net, decreased by **$0.2 million** in Q3 2019, primarily due to a life insurance gain in the prior year[104](index=104&type=chunk) [Income Taxes](index=28&type=section&id=Income%20Taxes) This section details the income tax benefit and effective tax rate, highlighting factors influencing tax expense - The company recognized a tax benefit of **$2.9 million** with an effective tax rate of **16.8%** in Q3 2019, compared to a tax benefit of **$0.7 million** with an effective tax rate of **60.7%** in Q3 2018[105](index=105&type=chunk) [Income (Loss) from Discontinued Operations](index=29&type=section&id=Income%20(Loss)%20from%20Discontinued%20Operations) This section reports on the income or loss generated from discontinued operations, including specific contributing factors - Income from discontinued operations was **$0.4 million** in Q3 2019, primarily due to insurance reserve adjustments, compared to a loss of **$0.3 million** in Q3 2018[106](index=106&type=chunk) [Results of Operations by Segment](index=29&type=section&id=Results%20of%20Operations%20by%20Segment) This section provides a detailed breakdown of financial performance across the company's different operating segments [Franchise Salons](index=29&type=section&id=Franchise%20Salons) This section analyzes the financial performance of franchise salons, including revenue growth and same-store sales trends Franchise Salons Performance (Millions USD) | Item (Millions USD) | Q3 2019 | Q3 2018 | Increase/(Decrease) (Millions USD) | | :----------------- | :------ | :------ | :------------------ | | Total product | $13.1 | $15.6 | $(2.5) | | Royalties and fees | $28.0 | $22.4 | $5.6 | | Franchise rental income | $31.4 | — | $31.4 | | Total franchise salons revenue | $72.5 | $38.0 | $34.5 | | Franchise same-store sales | (0.1)% | 1.2% | (1.3)% | | Operating income | $10.2 | $9.1 | $1.1 | - Franchise salon revenues increased by **$34.5 million** to **$72.5 million** in Q3 2019, primarily due to **$31.4 million** from Topic 842 adoption and a **$5.6 million** increase in royalties, ad fund revenue, fees, and product sales due to higher franchise salon counts[113](index=113&type=chunk) - Franchise same-store sales decreased by **(0.1)%** in Q3 2019, compared to a **1.2%** increase in Q3 2018[108](index=108&type=chunk)[112](index=112&type=chunk) [Company-owned Salons](index=30&type=section&id=Company-owned%20Salons) This section examines the financial performance of company-owned salons, including revenue declines and same-store sales trends Company-owned Salons Performance (Millions USD) | Item (Millions USD) | Q3 2019 | Q3 2018 | (Decrease) Increase (Millions USD) | | :----------------- | :------ | :------ | :------------------ | | Total revenue | $174.5 | $249.8 | (30.2)% | | Company-owned same-store sales | (2.0)% | 0.5% | | | Operating income | $5.4 | $19.6 | (72.4)% | - Company-owned salon revenues decreased by **$75.3 million** in Q3 2019, primarily due to the sale of **1,143 company-owned salons** (net of buybacks) and the closure of **147 salons**[117](index=117&type=chunk) - Company-owned same-store sales decreased by **(2.0)%** in Q3 2019, driven by a **5.0%** decrease in same-store guest transactions[117](index=117&type=chunk) [Corporate](index=31&type=section&id=Corporate) This section analyzes the corporate operating loss, highlighting factors such as administrative expenses and convention costs - Corporate operating loss decreased by **$0.4 million** in Q3 2019, primarily driven by lower general and administrative salaries and bonuses, partially offset by franchise convention costs[119](index=119&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources and uses of cash, along with its overall liquidity and capital structure [Sources of Liquidity](index=31&type=section&id=Sources%20of%20Liquidity) This section identifies the primary sources of funds available to the company, including cash, asset sales, and credit facilities - Primary sources of liquidity include funds from operating activities, available cash and cash equivalents (**$58.9 million** as of September 30, 2019), proceeds from salon asset sales, and borrowing agreements[120](index=120&type=chunk) - The company had **$183.5 million** of unused available credit under its **$295.0 million** revolving credit facility as of September 30, 2019[121](index=121&type=chunk) [Uses of Cash](index=31&type=section&id=Uses%20of%20Cash) This section outlines the company's cash requirements for strategic investments, capital expenditures, and working capital management - Liquidity requirements are dependent on strategic investments, business performance, capital expenditures, credit facilities, and working capital management[122](index=122&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) This section analyzes cash flows from operating, investing, and financing activities, highlighting key changes and drivers - Cash used in operating activities was **$13.5 million** in Q3 2019, a **$3.7 million** decrease compared to the prior comparable period, primarily due to lower annual bonus payments[123](index=123&type=chunk) - Cash provided by investing activities was **$32.0 million** in Q3 2019, an increase of **$6.2 million**, mainly from **$37.9 million** in cash proceeds from salon asset sales[124](index=124&type=chunk) - Cash used in financing activities was **$30.3 million** in Q3 2019, an increase of **$9.0 million**, primarily due to **$28.2 million** in common stock repurchases[125](index=125&type=chunk) [Financing Arrangements](index=32&type=section&id=Financing%20Arrangements) This section describes the company's debt and credit facilities, including terms and compliance with covenants [Debt to Capitalization Ratio](index=32&type=section&id=Debt%20to%20Capitalization%20Ratio) This section presents the company's debt to capitalization ratio and explains the factors influencing its change Debt to Capitalization Ratio | As of | Debt to Capitalization | | :----------------- | :--------------------- | | September 30, 2019 | 29.5% | | June 30, 2019 | 26.8% | - The debt to capitalization ratio increased by **270 basis points** to **29.5%** as of September 30, 2019, primarily due to decreases in shareholders' equity from share repurchases and liabilities associated with sale-leasebacks[127](index=127&type=chunk) [Share Repurchase Program](index=32&type=section&id=Share%20Repurchase%20Program) This section details the company's share repurchase activities, including the number of shares bought back and remaining authorization - The company repurchased **1.5 million shares** for **$26.3 million** during Q3 2019 under its approved stock repurchase program[128](index=128&type=chunk) - **$54.6 million** remains outstanding under the approved stock repurchase program as of September 30, 2019[128](index=128&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes to the company's market risk factors since its Annual Report on Form 10-K for the fiscal year ended June 30, 2019 - No material changes to market risk factors have occurred since the June 30, 2019 Annual Report on Form 10-K[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and details the implementation of new internal controls and system modifications related to the adoption of new lease accounting guidance - The company's disclosure controls and procedures were evaluated and concluded to be effective as of September 30, 2019[134](index=134&type=chunk) - New internal controls, business processes, and modified information technology systems were implemented to facilitate the adoption and ongoing application of the new lease accounting guidance (Topic 842)[135](index=135&type=chunk) [Part II. Other Information](index=32&type=section&id=Part%20II.%20Other%20Information) This section includes legal proceedings, risk factors, equity security sales, and a list of exhibits [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section reiterates the company's involvement in various lawsuits and claims, including class-wide consumer and wage and hour violations, emphasizing the unpredictable nature of these matters and their potential material impact on financial results - The company is a defendant in various lawsuits and claims, including allegations of class-wide consumer and wage and hour violations, with outcomes that are inherently unpredictable and could have a material adverse effect on results of operations[136](index=136&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section updates the company's risk factors, specifically detailing the ongoing challenges with The Beautiful Group (TBG) and its inability to successfully operate salons, which could adversely affect Regis Corporation's business, financial condition, and cash flows, including potential lease liabilities and the reversion of divested salons - TBG's inability to operate its salons successfully could adversely affect Regis's business, financial condition, and cash flows, including potential contingent lease liabilities[138](index=138&type=chunk) - As of September 30, 2019, Regis remains liable for up to **$35 million** associated with remaining TBG salon lease commitments[138](index=138&type=chunk) - Regis expects TBG to default on its obligations, potentially requiring Regis to satisfy liabilities for approximately **225 stores** in the US and Canada, and TBG's UK business is subject to administration proceedings, increasing the likelihood of Regis reverting approximately **200 UK stores**[139](index=139&type=chunk)[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides details on the company's ongoing stock repurchase program, including the number of shares repurchased during the quarter and the remaining authorization under the program - The company repurchased **1.5 million shares** for **$26.3 million** during the three months ended September 30, 2019[144](index=144&type=chunk) - **$54.6 million** remains outstanding under the approved stock repurchase program as of September 30, 2019[144](index=144&type=chunk) Stock Repurchase Program | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------------- | :----------------------------- | :--------------------------- | | 7/1/19 - 7/31/19 | 908,200 | $17.71 | | 8/1/19 - 8/31/19 | — | — | | 9/1/19 - 9/30/19 | 595,800 | $17.19 | | Total | 1,504,000 | $17.50 | [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various certifications and the financial information presented in iXBRL format - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 from the President and CEO, and Executive Vice President and CFO[146](index=146&type=chunk) - The financial information, including Condensed Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Cash Flows, and Notes, is provided in Inline Xtensible Business Reporting Language (iXBRL) format[146](index=146&type=chunk) [Signatures](index=39&type=section&id=Signatures) This section contains the official signatures of the company's authorized officers, certifying the submission of the Quarterly Report on Form 10-Q - The report was signed on October 29, 2019, by Andrew H. Lacko, Executive Vice President and Chief Financial Officer, and Kersten D. Zupfer, Senior Vice President and Chief Accounting Officer[150](index=150&type=chunk)