Regis (US:RGS)2025-05-13 13:30Financial Data and Key Metrics Changes - For the third fiscal quarter, total revenue was $57 million, an increase of 15.9% or $7.8 million compared to the prior year, primarily driven by revenue from company-owned salons due to the Align acquisition [26][29] - Adjusted EBITDA grew 33% year-over-year to $7.1 million, while operating income increased by 23% to $5 million [5][29] - Cash from operations improved by $6.5 million year-over-year, totaling $6.2 million for the quarter, marking the second consecutive quarter of positive cash flow [6][33] Business Line Data and Key Metrics Changes - The Align Salon Group acquisition contributed positively to results, although its impact was modest in the quarter as the focus was on integration and planning [7][26] - Same store sales for the consolidated company saw a decline of 1.1%, with Supercuts reporting a 1.1% increase, while SmartStyle experienced a 7.4% decline [10][12] - The company-owned salons segment's adjusted EBITDA improved by $1.6 million year-over-year to $843,000, primarily due to the Align acquisition [31] Market Data and Key Metrics Changes - The company noted that the timing of Easter negatively impacted sales by approximately 1.1%, suggesting that without this effect, sales would have been roughly flat for the quarter [11] - April same store sales showed improvement, with Supercuts delivering a 4.5% increase and the entire consolidated system demonstrating a 2.8% increase compared to the previous year [11] Company Strategy and Development Direction - The company is focused on a comprehensive transformation aimed at building a more resilient and efficient business model, prioritizing operational stability and profitability [3][4] - Key strategic priorities include optimizing the sales and profitability of company-owned salons and executing a holistic transformation agenda for the Supercuts brand [17][19] - The company aims to enhance brand perception and operational excellence through a structured roadmap that includes evolving brand strategy, unlocking omnichannel growth, and scaling operational excellence [19][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value of the strategic initiatives being implemented, despite acknowledging the challenges of declining salon traffic and new guest visits [13][25] - The company anticipates that calendar year 2025 will be the last year of significant closures, with a focus on stabilizing and growing the business moving forward [27][29] - Management highlighted the importance of disciplined cost management and capital allocation to navigate current challenges and support future growth [14][36] Other Important Information - The company reported a net closure of 49 salons during the quarter, primarily related to underperforming locations, while also shifting approximately 300 locations from franchise to corporate salon counts due to the Align acquisition [27][28] - The company expects adjusted G&A expenses to be approximately $40.5 million for fiscal year 2025, with a run rate projected between $43 million to $45 million [32] Q&A Session Summary Question: Understanding the accounting for Align - Management confirmed that while royalty fees in the franchise segment decreased, EBITDA in the company-owned segment increased, reflecting the impact of the Align acquisition [39][40] Question: Updates on store closings for this year - Management indicated that the pace of anticipated closures is in line with previous guidance, with expectations for fewer closures in the future [46][47] Question: Impact of remodeled stores on same store sales - Management noted that remodeled stores have seen a modest lift of about 5% in same store sales, with some locations achieving over 20% sustained price increases post-remodel [53][55] Question: Plans for cash allocation - Management stated that the priority is to pay down debt, maintain liquidity, and evaluate opportunities for capital deployment based on business needs [57][63]