Q1 2026 Regis Corp Earnings Call
Speaker #2: Thank you for joining the quarterly Regis earnings We will begin shortly . call . Thank you for joining the quarterly Regis earnings call .
Speaker #2: We will begin shortly . Thank you for quarterly joining Regis the earnings call . We will begin shortly . Thank you for quarterly joining the Regis earnings call .
Speaker #2: We will begin shortly . morning , and thank you for joining the Regis first Quarter 2020 earnings conference call . I am your host , Kersten Zupfer Executive Good President Vice Officer .
Speaker #2: I am joined today Financial by our interim Chief Executive Officer , Jim Lain . All in a participants are listen only mode . And this is being conference recorded .
We're reinforcing brand relevance and consistency across every touch point in salon online and through marketing, all designed to drive guest traffic and retention.
Compliance with brand standards of study and franchisees are increasingly embracing the new model.
Transparency and pricing service consistency, digital integration and Salon presentation.
Adoption is progressing though. Full system alignment will take time.
We've also completed a comprehensive customer research study. That's now informing and evolved Brand Story and creative Direction.
Sharpening, how Supercuts will differentiate within the industry.
Next month, we'll begin Pilots that improve digital interaction on our website and app removing friction and enhancing the guest experience.
Execution discipline remains high and our teams are committed to delivering transformation with precision and focus.
Operating over 300 salons, we acquired earlier this year. For Q1, we delivered month-over-month gains in traffic and same-store sales, with an adjusted EBITDA of $1.6 million, which is trending in the right direction as operational discipline strengthens.
We've implemented a new stylist, pay plan, and embedded a productivity-driven operating model.
Most importantly, stylus productivity is improving, which has a positive impact on their earnings and contributes to improved stylist retention.
As performance stabilizes, we expect our company-owned salons will increasingly serve as a center of excellence, testing learning and sharing best practices that can benefit our broader franchise Network.
In support of these 2 priorities.
We are advancing several key secondary initiatives aimed at positioning Regis for durable system-wide growth.
Strengthening our people, and culture, and driving technology and digital acceleration across the business.
Together, these efforts are designed to enhance our operational performance, reinforce our brand leadership and create sustainable, long-term value for all stakeholders.
In our portfolio Brands, we are extending key. Elements of the Supercuts transformation, including online, booking transparent, pricing, and loyalty integration.
Rather than waiting for later quarters, we've accelerated this work because the benefits are clear and immediate.
We're also piloting brand specific initiatives designed to strengthen performance across the portfolio.
Technology continues to be a critical enabler of transformation as well. We're stabilizing and optimizing our PS and booking platforms. While assessing broader modernization opportunities across the Enterprise, our partnership with Forum 3 and the expansion of our digital, and AI initiatives will help us harness data more effectively to drive marketing efficiency, guest engagement, and operational simplicity.
And lastly our people, and our culture, our critical to the overall success of our company. At the heart of, this is The Stylist, the face of Our Brands, and the core of Our Guest experience.
A thriving, stylist Community drives guest, loyalty and business growth. Insights from our recent qualitative research are helping us better understand what fuels stylist engagement and retention in, today's styling industry, we're also focused on deepening connection and communication across the organization.
Ensuring every employee field leader and franchise owner understands how their efforts ladder up to our broader goals.
When our franchises Thrive, regious thrives and that alignment remains fundamental to Our Success.
In summary, we are off to a solid start to fiscal 2026. Our results. Reflect continued progress, on the fundamentals of improving, profitability and generating positive cash flow. We are steadily advancing the transformation of Supercuts and our company owned salons.
We are executing with discipline driving stronger alignment, across our teams and franchise partners, and building, real momentum behind the Strategic priorities we have outlined.
Well there's more work to do. We are encouraged by the progress, and the clear signals that are actions are taking hold.
I want to thank our teams, our franchisees, and our stylists, for their commitment and resilience together. We are building a stronger, more modern, and more unified Regis position for long-term growth and success.
With that, I'll turn the call over to Kirsten for a deeper. Look at the financial results.
Thanks Jim. Our fiscal 2026. First quarter results, include the results of the 281 company on salons that we acquired from a line in December of 2024 as a reminder, our results for this quarter reflect contributions from the acquired company on salons, but prior your results do not.
As Jim shared our first quarter results, reflect meaningful progress. In enhancing regis's financial performance in and advancing key initiatives to position regions for sustainable growth.
For the first quarter we delivered, same store sales growth.
A 177% increase in operating income and our fourth consecutive quarter of positive cash from operations.
Company owned salons, resulting from the acquisition of a line in December of 2024 as well as an increase in same store sales of 0 n.
This increase was partially offset by lower non-m margin, franchise, rental income, and royalties due to fewer franchise locations.
As of September 30th 2025, we had a net decrease of 757 franchise locations compared to September 30th of 2024 approximately. 300 of these locations are related to the alliance salons that converted from franchise to company-owned.
Sequentially. We had 54 fewer franchise locations compared to the prior fourth quarter of 2025.
The 4443 net, franchise closures year-over-year, excluding the alliance salons, that converted to company-owned, primarily involved underperforming stores that had significantly lower trailing 12 months sales volumes that are top performing locations, the performance gap between these closed doors and our highest performing units was approximately 350,000. Underscoring. The strong potential potential within our system and highlighting the opportunity. We have to further enhance, profitability, margins and cash flow generation as we continue executing our transformation strategy.
We continue to believe, fiscal year 2025 was the last year of closures, in this order of magnitude.
In terms of profitability, we reported Gap, operating income of 5.9 million, an increase of 3.8 million compared to 2.1 million in the year ago quarter.
This increase was primarily driven by operating income contribution from the acquired company-owned salons, which was partially offset by lower royalty revenues.
In addition, our continued focus on disciplined cost management led to lower DNA expenses that further supported the improvement in operating income.
Income from continuing operations was $1.4 million, compared to a loss from continuing operations of $1.8 million in the year-ago quarter.
The year-over-year improvement was driven by an increase in company-owned salon revenue, which was partially offset by lower royalties and an increase in net interest expense.
the increase in both operating income and income from continuing operations reflect growth and same store, sales discipline cost management and momentum in our Core Business,
Turning to our adjusted results. As a reminder, our adjusted results exclude stock-based compensation expense.
We believe this provides a clearer view of our underlying business performance. A Reconciliation of our gaap to non-gaap results is included in our press release.
For the first quarter, our Consolidated adjusted evaa was $8 million an increase of 4.3% compared to 7.6 million in the prior year quarter. The $400,000 Improvement was primarily driven by the ebaa contribution from the acquired company owned salons.
Our adjusted GNA was 10.4 million in the first quarter of fiscal year 2026 up from 10 million. In the year ago, quarter, this slide increased resulted from GNA associated with our additional company-owned. Salons, partly, offset by lower GNA expenses, resulting from our continued. Focus on disciplined cost management.
Adjusted EVA for our franchise segment was $6.4 million in the quarter, a $1.6 million decrease compared to $8 million in the prior year quarter.
This decrease was primarily due to lower royalties and fees in the current period which were partially offset by lower GNA expenses.
As a result franchise adjusted Eva, as a percentage of franchise Revenue was 16.5% down from 17.6% in the year ago quarter.
adjusted Diva dawa company owned Salon segment, improved by 1.9 million year-over-year to 1.6 million for the quarter primarily as a result of increased number of company owned salons,
Turning to cash flows.
For the 3 months, ended September 30th 2025. We generated 2.3 million in cash from operations which is an improvement of 3.6 million compared to a use of cash by operations of 1.3 million in the prior year period.
The increase in cash generation was driven.
By a net increase in advertising funds.
And income generated by company owned salons. As a reminder, when evaluating our reported cash flows, we believe it is important to understand that cash flows are derived from 2 sources
Cash is designated specifically for marketing purposes and not available for corporate use.
For the first 3 months of fiscal year 2026, our total reported cash from operations of 2.3 million is comprised of 1.1 million in cash generated for the add funds, which is restricted and 1.2 million in cash. Generated from our core operations, which is unrestricted importantly, the business continues to generate positive cash from operations, providing a strong foundation for growth and financial flexibility.
For fiscal year 2026, we anticipate a meaningful increase in unrestricted cash generated from our core operations compared to fiscal year 2025.
The expected Improvement is supported by continued operational strength, a full year of acquired company-owned Salon results in the absence of 1-time expenses. We experienced last fiscal year,
Additionally, working capital improvements are expected to further enhance cash generation from our core business.
Ad fund cash, which is designated specifically for marketing purposes and not available for corporate use, built up over fiscal year 2025. As we moderated spending to focus on executing our business transformation strategy.
Our marketing plans for fiscal year, 2026 anticipate anticipate deploying, this accumulated, add fund cash to support initiative aimed at driving growth.
As a result, we expect unrestricted. Cash generated from operations to be higher in fiscal year, 2026 compared to 2025 total reported cash from operations. May be lower than the prior year, due to the planned usage of AD fund cash.
In allocating Capital, our priorities remain the same reinvesting in the business to support growth, maintaining discipline debt management and evaluating potential strategic opportunities.
Turning to our balance sheet. In terms of liquidity, as of September 30, 2025, we had $25.5 million of available liquidity, including capacity under our revolving credit agreement, and $16.6 million in unrestricted cash and cash equivalents.
As of the end of the first fiscal quarter, we had outstanding debt of 124.8 million, excluding deferred financing costs and the value of warrants, plus a crude paid and kind interest.
as a reminder in accordance with gaap, our balance sheet includes approximately 211 million of operating lease liabilities related to our franchise Salon leases
These leases have a weighted average remaining term of less than 5 years. And the associated obligations are serviced directly by our franchises.
Provided that the franchisees continue to meet their lease payments as they historically have. We believe these amounts should not be considered part of our debt position. When evaluating our financial leverage, we expect these liabilities will continue to decrease over time as the leases mature and as we further reduce our use of franchise leases.
finally, we have received questions from shareholders, about the potential to refinance our existing debt
Given the terms of our agreement, the economics of refinancing do not support. Such a move in the near term, it would not be in the best interest of our shareholders.
Although our current interest rate is higher than the recent market levels, the impact of certain terms outweighs any interest savings from refinancing
We will continue to assess refinancing opportunities as our debt agreements mature and market conditions evolve.
In summary, our fiscal year, 2026 first quarter results, reflect meaningful progress, in strengthening regis's Financial profile.
Our adjusted IBA and positive operating cash flows demonstrate, the benefits of operating leverage and the contributions from the Align acquisition, while our balance sheet and liquidity position provide flexibility to support our strategic initiatives.
This concludes our prepared remarks, we will now open the call to any questions.
Good morning. We did have a few questions come through the chat. Uh I will read the question for you. Jim. Can you please can you please provide more details about pricing actions. You have taken and impact on traffic if any
That as a franchise, it works. And, uh, they'll take action on that. That was, uh, submitted to the franchisees and early October, um, and late September early October, and, uh, they'll, uh, they, they have been working on that. Uh, sense, in terms of q1. Uh, we did see, franchises begin to take further pricing actions even prior to the survey coming out. Uh, the survey just, uh, tends to, to have, uh, franchisees act, uh, that maybe haven't acted or, or don't have as good. A field based on the, the breadth of the area that they they own, um, and our corporate salons. Uh, we can be far more. Um, um, um, um, we we can handle those price changes uh as as we see fit. Um oftentimes the minimum wage increases, which we are experiencing as some of the states where our our um, corporate salons are positioned. Uh, will be
A driver of taking price, uh, and anywhere else that we feel that there is an opportunity based on on the local competition and what they're doing.
In terms of the same store, traffic sales, transition. Yes, that question as well. Any notable differences in our and and and and the operating area. We're not seeing anything significant when you look across uh the country or even within our corporate salons. We're not seeing anything significant there that would you know cause uh any
Any change in direction or Focus? Uh, it's pretty. It's it's typical to see the seasonality in our business. Uh put back to school as an example in in in July and August. And the expectancy is an hourly that we're going to see in our businesses, we had towards Thanksgiving and Christmas.
Thanks, Jim. We did have a couple of additional questions come in. Um, specifically, can you talk about traffic trends at Super Customer Style, if any?
Yeah, uh, Jason, that that came in. Uh I appreciate the question in terms of traffic trends at Supercuts, where, you know, we are we are seeing as you saw, you can see that the, the improvements we're seeing from a same sort of sales standpoint, and the focus that we have there. Uh, we do see, um, uh good, uh, continued improvements in that Arena, smarts out, we have opportunity. Um, and as you heard me say during the narrative, there are some things that we're we're working on right now, um, to, to address, um, traffic and and performance in that smart style brand, which is our our second largest brand obviously. Um, so there is a, there is a focus there uh to work in that Arena.
And then next bill chartres submitted a number of questions. I think to make this a little bit easier, we'll just go live and have Bill. Um ask the questions live, if that's okay.
Though, the operator will allow you to ask questions, just take your phone off of mute, please.
Thank you. Can you guys hear me?
Yes. Yep, we can. Okay, okay, great. Yeah, good morning. Yeah. And and great quarter. Um, I guess the the question I have is, you know, you talked about the um, 54 stores that were sequentially. Um, shut and that annualized is about, you know, 200 or down 50% from um, the previous year.
is that kind of the way we should look at it but this year,
Store closures are reduced by half and it's about 200.
Yeah, you're right, we did close 54 locations in the first quarter. Um, you know, I'm not I'm not going to provide guidance per se on the number of salons, we expect to close
Um, however, we do not expect it to be at the levels of the last few years. I mean, generally our salons, they close at the end of their leases and the last few years we've had a large number of leases that came to their, you know, end of their lease life.
So, um, you know, we do our best to predict store closures. We use key metrics such as unit volume and rent percent. But there's off you know often situations that we can't predict such as you know, the landlord requiring a significant rent increase.
you get to like 4600 to store and and you know roughly with about 3,600 stores, its million dollars, you know, to all of the franchisees um is that right is is that um the correct math, you know generally speaking and I know it wouldn't help your company owned stores because you already have a very large nol
Yeah, Bill the gym. Uh thank you and and glad to have you on um your math is correct. Um that that is a significant uh positive impact. It's it's actually been something that that the beauty industry has been working on for the better part of 30 years. It's something that restaurant industry has enjoyed since 1993 and unfortunately, no parody with with our industry. Uh, but with the big beautiful bills, you suggest. Uh, and, and and stated that is, that is now um, um, something that our franchise owners are going to enjoy, uh, and as per your math, there is significant, um, material impact, um, to to their, their profitability. Um, in fact, right now just just this week Monday. Um, as you know, I'm a member of the board of directors for the ISBN. And, uh, I sit on a subcommittee, uh, of the ISBN board myself, and Senior leaders from both Great Clips and Sport Clips.
Um, and we are working on, uh, providing important guidance to owners because the next step of this is ensuring that owners understand, how do I do this in terms of, uh, when when tax time comes here in the spring, um, so we're ensuring that they have good guidance on that, so that they do enjoy, uh, the full benefits so, uh, much more to come on that but it's something that we're heavily engaged with, um, and are going to drive, um, to ensure that everyone enjoys the the benefit, uh, it's great. Great to hear that. And, and then, um, with GNA, um, previously you've given kind of like, annual guidance on GNA and and and where it's going. Um, do you plan to can you can Christian? Can you give us any more insight into GNA for for this year?
So, we have, in the past, and um,
Scripts. But on an annualized basis, we expect GNA to be in the range of 40 to 43 which includes GNA associated with the, the aligned transactions. So okay.
Okay, that's great. Yeah, that that'll help me a lot. And then in the, in the company-owned stores, um, do those all consist of a line stores? Now, do you have any other straggler company-owned stores that, you know, really are just leases that are waiting to roll over or have all of those been charged off? I mean, when I look at the company-owned revenue and expenses, am I looking basically at a line at this point
We do have a handful of of company owned salons. Um, you know, there's the select salons in Chicago, um, and maybe a couple a couple more. So it's primarily the salons acquired by. Um,
A line and then a handful of others that that you know, are are generally good swans for us.
Okay.
And then, um, you spoke in the prepared Mark about, um, you know, launching some new designs and stuff like that is it, is it actually like a prototype store? Is it, is it kind of like a super, super cut select that we're going to see. Um, and maybe we could even visit or, um, how is this going to be rolled out?
Yeah, Bill a good question. Um actually your your uh connection to Supercut select? We we have leaned in to Supercut select it has been successful for us. Um in terms of the work that we've done, gosh now for you know a good amount of time um over the course of this past quarter or 2. Uh in terms of developing the Prototype we're actually working with an outside professional design service. That's helped us with this. Uh, and to also ensure that it it, it, it, it connects to all the brand. Uh, the transformative brand work that we're doing that, I spoke to, in my narrative today. We want to make sure that that the look and the feel of the salon connects to where we're going in terms of the stylus and the customer, uh, and how the brand.
Eventually getting to the, the final prototype. Um, I anticipate that construction will start in early 2026. Uh, and will most certainly, um, um, advise, uh, more specifically as we get closer. I, I want to make sure that we've got materials at the right cost and that, that costs us a little extra time. That's okay. Um, I affordability for our franchisees, uh, is a real important component here but I I I'm really pleased and, uh, excited. You know, I've been in this industry a long time, I I really like what um we've created and um I think it's going to truly embody what uh the future of of of Supercuts will be
Okay, great. And then the last thing, um, just the CEO search update, um, you know, when when do you when, when, when does the board expect to have a, a decision on that? Yeah, it's a fair question and I'm asked often, um, I'm continuing in the interim role um, obviously and um, as the board continues to evaluate prospects, um, and and certainly those prospects include me, um, heavily engaged and focused and, uh, working very, very closely, uh, with the board and, and I anticipate, uh, that they'll, they'll, they'll make a final decision in the coming months. And, um, I'm pleased with the approach that they're taking, uh, to ensure
Sure, that we have uh the Right leader uh in place for the organization.
Great.
Well, that's all the questions I have. Thank you guys. Thank thanks, Bill.
Um, we have 1 more 1. Other question that came through on the chat. It relates to the refinancing when you say, no debt repayment in the near term, what does the near-term mean the make call requirement expires next June? Um,
so as it relates, as I mentioned, yeah, we're very looking very closely at them and the economics right now don't make sense but
You know, as it continues to mature like beyond June. As you mentioned, the economics, do get better. So, um, believe me, we continue to evaluate this and monitor, the capital markets closely, and, you know, we'll address this.
Uh, as soon as it makes sense to do so.
With that, I think that that ends the end of our Q&A session. Um, thank you for your interest in Regis Corporation. And if you have any further questions, um, feel free to reach out to me, or to, um, the mailbox investor relations at Regis corp.com and happy to answer. Those have a great morning. Thank you.