Attached files
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| 8-K - 8-K - REGIS CORP | rgs-20200618.htm |
Exhibit No. 99 | |||||
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REGIS REPORTS THIRD QUARTER 2020 RESULTS MATERIALLY IMPACTED BY THE COVID-19 PANDEMIC AND SIGNIFICANT PROGRESS IN SALON RE-OPENINGS AND IN ITS TRANSITION TO A FRANCHISE MODEL
Third Quarter Operating Loss Of $64.3 Million Includes A One-Time, Non-Cash Goodwill Impairment Charge Of $44.5 Million Related To Company-Owned Salons, Non-Cash Goodwill Derecognition Charges Of $19.8 Million Associated With The Sale Of Company-Owned Salons To Franchisees In The Third Quarter, And $7.1 Million Of Other Non-Recurring Discrete Items
Excluding Discrete Items And The Income From Discontinued Operations, The Company Reported Third Quarter 2020 Adjusted Net Loss Of $4.5 Million
The Company Continues To Make Significant Progress In Its Transition To A Fully-Franchised Model With The Sale And Conversion Of An Additional 375 Company-Owned Salons To Its Asset-Light Franchise Portfolio During The Quarter; Year-To-Date, The Company Has Sold And Converted 1,363 Company-Owned Salons To Its Franchise Portfolio
As Of June 15, 2020, Approximately 68% Of The Company's Salon Portfolio Have Re-opened From Hibernation Caused By The COVID-19 Pandemic
At The End Of The Quarter, Approximately 74% Of The Company's Salon Portfolio Had Been Franchised
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
| Consolidated Revenue | $ | 153,783 | $ | 258,343 | $ | 609,586 | $ | 820,849 | ||||||||||||||||||
| System-wide Revenue (1) | $ | 371,122 | $ | 444,284 | $ | 1,249,152 | $ | 1,360,543 | ||||||||||||||||||
| System-wide Same-Store Sales Comps (2) | (5.4) | % | (2.0) | % | (2.7) | % | (0.1) | % | ||||||||||||||||||
| Franchise Same-Store Sales Comps (2) | (4.1) | % | (1.3) | % | (1.8) | % | 0.4 | % | ||||||||||||||||||
| Company-owned Same-Store Sales Comps | (7.9) | % | (2.5) | % | (3.9) | % | (0.4) | % | ||||||||||||||||||
| Operating Loss | $ | (64,342) | $ | (22,162) | $ | (81,714) | $ | (20,284) | ||||||||||||||||||
| Loss From Continuing Operations | $ | (75,338) | $ | (14,811) | $ | (98,997) | $ | (14,857) | ||||||||||||||||||
| Diluted Loss per Share From Continuing Operations | $ | (2.10) | $ | (0.37) | $ | (2.75) | $ | (0.35) | ||||||||||||||||||
| EBITDA (3) | $ | (65,219) | $ | (1,401) | $ | (72,047) | $ | 25,322 | ||||||||||||||||||
| as a percent of revenue | (42.4) | % | (0.5) | % | (11.8) | % | 3.1 | % | ||||||||||||||||||
| As Adjusted (3) | ||||||||||||||||||||||||||
| Net (Loss) Income, as Adjusted | $ | (4,481) | $ | 15,404 | $ | 14,043 | $ | 34,760 | ||||||||||||||||||
| Diluted (Loss) Income per Share, as Adjusted | $ | (0.12) | $ | 0.37 | $ | 0.38 | $ | 0.79 | ||||||||||||||||||
| EBITDA, as Adjusted (3) | $ | 5,981 | $ | 37,158 | $ | 52,779 | $ | 82,907 | ||||||||||||||||||
| as a percent of revenue | 3.9 | % | 14.4 | % | 8.7 | % | 10.1 | % | ||||||||||||||||||
_______________________________________________________________________________
(1)Represents total sales within the system, excluding TBG franchise sales.
(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".
MINNEAPOLIS, June 18, 2020 -- Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is franchising, owning and operating technology enabled hair salons, today reported a third quarter 2020 net loss from continuing operations of $75.3 million, or $2.10 loss per diluted share as compared to net loss from continuing operations of $14.8 million, or $0.37 loss per diluted share in the third quarter of 2019. The Company’s third quarter reported results include the following discrete items; a one-time non-cash goodwill impairment charge of $44.5 million related to the Company-owned salon segment, non-cash goodwill derecognition charges of $19.8 million associated with the sale of 375 company-owned salons to franchisees in the third quarter, as well as $7.1 million of other discrete items. The non-cash goodwill impairment charge is driven by changes to the Company's forecast for the Company-owned segment related to the economic impact of COVID-19 substantially caused by the government mandated hibernations of the Company's salons. Absent the goodwill impairment charge in the third quarter, the company-owned goodwill would have been derecognized over the course of the vendition timeline. Excluding discrete items, the Company reported third quarter 2020 adjusted net loss of $4.5 million, or $0.12 loss per diluted share as compared to adjusted net income of $15.4 million, or $0.37 earnings per diluted share, for the same period last year. The year-over-year decrease in adjusted net income was driven primarily by the year-over-year decrease in the gain from the sale of salons to franchisees of $17.8 million due to lower proceeds per salon in the current year. The elimination of adjusted net income that had been generated in the prior year period from the 1,581 company-owned salons that were sold and converted to the Company’s asset-light franchise portfolio over the past twelve months also contributed to the decline, but this was partially offset by significant reductions in general and administrative expense and marketing. Additionally, the Company estimates it lost approximately $8 million in margin due to reduced traffic and store closures associated with the COVID-19 pandemic.
Total revenue in the quarter of $153.8 million decreased $104.6 million, or 40.5%, year-over-year driven primarily by the conversion of a net 1,581 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 $18.7 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 a gross up to both revenue and expense with no impact to overall earnings. The impact during the third quarter was an increase in revenue and expense by $31.8 million, with no impact on operating income.
Third quarter adjusted EBITDA of $6.0 million decreased $31.2 million, versus the same period last year. Excluding the $9.6 and $27.4 million adjusted gain from the sale of company-owned salons during the current and prior year quarter, respectively, adjusted EBITDA loss of $3.6 million was $13.4 million unfavorable versus the same period last year. This was driven primarily by the elimination of adjusted EBITDA that had been generated in the prior year period from the 1,581 company-owned salons that were sold and converted to the Company’s asset-light franchise portfolio over the past twelve months, partially offset by significant reductions in general and administrative expense and marketing spend.
Hugh Sawyer, Chairman, President and Chief Executive Officer, commented, "Despite the challenges caused by the pandemic and the government-mandated hibernation of our salon portfolio, we continued to make meaningful progress in all areas of our strategy." Mr. Sawyer concluded, “We remain committed to our transformation to a fully-franchised model on an expeditious timetable, the removal of non-essential G&A and the deployment of value-enhancing technology.”
Third Quarter Segment Results
Franchise Salons
| Three Months Ended March 31, | Increase (Decrease) | Nine Months Ended March 31, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) (1) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Product | $ | 15.3 | $ | 10.6 | $ | 4.7 | $ | 43.3 | $ | 31.3 | $ | 12.0 | ||||||||||||||||||||||||||
| Product sold to TBG mall locations | — | 3.7 | (3.7) | 2.0 | 16.5 | (14.5) | ||||||||||||||||||||||||||||||||
| Total product | 15.3 | 14.3 | 1.0 | 45.3 | 47.8 | (2.5) | ||||||||||||||||||||||||||||||||
| Royalties and fees | 8.7 | 22.8 | (14.1) | 66.1 | 67.8 | (1.7) | ||||||||||||||||||||||||||||||||
| Franchise rental income | 31.8 | — | 31.8 | 96.9 | — | 96.9 | ||||||||||||||||||||||||||||||||
| Total franchised salons revenue | $ | 55.8 | $ | 37.1 | $ | 18.7 | $ | 208.2 | $ | 115.6 | $ | 92.6 | ||||||||||||||||||||||||||
| Franchise Same-Store Sales Comps (2) | (4.1)% | (1.3)% | (1.8)% | 0.4% | ||||||||||||||||||||||||||||||||||
| EBITDA, as Adjusted | $ | 11.5 | $ | 9.8 | $ | 1.7 | $ | 36.4 | $ | 28.1 | $ | 8.3 | ||||||||||||||||||||||||||
| as a percent of revenue | 20.6% | 26.3% | 17.5% | 24.3% | ||||||||||||||||||||||||||||||||||
| as a percent of adjusted revenue (3) | 36.2% | 30.2% | 38.0% | 26.1% | ||||||||||||||||||||||||||||||||||
| Total Franchise Salons | 5,126 | 4,375 | 751 | |||||||||||||||||||||||||||||||||||
| as a percent of total Franchise and Company-owned salons | 73.9% | 56.4% | ||||||||||||||||||||||||||||||||||||
| Total Franchisees | 955 | 900 | 55 | |||||||||||||||||||||||||||||||||||
_______________________________________________________________________________
(1)Variances calculated on amounts shown in millions may result in rounding differences.
(2)TBG is excluded from same-store sales in all periods.
(3)Adjusted revenue excludes non-margin revenue. See Non-GAAP reconciliation.
Third quarter Franchise revenue was $55.8 million, a $18.7 million, or 50.5% increase compared to the prior year quarter, and included franchise rental income of $31.8 million due to the adoption of the new lease accounting requirements. Royalties and fees were $8.7 million, a $14.1 million, or 61.8% decrease versus the same period last year. Royalties and fees decreased $14.9 million due to the one-time refunding of previously collected cooperative advertising fees due to the COVID-19 pandemic and government-mandated hibernation of salons. Product sales to franchisees of $15.3 million increased $1.0 million versus the same period last year driven primarily by increased franchise salon counts.
Franchise adjusted EBITDA of $11.5 million grew $1.7 million, or 17.3% year-over-year primarily driven by the increase in salon counts.
Company-Owned Salons
| Three Months Ended March 31, | Increase (Decrease) | Nine Months Ended March 31, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) (1) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
| Total Revenue | $ | 97.9 | $ | 221.2 | $ | (123.3) | $ | 401.4 | $ | 705.3 | $ | (303.9) | ||||||||||||||||||||||||||
| Company-owned Same-Store Sales Comps | (7.9)% | (2.5)% | (3.9)% | (0.4)% | ||||||||||||||||||||||||||||||||||
| Year-over-Year Ticket change | 2.6% | 3.6% | 2.8% | 4.4% | ||||||||||||||||||||||||||||||||||
| Year-over-Year Transaction change | (10.5)% | (6.1)% | (6.7)% | (4.8)% | ||||||||||||||||||||||||||||||||||
| EBITDA, as Adjusted | $ | (1.3) | $ | 17.2 | $ | (18.5) | $ | 14.5 | $ | 66.1 | $ | (51.6) | ||||||||||||||||||||||||||
as a percent of revenue | (1.3)% | 7.8% | 3.6% | 9.4% | ||||||||||||||||||||||||||||||||||
| Total Company-owned salons | 1,815 | 3,376 | (1,561) | |||||||||||||||||||||||||||||||||||
| as a percent of total Franchise and Company-owned salons | 26.1% | 43.6% | ||||||||||||||||||||||||||||||||||||
_______________________________________________________________________________
(1)Variances calculated on amounts shown in millions may result in rounding differences.
Third quarter revenue for the Company-owned salon segment decreased $123.3 million, or 55.7%, versus the prior year to $97.9 million. The year-over-year decline in revenue was driven by the decrease of a net 1,581 salons sold and converted to the Company's asset-light franchise portfolio over the past 12 months, the closure of a net 187 unprofitable salons over the past 12 months, the temporary closure of salons at the end of March due to the COVID-19 pandemic and a decline in company-owned same-store sales of 7.9%. The year-over-year decline in company-owned same store sales was driven by a 10.5% decrease in transactions, partially related to the COVID-19 pandemic, partially offset by a 2.6% increase in average ticket.
Third quarter adjusted EBITDA loss of $1.3 million decreased $18.5 million, or 107.4% versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 1,581 company-owned salons that were sold and converted to the Company's asset-light franchise portfolio over the past 12 months, the impacts of the COVID-19 pandemic and the decline in service and product margins, partially offset by a decrease in general and administrative expense and marketing spend.
Other Key Events
•In January 2020, the Company announced reductions to general and administrative expenses that are expected to save approximately $19 million on an annualized basis.
•Closure of 90 non-performing company-owned salons in the quarter which were at or near the end of their lease term.
•In March 2020, the substantial majority of the Company's salons were closed due to government mandates as a result of the COVID-19 pandemic. Salons began to re-open as permitted by state and local guidance at the end of May. As of June 15, 2020, 3,934 of our franchise salons and 775 of our company-owned salons were open, representing approximately 68% of the Company's portfolio.
•In March 2020, the Company decided to waive cooperative advertising fees and refund $14.9 million of contributions previously made to the fund in order to provide needed temporary support to its franchise owners, which benefited the Company's marketing spend by $1.5 million in the quarter.
•In March 2020, the Company borrowed approximately $183 million under its unsecured revolving credit facility. The Company borrowed under the credit facility in order to increase its cash position and preserve financial flexibility in light of uncertainty resulting from the COVID-19 pandemic.
•In May 2020, the Company successfully amended its $295 million revolving credit facility that expires in March 2023. The amendment, among other things, removes all prior financial covenants, including the net leverage ratio and fixed charge coverage ratio, and adds a minimum liquidity covenant. In addition, the amendment provides the Company's lenders security in the Company's assets. The amendment gives the Company flexibility to manage the business through its strategic transformation, as well as the uncertainty generated by the COVID-19 pandemic.
•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 375 company-owned salons to its asset-light franchise portfolio. The Company expects that the economic uncertainty created by the COVID-19 pandemic may impact the number of salons to be sold, the pace of sales to franchisees and the proceeds from the sales. The Company is still committed to converting to a fully-franchise capital-light business.
•The impact of the transactions closed in the quarter is as follows:
| Three Months Ended March 31, | Increase (Decrease) | Nine Months Ended March 31, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
| Salons sold to franchisees | 375 | 245 | 130 | 1,363 | 502 | 861 | ||||||||||||||||||||||||||||||||
| Cash proceeds received | $ | 18,502 | $ | 30,569 | $ | (12,067) | $ | 87,916 | $ | 54,619 | $ | 33,297 | ||||||||||||||||||||||||||
| Gain on sale of venditions, excluding goodwill derecognition | $ | 9,628 | $ | 27,421 | $ | (17,793) | $ | 50,841 | $ | 43,922 | $ | 6,919 | ||||||||||||||||||||||||||
| Non-cash goodwill derecognition | (19,836) | (15,932) | (3,904) | (72,601) | (33,528) | (39,073) | ||||||||||||||||||||||||||||||||
| (Loss) gain from sale of salon assets to franchisees, net | $ | (10,208) | $ | 11,489 | $ | (21,697) | $ | (21,760) | $ | 10,394 | $ | (32,154) | ||||||||||||||||||||||||||
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 third quarter results on June 18, 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) 458-4121 and entering access code 5153028. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 5153028.
About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in beauty salons and cosmetology education. As of March 31, 2020, the Company franchised, owned or held ownership interests in 7,026 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.
CONTACT: REGIS CORPORATION:
Kersten Zupfer
investorrelations@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 a potential material reduction in revenue from our company-owned and franchised salons as a result of the uncertain duration and severity of the COVID-19 pandemic, as well as the health of our stylists, customers and employees; the continued ability of the Company to implement its strategy, priorities and initiatives including the re-engineering of our corporate and field infrastructure; 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 per share data)
| March 31, 2020 | June 30, 2019 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 241,037 | $ | 70,141 | ||||||||||
| Receivables, net | 27,602 | 30,143 | ||||||||||||
| Inventories | 59,029 | 77,322 | ||||||||||||
| Other current assets | 23,211 | 33,216 | ||||||||||||
| Total current assets | 350,879 | 210,822 | ||||||||||||
| Property and equipment, net | 65,880 | 78,090 | ||||||||||||
| Goodwill | 226,666 | 345,718 | ||||||||||||
| Other intangibles, net | 7,568 | 8,761 | ||||||||||||
| Right of use asset | 861,569 | — | ||||||||||||
| Other assets | 38,227 | 34,170 | ||||||||||||
| Non-current assets held for sale | — | 5,276 | ||||||||||||
| Total assets | $ | 1,550,789 | $ | 682,837 | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 39,120 | $ | 47,532 | ||||||||||
| Accrued expenses | 43,475 | 80,751 | ||||||||||||
| Short-term lease liability | 149,482 | — | ||||||||||||
| Total current liabilities | 232,077 | 128,283 | ||||||||||||
| Long-term debt, net | 273,000 | 90,000 | ||||||||||||
| Long-term lease liability | 727,245 | — | ||||||||||||
| Long-term financing liabilities | 28,233 | 28,910 | ||||||||||||
| Other non-current liabilities | 92,698 | 111,399 | ||||||||||||
| Total liabilities | 1,353,253 | 358,592 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Shareholders’ equity: | ||||||||||||||
Common stock, $0.05 par value; issued and outstanding 35,566,206 and 36,869,249 common shares at March 31, 2020 and June 30, 2019, respectively | 1,778 | 1,843 | ||||||||||||
| Additional paid-in capital | 21,186 | 47,152 | ||||||||||||
| Accumulated other comprehensive income | 6,998 | 9,342 | ||||||||||||
| Retained earnings | 167,574 | 265,908 | ||||||||||||
| Total shareholders’ equity | 197,536 | 324,245 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,550,789 | $ | 682,837 | ||||||||||
– more –
REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For The Three and Nine Months Ended March 31, 2020 and 2019
(Dollars and shares in thousands, except per share data amounts)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Service | $ | 78,387 | $ | 181,809 | $ | 322,133 | $ | 580,076 | ||||||||||||||||||
| Product | 34,877 | 53,766 | 124,516 | 173,006 | ||||||||||||||||||||||
| Royalties and fees | 8,698 | 22,768 | 66,062 | 67,767 | ||||||||||||||||||||||
| Franchise rental income | 31,821 | — | 96,875 | — | ||||||||||||||||||||||
| Total revenue | 153,783 | 258,343 | 609,586 | 820,849 | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Cost of service | 54,824 | 111,632 | 212,664 | 348,060 | ||||||||||||||||||||||
| Cost of product | 21,672 | 31,167 | 75,257 | 99,698 | ||||||||||||||||||||||
| Site operating expenses | 3,660 | 34,339 | 62,932 | 106,723 | ||||||||||||||||||||||
| General and administrative | 31,871 | 41,694 | 105,187 | 135,257 | ||||||||||||||||||||||
| Rent | 19,243 | 32,332 | 64,002 | 102,952 | ||||||||||||||||||||||
| Franchise rent expense | 31,821 | — | 96,875 | — | ||||||||||||||||||||||
| Depreciation and amortization | 10,359 | 8,630 | 27,486 | 27,732 | ||||||||||||||||||||||
| TBG mall location restructuring | 146 | 20,711 | 2,368 | 20,711 | ||||||||||||||||||||||
| Goodwill impairment | 44,529 | — | 44,529 | — | ||||||||||||||||||||||
| Total operating expenses | 218,125 | 280,505 | 691,300 | 841,133 | ||||||||||||||||||||||
| Operating loss | (64,342) | (22,162) | (81,714) | (20,284) | ||||||||||||||||||||||
| Other (expense) income: | ||||||||||||||||||||||||||
| Interest expense | (1,712) | (1,354) | (4,615) | (3,432) | ||||||||||||||||||||||
| (Loss) gain from sale of salon assets to franchisees, net | (10,208) | 11,489 | (21,760) | 10,394 | ||||||||||||||||||||||
| Interest income and other, net | (1,329) | 464 | 3,188 | 1,453 | ||||||||||||||||||||||
| Loss from continuing operations before income taxes | (77,591) | (11,563) | (104,901) | (11,869) | ||||||||||||||||||||||
| Income tax benefit (expense) | 2,253 | (3,248) | 5,904 | (2,988) | ||||||||||||||||||||||
| Loss from continuing operations | (75,338) | (14,811) | (98,997) | (14,857) | ||||||||||||||||||||||
| Income from discontinued operations, net of taxes | 301 | 178 | 753 | 6,027 | ||||||||||||||||||||||
| Net loss | $ | (75,037) | $ | (14,633) | $ | (98,244) | $ | (8,830) | ||||||||||||||||||
| Net loss per share: | ||||||||||||||||||||||||||
| Basic and diluted: | ||||||||||||||||||||||||||
| Loss from continuing operations | $ | (2.10) | $ | (0.37) | $ | (2.75) | $ | (0.35) | ||||||||||||||||||
| Income from discontinued operations | 0.01 | 0.00 | 0.02 | 0.14 | ||||||||||||||||||||||
| Net loss per share, basic and diluted (1) | $ | (2.10) | $ | (0.36) | $ | (2.73) | $ | (0.21) | ||||||||||||||||||
| Weighted average common and common equivalent shares outstanding: | ||||||||||||||||||||||||||
| Basic and diluted | 35,815 | 40,314 | 35,958 | 42,900 | ||||||||||||||||||||||
_______________________________________________________________________________
(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.
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REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
For the Nine Months Ended March 31, 2020 and 2019
(Dollars in thousands)
| Nine Months Ended March 31, | ||||||||||||||
| 2020 | 2019 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | (98,244) | $ | (8,830) | ||||||||||
| Adjustments to reconcile net (loss) to net cash used in operating activities: | ||||||||||||||
| Non-cash adjustments related to discontinued operations | (967) | (163) | ||||||||||||
| Depreciation and amortization | 23,635 | 24,727 | ||||||||||||
| Deferred income taxes | (6,590) | (6,034) | ||||||||||||
| Gain from sale of company headquarters, net | (2,513) | — | ||||||||||||
| Loss (gain) from sale of salon assets to franchisees, net | 21,760 | (10,394) | ||||||||||||
| Non-cash TBG mall location restructuring charge | — | 20,711 | ||||||||||||
| Goodwill impairment | 44,529 | — | ||||||||||||
| Salon asset impairments | 3,851 | 3,005 | ||||||||||||
| Stock-based compensation | 2,114 | 7,065 | ||||||||||||
| Amortization of debt discount and financing costs | 206 | 206 | ||||||||||||
| Other non-cash items affecting earnings | (442) | (492) | ||||||||||||
| Changes in operating assets and liabilities, excluding the effects of asset sales | (38,360) | (50,074) | ||||||||||||
| Net cash used in operating activities | (51,021) | (20,273) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | (32,331) | (23,160) | ||||||||||||
| Proceeds from sale of assets to franchisees | 87,916 | 54,619 | ||||||||||||
| Costs associated with sale of salon assets to franchisees | (1,887) | — | ||||||||||||
| Proceeds from company-owned life insurance policies | — | 24,617 | ||||||||||||
| Proceeds from sale of company headquarters | 8,996 | — | ||||||||||||
| Net cash provided by investing activities | 62,694 | 56,076 | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Borrowings on revolving credit facility | 213,000 | — | ||||||||||||
| Repayments of revolving credit facility | (30,000) | — | ||||||||||||
| Repurchase of common stock | (28,246) | (105,364) | ||||||||||||
| Taxes paid for shares withheld | (1,968) | (2,447) | ||||||||||||
| Net proceeds from distribution center sale and leaseback transaction | — | 18,068 | ||||||||||||
| Distribution center lease payments | (677) | — | ||||||||||||
| Net cash provided by (used in) financing activities | 152,109 | (89,743) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (379) | 5 | ||||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 163,403 | (53,935) | ||||||||||||
| Cash, cash equivalents and restricted cash: | ||||||||||||||
| Beginning of period | 92,379 | 148,774 | ||||||||||||
| End of period | $ | 255,782 | $ | 94,839 | ||||||||||
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REGIS CORPORATION
Same-Store Sales
SYSTEM-WIDE SAME-STORE SALES (1):
| For the Three Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||||||||||||||||
SmartStyle | (8.2) | % | (12.8) | % | (9.5) | % | 1.3 | % | (1.3) | % | 0.6 | % | ||||||||||||||||||||||||||
Supercuts | (3.1) | (12.1) | (3.7) | (1.7) | (9.2) | (2.2) | ||||||||||||||||||||||||||||||||
Signature Style | (4.6) | (6.4) | (4.8) | (3.3) | (7.9) | (3.9) | ||||||||||||||||||||||||||||||||
Total | (4.6) | % | (11.1) | % | (5.4) | % | (1.6) | % | (4.6) | % | (2.0) | % | ||||||||||||||||||||||||||
| For the Nine Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||||||||||||||||
SmartStyle | (2.8) | % | (9.6) | % | (4.8) | % | 2.2 | % | (1.2) | % | 1.2 | % | ||||||||||||||||||||||||||
Supercuts | (0.8) | (10.5) | (1.4) | 0.2 | (6.2) | (0.2) | ||||||||||||||||||||||||||||||||
Signature Style | (2.1) | (6.6) | (2.7) | (0.5) | (4.1) | (1.0) | ||||||||||||||||||||||||||||||||
Total | (1.7) | % | (9.0) | % | (2.7) | % | 0.4 | % | (3.0) | % | (0.1) | % | ||||||||||||||||||||||||||
_______________________________________________________________________________
(1)System-wide same-store sales are calculated as the total change in sales for system-wide franchise and company-owned locations 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 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 | ||||||||||||||||||||||||||||||||||||||
| March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||||||||||||||||
SmartStyle | (9.6) | % | (15.2) | % | (10.9) | % | (1.4) | % | (15.4) | % | (5.2) | % | ||||||||||||||||||||||||||
Supercuts | (2.9) | (11.2) | (3.3) | (0.1) | (8.9) | (0.6) | ||||||||||||||||||||||||||||||||
Signature Style | (3.3) | (4.9) | (3.5) | (1.6) | (6.6) | (2.2) | ||||||||||||||||||||||||||||||||
Total | (3.5) | % | (10.0) | % | (4.1) | % | (0.5) | % | (9.0) | % | (1.3) | % | ||||||||||||||||||||||||||
| For the Nine Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||||||||||||||||
SmartStyle | (6.0) | % | (16.2) | % | (8.6) | % | 0.1 | % | (16.6) | % | (4.7) | % | ||||||||||||||||||||||||||
Supercuts | (0.4) | (9.6) | (0.9) | 1.3 | (6.5) | 0.8 | ||||||||||||||||||||||||||||||||
Signature Style | (1.0) | (6.6) | (1.7) | 1.0 | (4.6) | 0.1 | ||||||||||||||||||||||||||||||||
Total | (0.9) | % | (10.1) | % | (1.8) | % | 1.2 | % | (6.8) | % | 0.4 | % | ||||||||||||||||||||||||||
_______________________________________________________________________________
(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 | ||||||||||||||||||||||||||||||||||||||
| March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||||||||||||||||
SmartStyle | (7.7) | % | (12.2) | % | (9.0) | % | 1.6 | % | — | % | 1.1 | % | ||||||||||||||||||||||||||
Supercuts | (5.7) | (17.9) | (6.7) | (5.2) | (9.6) | (5.6) | ||||||||||||||||||||||||||||||||
Signature Style | (6.2) | (8.7) | (6.5) | (4.3) | (8.7) | (4.7) | ||||||||||||||||||||||||||||||||
Total | (6.9) | % | (11.9) | % | (7.9) | % | (2.4) | % | (3.0) | % | (2.5) | % | ||||||||||||||||||||||||||
| For the Nine Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||||||||||||||||
SmartStyle | (2.0) | % | (8.3) | % | (3.8) | % | 2.4 | % | (0.3) | % | 1.6 | % | ||||||||||||||||||||||||||
Supercuts | (4.0) | (14.5) | (4.9) | (1.7) | (5.9) | (2.1) | ||||||||||||||||||||||||||||||||
Signature Style | (3.2) | (6.6) | (3.5) | (1.3) | (3.8) | (1.5) | ||||||||||||||||||||||||||||||||
Total | (2.8) | % | (8.3) | % | (3.9) | % | (0.1) | % | (1.7) | % | (0.4) | % | ||||||||||||||||||||||||||
_______________________________________________________________________________
(1)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.
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REGIS CORPORATION
System-Wide Location Counts
| March 31, 2020 | June 30, 2019 | |||||||||||||
FRANCHISE SALONS: | ||||||||||||||
SmartStyle/Cost Cutters in Walmart Stores | 1,219 | 615 | ||||||||||||
Supercuts | 2,522 | 2,340 | ||||||||||||
Signature Style | 1,215 | 766 | ||||||||||||
Total North American salons | 4,956 | 3,721 | ||||||||||||
Total International Salons (1) | 170 | 230 | ||||||||||||
Total Franchise Salons | 5,126 | 3,951 | ||||||||||||
as a percent of total Franchise and Company-owned salons | 73.9 | % | 56.0 | % | ||||||||||
| Total Franchisees | 955 | 907 | ||||||||||||
COMPANY-OWNED SALONS: | ||||||||||||||
| SmartStyle/Cost Cutters in Walmart Stores | 873 | 1,550 | ||||||||||||
| Supercuts | 217 | 403 | ||||||||||||
| Signature Style | 535 | 1,155 | ||||||||||||
Mall-based salons (2) | 190 | — | ||||||||||||
| Total Company-owned salons | 1,815 | 3,108 | ||||||||||||
| as a percent of total Franchise and Company-owned salons | 26.1 | % | 44.0 | % | ||||||||||
| OWNERSHIP INTEREST LOCATIONS: | ||||||||||||||
| Equity ownership interest locations | 85 | 86 | ||||||||||||
| Grand Total, System-wide | 7,026 | 7,145 | ||||||||||||
_______________________________________________________________________________
(1)Canadian and Puerto Rican salons are included in the North American salon totals.
(2)The mall-based salons were acquired from TBG on December 31, 2019. They are included in continuing operations under the Company-owned operating segment beginning January 1, 2020.
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Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating (loss) income, net (loss) income, net (loss) 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 nine months ended March 31, 2020 and 2019:
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 and impairment.
•TBG discontinued operations.
•Employee litigation reserve.
•Corporate office transition.
•CARES Act.
•Tax asset valuation allowance.
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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 March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||||||||
U.S. GAAP financial line item | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||
U.S. GAAP revenue | $ | 153,783 | $ | 258,343 | $ | 609,586 | $ | 820,849 | ||||||||||||||||||||||||
| U.S. GAAP operating loss | $ | (64,342) | $ | (22,162) | $ | (81,714) | $ | (20,284) | ||||||||||||||||||||||||
Non-GAAP operating expense adjustments (1) | ||||||||||||||||||||||||||||||||
| Professional fees | General and administrative | (138) | 1,579 | 223 | 5,629 | |||||||||||||||||||||||||||
| Severance | General and administrative | 5,136 | 515 | 8,053 | 3,305 | |||||||||||||||||||||||||||
| Legal fees | General and administrative | — | — | — | 439 | |||||||||||||||||||||||||||
Corporate office transition | Rent | 515 | — | 919 | — | |||||||||||||||||||||||||||
| Employee litigation reserve | Site operating expenses | — | — | (600) | — | |||||||||||||||||||||||||||
| TBG restructuring | TBG restructuring | 146 | 20,711 | 2,368 | 20,711 | |||||||||||||||||||||||||||
| Goodwill impairment | Goodwill impairment | 44,529 | — | 44,529 | — | |||||||||||||||||||||||||||
| Total non-GAAP operating expense adjustments | 50,188 | 22,805 | 55,492 | 30,084 | ||||||||||||||||||||||||||||
| Non-GAAP operating (loss) income (1) | $ | (14,154) | $ | 643 | $ | (26,222) | $ | 9,800 | ||||||||||||||||||||||||
| U.S. GAAP net loss | $ | (75,037) | $ | (14,633) | $ | (98,244) | $ | (8,830) | ||||||||||||||||||||||||
Non-GAAP net income adjustments: | ||||||||||||||||||||||||||||||||
| Non-GAAP revenue adjustments | — | — | — | — | ||||||||||||||||||||||||||||
| Non-GAAP operating expense adjustments | 50,188 | 22,805 | 55,492 | 30,084 | ||||||||||||||||||||||||||||
Corporate office transition | Interest income and other, net | 1,477 | — | (2,513) | — | |||||||||||||||||||||||||||
| Goodwill derecognition | Interest income and other, net | 19,836 | 15,932 | 72,601 | 33,528 | |||||||||||||||||||||||||||
| Income tax impact on Non-GAAP adjustments (2) | Income taxes | (644) | (8,522) | (12,540) | (13,995) | |||||||||||||||||||||||||||
| TBG discontinued operations, net of income tax | Loss from discontinued operations, net of tax | (301) | (178) | (753) | (6,027) | |||||||||||||||||||||||||||
Total non-GAAP net income adjustments | 70,556 | 30,037 | 112,287 | 43,590 | ||||||||||||||||||||||||||||
| Non-GAAP net (loss) income | $ | (4,481) | $ | 15,404 | $ | 14,043 | $ | 34,760 | ||||||||||||||||||||||||
_______________________________________________________________________________
(1)Adjusted operating margins for the three months ended March 31, 2020 and 2019, were 9.2% and 0.2%, and were 4.3% and 1.2% for the nine months ended March 31, 2020 and 2019, respectively, and are calculated as non-GAAP operating (loss) 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 nine months ended March 31, 2020 and 2019, for all non-GAAP operating expense adjustments. Included in the tax impact is a March 2020 adjustment of $14.7 million relating to the CARES Act, and an adjustment of $0.4 million relating to a Canadian deferred tax asset valuation allowance.
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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 per diluted share to non-GAAP net (loss) income per diluted share | ||||||||||||||||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| U.S. GAAP net loss per diluted share | $ | (2.095) | $ | (0.363) | $ | (2.732) | $ | (0.206) | ||||||||||||||||||
| Professional fees (1) | (0.003) | 0.030 | 0.005 | 0.100 | ||||||||||||||||||||||
| Severance (1) | 0.110 | 0.010 | 0.169 | 0.059 | ||||||||||||||||||||||
| Legal fees | — | — | — | 0.008 | ||||||||||||||||||||||
Corporate office transition | 0.043 | — | (0.034) | — | ||||||||||||||||||||||
| Employee litigation reserve | — | — | (0.013) | — | ||||||||||||||||||||||
| TBG restructuring | 0.003 | 0.390 | 0.050 | 0.368 | ||||||||||||||||||||||
| Goodwill derecognition (1) | 0.424 | 0.300 | 1.526 | 0.596 | ||||||||||||||||||||||
| TBG discontinued operations, net of tax | (0.008) | (0.003) | (0.020) | (0.138) | ||||||||||||||||||||||
| Goodwill impairment | 0.951 | — | 0.936 | — | ||||||||||||||||||||||
| CARES Act | 0.402 | — | 0.395 | — | ||||||||||||||||||||||
| Tax asset valuation | 0.012 | — | 0.012 | — | ||||||||||||||||||||||
Impact of change in weighted average shares (3) | 0.038 | 0.010 | 0.084 | 0.005 | ||||||||||||||||||||||
| Non-GAAP net (loss) income per diluted share (2) | $ | (0.123) | $ | 0.373 | $ | 0.378 | $ | 0.792 | ||||||||||||||||||
U.S. GAAP Weighted average shares - basic | 35,815 | 40,314 | 35,958 | 42,900 | ||||||||||||||||||||||
U.S. GAAP Weighted average shares - diluted | 35,815 | 40,314 | 35,958 | 42,900 | ||||||||||||||||||||||
Non-GAAP Weighted average shares - diluted (3) | 36,479 | 41,337 | 37,103 | 43,907 | ||||||||||||||||||||||
_______________________________________________________________________________
(1)Based on projected statutory effective tax rate analyses, the non-GAAP tax provision was calculated to be approximately 22% for the three and nine months ended March 31, 2020 and 2019, 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 nine months ended March 31, 2020 included additional shares for common stock equivalents of 0.7 and 1.1 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.
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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 nine months ended March 31, 2020, 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 March 31, 2020 | ||||||||||||||||||||||||||
Franchise | Company-owned | Corporate | Consolidated (1) | |||||||||||||||||||||||
| Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 11,082 | $ | (55,604) | $ | (30,515) | $ | (75,037) | ||||||||||||||||||
| Interest expense, as reported | — | — | 1,712 | 1,712 | ||||||||||||||||||||||
| Income taxes, as reported | — | — | (2,253) | (2,253) | ||||||||||||||||||||||
| Depreciation and amortization, as reported | 292 | 9,799 | 268 | 10,359 | ||||||||||||||||||||||
| EBITDA (as defined above) | $ | 11,374 | $ | (45,805) | $ | (30,788) | $ | (65,219) | ||||||||||||||||||
| Professional fees | — | — | (138) | (138) | ||||||||||||||||||||||
| Severance | — | — | 5,136 | 5,136 | ||||||||||||||||||||||
| TBG restructuring | 146 | — | — | 146 | ||||||||||||||||||||||
| Corporate office transition | — | — | 1,992 | 1,992 | ||||||||||||||||||||||
| Goodwill impairment, as reported | — | 44,529 | — | 44,529 | ||||||||||||||||||||||
| Goodwill derecognition | — | — | 19,836 | 19,836 | ||||||||||||||||||||||
| TBG discontinued operations, net of tax | — | — | (301) | (301) | ||||||||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 11,520 | $ | (1,276) | $ | (4,263) | $ | 5,981 | ||||||||||||||||||
| Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||
Franchise | Company-owned | Corporate | Consolidated (1) | |||||||||||||||||||||||
| Consolidated reported net (loss) income, as reported (U.S. GAAP) | $ | (11,180) | $ | 10,730 | $ | (14,183) | $ | (14,633) | ||||||||||||||||||
| Interest expense, as reported | — | — | 1,354 | 1,354 | ||||||||||||||||||||||
| Income taxes, as reported | — | — | 3,248 | 3,248 | ||||||||||||||||||||||
| Depreciation and amortization, as reported | 240 | 6,519 | 1,871 | 8,630 | ||||||||||||||||||||||
| EBITDA (as defined above) | $ | (10,940) | $ | 17,249 | $ | (7,710) | $ | (1,401) | ||||||||||||||||||
| Professional fees | — | — | 1,579 | 1,579 | ||||||||||||||||||||||
| Severance | — | — | 515 | 515 | ||||||||||||||||||||||
| TBG restructuring | 20,711 | — | — | 20,711 | ||||||||||||||||||||||
| Goodwill derecognition | — | — | 15,932 | 15,932 | ||||||||||||||||||||||
| TBG discontinued operations, net of income tax | — | — | (178) | (178) | ||||||||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 9,771 | $ | 17,249 | $ | 10,138 | $ | 37,158 | ||||||||||||||||||
_______________________________________________________________________________
(1)Consolidated EBITDA margins for the three months ended March 31, 2020 and 2019, were (42.4)% and (0.5)%, 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 March 31, 2020 and 2019 were 3.9% and 14.4%, respectively, and are calculated as adjusted EBITDA divided by U.S. GAAP revenue for each respective period.
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| For the Nine Months Ended March 31, 2020 | ||||||||||||||||||||||||||
| Franchise | Company-owned | Corporate | Consolidated (1) | |||||||||||||||||||||||
| Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 33,417 | $ | (51,308) | $ | (80,353) | $ | (98,244) | ||||||||||||||||||
| Interest expense, as reported | — | — | 4,615 | 4,615 | ||||||||||||||||||||||
| Income taxes, as reported | — | — | (5,904) | (5,904) | ||||||||||||||||||||||
| Depreciation and amortization, as reported | 662 | 21,844 | 4,980 | 27,486 | ||||||||||||||||||||||
| EBITDA (as defined above) | $ | 34,079 | $ | (29,464) | $ | (76,662) | $ | (72,047) | ||||||||||||||||||
| Professional fees | — | — | 223 | 223 | ||||||||||||||||||||||
| Severance | — | — | 8,053 | 8,053 | ||||||||||||||||||||||
| Employee litigation reserve | — | (600) | — | (600) | ||||||||||||||||||||||
| TBG restructuring | 2,368 | — | — | 2,368 | ||||||||||||||||||||||
| Corporate office transition | — | — | (1,595) | (1,595) | ||||||||||||||||||||||
| Goodwill impairment, as reported | — | 44,529 | — | 44,529 | ||||||||||||||||||||||
| Goodwill derecognition | — | — | 72,601 | 72,601 | ||||||||||||||||||||||
| TBG discontinued operations | — | — | (753) | (753) | ||||||||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 36,447 | $ | 14,465 | $ | 1,867 | $ | 52,779 | ||||||||||||||||||
| For the Nine Months Ended March 31, 2019 | ||||||||||||||||||||||||||
| Franchise | Company-owned | Corporate | Consolidated (1) | |||||||||||||||||||||||
| Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 6,780 | $ | 44,844 | $ | (60,454) | $ | (8,830) | ||||||||||||||||||
| Interest expense, as reported | — | — | 3,432 | 3,432 | ||||||||||||||||||||||
| Income taxes, as reported | — | — | 2,988 | 2,988 | ||||||||||||||||||||||
| Depreciation and amortization, as reported | 613 | 21,304 | 5,815 | 27,732 | ||||||||||||||||||||||
| EBITDA (as defined above) | $ | 7,393 | $ | 66,148 | $ | (48,219) | $ | 25,322 | ||||||||||||||||||
Professional fees | — | — | 5,629 | 5,629 | ||||||||||||||||||||||
Severance | — | — | 3,305 | 3,305 | ||||||||||||||||||||||
Legal fees | — | — | 439 | 439 | ||||||||||||||||||||||
| TBG restructuring | 20,711 | — | — | 20,711 | ||||||||||||||||||||||
| Goodwill derecognition | — | — | 33,528 | 33,528 | ||||||||||||||||||||||
| TBG discontinued operations | — | — | (6,027) | (6,027) | ||||||||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 28,104 | $ | 66,148 | $ | (11,345) | $ | 82,907 | ||||||||||||||||||
_______________________________________________________________________________
(1)Consolidated EBITDA margins for the nine months ended March 31, 2020 and 2019 were (11.8)% and 3.1%, 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 nine months ended March 31, 2020 and 2019, were 8.7% and 10.1%, respectively, and are calculated as adjusted EBITDA divided by adjusted U.S. GAAP revenue for each respective period.
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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 March 31, | ||||||||||||||
| 2020 | 2019 | |||||||||||||
| As Adjusted EBITDA | $ | 11,520 | $ | 9,771 | ||||||||||
| U.S. GAAP revenue | 55,837 | 37,107 | ||||||||||||
| As Adjusted EBITDA as a % of U.S. GAAP revenue | 20.6 | % | 26.3 | % | ||||||||||
| Non-margin revenue adjustments: | ||||||||||||||
| Franchise rental income | (31,821) | — | ||||||||||||
| Ad Fund revenue | 7,789 | (8,429) | ||||||||||||
| TBG product sales | — | 3,700 | ||||||||||||
| Adjusted revenue | $ | 31,805 | $ | 32,378 | ||||||||||
| As Adjusted EBITDA as a percent of adjusted revenue (1) | 36.2 | % | 30.2 | % | ||||||||||
| Nine Months Ended March 31, | ||||||||||||||
| 2020 | 2019 | |||||||||||||
| As Adjusted EBITDA | $ | 36,447 | $ | 28,104 | ||||||||||
| U.S. GAAP revenue | 208,224 | 115,553 | ||||||||||||
| As Adjusted EBITDA as a % of U.S. GAAP revenue | 17.5 | % | 24.3 | % | ||||||||||
| Non-margin revenue adjustments: | ||||||||||||||
| Franchise rental income | (96,875) | — | ||||||||||||
| Ad Fund revenue | (13,341) | (24,272) | ||||||||||||
| TBG product sales | (2,010) | 16,500 | ||||||||||||
| Adjusted revenue | $ | 95,998 | $ | 107,781 | ||||||||||
| As Adjusted EBITDA as a percent of adjusted revenue (1) | 38.0 | % | 26.1 | % | ||||||||||
(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.
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