Regis (RGS) 1 May 242024 Q3 Earnings call transcript

Good morning, and thank you for joining the Regis Third Quarter Fiscal 2024 Earnings Conference Call. I'm your host, Biz McShane, Vice President, Corporate Controller. [Operator Instructions] This conference is being recorded. The prepared remarks by our President and Chief Executive Officer, Matthew Doctor; and Executive Vice President and Chief Financial Officer, Kersten Zupfer, are accompanied by slides to help participants follow along.

I would like to remind everyone that the language on forward-looking statements included in our earnings release and 8-K filing also apply to our comments made on the call today. with our along can non-GAAP with mentioned today's with our found financial along measures. on www.regiscorp.com/investorrelations, GAAP website, reconciliation call documents, presentation be today, on measures These corresponding their of any Today's slides Presentations Financial section Statements the the site. and investor Supplemental of located are in Investor the will Matt. over that, I call With now turn to

you, Good morning, Biz. everyone. Thank

Before our strategic about a quick I jump note into our process. QX fiscal XXXX results, just review

balance the sheet prior on this is health calls, business of improving long-term our best As growth. I've noted for and aimed effort the position towards profitable

not We otherwise on on are making the progress today. call disclosing review developments and new will be any be the

As strategic we discuss, plan executing as Kersten this I our on process will will remain and continues. focused

fiscal Same-store and in as the with rose to QX, had first sales comps in Now is quarter, Weather January throughout the XX a our X.X% down X.X% fiscal similar progression our QX. of demonstrated We X.X%. impact that, our significant as quarter saw comparable a weeks sales did just start the ending let's turn which quarter, we quarter. X year-to-date. last in the to the

collectively top growth X% which by approximately theme sales did a comp quarter, driving up for volume we during sales top positive quarter quartile in still our positive the by between last that bottom here, February a the our good rest our same-store in and making a as of March. the of X.X% all mentioned that ended of comp sales well, sales lost a quartile the and ground is January salons month with I quarter. brands across followed as is comp, been job for the The with demonstrating salons salons a X% factor Our has recurrent overall negative X.X% disparity comps

progress basis the us and prior on track million $X.X year's was year-over-year Adjusted a compared for back QX $X to putting quarter, EBITDA consolidated profitability. on million in

For million versus EBITDA of XXXX, $X.X $XX.X adjusted quarters fiscal adjusted the quarters versus of our $XX.X first improvement XXXX of X first a EBITDA fiscal million. million is the X -- of

make 'XX, in on million $X.X quarter million of in the we $X.X quarter million for quarters with limiting income income improvement. the made fiscal X year quarters and million 'XX. QX $XX.X versus breakeven prior from liquidity first our the X have Operating We were remain have our $XX.X roughly improved $XX continue quarter. the reported progress in fiscal ample million regarding $X.X We cash headwinds perspective, progress that a at $X.X million has ended business. versus first despite million continue to and operating operations of liquidity use by during cash From liquidity approximately the versus the the in a to our for with

a salon perspective, count. continue see count our to store From we franchisee declines in

of less of one the last system last for unfortunately, the being quartile each that we quarter, first the XX we've for fiscal on of XXX during that the a XXX our close months had XX On with net net is versus had versus is in $XXX,XXX the $XXX,XXX X these Over which sales closures open, XXX during and X/X closures XXXX. I've and, closure year-to-date months. average to salons is basis, QX XXX fairly averaging the of ongoing that is this of a of half unavoidable, top than quarters average calls XXXX. dynamic discussed of of

higher And salon while a sales me to continue, have expect franchisees, will trend I a base count with don't with We to foundation point looked reestablish wrong, a get of this and volumes. where ultimately lower we to we a our albeit with and get the shedding come borne franchisor implications. lose as by the not a celebrated even as to losing potential a out potential perception we salons absolutely lay revenue low-volume with losses means this brand benefits is salons effort significant

However, drag salons work profitability, our businesses their base hard on the these to build these ultimately the especially as strengthen given have underlying closures franchisee their back. franchisees do

It's to going And these it profitability, base to business the continue closures, managed allows pointed will our a in operate we of reality be this have efforts that the forward. that to face. we smaller salons drive grow in to performance which towards stronger manner order and despite us is

In heard areas stability X longevity of Regis. me the will focus, ensure of of our you've recent priority speak and help quarters, each about which

addressing are And being the as process earlier, first for of with this long addressing term. to alluded midst I of structure. goal our strategic review our The we capital the in the

is different of The and about others initiatives bit brands we've core a and in back-to-basics other up been these these would developments I forward. that want and make our requires they're the error, will continue on to believe many to trial notice the time, speaking priorities the system our today. initiatives, to we these and set foundational on relate progress I business, we them unlock from to this share to going of at to are what potential and reiterate strongly past X related you'll and like call that for after areas, some success the

initiatives have of observed and disparities not been this revamp to singular event priority of the a by any result enforcement survival recent salon and to having primary These to consistency our am as historical much operations of times. and had are Regis #X we which I drive rather honing rollout or our years brand addition for and very as working going experience, I reason by-product stabilization during of forward, that but salons. the need standards. various in disparities to a procedures our is and operations the effort focus over throughout needed and in customer this across area first improve processes the salons view is development, Our excited

many by through service the experience While the time been excellence we set be there's good no of stylist franchisee by on progress of aligning focus and in quarter, brand. the training be accompanied customer will front revised organization. overhaul The will our will that made Supercuts start And a priority of materials. in a doubt first #X which years, standards, complete rollout in past, the this initial our for on past

manner and haven't as the We no we we some And force start for land year. Zenoti and to the will ability to end the each something are technology the exercise this on views next each on quality change environment management also service over excellence time now of our will of I our salons platform on the rollout, coming course we narrowing view in and, deliver of for this which salons of be in up on frankly, the we -- quite Having longer which towards implementing eyes end speak critical. we on had is year continue. clear have about they can our calendar system significant one I ensuring where the a the are this expect full in that of next.

reviving spoken now almost foundation point-of-sale salon yet the key the the Zenoti to experience. this customer this years as to We've transition of our forms X system another for about of

a for when the X-year in will technology OpenSalon really We in back will which X-year this the to this more help our is for line finish the also Regis ensure sight, account reliable taking are a increase XXXX. with platform. what but seeing increase development mark of early engagement the Pro This only user pleased digital once journey on have journey data end only capture has transition manner personalized system but into to board. Zenoti experience been of seamless some with transition not a in rallying will that the our we on a better We're engage operational customers can benefits across customers and plan so we and around already our not

to full organic efforts prove on By sales fruitful. this and of traffic continue more to complete, and on it That it focused, made Once booking brings. from Salons use. notion said, online availability is benefits the advanced and begins many migration perspective, of been a and online work one first continues the simpler is have to and Zenoti the foremost, key to large, booking outpace put the booking is with system really date that itself. real to our

In addition, footprint our uptick feedback review post-visit its turn leveraging which just and noticed platform presence. Zenoti in help online Google a guest ranking in we've the and by significant search being capabilities, on drive

we Now while these this for we execution are start our just utilizing to stylists. even as and not excited scratched a are surface an organic examples, it franchisee intention the and with platform, tool customers few with have

we the up in are Zenoti from to migrations of Friday, X,XXX salons this our last to earnings call, track salons last likely July. April and This had migrating with we completing migrate platform. to close salons in summer, X,XXX is our XX, on to the As

all that QX payment XXXX. we Zenoti, and QX this SuperSalon to We a so are payments fiscal Pro. now will have migration completed users transition the and cross payment all from QX threshold is likely on salon perspective, those And OpenSalon count that receive left in of fiscal

our we As have to proceeds date, which a gone towards has reminder, $XX debt. servicing received million in

the standards Zenoti salon our brand utilizing of really initiatives priorities. are on the operations X foundation and that Executing formed

and and is sales. ready With targeted build is the And loyalty our these will executed to and the business. place to where of priority drive we major strategies be promotions traffic on in next rollout

One initiatives out is phase of This of here key Supercuts test the rollout. full loyalty Rewards. has our the of Supercuts moved into rollout and program, development the and

of will end brand participating all a live XXXX with this Our salons the standard of this of September end wave be May, year. the include salons the remaining by all going in with Supercuts by first expectation XXX of for

this of results When launch, addition roll elements brands areas about brands industry. see in Zenoti connections loyalty stickiness our can will that on running. X other initiatives are powerful that pieces of out and experience win, we and our are based we and we relevant these convenience standards, fairly to across all the through Now underpinned differentiating key with to our equation the other take is promotion from strategies in which enforced pivot a through the the salon thinking we and program, by where nascent

education to area backbone the provide to trends, salons, stylists. superior best the how We this call for in current in stylists techniques equipped most customer. address of is with for the focus excellence is want and know execution it important fourth the skills soft the The I to be on

corporate tools to network the robust of and a services. hair to franchisee stylists ensure trainers need have employee and they quality training have We deliver

and Our and stylist has that a the engaging known training franchisees supplemented differentiator Regis. In-person as our for training for with Education training digital training digital our reason program Playground, is program often proprietary us Regis is choose the community. modules

an deliver more Franchisees AI to we're upon past experience. We bolster live we to drive retention of As as and believe points the may those we we live hires by that marks learning. digital More the and digital our leaning this that to engaging with productive. training exists enhanced onboarding training, and ways continue continuous even forward, and with process that thinking looking what and them into increase robust which are looking new they at the tend and look work to turnover address a XX, having franchisees. to to stay we're stylists stylist both look here more become foundational mix of XX, like longer further critical of engagement about through program and innovative come more components firmly education believe education with of will elements and through right XX-day education digital engagement

I area last want managing G&A. on The wrapping on our is before up to touch focus

$XX G&A in currently since 'XX. sized approximately equating to ensure million to on This fiscal continued yet savings our due appropriately are quarter managed. to efforts another business the at and decreased is in have savings in track versus fiscal $X fiscal $XX and approximately million XXXX our end we We 'XX marks to over million G&A,

current Regis down Now in of that have of and and has up believe these these if at been agile implementing our advancements the and I advancing will efforts. and pay improve this for success. salon efforts into on dedication dividends We open know hard franchisees field, with we're experience initiatives new closing, I productivity look stay operations in would how to company important the employees and the are combined work all is important as our heads and to we innovative did the to we put mention technological and set instituting customer not will back-to-basics long-term improve the be we remiss it salons. focused Everyone

on the our provide call more Kersten turn Kersten? I full and now detail results. QX over will to With that, to year

morning. Thanks, Matt, and good

results. morning's For this our call, review quarter will third I

increased same-store quarter EBITDA. sales, Overall, with positive income and system-wide positive adjusted increased operating the was third

more beginning million third no which quarter and expected prior profitability. with have Reviewing quarter This detail income primarily $XX.X and total was a of and gross million statement, and on declined $X.X decline third revenue, franchise revenues in rental the the in and income revenue expense to and a the relates up are were year. from revenue advertising fund reduction impact

out $XXX,XXX last and business salons number of year's due versus of over sales revenue salon product profitability. $XX.X revenue minimal million, impact revenue, transitioning Royalty represents our XX company-owned months. and of closures third down was of to reduced with the prior the which fee Additionally, the the quarter core course on

in X.X% reflection the our same-store performance system-wide quarter. grew which revenue Another of is sales,

prior third quarter of $X.X to by, in expenses quarter. primarily, increase The driven compared decrease million a $X the in was income to GAAP GAAP period. the year in posted compared We of million operating in million prior income the year $X.X G&A operating

We profit continue operating we to each that produce trend continue. to expect and quarter,

in loss ago The and of sale this income. the was quarter third by We year compared million $X.X reported result to current interest Pro in loss million period the of recognized the the per increase $X.XX. operating offset of loss year and per contingent a of our share an and quarter XXXX loss proceeds in to prior a sale $X a no $X.X related share of quarter of a OpenSalon partially a of million net compared payments proceeds in higher a year, of decline to June in $X.X in

Now basis, let's views million prior $X the adjusted costs. turn adjusted G&A results, quarter. due how the year which third consolidated was EBITDA increase to to our compared an $XXX,XXX management reflects to business. primarily The was the quarter million in On lower $X.X

decrease cost the structure, G&A to in be to million year now $XX and primarily continued third timing will rate was on the our a headcount lower our expenses. G&A quarter. $XX the is from adjusted $XX annual prior range million decrease With of The Our for quarter, $X.X million focus million. due we run of of believe

business in headcount lower quarter, of related partially franchise $X.X adjusted Our prior $X.X achieved the compared spend of quarter. million due is primarily core to $X EBITDA to a improvement in a in million the increase expenses. reduction G&A year timing million to This and

company-owned for adjusted On due $XXX,XXX periods, significantly the segment year. basis, company-owned our related of including to on company-owned salon inventory from less With salons decline XX company-owned lost quarter quarter, a March will the fiscal of our $XXX,XXX an segment closures. last as to XX, same future remainder is The salon have impact year decline write-offs the XXXX. of

the fiscal of reduction down the quarter to to the in well this million as and product primarily income, company-owned salons lower and year to compared for wind to the period sales decline of franchise a our second franchisees. as in advertising X Revenues the revenue first was revenue of were expected same months XXXX. $XXX Similar decline, rental $XXX relates million year

relief the million State $XX.X $X.X a and Adjusted of in X EBITDA to year partially same the our first primarily million from million related to offset of COVID-XX compared fiscal for the the was improvement months received grant XXXX. for Carolina XXXX. G&A million, lower by Adjusted year due improved to the North EBITDA rent, $XX.X period $X.X in

liquidity. to Turning

XXXX, At was $XX.X revolver outstanding, excluding As million. of cash. million deferred and March liquidity, million financing capacity debt had fees, of available of $XXX.X March we XX, $XX.X $X.X including our XX, of million

do covenants the covenants during our of violate to debt compliance any in are facility. we the currently, with not term of expect We and our

we operate we liquidity have adequate believe Additionally, the business. to

last sign due of count $XX million $XXX so due accounting lease moving Regis' approximately continue the These in responsible long Regis salons These their reminder, operating franchise over a factored have to subleasing Having our reduction. to due obligations life franchisees liabilities our the have is and debt accounted leases leases. standards, they entire salons, to in liabilities been. company-owned shows off the franchisees XX over salon decreased to sheet our of franchisees the As life of remaining $XXX position amounts as also pay liabilities million our the franchisees approximately by for and liabilities years for reduction corporate serviced Regis $X.X leases. liabilities related solely to the and space leases. be of lease should not for their the all office as the our to are balance approximately which million million respective to over with X of associated the

$X.X X operations, a the the which used prior months of from million from In is improvement we cash $X.X of the year, million year.

XX, cash Management increased interest is to the million and million from to from structure, State year higher XXXX, in in interest cash partially a on partially related million, $X.X cash offset to expense due from remains operations, the our by continued the cost ended bank Excluding our cost received of relief to $XXX,XXX expense interest primarily higher $X.X X-month March due operations used offset our improved of of rates the grant committed approximately and which we variable variable period, rates North by returning primarily million primarily the year on COVID-XX $X.X months $X.X In due to structure of fiscal $XXX,XXX, generation. cash approximately to used to our lower Carolina by debt. improvement debt. interest management increased due lower bank prior X primarily

Biz to would like it for interest my wrap concludes will you thank your up I and to continued Regis. in support call. remarks. the prepared to back This turn I

you This thank earnings conclude joining. and today's will Kersten, for Thanks, call.

e-mail our Kersten questions at Relations about investorrelations@regiscorp.com. please you our through financial results, any If Investor contact have