RGS - NASDAQ

Good morning and thank you for joining the Regis First Quarter 2023 Earnings Release Conference Call. All participants are in a listen-only mode. The prepared remarks by our President and Chief Executive Officer, Matthew Doctor; and Executive Vice President and Chief Financial Officer, Kersten

Thank you, Biz. Good morning, everyone, and thank you for your interest in Regis. I am excited to speak with you today and share our results for the quarter. Over the past several quarters, perhaps years even, we've been discussing what our company will look like and what the results should be on the other side of completing the transition to a fully franchised model, and winding down our legacy businesses. Over the course of the past year, we've made a lot of progress on this front. And I mentioned on our last call that we should start demonstrating positive EBITDA going forward and we are starting to do exactly that. We have come a long way through the hard work and resilience of the Regis team and our franchise, and that work is coming to fruition in our results. I am pleased to share our positive start to the year with the first quarter marking key milestones as we make progress towards advancing our strategy. To this end in the first quarter, we generated more EBITDA than all of fiscal 2022, and we recorded positive operating income for the first time since the quarter ended September 30, 2018. And while we have certainly come a long way, I would be remiss, if I didn't acknowledge there is still significant work ahead. Work that we are addressing head on through the initiatives we have in place and have discussed at length on previous calls. As we have strong conviction that they are the right ones to capitalize on the foundational work that has transformed Regis into an asset-light franchise model. With a durable balance sheet, talented team and dedicated franchisees, we continue to be laser-focused on providing our franchisees with the tools to ensure we continue to build the momentum on which we are gaining, and pave the way for a bright future for the entire Regis system. For today's call, I will highlight our results and will share the progress that we've been making on our strategy, and I'll review the priorities we have for the business as we enter the second quarter and for the full fiscal year. Delving deeper into our first quarter results. Same-store sales rose 4.5% versus the prior year's first quarter. Adjusted EBITDA on a consolidated basis was $3.8 million compared to a loss of $5 million in the prior year's quarter, an $8.8 million improvement. Our franchise segment EBITDA was $5 million, increasing $8.5 million from a loss of $3.5 million in the first quarter of fiscal 2022. Our franchise segment EBITDA continues its positive trend representing yet another quarter of strong franchise EBITDA growth. And as I mentioned in my opening remarks, we reported positive operating income of $2.5 million versus a loss of $4.9 million in Q1 of fiscal 2022 representing again the first quarter of positive operating income in 16 quarters. Another financial highlight is our decreased cash use, as we've come a long way from the cash use we've seen over the past two years. Kersten will get into the details of this item later during her remarks. Our liquidity position and capital structure remains strong having successfully renegotiated our credit agreement during the quarter. We ended the quarter with total liquidity of $48 million providing us ample runway to continue investing in and improving the business. Now turning to our business initiatives. Operationally, we are sticking with the game plan and staying on top of those items directly in our control and will be impactful like reducing G&A and winding down company-owned salons. And we are also intently focused on driving salon level sales and productivity with our initiatives in technology, stylist retention and recruitment and marketing expected to do just that. I want to take some time and touch on the areas within our control, as the team has done a great job of continuing to manage G&A, while more aggressively winding down our company-owned salons. These actions we are taking will be instrumental in continuing to provide us the runway needed to drive the turnaround and position Regis for growth. We've been closely managing G&A and we are pleased where this is coming in. Kersten will be updating you later in the call with more details on G&A and the expectation for continued improvement, in our annual outlook for this metric. In addition to G&A we have directed our real estate team to take an even more urgent approach to aligning now company-owned salons. We ended the quarter with 95 company-owned salons and we currently stand at 90, as of the end of October. These acceleration efforts should start bearing fruit in the quarters to come, as by getting out of these salons we will avoid future losses which would further benefit our results. And as we move ahead, we will continue to manage these two items very closely. Now moving on to our core salon initiatives of technology, stylist retention recruiting and marketing, our priorities here remain exactly the same, as I laid out on prior calls. On the technology front, we are primarily focused on the rollout of the

Thanks, Matt and good morning. We are pleased to speak with you to share our first quarter performance, which demonstrated strong progress against our strategy to transform Regis into an asset-light franchise operator. This has led to us delivering continued improvements in profitability. Notably, the first quarter marked our initial period of positive consolidated operating income since September of 2018, driven by improved core revenue consisting of royalty and fee income and reductions in G&A. Net income was another positive with an increase of $11.9 million to positive $1.5 million from a loss of $10.4 million in the first quarter last year. The increase in net income reflects the improvement in income from operations and the gain associated, with proceeds received from the sale of OSP to

Thank you, Kersten. As a reminder, please use the raise your hand or Q&A feature to ask a question. The first question that we got was tell us about the trends in the sales channel. We are hearing about other companies in the beauty industry where customers are spacing out time between appointments longer due to financial stress.

Yeah. Sure. Thanks for the question. It's Matt. I touched on this a little bit earlier regarding some of the trends in consumer behavior. It's certainly something that we're seeing, not necessarily even due to financial stress, but I'd probably say another word, I'd use is inconsistent since COVID inconsistent between the length of lengthening out the cycles, having longer hair cycle, hairstyles who they're going to and where and how long this will last for. What I would say to that is even in this environment, and even if that being the case there's still significant opportunity for us to ensure even those who may be going less still stay with us and don't go elsewhere. So getting back to that point of customer retention and doing a better job there. This will be a positive impact on that. And also there's still the opportunity to drive new traffic and keep them as well. So even in this kind of environment those two will still be net positives. And going back to something, I said in the call which is capitalizing on driving some trends. And this I mean actual hairstyle trends versus visitation trends having these folks within our salons, we can build service tickets to the promotional calendars we're talking about hopefully ensuring that, when folks do come on we can be the salons they look forward to go to for their baseline service as well as drive trends in hair and give them further reason to come back versus just give me the usual, which of course is totally okay as well.