Q1 2022 Regis Corp Earnings Call
Third for up to $50 million. So we still have capacity to issue more shares under the program and we will assess the merits of doing so going forward.
We also took another look at our organizational structure and realigned our business to decrease costs, while optimizing the support for our brands and our franchisees.
This re org was completed in October and is not reflected in the results we published yesterday. These.
These changes are expected to result in annual savings of approximately $5 million and I will let kersten outline the revised G&A range based on those recent changes.
These savings are above and beyond the savings, resulting from our zero based budgeting process, which we concluded last June.
As part of this re org I wanted to highlight the role of Jim Lain, who is now our president of franchise operations.
Jim now leads all regent brands from operational excellence and execution to franchisee relationships business performance and strategies to build traffic and drive customer satisfaction and loyalty.
This does not represent a departure from our branch centric approach as brand Centricity remains in many aspects of Jim's organization such as marketing in fact, we believe this best combines both grand focus and a flexible efficient team structure we.
We look forward to seeing the progress Jim makes with our brands given his extensive experience in our industry as.
As we continue to navigate the current environment and sales recovery will look to pull the levers within our control to ensure we just is in a healthy financial position.
And these two initiatives the use of the ATM program and the rewards are major contributors to that effort.
Turning to our results Q1 of fiscal 'twenty, two saw improving same store sales of 23%.
While we continue to demonstrate quarter over quarter improvement staffing and labor continue to put pressure on our business.
Not only our staffing hours down during normal business hours, but the shortage in labor is also driving salon closures during periods. When they would have been historically open such as Sundays and Mondays such staffing issues, which have been prevalent across a variety of retail and service businesses are impeding our full recovery gear.
Given the importance of labor to our business and revenue generation capabilities. We have made it our top priority to work with our franchisees to recruit stylists, we have invested in a premier mobile solution that streamlines the entire hiring process and are assisting our franchisees and recruiting from beauty schools.
We're also closely monitoring beauty school enrollment as graduates from such schools or the main pipeline for new stylists and all of our regent brands.
Since will began their training pre COVID-19 had an interruption in gaining their hours for licensure as the majority of states did not reduce the hour requirements for licensure doing COVID-19 to accommodate for school closures and capacity restrictions.
As a result of this many students either dropped out of beauty school or were delayed in getting their licenses a problem, which was compounded with very few new enrollments during that time.
Through our relationship with Empire education, we can see that new leads defined as people interested in enrolling in beauty schools have already returned to pre COVID-19 levels at.
At the same time, most beauty schools are back to pre pandemic operating models. So we can expect the level of graduates to return to pre COVID-19 levels around June of 2022.
This is good news for the industry, making it evident that interest in the beauty industry is intact, which gives us another data point to believe that the labor shortages truly temporary.
While the stats are encouraging we need to work with our franchisees to ensure enrolled students end up converting to salon employees.
We're implementing high touch initiatives for Empire education, specifically that can ultimately be leveraged for beauty schools more broadly.
We're also evaluating the merits of recruitment marketing in addition to identifying best in class pay plans and successful hiring and retention strategies from our top franchisees.
I now want to touch on another key pillar of our strategy, which is the continued rollout of our proprietary salon booking in automation technology platform open Salon probe.
When it comes to this technology are focused last quarter was to implement an important shift in leadership.
Our prior Chief Technology Officer did an outstanding job building, an entire team and system from scratch that.
The hiring of John <unk>, our new CTO, Mark a new milestone in our OSB strategy, which is to ensure the capabilities of our software to match or exceed the capabilities of global competing store management and digital services as we continue to strive for both an unparalleled franchise the experience and for commercialization and beyond.
One industry and brands.
John's experience in scaling consumer facing platforms make him the perfect leader to take our open salon ecosystem to the next level. He is a fantastic addition to the <unk> team.
Another Great addition to the <unk> team is Lockheed Andrews, who joined our board of directors in September.
<unk> is a proven leader with deep expertise in E Commerce digital transformation and data analytics.
We're thrilled to have her as a resource to read just given the wealth of knowledge and experience he brings.
Before I turn the call over to Kirsten I'd like to reemphasize, we just its position as the largest hair Salon network in the world.
We are the industry leader with almost 100 years of heritage and operating experience, we comprise over 5600 salons spanning brands, but some of the highest awareness levels in the industry.
Our brands represent 45% of large chain hair care spin spending that is not threatened by replacement technology.
We are fully franchise business model with the most comprehensive service offering at the largest combined scale versus competitors, which means we offer the greatest opportunity for franchise investments.
Our revamped management team is a mixture of tenured regent leaders and executives from other companies with complementary expertise and franchising operations marketing development International growth Finance and technology. We see these pillars is fundamental sources of strength that coupled with our new G&A structure.
And full migration to an asset light model position us well for growth and sustained profitability as we emerge from the pandemic.
As we continue through fiscal 2022, our focus remains locked in on sales for which the main lever is currently in the form of stylists recruiting OSP adoption bolstering, our franchisee base to drive growth and a healthy balance sheet.
Thank you so much for your continued interest in Regis and I will now turn the call over to Kirsten to take you through the numbers kersten.
Thanks, Philippe and good morning yesterday, we reported on a consolidated basis first quarter revenues of $78 million, which represented a $34 million increase from the prior year.
The increase is a result of our continue our recovery from the COVID-19 pandemic.
Currently our salon are not dancing mandated closures or other significant government imposed restrictions, but as we've discussed a return to pre COVID-19 volumes continued to be hampered by the labor shortage.
On a two year basis of comparison to pre Covid system wide comps were down 17% in the quarter.
This is an improvement over Q4, when we were down 21%.
While comps historically have been the key indicator of the health of the business.
Due to the pandemic I want to focus on total system sales.
System wide sales are key indicator for our fully franchise business as eastbound made by a franchisee directly improves our bottom line.
System sales increased approximately 8% from the fourth quarter.
We reported an operating loss of $6 million during the quarter compared to an operating loss of $32 million in the prior quarter the.
The improvement is a result of our recovery from COVID-19, and the transition to our franchise our motto.
First quarter consolidated adjusted EBITDA loss was $6 million compared to a loss of $23 million in Q4 of 2021.
As we are nearing the end of our transformation I want to call out some losses that we incurred in the quarter that we expect to eliminate reduced by the end of the fiscal year, our franchise product sales business and company owned salons contributed losses of approximately $3 million and $1 $6 million, respectively. Both of which are not part of.
Our go forward business.
The actions, we recently took to reduce G&A are not yet reflected in our results that the changes were made in October.
$5 million in annual savings Philippe mentioned will be seen in our Q2 forward.
As I mentioned on our last call, we expect our G&A to decrease throughout the fiscal year and anticipate that Q4, G&A will represent our run rate G&A.
With the recent G&A changes, we now expect our end state run rate G&A to be in the range of $65 million to $70 million annually.
Turning to liquidity as of September 30th we had $148 million of liquidity, including $82 million of available revolver capacity and $46 million of cash.
Our net available liquidity as of September 30 was $73 million, which reflects our minimum liquidity covenant requirements and the permitted add back of the shortfall in certain refranchising proceeds in accordance with our credit agreement.
The $19 million quarterly increase in net available liquidity was duty utilizing the ATM, we raised $37 million in total of which 32 million settled in September and $5 million settled in October our liquidity provides the company with sufficient operational and financial flexibility to navigate the REIT.
Covering and progressed to the next phase of our transformation to a pure asset light franchise owner.
In the first quarter, we used $12 million of cash from operations, which is approximately $8 million left on our fourth quarter cash use of $20 million driven in part by continued improving com.
Removing $2 million of cash used on a one time item our cash use was $10 million in the first quarter. We expect our cash used in operations to continue to decline each quarter throughout fiscal year 2002, as the exit distribution centers and realized savings from our recent G&A action.
On the business side, the reopening of our Canadian salons in the quarter was an important turning point, we are no longer facing government mandated closures, which have severely impacted our franchisees and our business. The middle part of the country continues to perform better than the color, but all regions are improving.
We are hopeful that higher vaccination rates for adult vaccines for kids and less government assistance, while encouraged stylists to return to work as we head into the holiday season.
To reiterate play based closing comment we believe we are well positioned for growth and sustained profitability as we emerge from the pandemic and look forward to continued recovery as we head into the holiday season.
This concludes my prepared remarks, I would like to thank you for your continued support and interest in region and will now turn the call back convinced for question.
Yes.
Thank you Carsten.
We have no questions. This morning. Thank you very much for joining that include.
That concludes our call today.
Okay.