Regis Corporation Reports Continued Profitability for the Fourth Fiscal Quarter and Full Fiscal Year 2024

Regis Corporation (Nasdaq GM: RGS), a leader in the haircare industry, today announced financial results for the fourth fiscal quarter and full year ended June 30, 2024.

Matthew Doctor, Regis Corporation's President and Chief Executive Officer, commented: "I am very pleased with the milestones achieved in fiscal 2024 that pave the way for a new day at Regis. The strategic refinancing completed in June 2024 was an outstanding result that puts Regis on solid financial footing and creates flexibility we have not had in years. Our results and continued growth in profitability is a testament to the hard work and dedication of our franchisees and employees. I am excited that for the first time since I have been CEO we are able to grow our franchisees sales and profitability with our undivided focus, and can start taking a longer-term view as opposed to the short-term blocking and tackling that was required to get to this point. With the Zenoti migration complete, and the right organization in place, we are ready to execute on a focused set of priorities to ultimately increase traffic to our salons through operational excellence and drive growth and value creation for all stakeholders."

Business Highlights and Updates:

• Entered into a new senior secured credit facility with TCW Asset Management Company LLC ("TCW"), a leading global asset manager, and Midcap Financial Trust ("Midcap") in June 2024;
• A $105 million term loan replaced the Company's existing debt, reducing outstanding indebtedness by more than $80 million and saving approximately $7 million in cash interest annually. In addition to the term loan, the Company has access to a $25 million revolving credit facility;
• The new revolving credit facility and term loan will mature in June 2029 vs. previous debt maturity of August 2025;
• Completed Zenoti point-of-sale migration in August 2024; majority of earned migration proceeds to be received in the second quarter fiscal 2025

Financial Highlights:

Fourth quarter fiscal 2024 compared to fourth quarter fiscal 2023:

• System-wide revenue of $293.7 million versus $311.8 million in the fourth quarter fiscal 2023, a decline of $18.1 million; and system-wide same-store sales decreased 1.3%;
• Operating income of $4.6 million versus $3.6 million in the fourth quarter fiscal 2023; a $1.0 million improvement;
• Adjusted EBITDA of $7.4 million versus $5.2 million in the fourth quarter fiscal 2023, a $2.2 million improvement;
• Franchise adjusted EBITDA of $6.1 million versus $5.5 million in the fourth quarter fiscal 2023, a $0.6 million improvement;
• Net income of $91.2 million versus a net loss of $4.8 million in the fourth quarter fiscal 2023, a $96.0 million improvement; and
• Diluted earnings per share of $38.10 versus $2.07 loss per diluted share in the fourth quarter fiscal 2023, a $40.17 improvement.

Full fiscal year 2024 compared to full fiscal year 2023:

• System-wide revenue of $1,179.5 million versus $1,230.5 million in fiscal year 2023, a decline of $51.0 million; system-wide same-store sales improved 0.7%;
• Operating income of $20.9 million versus $8.8 million in fiscal year 2023, a $12.1 million improvement;
• Adjusted EBITDA of $25.9 million versus $21.0 million in fiscal year 2023, a $4.9 million improvement;
• Franchise adjusted EBITDA of $26.3 million versus $22.8 million in fiscal year 2023, a $3.5 million improvement;
• Net income of $91.1 million versus a net loss of $7.4 million in fiscal year 2023, a $98.5 million improvement; and
• Diluted earnings per share of $38.34 income per diluted share versus a $3.18 loss per diluted share in fiscal year 2023, a $41.52 improvement.

Revenue

Total consolidated revenue of $49.4 million in the fourth quarter and total revenue for fiscal year 2024 of $203.0 million, declined $6.3 million, and $30.3 million, respectively. The declines in both periods were driven primarily by a reduction in non-margin franchise rental income and advertising contributions and the wind down of loss generating salons, partially offset by non-cash revenue resulting from a change in estimate to gift card breakage.

Operating Income

Regis reported fourth quarter 2024 income from operations of $4.6 million compared to $3.6 million in the fourth quarter 2023. Regis reported fiscal year 2024 income from operations of $20.9 million compared to $8.8 million in fiscal year 2023. The improvements in operating income in both periods were driven primarily by lower rent expense, and non-cash revenue resulting from a change in estimate to gift card breakage, partially offset by lower royalties and fees. The year-over-year improvement is also driven by the wind down of franchise product sales and lower general and administrative expenses.

Income (Loss) from Continuing Operations

Regis reported fourth quarter 2024 net income from continuing operations of $91.3 million, or $38.14 income per diluted share, compared to a net loss from continuing operations of $4.8 million, or $2.07 loss per diluted share, in the fourth quarter 2023. Regis reported fiscal year 2024 net income from continuing operations of $89.1 million, or $37.50 income per diluted share, compared to a net loss from continuing operations of $11.3 million, or $4.88 loss per diluted share, in 2023. The year-over-year improvement in net income (loss) from continuing operations in both periods was driven by the gain on extinguishment of long-term debt of $94.6 million and improved operating income.

Net Income (Loss)

The Company reported fourth quarter 2024 net income of $91.2 million, or $38.10 income per diluted share, compared to a net loss of $4.8 million, or $2.07 loss per diluted share for the same period last year. The Company reported fiscal year 2024 net income of $91.1 million, or $38.34 income per diluted share, compared to a net loss of $7.4 million, or $3.18 loss per diluted share, in 2023. The year-over-year improvement in net income (loss) in both periods was driven by the gain on extinguishment of long-term debt and improved operating income.

Adjusted EBITDA

Fourth quarter adjusted EBITDA of $7.4 million improved $2.2 million versus adjusted EBITDA of $5.2 million in the same period last year. The improvements were driven by lower rent expense and non-cash revenue resulting from a change in estimate to gift card breakage, partially offset by lower franchise revenue.

Fiscal year adjusted EBITDA of $25.9 million improved $4.9 million, versus an adjusted EBITDA of $21.0 million in the same period last year. The improvement was primarily due to lower rent expense, lower general and administrative expenses, and non-cash revenue resulting from a change in estimate to gift card breakage. Fiscal year 2023 adjusted EBITDA also benefited from a $1.1 million grant from the state of North Carolina related to COVID-19 relief.

Franchise Revenue

Fourth quarter franchise revenue was $47.1 million, a $6.4 million, or 12.0% decrease compared to the prior year quarter. Non-margin franchise rental income decreased $2.9 million due to fewer salons in the current year. Royalties were $16.1 million, a $0.5 million, or 3.0% decrease, versus the same period last year due to the decline in salon count. Product sales to franchisees decreased $0.6 million, as a result of the transition out of the wholesale product business. Franchise fees decreased $0.6 million compared to the prior year quarter, primarily due to a decrease in terminated development agreements.

Fiscal year 2024 franchise revenue was $195.7 million, a $27.5 million, or 12.3% decrease compared to the prior year primarily due to a decline in non-margin franchise rental income as a result of a lower franchise salon count.

Franchise Adjusted EBITDA

Fourth quarter franchise adjusted EBITDA of $6.1 million improved $0.6 million from the same period last year. The improvement was primarily due to lower rent expense.

Fiscal year 2024 franchise adjusted EBITDA of $26.3 million improved $3.5 million year-over-year. The improvement was primarily due to lower rent expense and lower general and administrative expenses.

Company-Owned Salon Revenue

Fourth quarter revenue for the company-owned salon segment improved $0.1 million versus the prior year to $2.3 million. The year-over-year improvement in revenue was primarily driven by non-cash revenue resulting from a change in estimate related to gift card breakage, partially offset by company-owned salon closures.

Fiscal year 2024 revenue for the company-owned salon segment declined $2.8 million versus the prior year to $7.3 million due to company-owned salon closures, partially offset by non-cash revenue resulting from a change in estimate related to gift card breakage.

Company-Owned Salon Adjusted EBITDA

Fourth quarter company-owned salon adjusted EBITDA improved $1.6 million year-over-year primarily due to a change in estimate related to gift card breakage and the closure of unprofitable salons.

Fiscal year 2024 company-owned salon adjusted EBITDA loss improved $1.5 million year-over-year driven primarily by the closure of unprofitable salons; and non-cash revenue resulting from a change in estimate related to gift card breakage, partially offset by a $1.1 million grant from the state of North Carolina related to COVID-19 relief in fiscal year 2023.

Balance Sheet and Cash Flow

The Company ended fiscal year 2024 with $10.1 million in cash and cash equivalents. On June 24, 2024, the Company refinanced its credit facility, reducing its indebtedness by more than $80 million, resulting in $115.3 million in outstanding borrowings ($105.0 million term loan and $10.2 million revolver draw) and total liquidity of $19.9 million at June 30, 2024. The Company utilized its U.S. federal and state net operating losses to offset the entire tax liability related to this transaction. Net cash used in operating activities for the fiscal year totaled $2.0 million, an improvement of $5.8 million from the prior year. Cash use improved due primarily to lower general and administrative expense, partially offset by a decrease in franchise revenue.

Non-GAAP reconciliations

For GAAP to non-GAAP reconciliations, please refer to the attached section titled "Non-GAAP Reconciliations." A complete reconciliation of reported earnings to adjusted earnings is included in this press release and is available on the Company’s website at www.regiscorp.com.

Earnings Webcast

Regis Corporation will host a conference call via webcast discussing fourth quarter and fiscal year 2024 results today, August 28, 2024, at 7:30 a.m., Central time. Interested parties are invited to participate in the live webcast by registering for the event at www.regiscorp.com/investor-relations.html. The webcast will include a slide presentation. A replay of the presentation will be available on our website at the same web address.

About Regis Corporation

Regis Corporation (NasdaqGM:RGS) is a leader in the haircare industry. As of June 30, 2024, the Company franchised or owned 4,408 locations. Regis' franchised and corporate locations operate under concepts such as Supercuts^®, SmartStyle^®, Cost Cutters^®, Roosters^®, and First Choice Haircutters^®. For additional information about the Company, including a reconciliation of certain non-GAAP financial information and certain supplemental financial information, please visit the Investor Information section of the corporate website at www.regiscorp.com.

This press release contains or may contain "forward-looking statements" within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management's best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect," "estimate," "anticipate," and "plan." In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These uncertainties include a potential material adverse impact on our business and results of operations as a result of changes in consumer shopping trends and changes in manufacturer distribution channels; laws and regulations could require us to modify current business practices and incur increased costs including increases in minimum wages; changes in general economic environment; changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns; compliance with Nasdaq listing requirements; reliance on franchise royalties and overall success of our franchisees’ salons; our salons' dependence on a third-party supplier agreement for merchandise; our franchisees' ability to attract, train and retain talented stylists and salon leaders; the success of our franchisees, which operate independently; data security and privacy compliance and our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, franchisees, employees, vendors or Company information; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic to our franchisees' salons; our ability to maintain and enhance the value of our brands; reliance on information technology systems; reliance on external vendors; the use of social media; the effectiveness of our enterprise risk management program; ability to generate sufficient cash flow to satisfy our debt service obligations; compliance with covenants in our financing arrangement; premature termination of agreements with our franchisees; the continued ability of the Company to implement cost reduction initiatives and achieve expected cost savings; continued ability to compete in our business markets; reliance on our management team and other key personnel; the continued ability to maintain an effective system of internal control over financial reporting; changes in tax exposure; the ability of our Tax Preservation Plan to protect the future availability of the Company's tax assets; potential litigation and other legal or regulatory proceedings; or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A of this Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

Non-GAAP Reconciliations:

This press release includes a presentation of operating income excluding certain non-cash charges, adjusted EBITDA, and adjusted franchise revenue, which are non-GAAP measures. The non-GAAP measures are financial measures that do not reflect United States Generally Accepted Accounting Principles (GAAP). We believe our presentation of the non-GAAP measures provides meaningful insight into our ongoing operating performance and a supplemental perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance from the same perspective as management and the Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors' analyses and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. We also believe the non-GAAP measures are useful to investors because they provide supplemental information that research analysts frequently use to analyze financial performance.

Items impacting comparability are not defined terms within U.S. GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine the items to consider as "items impacting comparability" based on how management views our business, makes financial, operating and planning decisions and evaluates the Company's ongoing performance.

The reconciliation of U.S. GAAP operating income to non-GAAP operating income excluding certain non-cash charges is included in the release.

The following items have been excluded from our non-GAAP adjusted EBITDA results: discontinued operations, inventory reserve, one-time professional fees and settlements, severance expense, the benefit from lease liability decreases in excess of previously impaired right of use asset, lease termination fees, asset retirement obligation costs, and the benefit from the Company's debt refinancing.

We present adjusted revenue to provide a meaningful franchise adjusted EBITDA margin, which removes non-margin revenue from total revenue to arrive at an adjusted margin. Margin is a common metric used by investors, however, the majority of our revenue is offset by equal expense, so it does not contribute to our margin. We remove the non-margin revenue from this metric in order to show a meaningful margin rate.

The method we use to produce non-GAAP results is not in accordance with U.S. GAAP and may differ from methods used by other companies. These non-GAAP results should not be regarded as a substitute for corresponding U.S. GAAP measures, but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations as they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with our financial statements prepared in accordance with U.S. GAAP.

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