The Company Continues To Make Significant
Progress In Its Transition To A Fully-Franchised Model With The
Sale And Conversion Of An Additional 443 Company-Owned Salons To
Its Asset-Light Franchise Portfolio During The Quarter;
Year-To-Date, The Company Has Sold And Converted 988 Company-Owned
Salons To Its Franchise Portfolio
Approximately 900 Company-Owned Salons, Or
Approximately 50% Of The Remaining Company-Owned Salon Portfolio
Available For Sale Are Now In Various Stages Of Negotiations To Be
Purchased After Adjusting For Expected Salon Closures
Significant Progress In Transition Enables
The Company's Retention Of Guggenheim Securities, LLC, The
Investment Banking And Capital Markets Business Of Guggenheim
Partners, LLC, As Its Exclusive Investment Banker To Identify
Sources Of Replacement Debt Financing On Terms Appropriate For A
Fully-Franchised Capital-Light Growth Platform
The Company's Board Of Directors Elects Hugh
Sawyer, President and Chief Executive Officer, As Chairman Of The
Company's Board Of Directors
Dave Williams To Remain The Board's Lead
Independent Director
Regis Corporation (NYSE:RGS):
Three Months Ended December
31,
Six Months Ended December
31,
(Dollars in thousands)
2019
2018
2019
2018
Consolidated Revenue
$208,765
$274,671
$455,803
$562,506
System-wide Revenue (1)
$428,731
$451,045
$878,019
$916,257
System-wide Same-Store Sales Comps (2)
(2.3
)%
0.9
%
(1.7
)%
0.8
%
Franchise Same-Store Sales Comps (2)
(1.4
)%
1.4
%
(0.8
)%
1.3
%
Company-owned Same-Store Sales Comps
(3.6
)%
0.5
%
(2.7
)%
0.5
%
Net (Loss) Income From Continuing
Operations
$(9,481
)
$417
$(23,659
)
$(46
)
Diluted (Loss) Income per Share From
Continuing Operations
$(0.26
)
$0.01
$(0.66
)
$0.00
EBITDA (3)
$(986
)
$16,956
$(6,828
)
$26,723
as a percent of revenue
(0.5
)%
6.2
%
(1.5
)%
4.8
%
As Adjusted (3)
Net Income, as Adjusted
$4,622
$8,039
$18,522
$19,356
Diluted Income per Share, as Adjusted
$0.13
$0.18
$0.50
$0.43
EBITDA, as Adjusted (3)
$17,014
$20,615
$46,799
$45,749
as a percent of revenue
8.1
%
7.5
%
10.3
%
8.1
%
(1) Represents total sales within the
system, excluding TBG.
(2) System-wide and franchise same-store
sales excludes TBG in both periods.
(3) See GAAP to non-GAAP reconciliations,
within the attached section titled "Non-GAAP Reconciliations".
Regis Corporation (NYSE: RGS), a leader in the haircare
industry, whose primary business is franchising, owning and
operating technology enabled hair salons, today reported second
quarter 2020 net loss from continuing operations of $9.5 million,
or $0.26 loss per diluted share as compared to net income from
continuing operations of $0.4 million, or $0.01 income per diluted
share in the second quarter of 2019. The Company’s reported results
include $20.7 million of non-cash goodwill derecognition associated
with the sale of 443 salons to franchisees, partially offset by
$2.6 million of other discrete items. Excluding discrete items and
the income from discontinued operations, the Company reported
second quarter 2020 adjusted net income of $4.6 million, or $0.13
earnings per diluted share as compared to adjusted net income of
$8.0 million, or $0.18 earnings per diluted share, for the same
period last year. The year-over-year decrease in adjusted net
income was driven primarily by the elimination of adjusted net
income that had been generated in the prior year period from the
1,447 company-owned salons that were sold and converted to the
Company’s asset-light franchise portfolio over the past twelve
months.
Total revenue in the quarter of $208.8 million decreased $65.9
million, or 24.0%, year-over-year driven primarily by the
conversion of a net 1,447 company-owned salons to the Company's
asset-light franchise portfolio over the past 12 months. These
reductions were partially offset by revenue growth of $39.4 million
in the Company's franchise segment. The Company noted that in
connection with the new leasing guidance, it now records franchise
rental income and the corresponding rental expense on separate line
items. The net impact is to gross up both revenue and expense with
no impact to overall earnings. The impact during the second quarter
was an increase in revenue and expense by $33.6 million, with no
impact on operating income.
Second quarter adjusted EBITDA of $17.0 million decreased $3.6
million, versus the same period last year. Excluding the $15.0 and
$9.4 million gain from the sale of company-owned salons during the
current and prior year quarter, respectively, adjusted EBITDA of
$2.0 million was $9.2 million unfavorable versus the same period
last year driven primarily by the elimination of EBITDA that had
been generated in the prior year from the 1,447 company-owned
salons that were sold and converted to the Company’s asset-light
franchise portfolio over the past 12 months.
Hugh Sawyer, Chairman, President and Chief Executive Officer,
commented, "As we disclosed at the close of fiscal year 2019, the
transition to a capital-light franchise model initially has a
dilutive impact on the Company’s Adjusted EBITDA, as we saw this
quarter. Nevertheless, we remain convinced that a fully-franchised
business that generates a higher return on its capital will prove
to be in the best long-term interests of our shareholders.” Mr.
Sawyer continued, “The second quarter represents an important
milestone in our transition where we gained additional clarity into
the estimated end-state of our transformational process. We now
believe that our transition to a fully-franchised business will be
substantially complete by the end of this calendar year.” Mr.
Sawyer concluded, “This improved visibility related to the speed of
our transition enabled us to begin meaningful reductions in our
annualized expenses and to initiate plans to re-engineer our
capital structure in expectation of our estimated end-state and a
new organic growth phase as a capital-light franchisor.”
Second Quarter Segment
Results
Franchise
Three Months Ended December
31,
Increase (Decrease)
Six Months Ended December
31,
Increase (Decrease)
(Dollars in millions) (1)
2019
2018
2019
2018
Revenue
Product
$
16.2
$
10.6
$
5.6
$
28.0
$
20.7
$
7.3
Product sold to TBG mall locations
0.7
7.2
(6.5
)
2.0
12.7
(10.7
)
Total product
$
16.9
$
17.8
$
(0.9
)
$
30.0
$
33.4
$
(3.4
)
Royalties and fees
29.3
22.6
6.7
57.4
45.0
12.4
Franchise rental income
33.6
—
33.6
65.1
—
65.1
Total franchised salons revenue
$
79.8
$
40.4
$
39.4
$
152.5
$
78.4
$
74.1
Franchise Same-Store Sales Comps (2)
(1.4
)%
1.4
%
(0.8
)%
1.3
%
EBITDA, as Adjusted
$
13.1
$
8.5
$
4.6
$
24.9
$
18.3
$
6.6
as a percent of revenue
16.4
%
20.9
%
16.4
%
23.4
%
as a percent of adjusted revenue
37.6
%
33.4
%
38.8
%
36.8
%
Total Franchise Salons
4,790
4,266
524
as a percent of total Company-owned and
Franchise salons
67.8
%
53.8
%
(1) Variances calculated on amounts shown
in millions may result in rounding differences.
(2) TBG is excluded from same-store sales
in both periods.
Second quarter Franchise revenue was $79.8 million, a $39.4
million, or 97.5% increase compared to the prior year quarter and
included franchise rental income of $33.6 million due to the
adoption of the new lease accounting requirements. Royalties and
fees were $29.3 million, a $6.7 million, or 29.8% increase versus
the same period last year. Royalties and fees increased due to
increased franchise salon counts. Product sales to franchisees of
$16.9 million decreased $0.9 million versus the same period last
year driven primarily by lower sales to TBG, partially offset by
increased franchise salon counts.
Franchise adjusted EBITDA of $13.1 million grew $4.6 million, or
54.4% year-over-year primarily driven by the increase in salon
counts.
Company-Owned Salons
Three Months Ended December
31,
(Decrease)
Six Months Ended December
31,
(Decrease)
(Dollars in millions) (1)
2019
2018
2019
2018
Total Revenue
$
128.9
$
234.3
$
(105.3
)
$
303.4
$
484.1
$
(180.7
)
Company-owned Same-Store Sales Comps
(3.6
)%
0.5
%
(2.7
)%
0.5
%
Year-over-Year Ticket change
3.0
%
5.2
%
3.0
%
4.7
%
Year-over-Year Transaction change
(6.6
)%
(4.7
)%
(5.7
)%
(4.2
)%
EBITDA, as Adjusted
$
4.2
$
21.3
$
(17.1
)
$
15.7
$
48.9
$
(33.2
)
as a percent of revenue
3.3
%
9.0
%
5.2
%
10.1
%
Total Company-owned salons (2)
2,277
3,668
(1,391
)
as a percent of total Company-owned and
Franchise salons
32.2
%
46.2
%
(1) Variances calculated on amounts shown
in millions may result in rounding differences.
(2) Includes the 207 mall-based salons
that were acquired from TBG on December 31, 2019.
Second quarter revenue for the Company-owned salon segment
decreased $105.3 million, or 45.0%, versus the prior year to $128.9
million. The year-over-year decline in revenue was driven by the
decrease of a net 1,447 salons sold and converted to the Company's
asset-light franchise portfolio over the past 12 months, the
closure of a net 151 unprofitable salons over the past 12 months
and by a decline in Company-owned same-store sales of 3.6%. The
year-over-year decline in company-owned same store sales was driven
by a 6.6% decrease in transactions, which may be partially related
to the shorter number of retail days between Thanksgiving and
Christmas in 2019, partially offset by a 3.0% increase in average
ticket.
Second quarter adjusted EBITDA of $4.2 million decreased $17.1
million, or 80.1% versus the same period last year driven primarily
by the elimination of EBITDA that had been generated in the prior
year period from the 1,447 company-owned salons that were sold and
converted to the Company's asset-light franchise portfolio over the
past 12 months and the decline in service and product margins,
partially offset by a decrease in marketing spend.
Other Key Events
- In January 2020, the Company announced further reductions to
general and administrative expenses that are expected to save
approximately $19 million on an annualized basis.
- The Company's retention of Guggenheim Securities, LLC as its
exclusive investment banker to identify sources of replacement debt
financing on terms appropriate for a fully-franchised capital-light
growth platform. The Company expects to complete its replacement
debt financing no later than the fourth quarter of this fiscal
year.
- The Company's Board of Directors elected Hugh Sawyer, President
and Chief Executive Officer, as Chairman of the Company's Board of
Directors. Dave Williams to remain the Board's Lead Independent
Director.
- The Company closed on the sale of its corporate headquarters in
December 2019 resulting in a $4.0 million gain in the three and six
months ended December 31, 2019.
- The Company sold and converted an additional 133 company-owned
salons to the Alline Salon Group, who is now the Company's largest
franchisee and sole Holiday Hair franchisee.
- Announced the sale of 121 SmartStyle salons to the Yellowhammer
Salon Group.
- Closure of 51 non-performing company-owned salons in the
quarter which were at or near the end of their lease term.
- The Company integrated a small number of former TBG North
American salons which are now being managed in the normal course.
These salons represent approximately 10% of the company-owned salon
portfolio.
- The Company's new internally developed back office salon
management system is in Beta.
- The Company is preparing for the launch of its new private
label haircare products under its "Blossom" brand and the relaunch
of its repackaged and reformulated successful "Designline" owned
brand in the Spring.
- The Company entered into an agreement to sell its stake in the
Empire Education Group which allows the Company to de-complicate
and de-risk its business while preserving and enhancing the
essential value we derive from our relationship with Empire
Education.
- The Company continues to make meaningful progress on its
previously disclosed effort to convert to a fully-franchised model.
During the quarter, it sold and transferred 443 company-owned
salons to its asset-light franchise portfolio. In addition, the
Company has a pipeline of approximately 900 salons to be
transitioned in various stages of negotiation. The pipeline
represents approximately 50% of the Company-owned salon portfolio
when taking into account expected closures of approximately 350 -
500 company-owned salon locations. The Company estimates that its
transition to a franchise platform will be substantially complete
by calendar year-end.
- The impact of the transactions closed in the quarter is as
follows:
Three Months Ended December
31,
Increase (Decrease)
Six Months Ended December
31,
Increase (Decrease)
(Dollars in thousands)
2019
2018
2019
2018
Salons sold to franchisees
443
133
310
988
257
731
Cash proceeds received
$
31,468
$
11,628
$
19,840
$
69,414
$
24,050
$
45,364
Gain on sale of venditions, excluding
goodwill derecognition
$
14,993
$
9,369
$
5,624
$
41,213
$
16,501
$
24,712
Non-cash goodwill derecognition
(20,685
)
(6,504
)
14,181
(52,765
)
(17,596
)
35,169
(Loss) Gain from sale of salon assets to
franchisees, net
$
(5,692
)
$
2,865
$
(8,557
)
$
(11,552
)
$
(1,095
)
$
(10,457
)
Adoption of New Accounting
Standard
On July 1, 2019, the Company adopted amended lease guidance. The
guidance was adopted on a prospective basis and results in an
increase in franchise revenue and franchise rent expense. There is
no impact on operating income.
Non-GAAP
reconciliations:
For GAAP to non-GAAP reconciliations, please refer to 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 second quarter results tomorrow, February 4, 2020, at 9
a.m., Central time. Interested parties are invited to participate
in the live webcast by logging on to www.regiscorp.com or
participate via telephone by dialing (800) 367-2403 and entering
access code 8274513. A replay of the presentation will be available
later that day. The replay phone number is (888) 203-1112, access
code 8274513.
About Regis Corporation Regis Corporation (NYSE:RGS) is a
leader in beauty salons and cosmetology education. As of December
31, 2019, the Company franchised, owned or held ownership interests
in 7,152 worldwide locations. Regis’ franchised and corporate
locations operate under concepts such as Supercuts®, SmartStyle®,
Cost Cutters®, Roosters® and First Choice Haircutters®. Regis
maintains an ownership interest in Empire Education Group in the
U.S. 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 factors include the continued
ability of the Company to implement its strategy, priorities and
initiatives including the re-engineering of our corporate and field
infrastructure; our and our franchisee's ability to attract, train
and retain talented stylists; financial performance of our
franchisees; acceleration of sale of salons to franchisees; if our
capital investments in technology do not achieve appropriate
returns; our ability to manage cyber threats and protect the
security of potentially sensitive information about our guests,
employees, vendors or Company information; the ability to operate
or sell the salons transferred back from TBG; the outcome of the
review by the administrator in TBG's insolvency proceedings in the
United Kingdom; the ability of the Company to maintain a
satisfactory relationship with Walmart; marketing efforts to drive
traffic; changes in regulatory and statutory laws including
increases in minimum wages; our ability to maintain and enhance the
value of our brands; premature termination of agreements with our
franchisees; reliance on information technology systems; reliance
on external vendors; consumer shopping trends and changes in
manufacturer distribution channels; competition within the personal
hair care industry; changes in tax exposure; changes in healthcare;
changes in interest rates and foreign currency exchange rates;
failure to standardize operating processes across brands; financial
performance of Empire Education Group; the continued ability of the
Company to implement cost reduction initiatives; compliance with
debt covenants and access to existing revolving credit facility;
changes in economic conditions; changes in consumer tastes and
fashion trends; exposure to uninsured or unidentified risks;
reliance on our management team and other key personnel or other
factors not listed above. Additional information concerning
potential factors that could affect future financial results is set
forth under Item 1A on 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.
REGIS CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited)
(Dollars in thousands, except
share data)
December 31, 2019
June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
49,783
$
70,141
Receivables, net
27,756
30,143
Inventories
68,413
77,322
Other current assets
32,458
33,216
Total current assets
178,410
210,822
Property and equipment, net
68,917
78,090
Goodwill
293,019
345,718
Other intangibles, net
8,159
8,761
Right of use asset
911,948
—
Other assets
38,144
34,170
Non-current assets held for sale
—
5,276
Total assets
$
1,498,597
$
682,837
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
55,587
$
47,532
Accrued expenses
59,707
80,751
Short-term lease liability
156,154
—
Total current liabilities
271,448
128,283
Long-term debt, net
60,000
90,000
Long-term lease liability
767,624
—
Long-term financing liabilities
28,485
28,910
Other noncurrent liabilities
95,979
111,399
Total liabilities
1,223,536
358,592
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.05 par value; issued and
outstanding 35,563,611 and 36,869,249 common shares at December 31,
2019 and June 30, 2019 respectively
1,778
1,843
Additional paid-in capital
21,230
47,152
Accumulated other comprehensive income
9,480
9,342
Retained earnings
242,573
265,908
Total shareholders’ equity
275,061
324,245
Total liabilities and
shareholders’ equity
$
1,498,597
$
682,837
REGIS CORPORATION
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (Unaudited)
For The Three and Six Months
Ended December 31, 2019 and 2018
(Dollars and shares in
thousands, except per share data amounts)
Three Months Ended December
31,
Six Months Ended December
31,
2019
2018
2019
2018
Revenues:
Service
$
101,805
$
190,419
$
243,746
$
398,267
Product
43,983
61,649
89,639
119,240
Royalties and fees
29,347
22,603
57,364
44,999
Franchise rental income
33,630
—
65,054
—
Total revenue
208,765
274,671
455,803
562,506
Operating expenses:
Cost of service
67,358
114,931
157,840
236,428
Cost of product
27,258
36,350
53,585
68,531
Site operating expenses
26,330
35,563
59,272
72,384
General and administrative
32,691
45,836
73,316
93,563
Rent
20,495
34,642
44,759
70,620
Franchise rent expense
33,630
—
65,054
—
Depreciation and amortization
7,747
8,900
17,127
19,102
TBG mall location restructuring
722
—
2,222
—
Total operating expenses
216,231
276,222
473,175
560,628
Operating (loss) income
(7,466
)
(1,551
)
(17,372
)
1,878
Other (expense) income:
Interest expense
(1,464
)
(1,072
)
(2,903
)
(2,078
)
(Loss) gain from sale of salon assets to
franchisees, net
(5,692
)
2,865
(11,552
)
(1,095
)
Interest income and other, net
4,346
629
4,517
989
(Loss) income from continuing operations
before income taxes
(10,276
)
871
(27,310
)
(306
)
Income tax benefit (expense)
795
(454
)
3,651
260
(Loss) income from continuing
operations
(9,481
)
417
(23,659
)
(46
)
Income from discontinued operations, net
of taxes
79
6,113
452
5,849
Net (loss) income
$
(9,402
)
$
6,530
$
(23,207
)
$
5,803
Net (loss) income per share:
Basic:
(Loss) income from continuing
operations
$
(0.26
)
$
0.01
$
(0.66
)
$
0.00
Income from discontinued operations
0.00
0.14
0.01
0.13
Net (loss) income per share, basic (1)
$
(0.26
)
$
0.15
$
(0.64
)
$
0.13
Diluted:
(Loss) income from continuing
operations
$
(0.26
)
$
0.01
$
(0.66
)
$
0.00
Income from discontinued operations
0.00
0.14
0.01
0.13
Net (loss) income per share, diluted
(1)
$
(0.26
)
$
0.15
$
(0.64
)
$
0.13
Weighted average common and common
equivalent shares outstanding:
Basic
35,798
43,619
36,028
44,175
Diluted
35,798
44,479
36,028
44,175
(1) Total is a recalculation;
line items calculated individually may not sum to total due to
rounding.
REGIS CORPORATION
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (Unaudited)
For the Six Months Ended
December 31, 2019 and 2018
(Dollars in thousands)
Six Months Ended December
31,
2019
2018
Cash flows from operating activities:
Net (loss) income
$
(23,207
)
$
5,803
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Non-cash adjustments related to
discontinued operations
(586
)
176
Depreciation and amortization
14,484
16,799
Deferred income taxes
(5,227
)
(7,915
)
Gain from sale of company headquarters,
net
(3,990
)
—
Loss from sale of salon assets to
franchisees, net
11,552
1,095
Salon asset impairments
2,643
2,303
Stock-based compensation
2,139
4,552
Amortization of debt discount and
financing costs
138
138
Other non-cash items affecting
earnings
(243
)
(352
)
Changes in operating assets and
liabilities, excluding the effects of asset sales
(17,032
)
(33,223
)
Net cash used in operating activities
(19,329
)
(10,624
)
Cash flows from investing activities:
Capital expenditures
(17,576
)
(16,804
)
Proceeds from sale of assets to
franchisees
69,414
24,050
Costs associated with sale of salon assets
to franchisees
(1,550
)
—
Proceeds from company-owned life insurance
policies
—
24,617
Proceeds from sale of company
headquarters
8,996
—
Net cash provided by investing
activities
59,284
31,863
Cash flows from financing activities:
Repayment of long-term debt
(30,000
)
—
Repurchase of common stock
(28,246
)
(65,136
)
Taxes paid for shares withheld
(1,809
)
(2,305
)
Net proceeds from sale and leaseback
transaction
—
18,068
Sale and leaseback payments
(480
)
—
Net cash used in financing activities
(60,535
)
(49,373
)
Effect of exchange rate changes on cash
and cash equivalents
122
(174
)
Decrease in cash, cash equivalents, and
restricted cash
(20,458
)
(28,308
)
Cash, cash equivalents and restricted
cash:
Beginning of period
92,379
148,774
End of period
$
71,921
$
120,466
REGIS CORPORATION Same-Store
Sales
SYSTEM-WIDE SAME-STORE SALES (1):
For the Three Months
Ended
December 31, 2019
December 31, 2018
Service
Retail
Total
Service
Retail
Total
SmartStyle
(2.0
)%
(9.6
)%
(4.3
)%
4.1
%
(2.1
)%
2.1
%
Supercuts
(0.4
)
(11.8
)
(1.1
)
1.0
(4.5
)
0.6
Signature Style
(1.5
)
(8.0
)
(2.3
)
0.5
(1.7
)
0.3
Total
(1.1
)%
(9.6
)%
(2.3
)%
1.5
%
(2.5
)%
0.9
%
For the Six Months
Ended
December 31, 2019
December 31, 2018
Service
Retail
Total
Service
Retail
Total
SmartStyle
(0.9
)%
(8.6
)%
(3.1
)%
2.7
%
(1.2
)%
1.6
%
Supercuts
0.2
(9.8
)
(0.4
)
1.1
(4.9
)
0.7
Signature Style
(1.3
)
(6.7
)
(2.0
)
0.8
(2.4
)
0.5
Total
(0.5
)%
(8.3
)%
(1.7
)%
1.4
%
(2.3
)%
0.8
%
(1) System-wide same-store sales are
calculated as the total change in sales for system-wide
company-owned and franchise locations for more than one year
(including TBG mall locations in 2019) that were open on a specific
day of the week during the current period and the corresponding
prior period. Quarterly and year-to-date system-wide same-store
sales are the sum of the system-wide same-store sales computed on a
daily basis. Franchise salons that do not report daily sales are
excluded from same-store sales. Locations relocated within a
one-mile radius are included in same-store sales as they are
considered to have been open in the prior period. System-wide
same-store sales are calculated in local currencies to remove
foreign currency fluctuations from the calculation. TBG salons were
not a franchise location in fiscal year 2020 so by definition they
are not included in system-wide same-store sales. TBG same-store
sales are excluded from fiscal year 2019 same-store sales to be
comparative to fiscal year 2020.
FRANCHISE SAME-STORE SALES (1):
For the Three Months
Ended
December 31, 2019
December 31, 2018
Service
Retail
Total
Service
Retail
Total
SmartStyle
(5.1
)%
(14.8
)%
(7.6
)%
1.1
%
(20.0
)%
(5.6
)%
Supercuts
0.1
(10.5
)
(0.5
)
2.3
(5.8
)
1.8
Signature Style
(0.4
)
(6.8
)
(1.4
)
1.9
(1.9
)
1.3
Total
(0.4
)%
(10.1
)%
(1.4
)%
2.2
%
(5.7
)%
1.4
%
For the Six Months
Ended
December 31, 2019
December 31, 2018
Service
Retail
Total
Service
Retail
Total
SmartStyle
(4.3
)%
(16.6
)%
(7.6
)%
1.7
%
(17.7
)%
(4.3
)%
Supercuts
0.9
(8.8
)
0.3
1.9
(5.3
)
1.5
Signature Style
—
(7.3
)
(1.0
)
2.2
(3.7
)
1.3
Total
0.3
%
(10.1
)%
(0.8
)%
2.0
%
(5.7
)%
1.3
%
(1) Franchise same-store sales are
calculated as the total change in sales for salons that have been a
franchise location for more than one year that were open on a
specific day of the week during the current period and the
corresponding prior period. Quarterly and year-to-date franchise
same-store sales are the sum of the franchise same-store sales
computed on a daily basis. Franchise salons that do not report
daily sales are excluded from same-store sales. Locations relocated
within a one-mile radius are included in same-store sales as they
are considered to have been open in the prior period. Franchise
same-store sales are calculated in local currencies to remove
foreign currency fluctuations from the calculation. TBG salons were
not a franchise location in fiscal year 2020 so by definition they
are not included in system-wide same-store sales. TBG same-store
sales are excluded from fiscal year 2019 same-store sales to be
comparative to fiscal year 2020.
COMPANY-OWNED SAME-STORE SALES (2):
For the Three Months
Ended
December 31, 2019
December 31, 2018
Service
Retail
Total
Service
Retail
Total
SmartStyle
(1.2
)%
(8.6
)%
(3.5
)%
4.3
%
(1.0
)%
2.6
%
Supercuts
(3.9
)
(17.7
)
(5.1
)
(1.4
)
(2.9
)
(1.5
)
Signature Style
(2.5
)
(9.4
)
(3.3
)
(0.1
)
(1.6
)
(0.3
)
Total
(2.1
)%
(9.3
)%
(3.6
)%
1.0
%
(1.4
)%
0.5
%
For the Six Months
Ended
December 31, 2019
December 31, 2018
Service
Retail
Total
Service
Retail
Total
SmartStyle
(0.1
)%
(7.1
)%
(2.2
)%
2.8
%
(0.4
)%
1.8
%
Supercuts
(3.6
)
(13.4
)
(4.4
)
(0.3
)
(4.4
)
(0.6
)
Signature Style
(2.4
)
(6.0
)
(2.8
)
0.1
(1.4
)
—
Total
(1.6
)%
(7.2
)%
(2.7
)%
0.9
%
(1.1
)%
0.5
%
(2) Company-owned same-store sales are
calculated as the total change in sales for company-owned locations
that were open on a specific day of the week during the current
period and the corresponding prior period. Quarterly and
year-to-date company-owned same-store sales are the sum of the
company-owned same-store sales computed on a daily basis. Locations
relocated within a one-mile radius are included in same-store sales
as they are considered to have been open in the prior period.
Company-owned same-store sales are calculated in local currencies
to remove foreign currency fluctuations from the calculation.
REGIS CORPORATION
System-Wide Location
Counts
December 31, 2019
June 30, 2019
FRANCHISE SALONS:
SmartStyle/Cost Cutters in Walmart
Stores
969
615
Supercuts
2,493
2,340
Signature Style
1,156
766
Total North American Franchise salons
4,618
3,721
Total International Salons (1)
172
230
Total Franchise Salons
4,790
3,951
as a percent of total Company-owned and
Franchise salons
67.8
%
56.0
%
COMPANY-OWNED SALONS:
SmartStyle/Cost Cutters in Walmart
Stores
1,159
1,550
Supercuts
262
403
Signature Style
649
1,155
Mall-based salons (2)
207
—
Total Company-owned salons
2,277
3,108
as a percent of total Company-owned and
Franchise salons
32.2
%
44.0
%
OWNERSHIP INTEREST LOCATIONS:
Equity ownership interest locations
85
86
Grand Total, System-wide
7,152
7,145
(1) Canadian and Puerto Rican salons are
included in the North American salon totals.
(2) The mall-based salons were acquired on
December 31, 2019 resulting in no impact to the Statement of
Operations for the three and six months ended December 31,
2019.
Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating (loss) income,
net income, net income per diluted share, and other non-GAAP
financial measures provides meaningful insight into our ongoing
operating performance and an alternative 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 research analysts frequently
use to analyze financial performance.
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 in
that 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.
Non-GAAP reconciling items for the three and six ended months
ended December 31, 2019 and 2018:
The following information is provided to give qualitative and
quantitative information related to items impacting comparability.
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 which 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 following items have been
excluded from our non-GAAP results:
- Professional fees.
- Severance expense.
- Legal fees.
- TBG restructuring.
- Goodwill derecognition.
- TBG discontinued operations.
- Employee litigation reserve.
- Corporate office transition.
REGIS CORPORATION
Reconciliation of selected
U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except
per share data)
(Unaudited)
Reconciliation of U.S. GAAP
operating (loss) income and U.S. GAAP net (loss) income to
equivalent non-GAAP measures
Three Months Ended December
31,
Six Months Ended December
31,
U.S. GAAP financial line
item
2019
2018
2019
2018
U.S. GAAP revenue
$
208,765
$
274,671
$
455,803
$
562,506
U.S. GAAP operating (loss)
income
$
(7,466
)
$
(1,551
)
$
(17,372
)
$
1,878
Non-GAAP operating expense adjustments
(1)
Professional fees
General and administrative
115
2,759
115
4,050
Severance
General and administrative
497
70
2,917
2,790
Legal fees
General and administrative
—
439
—
439
Corporate office transition
Rent
404
—
404
—
Employee litigation reserve
Site operating expenses
(600
)
—
(600
)
—
TBG restructuring
TBG restructuring
968
—
2,468
—
Total non-GAAP operating expense
adjustments
1,384
3,268
5,304
7,279
Non-GAAP operating (loss) income
(1)
$
(6,082
)
$
1,717
$
(12,068
)
$
9,157
U.S. GAAP net (loss) income
$
(9,402
)
$
6,530
$
(23,207
)
$
5,803
Non-GAAP net income
adjustments:
Non-GAAP revenue adjustments
—
—
—
—
Non-GAAP operating expense adjustments
1,384
3,268
5,304
7,279
Corporate office transition
Interest income and other,
net
(3,990
)
—
(3,990
)
—
Goodwill derecognition
Interest income and other,
net
20,685
6,504
52,765
17,596
Income tax impact on Non-GAAP adjustments
(2)
Income taxes
(3,976
)
(2,150
)
(11,898
)
(5,473
)
TBG discontinued operations, net of income
tax
Loss from discontinued
operations, net of tax
(79
)
(6,113
)
(452
)
(5,849
)
Total non-GAAP net income adjustments
14,024
1,509
41,729
13,553
Non-GAAP net income
$
4,622
$
8,039
$
18,522
$
19,356
Notes:
(1) Adjusted operating margins for the
three months ended December 31, 2019 and 2018, were 2.9% and 0.6%,
and were 2.6% and 1.6% for the six months ended December 31, 2019
and 2018, respectively, and are calculated as non-GAAP operating
income divided by U.S. GAAP revenue for each respective period.
(2) Based on projected statutory effective
tax rate analyses, the non-GAAP tax provision was calculated to be
approximately 22% for the three and six months ended December 31,
2019 and 2018, for all non-GAAP operating expense adjustments.
REGIS CORPORATION
Reconciliation of selected
U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except
per share data)
(Unaudited)
Reconciliation of U.S. GAAP
net (loss) income per diluted share to non-GAAP net income per
diluted share
Three Months Ended December
31,
Six Months Ended December
31,
2019
2018
2019
2018
U.S. GAAP net (loss) income per diluted
share
$
(0.263
)
$
0.147
$
(0.644
)
$
0.131
Severance (1)
0.010
0.001
0.061
0.048
Professional fees (1)
0.002
0.048
0.002
0.070
Legal fees
—
0.008
—
0.008
Employee litigation reserve
(0.013
)
—
(0.013
)
—
Corporate office transition
(0.074
)
—
(0.075
)
—
TBG restructuring
0.020
—
0.052
—
Goodwill derecognition (1)
0.435
0.114
1.101
0.304
TBG discontinued operations, net of
tax
(0.002
)
(0.137
)
(0.012
)
(0.130
)
Impact of change in weighted average
shares (3)
0.009
—
0.023
(0.003
)
Non-GAAP net income per diluted share
(2)
$
0.125
$
0.181
$
0.496
$
0.429
U.S. GAAP Weighted average shares -
basic
35,798
43,619
36,028
44,175
U.S. GAAP Weighted average shares -
diluted
35,798
44,479
36,028
44,175
Non-GAAP Weighted average shares - diluted
(3)
37,120
44,479
37,366
45,078
Notes:
(1) Based on projected statutory effective
tax rate analyses, the non-GAAP tax provision was calculated to be
approximately 22% for the three and six months ended December 31,
2019 and 2018, for all non-GAAP operating expense adjustments.
(2) Total is a recalculation; line items
calculated individually may not sum to total due to rounding.
(3) Non-GAAP net income per share reflects
the weighted average shares associated with non-GAAP net income,
which includes the dilutive effect of common stock equivalents. The
earnings per share impact of the adjustments for the three and six
months ended December 31, 2019 included additional shares for
common stock equivalents of 1.3 million. The impact of the
adjustments described above result in the effect of the common
stock equivalents to be dilutive to the non-GAAP net income per
share.
REGIS CORPORATION Reconciliation of
reported U.S. GAAP net income (loss) to adjusted EBITDA, a non-GAAP
financial measure (Dollars in thousands)
(Unaudited)
Adjusted EBITDA EBITDA represents U.S. GAAP net (loss)
income for the respective period excluding interest expense, income
taxes and depreciation and amortization expense. The Company
defines adjusted EBITDA, as EBITDA excluding identified items
impacting comparability for each respective period. For the three
and six months ended December 31, 2019, the items impacting
comparability consisted of the items identified in the non-GAAP
reconciling items for the respective periods. The impacts of the
income tax provision adjustments associated with the above items
are already included in the U.S. GAAP reported net (loss) income to
EBITDA reconciliation, therefore there is no adjustment needed for
the reconciliation from EBITDA to adjusted EBITDA.
Three Months Ended December
31, 2019
Franchise
Company-owned
Corporate
Consolidated (1)
Consolidated reported net (loss)
income, as reported (U.S. GAAP)
$
12,126
$
(1,105
)
$
(20,423
)
$
(9,402
)
Interest expense, as reported
—
—
1,464
1,464
Income taxes, as reported
—
—
(795
)
(795
)
Depreciation and amortization, as
reported
210
5,938
1,599
7,747
EBITDA (as defined above)
$
12,336
$
4,833
$
(18,155
)
$
(986
)
Professional fees
—
—
115
115
Severance
—
—
497
497
Employee litigation reserve
—
(600
)
—
(600
)
TBG restructuring
722
—
246
968
Corporate office transition
—
—
(3,586
)
(3,586
)
Goodwill derecognition
—
—
20,685
20,685
TBG discontinued operations, net of
tax
—
—
(79
)
(79
)
Adjusted EBITDA, non-GAAP financial
measure
$
13,058
$
4,233
$
(277
)
$
17,014
Three Months Ended December
31, 2018
Franchise
Company-owned
Corporate
Consolidated (1)
Consolidated reported net income
(loss), as reported (U.S. GAAP)
$
8,240
$
14,538
$
(16,248
)
$
6,530
Interest expense, as reported
—
—
1,072
1,072
Income taxes, as reported
—
—
454
454
Depreciation and amortization, as
reported
215
6,728
1,957
8,900
EBITDA (as defined above)
$
8,455
$
21,266
$
(12,765
)
$
16,956
Professional fees
—
—
2,759
2,759
Legal fees
—
—
439
439
Severance
—
—
70
70
Goodwill derecognition
—
—
6,504
6,504
TBG discontinued operations, net of income
tax
—
—
(6,113
)
(6,113
)
Adjusted EBITDA, non-GAAP financial
measure
$
8,455
$
21,266
$
(9,106
)
$
20,615
Notes:
(1) Consolidated EBITDA margins for the
three months ended December 31, 2019 and 2018, were (0.5)% and
6.2%, respectively, and are calculated as EBITDA (as defined above)
divided by U.S. GAAP revenue for each respective period.
Consolidated adjusted EBITDA margins for the three months ended
December 31, 2019 and 2018 were 8.1% and 7.5%, respectively, and
are calculated as adjusted EBITDA divided by U.S. GAAP revenue for
each respective period.
For the Six Months Ended
December 31, 2019
Franchise
Company-owned
Corporate
Consolidated (1)
Consolidated reported net income
(loss), as reported (U.S. GAAP)
$
22,335
$
4,296
$
(49,838
)
$
(23,207
)
Interest expense, as reported
—
—
2,903
2,903
Income taxes, as reported
—
—
(3,651
)
(3,651
)
Depreciation and amortization, as
reported
370
12,045
4,712
17,127
EBITDA (as defined above)
$
22,705
$
16,341
$
(45,874
)
$
(6,828
)
Professional fees
—
—
115
115
Severance
—
—
2,917
2,917
Employee litigation reserve
—
(600
)
—
(600
)
TBG restructuring
2,222
—
246
2,468
Corporate office transition
—
—
(3,586
)
(3,586
)
Goodwill derecognition
—
—
52,765
52,765
TBG discontinued operations
—
—
(452
)
(452
)
Adjusted EBITDA, non-GAAP financial
measure
$
24,927
$
15,741
$
6,131
$
46,799
For the Six Months Ended
December 31, 2018
Franchise
Company-owned
Corporate
Consolidated (1)
Consolidated reported net income
(loss), as reported (U.S. GAAP)
$
17,960
$
34,114
$
(46,271
)
$
5,803
Interest expense, as reported
—
—
2,078
2,078
Income taxes, as reported
—
—
(260
)
(260
)
Depreciation and amortization, as
reported
373
14,785
3,944
19,102
EBITDA (as defined above)
$
18,333
$
48,899
$
(40,509
)
$
26,723
Professional fees
—
—
4,050
4,050
Severance
—
—
2,790
2,790
Legal fees
—
—
439
439
Goodwill derecognition
—
—
17,596
17,596
TBG discontinued operations
—
—
(5,849
)
(5,849
)
Adjusted EBITDA, non-GAAP financial
measure
$
18,333
$
48,899
$
(21,483
)
$
45,749
Notes:
(1) Consolidated EBITDA margins for the
six months ended December 31, 2019 and 2018 were (1.5)% and 4.8%,
respectively, and are calculated as EBITDA (as defined above)
divided by U.S. GAAP revenue for each respective period.
Consolidated adjusted EBITDA margins for the six months ended
December 31, 2019 and 2018, were 10.3% and 8.1%, respectively, and
are calculated as adjusted EBITDA divided by adjusted U.S. GAAP
revenue for each respective period.
REGIS CORPORATION
Reconciliation of reported
Franchise EBITDA as a percent of U.S. GAAP revenue
to EBITDA as a percent
of adjusted revenue
(Dollars in thousands)
(Unaudited)
Three Months Ended December
31,
2019
2018
As Adjusted EBITDA
$
13,058
$
8,455
U.S. GAAP revenue
79,841
40,421
As Adjusted EBITDA as a % of U.S. GAAP
revenue
16.4
%
20.9
%
Non-margin revenue adjustments:
Franchise rental income
(33,630
)
—
Ad Fund revenue
(10,703
)
(7,867
)
TBG product sales
(744
)
(7,217
)
Adjusted revenue
$
34,764
$
25,337
As Adjusted EBITDA as a percent of
adjusted revenue
37.6
%
33.4
%
Six Months Ended December
31,
2019
2018
As Adjusted EBITDA
$
24,927
$
18,333
U.S. GAAP revenue
152,387
78,446
As Adjusted EBITDA as a % of U.S. GAAP
revenue
16.4
%
23.4
%
Non-margin revenue adjustments:
Franchise rental income
(65,054
)
—
Ad Fund revenue
(21,128
)
(15,843
)
TBG product sales
(2,010
)
(12,729
)
Adjusted revenue
$
64,195
$
49,874
As Adjusted EBITDA as a percent of
adjusted revenue
38.8
%
36.8
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200203005803/en/
REGIS CORPORATION: Kersten Zupfer
investorrelations@regiscorp.com
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