Regis® Reports Fourth Quarter and Full Year 2019 Operating Results and Announces Its Decision to Transition the Balance of Its Company-owned Salons to a Fully Franchised Model

The Company Recorded The Profitable Sale and Conversion Of 767 Company Owned Salons To Its Asset-Light Franchise Portfolio During The Full Year And 265 During the Quarter.

The Company Repurchased 2.6 million Shares, Or Approximately 6.5% Of Its Common Stock During The Quarter; For the Full Year, The Company Purchased 8.6 million Shares, Or 19.0% Of Its Common Stock.

The Company Announced Its Decision To Fully Convert Its Company Owned Salon Portfolio Into Its Capital-Light, High Growth and Technology Enabled Franchise Portfolio.

MINNEAPOLIS--()--Regis Corporation (NYSE: RGS):

 

Three Months Ended
June 30,

 

Twelve Months Ended
June 30,

(Dollars in thousands)

 

2019

 

2018 (1)

 

2019

 

2018 (1)

Consolidated Revenue

 

$248,190

 

$300,383

 

$1,069,039

 

$1,235,479

System-wide Sales (2)

 

$461,088

 

$473,216

 

$1,821,645

 

$1,892,702

 

 

 

 

 

 

 

 

 

System-wide Same-Store Sales Comps

 

(0.7

)%

 

0.7

%

 

(0.5

)%

 

0.9

%

System-wide Same-Store Sales Comps, excluding TBG mall locations (3)

 

%

 

NA

 

(0.1

)%

 

NA

Franchise Same-Store Sales Comps, excluding TBG mall locations (3)

 

0.1

%

 

NA

 

0.3

%

 

NA

Franchise Same-Store Sales Comps (4)

 

(1.3

)%

 

0.8

%

 

(0.7

)%

 

2.1

%

Company-owned Same-Store Sales Comps

 

(0.1

)%

 

0.7

%

 

(0.4

)%

 

0.5

%

 

 

 

 

 

 

 

 

 

Net (Loss) Income From Continuing Operations

 

$(5,265)

 

$5,499

 

$(20,122)

 

$59,621

Diluted (Loss) Earnings per Share From Continuing Operations

 

$(0.14)

 

$0.12

 

$(0.48)

 

$1.27

EBITDA (5)

 

$950

 

$23,881

 

$26,272

 

$5,321

as a percent of revenue

 

0.4

%

 

8.0

%

 

2.5

%

 

0.4

%

 

 

 

 

 

 

 

 

 

As Adjusted(6)

 

 

 

 

 

 

 

 

Consolidated Revenue, as Adjusted

 

$248,190

 

$300,383

 

$1,069,039

 

$1,233,418

Net Income, as Adjusted

 

$24,614

 

$8,968

 

$59,375

 

$22,713

Diluted Earnings per Share, as Adjusted

 

$0.62

 

$0.19

 

$1.38

 

$0.48

EBITDA, as Adjusted (5)

 

$39,390

 

$29,335

 

$122,295

 

$87,436

as a percent of revenue, as adjusted

 

15.9

%

 

9.8

%

 

11.4

%

 

7.1

%

____________________________________

(1) Amounts for fiscal year 2018 have been adjusted to account for the adoption of "ASC 606 - Revenue From Contracts with Customers."
(2) System-wide sales represent total sales at franchise and company-owned locations, excluding TBG mall locations.
(3) Same-store sales include salons that have been a franchise location for more than one year, therefore TBG mall locations are not included in 2018 same-store sales.
(4) Franchise same-stores sales included North American TBG mall locations through June 27, 2019.
(5) See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations" for a reconciliation of EBITDA to Adjusted EBITDA
(6) 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 hair salons, today reported fourth quarter 2019 net loss from continuing operations of $5.3 million, or $0.14 per diluted share as compared to income of $5.5 million or $0.12 in the fourth quarter of 2018. The Company's reported results include $33.5 million of non-cash goodwill derecognition associated with the sale of 265 salons to franchisees and net $4.8 million of other discrete costs. Excluding discrete items, and the losses from discontinued operations, the Company reported fourth quarter 2019 adjusted net income of $24.6 million, or $0.62 per diluted share as compared to $9.0 million, or $0.19 per diluted share for the same period last year. The year-over-year increase in adjusted net income was driven primarily by the increase on the gain on salons sold to franchisees, excluding non-cash goodwill derecognition.

Total revenue in the quarter of $248.2 million decreased $52.2 million, or 17.4%, year-over-year driven primarily by the closure of a net 214 salons, the conversion of 767 company-owned salons to franchised locations over the past 12-month period, a reduction in product sales to TBG and a decline in company-owned same store sales of 10 bps. The negative company-owned same-store sales performance was the result of a 4.3% decline in year-over-year transactions, partially offset by a 4.2% increase in ticket.

Fourth quarter adjusted EBITDA of $39.4 million increased $10.1 million versus the same period last year. Excluding the $26.1 million and $2.2 million gain from the sale of company-owned salons during the current and prior year, respectively, adjusted EBITDA of $13.3 million was $13.8 million or 50.9% unfavorable versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 767 company-owned salons that were profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.

On a full year basis, adjusted EBITDA of $122.3 million increased $34.9 million versus the same period last year. Excluding the $70.0 million and $4.1 million gain from the sale of company-owned salons during the current and prior year, respectively, adjusted EBITDA of $52.3 million was $31.0 million or 37.2% unfavorable versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 767 company-owned salons that were profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.

Hugh Sawyer, President and Chief Executive Officer, commented, “After more than two years of carefully planned evolution we have identified and confirmed a compelling vision for Regis as a capital light, high growth, technology enabled franchise company.” Mr. Sawyer concluded, “Although the transition to a capital light franchise model will initially have a dilutive impact on the Company’s Adjusted EBITDA, we are 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.”

The Company Announces Its Intent To Convert To A Fully Franchised Model 
An important component of the Company’s multi-year transformation has been to convert its company-owned salons to a capital-light franchise platform where it is in the best economic interest of its shareholders. At the same time, the Company has continued to make strategic investments in key elements of the future state of its business through disruptive technology, differentiated marketing and advertising, industry leading stylist recruiting and training, enhanced supply chain capabilities, introduction of trend-driven merchandise and the establishment of core competencies needed to support the growth of the Company’s franchise portfolio.

Given the success to date of the Company’s effort to profitably sell and convert company-owned salons into its franchise portfolio, the Company has reached the decision to fully franchise its remaining company-owned portfolio of salons. In doing so, the Company anticipates that a fully franchised portfolio will drive the following benefits:

  • Improvement in the Company’s return on capital given the capital-light nature of the model
  • A more simple business model resulting in predictable operating cash flow and providing a platform for sustainable organic growth
  • Owners that are able to consistently deliver a better and more localized service experience to our customers
  • Franchise partners that are a source of the new ideas and services needed to continually refresh the Company’s brands
  • Franchising enables Regis to consolidate its disparate brands from more than 50 banners to five core brands: Supercuts®, SmartStyle®, Cost Cutters®, First Choice Haircutters® and Roosters®, a barber brand that the Company believes it can scale with our franchise orientation.
  • A fully franchised model will also support a modest number of company-owned salons to test new services, merchandise, operating concepts or technology.

The Company anticipates that it may require 18 to 24 months to complete its conversion to a fully franchised portfolio. The Company also noted that as of the end of fiscal 2019, approximately 1,300 company-owned salons, or approximately 48% of the remaining company-owned portfolio, are in various stages of negotiation to be purchased by new or existing franchisees.

Fourth Quarter Segment Results 

Franchise

 

Three Months Ended
June 30,

 

Increase
(Decrease)

 

Twelve Months Ended
June 30,

 

Increase
(Decrease)

(Dollars in millions) (1)

2019

 

2018 (2)

 

 

2019

 

2018 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Product

$

11.6

 

 

$

9.8

 

 

18.4

%

 

$

42.9

 

 

$

34.6

 

 

24.0

%

Product sold to TBG mall locations

0.5

 

 

6.2

 

 

(91.9

)%

 

17.0

 

 

19.1

 

 

(11.0

)%

Total product

$

12.1

 

 

$

16.0

 

 

(24.4

)%

 

$

59.9

 

 

$

53.7

 

 

11.5

%

Royalties and fees

26.0

 

 

20.9

 

 

24.2

%

 

93.8

 

 

77.4

 

 

21.2

%

Total Revenue

$

38.1

 

 

$

36.9

 

 

3.3

%

 

$

153.7

 

 

$

131.1

 

 

17.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Franchise Same-Store Sales Comps, excluding TBG mall locations (3)

0.1

%

 

NA

 

 

 

0.3

%

 

NA

 

 

Franchise Same-Store Sales Comps (4)

(1.3

)%

 

0.8

%

 

(210) bps

 

(0.7

)%

 

2.1

%

 

(280) bps

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA, as Adjusted

$

10.6

 

 

$

10.3

 

 

2.9

%

 

$

38.7

 

 

$

36.0

 

 

7.5

%

as a percent of revenue

27.9

%

 

27.9

%

 

(0) bps

 

25.2

%

 

27.5

%

 

(230) bps

 

 

 

 

 

 

 

 

 

 

 

 

Total Franchise Salons (5)

3,951

 

 

4,114

 

 

(4.0

)%

 

 

 

 

 

 

as a percent of total Company-owned and Franchise salons

56.0

%

 

50.9

%

 

 

 

 

 

 

 

 

____________________________________

(1) Variances calculated on amounts shown in millions may result in rounding differences.
(2) Amounts for fiscal year 2018 have been recast to account for the adoption of "ASC 606 - Revenue From Contracts With Customers."
(3) Same-store sales include salons that have been a franchise location for more than one year, therefore TBG is not included in 2018 same-store sales.
(4) TBG mall locations same-store sales were included in Franchise same-stores sales until June 27, 2019.
(5) As of June 27, 2019 TBG North American mall locations operate under a license agreement so they are excluded from salon count.

Fourth quarter Franchise revenue was $38.1 million, a $1.2 million, or 3.3% increase compared to the prior year quarter. Royalties and fees were $26.0 million, a $5.1 million, or 24.2% increase versus the same period last year driven primarily by increased franchise salon counts. Product sales to non-TBG mall locations were $11.6 million, a $1.8 million, or 18.4% increase versus the prior year primarily driven by the increase in franchise salon counts. These increases were partially offset by a $5.7 million decrease in product sales to TBG mall locations.

Franchise adjusted EBITDA of $10.6 million improved $0.3 million, or 2.9% year-over-year, primarily driven by the increase in salon counts, partially offset by planned strategic G&A investments to enhance the Company’s franchisor capabilities and to support the increased volume and cadence of transactions and conversions into the Franchise portfolio along with a decrease in margin dollars on product sold to franchisees.

Company-Owned Salons

 

Three Months Ended
June 30,

 

(Decrease)
Increase

 

Twelve Months Ended
June 30,

 

(Decrease)
Increase

(Dollars in millions) (1)

2019

 

2018 (2)

 

 

2019

 

2018 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue, as Adjusted

$

210.1

 

 

$

263.5

 

 

(20.3

)%

 

$

915.4

 

 

$

1,102.3

 

 

(17.0

)%

Same-Store Sales Comps, as Adjusted

(0.1

)%

 

0.7

%

 

(80) bps

 

(0.4

)%

 

0.3

%

 

(70) bps

Year-over-Year Ticket change

4.2

%

 

4.4

%

 

 

 

4.3

%

 

3.4

%

 

 

Year-over-Year Transaction change (3)

(4.3

)%

 

(3.7

)%

 

 

 

(4.7

)%

 

(3.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA, as Adjusted

$

22.4

 

 

$

38.3

 

 

(41.4

)%

 

$

88.6

 

 

$

127.1

 

 

(30.3

)%

as a percent of revenue, as adjusted

10.7

%

 

14.5

%

 

(380) bps

 

9.7

%

 

11.5

%

 

(180) bps

 

 

 

 

 

 

 

 

 

 

 

 

Total Company-owned Salons

3,108

 

 

3,966

 

 

(21.6

)%

 

 

 

 

 

 

as a percent of total Company-owned and Franchise salons

44.0

%

 

49.1

%

 

 

 

 

 

 

 

 

____________________________________

(1) Variances calculated on amounts shown in millions may result in rounding differences.
(2) Amounts for fiscal year 2018 have recast to account for the adoption of "ASC 606 - Revenue From Contracts with Customers."
(3) Defined as total transactions and is what the Company had historically referred to as Traffic.

Fourth quarter Company-owned salon revenue, as adjusted, decreased $53.4 million, or 20.3% versus the prior year to $210.1 million. The year-over-year decline in revenue was driven by the decrease of 767 salons profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months and the closure of 133 unprofitable salons.

Fourth quarter adjusted EBITDA of $22.4 million declined 41.4% versus the same period last year driven primarily by elimination of EBITDA that had been generated in the prior year period from the 767 company-owned salons that were profitable sold and converted to the Company’s asset-light franchise portfolio over the past twelve months, state minimum wage increases, and the prior year inclusion of a one-time benefit from a settlement, partially offset by management initiatives.

Other Fourth Quarter Key Events 

  • The Company repurchased 2.6 million common shares, which is 6.5% of its common stock, at an average price of $18.68 per share for a total of $48.3 million.
  • The Company sold and transferred 265 Company-owned salons to its asset-light franchise portfolio. The impact of these transactions is as follows:

 

 

Three Months Ended
June 30,

 

 

 

Twelve Months Ended
June 30,

 

 

(Dollars in thousands)

 

2019

 

2018

 

(Decrease)
Increase

 

2019

 

2018

 

(Decrease)
Increase

 

 

 

 

 

 

 

 

 

 

 

 

 

Salons sold to franchisees (1)

 

265

 

 

145

 

 

120

 

 

767

 

 

1,582

 

 

(815

)

Cash proceeds received

 

$

40,168

 

 

$

5,963

 

 

$

34,205

 

 

$

94,787

 

 

$

11,582

 

 

$

83,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of venditions, excluding goodwill derecognition

 

$

26,051

 

 

$

2,171

 

 

$

23,880

 

 

$

69,973

 

 

$

4,140

 

 

$

65,833

 

Non-cash goodwill derecognition

 

(33,527

)

 

(2,185

)

 

(31,342

)

 

(67,055

)

 

(3,899

)

 

(63,156

)

(Loss) gain from sale of salon assets to franchisees, net

 

$

(7,476

)

 

$

(14

)

 

$

(7,462

)

 

$

2,918

 

 

$

241

 

 

$

2,677

 

   

(1) In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 salons, and substantially all of its International segment, representing approximately 250 salons in the UK, to The Beautiful Group (TBG).

Transformational Strategy Update 
The Company continued to make progress during the quarter implementing elements of its transformational strategy which includes:

  • Reinvigorated Supercuts® creative approach to marketing by launching a new Supercuts® brand campaign
  • Partnership with Google to improve and streamline the salon discovery and customer booking experience
  • Launched Opensalon™, Regis' proprietary platform that allows customers to book salon services directly and enables customers to reserve and check-in for various salon services via mobile devices or desktops

Adoption of New Accounting Standard 
On July 1, 2018, the Company adopted amended revenue recognition guidance. For comparability, the Company has adjusted prior reporting periods, including the quarter and year ended June 30, 2018. As a result, future financial statements will be comparable to the prior year results, but they will not be comparable to the financial results issued previously.

Non-GAAP reconciliations: 
For GAAP to non-GAAP reconciliations, please refer to the 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 fourth quarter results today, August 27, 2019, 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 (888) 220-8474 and entering access code 5001949. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 5001949.

About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in beauty salons and cosmetology education. As of June 30, 2019, the Company franchised, owned or held ownership interests in 7,145 worldwide locations. Regis’ corporate and franchised 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. To join Regis Corporation’s email alert list, click on this link: http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1

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; 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 improving 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 Beautiful Group's ability to operate its salons successfully, as well as maintain adequate working capital; 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; 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
(Dollars in thousands, except per share data)

 

 

 

June 30, 2019

 

June 30, 2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

70,141

 

 

$

110,399

 

Receivables, net

 

30,143

 

 

52,430

 

Inventories

 

77,322

 

 

79,363

 

Other current assets

 

33,216

 

 

47,867

 

Total current assets

 

210,822

 

 

290,059

 

 

 

 

 

 

Property and equipment, net

 

78,090

 

 

99,288

 

Goodwill

 

345,718

 

 

412,643

 

Other intangibles, net

 

8,761

 

 

10,557

 

Other assets

 

34,170

 

 

37,616

 

Long-term assets held for sale

 

5,276

 

 

6,572

 

Total assets

 

$

682,837

 

 

$

856,735

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

47,532

 

 

$

57,738

 

Accrued expenses

 

80,751

 

 

100,716

 

Total current liabilities

 

128,283

 

 

158,454

 

 

 

 

 

 

Long-term debt, net

 

90,000

 

 

90,000

 

Long-term lease liability

 

28,910

 

 

 

Other noncurrent liabilities

 

111,399

 

 

121,843

 

Total liabilities

 

358,592

 

 

370,297

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

Shareholders' equity:

 

 

 

 

Common stock, $0.05 par value; issued and outstanding, 36,869,249 and 45,258,571 common shares at June 30, 2019 and 2018, respectively

 

1,843

 

 

2,263

 

Additional paid-in capital

 

47,152

 

 

194,436

 

Accumulated other comprehensive income

 

9,342

 

 

9,656

 

Retained earnings

 

265,908

 

 

280,083

 

Total shareholders' equity

 

324,245

 

 

486,438

 

Total liabilities and shareholders' equity

 

$

682,837

 

 

$

856,735

 

REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For The Three and Twelve Months Ended June 30, 2019 and 2018
(Dollars and shares in thousands, except per share data)

 

 

 

Three Months Ended
June 30,

 

Twelve Months Ended
June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Service

 

$

169,584

 

 

$

218,415

 

 

$

749,660

 

 

$

899,345

 

Product

 

52,612

 

 

61,039

 

 

225,618

 

 

258,740

 

Royalties and fees

 

25,994

 

 

20,929

 

 

93,761

 

 

77,394

 

 

 

248,190

 

 

300,383

 

 

1,069,039

 

 

1,235,479

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of service

 

104,767

 

 

123,815

 

 

452,827

 

 

530,582

 

Cost of product

 

29,118

 

 

33,458

 

 

128,816

 

 

140,623

 

Site operating expenses

 

34,308

 

 

37,892

 

 

141,031

 

 

154,067

 

General and administrative

 

41,747

 

 

44,560

 

 

177,004

 

 

174,045

 

Rent

 

28,864

 

 

35,816

 

 

131,816

 

 

183,096

 

Depreciation and amortization

 

10,116

 

 

11,441

 

 

37,848

 

 

58,205

 

TBG Restructuring

 

1,105

 

 

 

 

21,816

 

 

 

Total operating expenses

 

250,025

 

 

286,982

 

 

1,091,158

 

 

1,240,618

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

(1,835

)

 

13,401

 

 

(22,119

)

 

(5,139

)

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

Interest expense

 

(1,363

)

 

(1,090

)

 

(4,795

)

 

(10,492

)

(Loss) gain on sale of salon assets to franchisees

 

(7,476

)

 

(14

)

 

2,918

 

 

241

 

Interest income and other, net

 

276

 

 

1,265

 

 

1,729

 

 

5,199

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations before income taxes

 

(10,398

)

 

13,562

 

 

(22,267

)

 

(10,191

)

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

5,133

 

 

(8,063

)

 

2,145

 

 

69,812

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

(5,265

)

 

5,499

 

 

(20,122

)

 

59,621

 

 

 

 

 

 

 

 

 

 

(Loss) income from discontinued operations, net of income taxes

 

(131

)

 

(2,212

)

 

5,896

 

 

(53,185

)

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(5,396

)

 

$

3,287

 

 

$

(14,226

)

 

$

6,436

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(0.14

)

 

$

0.12

 

 

$

(0.48

)

 

$

1.28

 

(Loss) income from discontinued operations

 

 

 

(0.05

)

 

0.14

 

 

(1.14

)

Net (loss) income per share, basic (1)

 

$

(0.14

)

 

$

0.07

 

 

$

(0.34

)

 

$

0.14

 

Diluted:

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(0.14

)

 

$

0.12

 

 

$

(0.48

)

 

$

1.27

 

(Loss) income from discontinued operations

 

 

 

(0.05

)

 

0.14

 

 

(1.13

)

Net (loss) income per share, diluted (1)

 

$

(0.14

)

 

$

0.07

 

 

$

(0.34

)

 

$

0.14

 

Weighted average common and common equivalent shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

38,618

 

 

46,014

 

 

41,829

 

 

46,517

 

Diluted

 

38,618

 

 

46,633

 

 

41,829

 

 

47,035

 

(1) Total is a recalculation; line items calculated individually may not sum to total due to rounding.

REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)

 

 

 

Three Months Ended June 30,

 

Twelve Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Net (loss) income

 

$

(5,396

)

 

$

3,287

 

 

$

(14,226

)

 

$

6,436

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments during the period:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

791

 

 

(1,072

)

 

185

 

 

(168

)

Reclassification adjustments for losses included in net (loss) income

 

 

 

 

 

 

 

6,152

 

Net current period foreign currency translation adjustments

 

791

 

 

(1,072

)

 

185

 

 

5,984

 

Recognition of deferred compensation

 

(499

)

 

336

 

 

(499

)

 

336

 

Other comprehensive (loss) income

 

292

 

 

(736

)

 

(314

)

 

6,320

 

Comprehensive (loss) income

 

$

(5,104

)

 

$

2,551

 

 

$

(14,540

)

 

$

12,756

 

REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF CASH FLOW
(Dollars in thousands)

 

 

 

Twelve Months Ended June 30,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(14,226

)

 

$

6,436

 

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

 

 

 

 

Non-cash impairment related to discontinued operations

 

306

 

 

38,826

 

Depreciation and amortization

 

33,261

 

 

39,433

 

Depreciation related to discontinued operations

 

 

 

3,738

 

Deferred income taxes

 

(9,812

)

 

(80,241

)

Gain on life insurance proceeds

 

 

 

(7,986

)

Gain from sale of salon assets to franchisees, net

 

(2,918

)

 

(241

)

Non-cash TBG restructuring charge

 

21,008

 

 

 

Salon asset impairments

 

4,587

 

 

11,092

 

Accumulated other comprehensive income reclassification adjustments

 

 

 

6,152

 

Stock-based compensation

 

9,003

 

 

8,269

 

Amortization of debt discount and financing costs

 

275

 

 

4,080

 

Other non-cash items affecting earnings

 

(903

)

 

(294

)

Changes in operating assets and liabilities (1):

 

 

 

 

Receivables

 

(17,304

)

 

(12,081

)

Inventories

 

(8,492

)

 

13,940

 

Income tax receivable

 

(703

)

 

527

 

Other current assets

 

(783

)

 

239

 

Other assets

 

(5,546

)

 

(11,229

)

Accounts payable

 

(5,836

)

 

(1,103

)

Accrued expenses

 

(20,158

)

 

(10,940

)

Other noncurrent liabilities

 

717

 

 

(6,027

)

Net cash (used in) provided by operating activities

 

(17,524

)

 

2,590

 

Cash flows from investing activities:

 

 

 

 

Capital expenditures

 

(31,616

)

 

(29,571

)

Capital expenditures related to discontinued operations

 

 

 

(1,171

)

Proceeds from sale of salon assets to franchisees

 

94,787

 

 

11,582

 

Proceeds from company-owned life insurance policies

 

24,617

 

 

18,108

 

Net cash (used in) provided by investing activities

 

87,788

 

 

(1,052

)

Cash flows from financing activities:

 

 

 

 

Borrowings on revolving credit facilities

 

 

 

90,000

 

Repayments of long-term debt

 

 

 

(124,230

)

Repurchase of common stock

 

(152,661

)

 

(24,798

)

Proceeds from sale and lease back transactions

 

28,821

 

 

 

Sale and lease back transaction payments

 

(378

)

 

 

Employee taxes paid for shares withheld

 

(2,477

)

 

(2,413

)

Settlement of equity awards

 

 

 

(794

)

Net cash used in financing activities

 

(126,695

)

 

(62,235

)

Effect of exchange rate changes on cash and cash equivalents

 

35

 

 

(514

)

Decrease in cash and cash equivalents

 

(56,396

)

 

(61,211

)

Cash and cash equivalents:

 

 

 

 

Beginning of year

 

148,775

 

 

208,634

 

Cash and cash equivalents included in current assets held for sale

 

 

 

1,352

 

Beginning of year, total cash and cash equivalents

 

148,775

 

 

209,986

 

End of year

 

$

92,379

 

 

$

148,775

 

____________________________________

(1) Changes in operating assets and liabilities exclude assets and liabilities sold or acquired.

SYSTEM WIDE SAME-STORE SALES (1):

 

 

For the Three Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Service

 

Retail

 

Total

 

Service

 

Retail

 

Total

SmartStyle

 

0.9

%

 

(1.3

)%

 

0.3

%

 

0.8

%

 

4.0

%

 

1.7

%

Supercuts

 

0.4

 

 

(6.5

)

 

 

 

0.9

 

 

(5.7

)

 

0.4

Signature Style

 

(1.1

)

 

5.4

 

 

(0.4

)

 

1.0

 

 

(3.8

)

 

0.4

Total, excluding TBG mall locations

 

%

 

(0.5

)%

 

%

 

NA

 

NA

 

NA

TBG mall locations

 

(2.5

)

 

(25.5

)

 

(5.6

)

 

NA

 

NA

 

NA

Total

 

(0.3

)%

 

(3.4

)%

 

(0.7

)%

 

0.9

%

 

(0.3

)%

 

0.7

%

 

 

 

For the Twelve Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Service

 

Retail

 

Total

 

Service

 

Retail

 

Total

SmartStyle

 

1.9

%

 

(1.2

)%

 

1.0

%

 

(0.5

)%

 

0.6

%

 

(0.2

)%

Supercuts

 

0.3

 

 

(6.3

)

 

(0.2

)

 

2.5

 

 

(5.4

)

 

1.9

 

Signature Style

 

(0.7

)

 

(1.9

)

 

(0.8

)

 

1.0

 

 

(2.6

)

 

0.5

 

Total, excluding TBG mall locations

 

0.3

%

 

(2.4

)%

 

(0.1

)%

 

NA

 

NA

 

NA

TBG mall locations

 

(3.1

)

 

(12.1

)

 

(4.5

)

 

NA

 

NA

 

NA

Total

 

%

 

(3.4

)%

 

(0.5

)%

 

1.3

%

 

(1.4

)%

 

0.9

%

____________________________________

(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.

FRANCHISE SAME-STORE SALES (1):

 

 

For the Three Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Service

 

Retail

 

Total

 

Service

 

Retail

 

Total

SmartStyle

 

(2.2

)%

 

(19.1

)%

 

(6.7

)%

 

3.0

%

 

(15.5

)%

 

(1.1

)%

Supercuts

 

1.6

 

 

(8.2

)

 

1.0

 

 

0.9

 

 

(5.7

)

 

0.5

 

Signature Style

 

0.5

 

 

(4.2

)

 

(0.1

)

 

2.2

 

 

(3.2

)

 

1.4

 

Total, excluding TBG mall locations

 

1.0

%

 

(9.2

)%

 

0.1

%

 

NA

 

NA

 

NA

TBG mall locations

 

(2.5

)

 

(25.5

)

 

(5.6

)

 

NA

 

NA

 

NA

Total

 

0.2

%

 

(14.1

)%

 

(1.3

)%

 

1.3

%

 

(4.6

)%

 

0.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Twelve Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Service

 

Retail

 

Total

 

Service

 

Retail

 

Total

SmartStyle

 

(0.9

)%

 

(17.7

)%

 

(5.6

)%

 

(0.7

)%

 

(14.3

)%

 

(2.7

)%

Supercuts

 

1.3

 

 

(6.9

)

 

0.8

 

 

2.7

 

 

(6.1

)

 

2.1

 

Signature Style

 

0.8

 

 

(4.5

)

 

0.1

 

 

2.6

 

 

(1.3

)

 

2.0

 

Total, excluding TBG mall locations

 

1.1

%

 

(7.5

)%

 

0.3

%

 

NA

 

NA

 

NA

TBG mall locations

 

(3.1

)

 

(12.1

)

 

(4.5

)

 

NA

 

NA

 

NA

Total

 

0.2

%

 

(8.9

)%

 

(0.7

)%

 

2.6

%

 

(3.8

)%

 

2.1

%

(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 is not included in 2018 same-store sales as it was not a franchise location in the previous year.

COMPANY-OWNED SAME-STORE SALES (2):

 

 

For the Three Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Service

 

Retail

 

Total

 

Service

 

Retail

 

Total

SmartStyle

 

1.4

%

 

1.1

%

 

1.3

%

 

0.8

%

 

4.2

%

 

1.8

%

Supercuts

 

(3.3

)

 

(2.9

)

 

(3.3

)

 

0.7

 

 

(5.7

)

 

0.2

 

Signature Style

 

(2.0

)

 

13.1

 

 

(0.5

)

 

0.4

 

 

(4.3

)

 

 

Total

 

(0.9

)%

 

3.2

%

 

(0.1

)%

 

0.6

%

 

1.0

%

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Twelve Months Ended

 

 

June 30, 2019

 

June 30, 2018

 

 

Service

 

Retail

 

Total

 

Service

 

Retail

 

Total

SmartStyle

 

2.1

%

 

0.1

%

 

1.5

%

 

(0.5

)%

 

0.6

%

 

0.2

%

Supercuts

 

(2.0

)

 

(5.4

)

 

(2.3

)

 

2.3

 

 

(4.6

)

 

1.7

 

Signature Style

 

(1.5

)

 

0.1

 

 

(1.3

)

 

0.2

 

 

(3.5

)

 

(0.2

)

Total

 

(0.3

)%

 

(0.5

)%

 

(0.4

)%

 

0.5

%

 

(0.8

)%

 

0.3

%

____________________________________

(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 (NYSE: RGS)
System-wide location counts

 

 

 

June 30, 2019

 

June 30, 2018

 

 

 

 

 

FRANCHISE SALONS:

 

 

 

 

 

 

 

 

 

SmartStyle/Cost Cutters in Walmart Stores

 

615

 

561

Supercuts

 

2,340

 

1,739

Signature Style

 

766

 

745

Total franchise locations, excluding TBG mall locations

 

3,721

 

3,045

Total North American TBG mall locations (1)

 

 

 

807

 

Total North American Salons

 

3,721

 

3,852

Total International Salons (1)

 

230

 

262

Total Franchise Salons (2)

 

3,951

 

4,114

as a percent of total Company-owned and Franchise salons

 

56.0

%

 

50.9

%

 

 

 

 

 

COMPANY-OWNED SALONS:

 

 

 

 

 

 

 

 

 

SmartStyle/Cost Cutters in Walmart Stores

 

1,550

 

1,660

Supercuts

 

403

 

928

Signature Style

 

1,155

 

1,378

Total Company-owned Salons

 

3,108

 

3,966

as a percent of total Company-owned and Franchise salons

 

44.0

%

 

49.1

%

 

 

 

 

 

OWNERSHIP INTEREST LOCATIONS:

 

 

 

 

 

 

 

 

 

Equity ownership interest locations

 

86

 

88

 

 

 

 

 

Grand Total, System-wide

 

7,145

 

8,168

 

 

 

 

 

____________________________________

(1) Canadian and Puerto Rican salons are included in the North American salon totals.
(2) As of June 27, 2019, TBG North American mall locations operate under a license agreement so they are excluded from salon count.

Non-GAAP Reconciliations

We believe our presentation of non-GAAP operating 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 both our financial statements prepared in accordance with U.S. GAAP and the reconciliation of the selected U.S. GAAP to non-GAAP financial measures, which are located in the Investor Information section of the corporate website at www.regiscorp.com.

Non-GAAP reconciling items for the three and twelve months ended June 30, 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:

  • SmartStyle restructuring discounting and costs.
  • Employee litigation reserve.
  • Executive transition costs
  • Professional fees.
  • Severance expense.
  • Gain on life insurance proceeds.
  • Legal fees.
  • Goodwill derecognition.
  • Impact of tax reform.
  • TBG restructuring.
  • TBG discontinued operations.
  • Debt refinancing.

The non-GAAP tax provision adjustments related to the amounts excluded from our non-GAAP results are due to the change in non-GAAP taxable income as compared to U.S. GAAP taxable income or loss, resulting from the non-GAAP reconciling items addressed herein. The non-GAAP tax provision adjustments are made to reflect the year-to-date non-GAAP tax rate for each period. The non-GAAP weighted average shares adjustments are due to the change in non-GAAP net income as compared to the U.S. GAAP net income or loss, resulting from the non-GAAP reconciling items addressed herein. Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which may include the dilutive effect of common stock.

REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except per share data)

 

Reconciliation of U.S. GAAP operating income and net income (loss) to equivalent non-GAAP measures

 

 

 

 

Three Months Ended
June 30,

 

Twelve Months Ended
June 30,

 

 

U.S. GAAP financial line item

 

2019

 

2018

 

2019

 

2018

U.S. GAAP revenue

 

 

 

$

248,190

 

 

$

300,383

 

 

$

1,069,039

 

 

$

1,235,479

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP revenue adjustments

 

 

 

 

 

 

 

 

 

 

SmartStyle restructuring discounting

 

Product Sales

 

 

 

 

 

 

 

(2,061

)

Non-GAAP revenue

 

 

 

$

248,190

 

 

$

300,383

 

 

$

1,069,039

 

 

$

1,233,418

 

 

 

 

 

 

 

 

 

 

 

 

U.S. GAAP operating income

 

 

 

$

(1,835

)

 

$

13,401

 

 

$

(22,119

)

 

$

(5,139

)

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP revenue adjustments

 

 

 

 

 

 

 

 

 

(2,061

)

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP operating expense adjustments (1)

 

 

 

 

 

 

 

 

 

 

SmartStyle restructuring discounting

 

Cost of Service

 

 

 

636

 

 

 

 

826

 

SmartStyle restructuring and discounting costs

 

Cost of Product

 

 

 

1

 

 

 

 

2,993

 

SmartStyle restructuring discounting

 

Site operating expenses

 

 

 

48

 

 

 

 

534

 

Employee litigation reserve

 

Site operating expenses

 

2,000

 

 

 

 

2,000

 

 

 

SmartStyle restructuring costs

 

General and administrative

 

 

 

469

 

 

 

 

1,803

 

Severance

 

General and administrative

 

118

 

 

(176

)

 

3,423

 

 

2,652

 

Professional fees

 

General and administrative

 

258

 

 

80

 

 

5,887

 

 

1,707

 

Executive transition costs

 

General and administrative

 

 

 

 

 

 

 

564

 

Gain on life insurance proceeds

 

General and administrative

 

 

 

 

 

 

 

(7,986

)

Legal fees

 

General and administrative

 

1,300

 

 

 

 

1,739

 

 

 

SmartStyle restructuring costs

 

Rent

 

 

 

 

 

 

 

23,999

 

SmartStyle restructuring costs

 

Depreciation and amortization

 

 

 

218

 

 

 

 

13,140

 

TBG restructuring costs

 

TBG restructuring

 

1,105

 

 

 

 

21,815

 

 

 

Total non-GAAP operating expense adjustments

 

 

 

4,781

 

 

1,276

 

 

34,864

 

 

40,232

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP operating income (1)

 

 

 

$

2,946

 

 

$

14,677

 

 

$

12,745

 

 

$

33,032

 

 

 

 

 

 

 

 

 

 

 

 

U.S. GAAP net income (loss)

 

 

 

$

(5,396

)

 

$

3,287

 

 

$

(14,226

)

 

$

6,436

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income adjustments:

 

 

 

 

 

 

 

 

 

 

Non-GAAP revenue adjustments

 

 

 

 

 

 

 

 

 

(2,061

)

Non-GAAP operating adjustments

 

 

 

4,781

 

 

1,276

 

 

34,864

 

 

40,232

 

Debt refinancing

 

Interest expense

 

 

 

 

 

 

 

2,957

 

Goodwill derecognition

 

Interest income and other, net

 

33,527

 

 

2,185

 

 

67,055

 

 

3,899

 

Income tax impact on Non-GAAP adjustments (2)

 

Income taxes

 

(8,429

)

 

(761

)

 

(22,422

)

 

(10,833

)

Impact of tax reform

 

Income taxes

 

 

 

769

 

 

 

 

(71,102

)

Discontinued operations, net of income tax

 

Loss from discontinued operations, net of tax

 

131

 

 

2,212

 

 

(5,896

)

 

53,185

 

Total non-GAAP net income adjustments

 

 

 

$

30,010

 

 

$

5,681

 

 

$

73,601

 

 

$

16,277

 

Non-GAAP net income

 

 

 

$

24,614

 

 

$

8,968

 

 

$

59,375

 

 

$

22,713

 

____________________________________

Notes:
(1) Adjusted operating margins for the three months ended June 30, 2019, and 2018, were 1.2% and 4.9%, respectively, and were 1.2% and 2.7% for the twelve months ended June 30, 2019 and 2018, respectively, and are calculated as non-GAAP operating income divided by non-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 twelve months ended June 30, 2019, and 2018, for all non-GAAP operating expense adjustments. Non-GAAP operating expense adjustments recognized during the first quarter of fiscal year 2018, were not tax effected as a result of the valuation allowance.

REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except per share data)

 

Reconciliation of U.S. GAAP net income (loss) per diluted share to non-GAAP net income per diluted share

 

Three Months Ended
June 30,

 

Twelve Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

U.S. GAAP net income (loss) per diluted share

 

$

(0.140

)

 

$

0.070

 

 

$

(0.340

)

 

$

0.137

 

SmartStyle restructuring and discounting costs (1) (2)

 

 

 

0.023

 

 

 

 

0.692

 

Employee litigation reserve

 

0.039

 

 

 

 

0.036

 

 

 

Severance (1) (2)

 

0.002

 

 

(0.003

)

 

0.062

 

 

0.047

 

Professional fees (1) (2)

 

0.005

 

 

0.001

 

 

0.106

 

 

0.032

 

Executive transition costs (1) (2)

 

 

 

 

 

 

 

0.011

 

Gain on life insurance proceeds (1) (2)

 

 

 

 

 

 

 

(0.170

)

Legal fees (1) (2)

 

0.026

 

 

 

 

0.031

 

 

 

Debt refinancing (1) (2)

 

 

 

 

 

 

 

0.049

 

Goodwill derecognition (1) (2)

 

0.657

 

 

0.037

 

 

1.212

 

 

0.066

 

Impact of tax reform

 

 

 

0.016

 

 

 

 

(1.512

)

TBG restructuring

 

0.022

 

 

 

 

0.394

 

 

 

Discontinued operations, net of tax (2)

 

0.003

 

 

0.047

 

 

(0.137

)

 

1.131

 

Impact of change in weighted average shares (2)

 

0.004

 

 

 

 

0.011

 

 

 

Non-GAAP net income per diluted share (2) (3)

 

$

0.620

 

 

$

0.192

 

 

$

1.375

 

 

$

0.483

 

 

 

 

 

 

 

 

 

 

U.S. GAAP Weighted average shares - basic

 

38,618

 

46,014

 

41,829

 

46,517

U.S. GAAP Weighted average shares - diluted

 

38,618

 

46,633

 

41,829

 

47,035

Non-GAAP Weighted average shares - diluted (2)

 

39,692

 

46,633

 

43,171

 

47,035

____________________________________

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 twelve months ended June 30, 2019, and 2018, for all non-GAAP operating expense adjustments. Non-GAAP operating expense adjustments recognized during the first quarter of fiscal year 2018 were not tax effected as a result of the valuation allowance.

(2) 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 months and twelve months ended June 30, 2019 included additional shares for common stock equivalents of 1.1 million and 1.3 million, respectively. 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.

(3) Total is a recalculation; line items calculated individually may not sum to total due to rounding.

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 income (loss) 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 twelve months ended June 30, 2019 and 2018, the items impacting comparability consisted of the items identified in the non-GAAP reconciling items for the respective periods. The impacts of the debt refinancing, income tax provision adjustments associated with the above items, impact of tax reform and the SmartStyle restructuring costs included within depreciation and amortization are already included in the U.S. GAAP reported net income (loss) to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to adjusted EBITDA.

 

 

 

Three Months Ended June 30, 2019

 

 

Company-
owned (1)

 

Franchise (2)

 

Corporate

 

Consolidated (3)

Consolidated reported net income (loss), as reported (U.S. GAAP)

 

$

13,477

 

 

$

9,362

 

 

$

(28,235

)

 

$

(5,396

)

Interest expense, as reported

 

 

 

 

 

1,363

 

 

1,363

 

Income taxes, as reported

 

 

 

 

 

(5,133

)

 

(5,133

)

Depreciation and amortization, as reported

 

6,959

 

 

149

 

 

3,008

 

 

10,116

 

EBITDA (as defined above)

 

$

20,436

 

 

$

9,511

 

 

$

(28,997

)

 

$

950

 

 

 

 

 

 

 

 

 

 

Employee litigation reserve

 

2,000

 

 

 

 

 

 

2,000

 

Severance

 

 

 

 

 

118

 

 

118

 

Professional fees

 

 

 

 

 

258

 

 

258

 

Legal fees

 

 

 

 

 

1,300

 

 

1,300

 

Goodwill derecognition

 

 

 

 

 

33,527

 

 

33,527

 

TBG restructuring

 

 

 

1,106

 

 

 

 

1,106

 

Discontinued operations, net of tax

 

 

 

 

 

131

 

 

131

 

Adjusted EBITDA, non-GAAP financial measure

 

$

22,436

 

 

$

10,617

 

 

$

6,337

 

 

$

39,390

 

 

 

 

Three Months Ended June 30, 2018

 

 

Company-
owned (1)

 

Franchise (2)

 

Corporate

 

Consolidated (3)

Consolidated reported net income (loss), as reported (U.S. GAAP)

 

$

27,866

 

 

$

10,168

 

 

$

(34,747

)

 

$

3,287

 

Interest expense, as reported

 

 

 

 

 

1,090

 

 

1,090

 

Income taxes, as reported

 

 

 

 

 

8,063

 

 

8,063

 

Depreciation and amortization, as reported

 

9,284

 

 

90

 

 

2,067

 

 

11,441

 

EBITDA (as defined above)

 

$

37,150

 

 

$

10,258

 

 

$

(23,527

)

 

$

23,881

 

 

 

 

 

 

 

 

 

 

SmartStyle restructuring discounting and costs, net

 

1,154

 

 

 

 

 

 

1,154

 

Severance

 

 

 

 

 

(176

)

 

(176

)

Professional fees

 

 

 

 

 

80

 

 

80

 

Goodwill derecognition

 

 

 

 

 

2,185

 

 

2,185

 

Discontinued operations, net of tax

 

 

 

 

 

2,211

 

 

2,211

 

Adjusted EBITDA, non-GAAP financial measure

 

$

38,304

 

 

$

10,258

 

 

$

(19,227

)

 

$

29,335

 

____________________________________

Notes:
(1) Company-owned adjusted EBITDA margin for the three months ended June 30, 2019, and 2018, were 10.7% and 14.5%, respectively, and are calculated as company-owned adjusted EBITDA (as defined above) divided by company-owned adjusted revenue for each respective period.

(2) Franchise adjusted EBITDA margin for the three months ended June 30, 2019 and 2018, were 27.9% and 27.9%, respectively and are calculated as franchise adjusted EBITDA (as defined above) divided by franchise adjusted revenue for each respective period.

(3) Consolidated EBITDA margins for the three months ended June 30, 2019, and 2018, were 0.4% and 8.0%, respectively, and are calculated as EBITDA (as defined above) divided by U.S. GAAP revenue for each respective period. Consolidated adjusted EBITDA margin for the three months ended June 30, 2019, and 2018, were 15.9% and 9.8%, respectively, and are calculated as consolidated adjusted EBITDA (as defined above) divided by consolidated adjusted revenue for each respective period.

 

 

Twelve Months Ended June 30, 2019

 

 

Company-
owned (1)

 

Franchise (2)

 

Corporate

 

Consolidated (3)

Consolidated reported net income (loss), as reported (U.S. GAAP)

 

$

58,321

 

 

$

16,142

 

 

$

(88,689

)

 

$

(14,226

)

Interest expense, as reported

 

 

 

 

 

4,795

 

 

4,795

 

Income taxes, as reported

 

 

 

 

 

(2,145

)

 

(2,145

)

Depreciation and amortization, as reported

 

28,263

 

 

762

 

 

8,823

 

 

37,848

 

EBITDA (as defined above)

 

$

86,584

 

 

$

16,904

 

 

$

(77,216

)

 

$

26,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee litigation reserve

 

2,000

 

 

 

 

 

 

2,000

 

Severance

 

 

 

 

 

3,423

 

 

3,423

 

Professional fees

 

 

 

 

 

5,887

 

 

5,887

 

Legal fees

 

 

 

 

 

1,739

 

 

1,739

 

Goodwill derecognition

 

 

 

 

 

67,055

 

 

67,055

 

TBG restructuring

 

 

 

21,815

 

 

 

 

21,815

 

Discontinued operations, net of tax

 

 

 

 

 

(5,896

)

 

(5,896

)

Adjusted EBITDA, non-GAAP financial measure

 

$

88,584

 

 

$

38,719

 

 

$

(5,008

)

 

$

122,295

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended June 30, 2018

 

 

Company-
owned (1)

 

Franchise (2)

 

Corporate

 

Consolidated (3)

Consolidated reported net income (loss), as reported (U.S. GAAP)

 

$

50,516

 

 

$

35,637

 

 

$

(79,717

)

 

6,436

 

Interest expense, as reported

 

 

 

 

 

10,492

 

 

10,492

 

Income taxes, as reported

 

 

 

 

 

(69,812

)

 

(69,812

)

Depreciation and amortization, as reported

 

48,508

 

 

365

 

 

9,332

 

 

58,205

 

EBITDA (as defined above)

 

$

99,024

 

 

$

36,002

 

 

$

(129,705

)

 

$

5,321

 

 

 

 

 

 

 

 

 

 

SmartStyle restructuring discounting and costs, net

 

28,057

 

 

 

 

37

 

 

28,094

 

Gain on life insurance proceeds

 

 

 

 

 

(7,986

)

 

(7,986

)

Severance

 

 

 

 

 

2,652

 

 

2,652

 

Professional fees

 

 

 

 

 

1,707

 

 

1,707

 

Executive transition costs

 

 

 

 

 

564

 

 

564

 

Goodwill derecognition

 

 

 

 

 

3,899

 

 

3,899

 

Discontinued operations, net of tax

 

 

 

 

 

53,185

 

 

53,185

 

Adjusted EBITDA, non-GAAP financial measure

 

$

127,081

 

 

$

36,002

 

 

$

(75,647

)

 

$

87,436

 

____________________________________

Notes:
(1) Company-owned adjusted EBITDA margin for the twelve months ended June 30, 2019, and 2018, were 9.7% and 11.5%, respectively, and are calculated as company-owned adjusted EBITDA (as defined above) divided by company-owned adjusted revenue for each respective period.

(2) Franchise adjusted EBITDA margin for the twelve months ended June 30, 2019 and 2018, were 25.2% and 27.5%, respectively and are calculated as franchise adjusted EBITDA (as defined above) divided by franchise adjusted revenue for each respective period.

(3) Consolidated EBITDA margins for the twelve months ended June 30, 2019, and 2018, were 2.5% and 0.4%, respectively, and are calculated as EBITDA (as defined above) divided by U.S. GAAP revenue for each respective period. Consolidated adjusted EBITDA margin for the twelve months ended June 30, 2019, and 2018, were 11.4% and 7.1%, respectively, and are calculated as consolidated adjusted EBITDA (as defined above) divided by consolidated adjusted revenue for each respective period.

REGIS CORPORATION
Reconciliation of reported U.S. GAAP revenue change
(unaudited)

 

CONSOLIDATED REVENUE

Three Months Ended
June 30,

 

Twelve Months Ended
June 30,

Factor

 

2019

 

2018

 

2019

 

2018

Revenue decline, as reported (U.S. GAAP)

 

(17.4

)%

 

(8.2

)%

 

(13.5

)%

 

(4.4

)%

Closed salons

 

1.7

 

 

5.7

 

 

4.3

 

 

3.9

 

Salons sold to franchisees

 

14.0

 

 

5.1

 

 

9.1

 

 

2.8

 

New company-owned stores

 

(0.3

)

 

 

 

(0.1

)

 

(0.2

)

Franchise product and royalties and fees

 

1.4

 

 

0.4

 

 

(0.2

)

 

 

Franchise same-stores sales (1)

 

 

 

 

 

 

 

 

TBG product, royalties and fees

 

2.3

 

 

(2.2

)

 

0.1

 

 

(1.6

)

Advertising fund

 

(2.4

)

 

(0.1

)

 

(0.6

)

 

 

Foreign currency

 

0.3

 

 

(0.3

)

 

0.3

 

 

(0.3

)

Other

 

0.3

 

 

0.3

 

 

0.2

 

 

0.3

 

Company-owned same-store sales

 

(0.1

)%

 

0.7

%

 

(0.4

)%

 

0.5

%

(1) Franchise same-store sales increase (decrease) franchise royalties. As we transition to the asset-light franchise platform, franchise same-store sales will become more significant to consolidated revenues.

 

Contacts

REGIS CORPORATION:
Andrew Lacko
952-918-4175
investorrelations@regiscorp.com

Contacts

REGIS CORPORATION:
Andrew Lacko
952-918-4175
investorrelations@regiscorp.com