What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-02-01 compared with 2022-11-01 · 89 added, 83 removed, 188 unchanged (48% of the section changed)

4 unchanged sentences

Regis Corporation (NYSE:RGS) is a leader in the beauty salon industry.

As of September 30, 2022, the Company franchised, owned or held ownership interests in 5,494 worldwide locations.

As of December 31, 2022, the Company franchised, owned or held ownership interests in 5,347 worldwide locations.

Our locations consisted of 5,271 system-wide North American and international salons, and 76 locations in which we maintained a non-controlling ownership interest less than 100 percent.

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.

As of September 30, 2022, the Company had 608 employees worldwide.

Regis maintains an ownership interest in Empire Education Group in the United States.

As of December 31, 2022, the Company had 545 employees worldwide.

Merchandising Strategy

As part of the Company's transformation to focus on managing and nurturing brands, and in line with its capital-light business, the Company adopted a new merchandise strategy to shift its product business from a wholesale model to a third-party distribution model.

As part of the Company's transformation to focus on managing and nurturing brands, and in line with its capital-light business, the Company shifted its product business from a wholesale model to a third-party distribution model in fiscal year 2022.

Management expects the change will positively impact franchisees by providing them access to industry-leading pricing, loyalty programs, promotional benefits, educational assets, and ongoing support.

The Company will receive a rebate from the third-party distributors which is included in fees on the interim unaudited Condensed Consolidated Statement of Operations.

The Company receives a rebate from the third-party distributor, which is included in fees on the interim unaudited Condensed Consolidated Statement of Operations.

As a result of the change, product sales to franchisees will continue to decrease and are expected to provide less revenue and costs in fiscal year 2023 as compared to prior year.

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System-wide same-store sales by concept are detailed in the table below:

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2022 2021 2022 2021

Supercuts 7.2 % 30.8 % 8.0 % 30.6 %

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(1) System-wide same-store sales are calculated as the total change in sales for system-wide franchise and company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period.

Quarterly system-wide same-store sales are the sum of the system-wide same-store sales computed on a daily basis.

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.

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The percentages are computed as a percent of total consolidated revenues, except as otherwise indicated, and the increase (decrease) is measured in basis points.

Three Months Ended September 30,

Variances calculated on amounts shown in millions may result in rounding differences.

Three Months Ended December 31, Six Months Ended December 31,

2022 2021 2022 2021 2022 2022 2021 2022 2021 2022

($ in millions) % of Total

Revenues (1) Increase (Decrease) ($ in millions) % of Total

Revenues (1) Increase (Decrease)

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Cost of product sales to franchisees 1.3 3.1 118.2 129.2 (1,100) 1.8 10.8 112.5 103.8 870

Inventory reserve 1.2 — 2.0 — N/A 1.2 — 1.0 — N/A

General and administrative 11.7 15.1 19.6 21.8 (220) 26.1 35.9 21.4 24.6 (320)

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Other, net 1.2 0.1 2.0 0.1 190 0.8 (0.1) 0.7 (0.1) 80

Income tax (expense) benefit (4) — — (1.5) 0.5 N/A

Income tax benefit (expense) (3) — 0.2 — 3.8 N/A — 0.2 (0.6) 1.6 N/A

Income (loss) from discontinued operations 0.1 (0.8) 0.2 (1.2) 140 3.4 (1.9) 2.8 (1.3) 410

Net income (loss) (3) 1.5 (10.4) 2.4 (13.5) 1,590

Net loss (2) (2.4) (4.9) (4.0) (7.1) 310 (0.9) (15.3) (0.7) (10.5) 980

_______________________________________________________________________________

(1) Variances calculated on amounts shown in millions may result in rounding differences.

(1) Cost of product sales to franchisees is computed as a percent of product sales to franchisees.

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The income tax basis point change is noted as not applicable (N/A) as the discussion within MD&A is related to the effective income tax rate.

Three Months Ended September 30, 2022 Compared with Three Months Ended September 30, 2021

Three and Six Months Ended December 31, 2022 Compared with Three and Six Months Ended December 31, 2021

Consolidated Revenues

Consolidated revenues are comprised of royalties, fees, advertising fund contributions, product sales to franchisees, franchise rental income and company-owned salon revenue.

Consolidated revenue decreased $14.9 million, or 19.4%, for the three months ended September 30, 2022.

Royalty revenue increased $0.6 million in the three months ended September 30, 2022 due to higher average royalty rates.

The overall decrease in revenue is due to the decrease in company-owned salon revenue of $4.9 million due primarily to salon closures and to the decline in product sales to franchisees of $7.6 million.

During the twelve months ended September 30, 2022, 30 salons were sold to franchisees and 370 and 22 system-wide salons were closed and constructed, respectively (2023 Net Salon Count Changes).

During the three months ended September 30, 2022, royalties increased $0.6 million, or 3.6%, primarily due to higher average royalty rates partially offset by a decrease in franchise salon count.

During the three months ended September 30, 2022, fees increased $0.3 million, or 13.0%, primarily due to the rebate from the Company's third-party distributor, which is a new source of revenue.

See Note 2 to the unaudited Condensed Consolidated Financial Statements.

Consolidated revenues are comprised of royalties, fees, product sales to franchisees, advertising fund contributions, franchise rental income and company-owned salon revenue.

Consolidated revenue decreased $9.3 and $24.3 million, or 13.4% and 16.6%, for the three and six months ended December 31, 2022, respectively.

Royalty revenue increased $0.1 and $0.6 million in the three and six months ended December 31, 2022, respectively, due to improved system-wide same-store sales and average royalty rates.

The overall decrease in revenue for the three and six months ended December 31, 2022 is due to the decrease in company-owned salon revenue of $2.4 and $7.3 million, respectively, due primarily to salon closures, the decline in product sales to franchisees of $1.3 and $8.8 million, respectively, and the decline in franchise rental income of $4.9 and $8.3 million, respectively.

During the twelve months ended December 31, 2022, 17 salons were sold to franchisees and 452 and 20 system-wide salons were closed and constructed, respectively (2023 Net Salon Count Changes).

During the three and six months ended December 31, 2022, royalties increased $0.1 and $0.6 million, or 0.6% and 1.8%, respectively, primarily due to higher average royalty rates and improved system-wide same-store sales partially offset by a decrease in franchise salon count.

During the three and six months ended December 31, 2022, fees decreased $0.7 and $0.4 million, or 17.9% and 6.5%, respectively, primarily due to a decrease in terminated development agreements in fiscal year 2023 partially offset by an increase in the rebate received from the Company's shift in its product business to a third-party distribution model.

Product Sales to Franchisees

Product sales to franchisees decreased $7.6 million, or 95.0%, during the three months ended September 30, 2022, primarily due to the Company's shift in its product business to a third-party distribution model.

Product sales to franchisees decreased $1.3 and $8.8 million, or 54.2% and 84.6%, respectively, during the three and six months ended December 31, 2022, primarily due to the Company's shift in its product business to a third-party distribution model.

Advertising Fund Contributions

Advertising fund contributions increased $0.2 million, or 2.5%, during the three months ended September 30, 2022, primarily due to the increase in Supercuts system-wide sales.

Advertising fund contributions did not change significantly year-over-year, declining slightly due to a reduction in salon count partially offset by an increase in system-wide same-store sales.

Franchise Rental Income

During the three months ended September 30, 2022, franchise rental income decreased $3.5 million, or 10.4%, primarily due to lower franchise salon count.

During the three and six months ended December 31, 2022, franchise rental income decreased $4.9 and $8.3 million, or 14.5% and 12.3%, respectively, primarily due to a lower franchise salon count.

Company-owned Salon Revenue

During the three months ended September 30, 2022, company-owned salon revenue decreased $4.9 million, or 61.3%, due to the decrease in company-owned salons as a result of a decrease in salon count and a decline in product sales.

During the three and six months ended December 31, 2022, company-owned salon revenue decreased $2.4 and $7.3 million, or 48.0% and 56.2%, respectively, due to the decrease in company-owned salon count and a decline in product sales.

Cost of Product Sales to Franchisees

The 3,000 basis point increase in cost of product as a percent of product revenues during the three months ended September 30, 2022 was primarily due to the Company reducing prices to liquidate distribution center inventory.

The 1,100 basis point decrease in cost of product as a percent of product revenues during the three months ended December 31, 2022 was primarily due to higher marketing and freight expense in fiscal year 2022.

The 870 basis point increase in cost of product as a percent of product revenues during the six months ended December 31, 2022 was primarily due to the Company reducing prices to liquidate distribution center inventory.

Inventory Reserve

In the three and six months ended December 31, 2022, the Company recorded an inventory reserve charge of $1.2 million related to slow moving products.

During the three and six months ended December 31, 2021, the Company recorded inventory reserve charges of $1.2 and $1.5 million, respectively, which were included in company-owned salon expense related to distribution center inventory.

General and Administrative

The decrease of $6.4 million, or 30.8%, in general and administrative expense during the three months ended September 30, 2022 was primarily due to lower administrative and field management compensation resulting from headcount reductions and a decrease in expenses associated with the distribution center closures in fiscal year 2022.

Rent expense did not change significantly year over year.

There was a benefit of $1.1 million in fiscal year 2022 related to Canadian COVID-19 rent relief, which was offset by the net reduction in the number of company-owned salons in fiscal year 2023.

General and administrative expense decreased $3.4 and $9.8 million, or 22.5% and 27.3%, during the three and six months ended December 31, 2022, respectively.

Lower administrative and field management compensation resulting from headcount reductions, a decrease in expenses associated with the distribution center closures in fiscal year 2022 and a favorable actuarial adjustment of $0.6 million contributed to the decrease.

Rent expense decreased $0.9 and $1.0 million, or 30.0% and 20.8%, during the three and six months ended December 31, 2022, respectively.

There was a benefit of $0.1 and $1.2 million in the three and six months ended December 31, 2021 related to Canadian COVID-19 rent relief, which was offset by the net reduction in the number of company-owned salons in fiscal year 2023.

Advertising Fund Expense

Advertising fund expense increased $0.2 million, or 2.5%, during the three months ended September 30, 2022, primarily due to the increase in Supercuts system-wide sales.

Advertising fund expense did not change significantly year-over-year, declining slightly due to a reduction in salon count partially offset by an increase in system-wide same-store sales.

Franchise Rent Expense

During the three months ended September 30, 2022, franchise rent expense decreased $3.5 million, or 10.4%, primarily due to lower franchise salon count.

During the three and six months ended December 31, 2022, franchise rent expense decreased $4.9 and $8.3 million, or 14.5% and 12.3%, respectively, primarily due to a lower franchise salon count.

Company-owned Salon Expense

Company-owned salon expense for the three months ended September 30, 2022 decreased $4.9 million, or 62.0%, primarily due to the reduction in company-owned salons and a decline in product sales, partially offset by $0.6 million of Canadian wage relief received in fiscal year 2022.

Company-owned salon expense for the three and six months ended December 31, 2022 decreased $2.9 and $7.8 million, or 56.9% and 60.0%, respectively, primarily due to the reduction in company-owned salon count and a decline in product sales, partially offset by $0.8 and $1.4 million of Canadian wage relief received in the three and six months ended December 31, 2021, respectively.

Depreciation and Amortization

The decrease of $0.2 million, or 13.3%, in depreciation and amortization during the three months ended September 30, 2022 was primarily due to lower asset retirement obligations ("white boxing" salons at lease end) and the net reduction in company-owned salon count.

The increases of $2.2 and $1.9 million, or 137.5% and 61.3%, in depreciation and amortization during the three and six months ended December 31, 2022, respectively, were primarily due to a $2.6 million accelerated depreciation charge related to the consolidation of office space within the Company's corporate headquarters, partially offset by lower asset retirement obligations ("white boxing" salons at lease end) and the net reduction in company-owned salon count.

Long-Lived Asset Impairment

In the three months ended September 30, 2022, the Company did not record a long-lived asset impairment charge and in the three months ended September 30, 2021, the Company recorded a long-lived asset impairment charge of $0.2 million.

The decrease in long-lived asset impairment was primarily due to more salons being impaired in prior periods.

In the three and six months ended December 31, 2022, the Company did not record a long-lived asset impairment charge, and in the three and six months ended December 31, 2021, the Company recorded long-lived asset impairment charges of $0.1 and $0.2 million, respectively.

The decreases in long-lived asset impairment was primarily due to salons being impaired in prior periods.

Interest Expense

The $0.7 million increase in interest expense for the three months ended September 30, 2022 was primarily due to the amortization of fees related to the credit amendment that was signed in the first quarter of fiscal year 2023 and a higher interest rate on outstanding borrowings.

The $1.2 and $1.9 million increases in interest expense for the three and six months ended December 31, 2022, respectively, were primarily due to the amortization of fees related to the credit amendment that was signed in the first quarter of fiscal year 2023 and a higher interest rate on outstanding borrowings.

Loss from Sale of Salon Assets to Franchisees, Net

There was one salon sold in the three months ended September 30, 2022 compared to 81 in the three months ended September 30, 2021, which resulted in a $1.1 million decrease in the loss from sale of salon assets to franchisees, net.

The decrease of $0.3 million in other, net during the three months ended September 30, 2022 was primarily due to a higher foreign exchange loss in the three months ended September 30, 2022.

Income Tax (Expense) Benefit

During the three months ended September 30, 2022, the Company recognized tax expense of $0.03 million, with a corresponding effective tax rate of (1.5%), as compared to recognizing a tax benefit of $0.05 million, with a corresponding effective tax rate of 0.5% during the three months ended September 30, 2021.

There was one salon sold in the six months ended December 31, 2022 compared to 13 and 94 in the three and six months ended December 31, 2021, respectively, which resulted in $0.6 and $1.7 million decreases in the loss from sale of salon assets to franchisees, net.

Other, net increased $1.1 and $0.9 million during the three and six months ended December 31, 2022, respectively, primarily due to a $1.1 million grant received from the state of North Carolina related to COVID-19 relief.

Income Tax Benefit (Expense)

During the three months ended December 31, 2022, the Company recognized no tax benefit or expense, as compared to recognizing a tax benefit of $0.2 million, with a corresponding effective tax rate of 3.8% during the three months ended December 31, 2021.

During the six months ended December 31, 2022, the Company recognized tax expense of $0.03 million, with a corresponding effective tax rate of (0.6)%, as compared to recognizing a tax benefit of $0.2 million, with a corresponding effective tax rate of 1.6% during the six months ended December 31, 2021.

See Note 5 to the unaudited Condensed Consolidated Financial Statements.

Income (Loss) from Discontinued Operations

In the three months ended September 30, 2022 and 2021, the Company recognized a gain from discontinued operations, net of income taxes of $3.3 million and a loss of $1.1 million, respectively.

The gain in fiscal year 2023 is primarily due to receipt of $4.0 million in sales proceeds, which were previously held back.

In the three and six months ended December 31, 2022, the Company recorded a gain from discontinued operations of $0.1 and $3.4 million, respectively, and in the three and six months ended December 31, 2021, the Company recorded a loss of $0.8 and $1.9 million, respectively.

The gain in fiscal year 2023 is primarily due to receipt of $4.5 million in sales proceeds, of which $0.5 million were received in the second quarter, which were previously held back.

See Note 3 to the unaudited Condensed Consolidated Financial Statements.

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Significant results of continuing operations are discussed below with respect to each of these segments.

Three Months Ended September 30,

2022 2021 Increase (Decrease) (1)

(Dollars in millions)

Three Months Ended December 31, Six Months Ended December 31,

2022 2021 Increase (Decrease) (1) 2022 2021 Increase (Decrease) (1)

(Dollars in millions) (Dollars in millions)

Royalties $ 16.2 $ 16.1 $ 0.1 $ 33.3 $ 32.7 $ 0.6

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Franchise same-store sales (2) 4.5 % 22.4 % 4.6 % 23.0 %

Operating income (loss) $ 4.1 $ (3.9) $ 8.0

Franchise adjusted EBITDA $ 7.5 $ 5.7 $ 1.8 $ 12.5 $ 2.3 $ 10.2

Total franchise salons 5,196 5,553 (357)

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(2) Franchise same-store sales are calculated as the total change in sales for franchise locations that were open on a specific day of the week during the current period and the corresponding prior period.

Quarterly franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis.

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.

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Franchise Revenue

Franchise revenues decreased $10.0 million during the three months ended September 30, 2022.

The decrease in franchise salon revenue during the three months ended September 30, 2022 was primarily due to the decrease in product sales to franchisees due to the Company's shift to third-party distributors and franchise rental income.

During the twelve months ended September 30, 2022, franchisees purchased 30 salons from the Company and constructed (net of relocations) and closed 21 and 315 franchise salons, respectively.

Franchise Operating Income (Loss)

During the three months ended September 30, 2022, franchise salon operations generated operating income of $4.1 million and generated operating losses of $3.9 million during the three months ended September 30, 2021.

Operating income improved primarily due to higher royalty revenue and decreased general and administrative expense and rent.

Franchise revenues decreased $6.8 and $16.9 million during the three and six months ended December 31, 2022, respectively.

The decreases in franchise salon revenue during the three and six months ended December 31, 2022 were primarily due to the decrease in product sales to franchisees due to the Company's shift to a third-party distributor and franchise rental income.

During the twelve months ended December 31, 2022, franchisees purchased 17 salons from the Company and constructed (net of relocations) and closed 19 and 393 franchise salons, respectively.

Franchise Adjusted EBITDA

During the three and six months ended December 31, 2022, franchise adjusted EBITDA totaled $7.5 and $12.5 million, respectively, an improvement of $1.8 and $10.2 million compared to the three and six months ended December 31, 2021, respectively.

The improvements are primarily due to an increase in average royalty revenues and a decrease in general and administrative expense.

Company-owned Salons

Three Months Ended September 30,

2022 2021 Decrease (1)

(Dollars in millions)

Three Months Ended December 31, Six Months Ended December 31,

2022 2021 (Decrease) Increase (1) 2022 2021 (Decrease) Increase (1)

(Dollars in millions) (Dollars in millions)

Total revenue $ 2.6 $ 5.0 $ (2.4) $ 5.7 $ 13.0 $ (7.3)

Operating loss $ (1.6) $ (1.0) $ (0.6)

Company-owned salon adjusted EBITDA $ 0.3 $ (3.1) $ 3.4 $ (0.9) $ (4.7) $ 3.8

Total company-owned salons 75 150 (75)

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Company-owned Salon Revenue

Company-owned salon revenues decreased $4.9 million during the three months ended September 30, 2022, primarily due to the 2023 Net Salon Count Changes and a decline in product sales in salons.

Company-owned Salon Operating Loss

During the three months ended September 30, 2022, company-owned salon operating loss increased $0.6 million, compared to the prior comparable period.

The increase in the loss during the three months ended September 30, 2022 was primarily due to the Company receiving Canadian COVID-19 rent and wage relief benefits of $1.7 million in fiscal year 2022, partially offset by the closure of loss-generating salons.

Company-owned salon revenues decreased $2.4 and $7.3 million during the three and six months ended December 31, 2022, respectively, primarily due to the 2023 Net Salon Count Changes and a decline in product sales in salons.

Company-owned Salon Adjusted EBITDA

During the three and six months ended December 31, 2022, company-owned salon adjusted EBITDA improved $3.4 and $3.8 million, respectively, primarily due to the closure of unprofitable salons and a $1.1 million grant received from the state of North Carolina related to COVID-19 relief in the three months ended December 31, 2022.

LIQUIDITY AND CAPITAL RESOURCES

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The Company believes it has sufficient liquidity, cash on hand and borrowing capacity, to meet its obligations in the next twelve months and beyond.

As of September 30, 2022, cash and cash equivalents were $9.5 million, with $8.3 million and $1.2 million within the United States and Canada, respectively.

As of September 30, 2022, the Company's borrowing arrangements include a $180.0 million term loan and a $55.0 million revolving credit facility that expires in August 2025.

As of September 30, 2022, the unused available credit under the revolving credit facility was $38.3 million, the credit agreement has a minimum liquidity covenant of $10.0 million, and total liquidity per the agreement was $47.8 million.

As of December 31, 2022, cash and cash equivalents were $9.4 million, with $8.4 and $1.0 million within the United States and Canada, respectively.

As of December 31, 2022, the Company's borrowing arrangements include a $173.8 million term loan and a $55.0 million revolving credit facility that expires in August 2025.

As of December 31, 2022, the unused available credit under the revolving credit facility was $34.3 million, the credit agreement has a minimum liquidity covenant of $10.0 million, and total liquidity per the agreement was $43.7 million.

See Note 9 to the unaudited Condensed Consolidated Financial Statements.

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The timing and amount of sales of shares, if any, will depend on a variety of factors, including prevailing market conditions, the trading price of shares, and other factors as determined by the Company.

During the three months ended September 30, 2022, the Company did not issue shares under the prospectus supplement.

During the three months ended September 30, 2021, the Company issued 8.1 million shares and received net proceeds of $32.2 million.

On September 29, 2021, the Company sold 1.2 million shares for net proceeds of $5.0 million, which settled on October 1, 2021.

As of September 30, 2022, $11.6 million remains outstanding under the share issuance program.

During the three and six months ended December 31, 2022, the Company did not issue shares under the prospectus supplement.

During the six months ended December 31, 2021, the Company issued 9.3 million shares and received net proceeds of $37.2 million.

As of December 31, 2022, $11.6 million remains outstanding under the share issuance program.

The Company closely manages its liquidity and capital resources.

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Cash Requirements

The Company's most significant contractual cash requirements as of September 30, 2022 were lease commitments and interest payments.

The Company's most significant contractual cash requirements as of December 31, 2022 were lease commitments and interest payments.

See Note 8 to the unaudited Condensed Consolidated Financial Statements for further lease commitment detail.

Additionally, the Company is expecting to pay $2.5 million in deferred social security contributions in the second quarter of fiscal year 2023.

Cash Flows from Operating Activities

During the three months ended September 30, 2022, cash used in operating activities was $5.1 million compared to $12.3 million in the prior year.

Cash used in operations improved due to higher royalties and lower general and administrative expense.

During the six months ended December 31, 2022, cash used in operating activities was $6.9 million compared to $24.3 million in the prior year.

Cash used in operations improved due to lower general and administrative expense, a $1.1 million cash grant received from the state of North Carolina related to COVID-19 relief and less cash used for working capital.

Cash use in fiscal year 2023 included a $2.5 million payment of previously deferred social security contributions.

Cash Flows from Investing Activities

During the three months ended September 30, 2022, cash provided by investing activities of $3.3 million, primarily related to cash received of $4.0 million from the sale of OSP, net of a $0.5 million transaction fee.

During the three months ended September 30, 2021, cash used in investing activities of $1.5 million was primarily due to capital expenditures, primarily related to internally-developed capitalized software.

During the six months ended December 31, 2022, cash provided by investing activities of $3.6 million, primarily related to cash received of $4.5 million from the sale of OSP, net of a $0.5 million transaction fee.

During the six months ended December 31, 2021, cash used in investing activities of $2.9 million was primarily due to capital expenditures, primarily related to internally-developed capitalized software.

Cash Flows from Financing Activities

During the three months ended September 30, 2022, cash used in financing activities was $3.8 million, primarily as a result of debt refinancing fees of $4.3 million, partially offset by a net $0.6 million borrowing under the Company's revolving credit facility.

During the three months ended September 30, 2021, cash provided by financing activities was $40.8 million, primarily as a result of net proceeds related to the issuance of common stock.

During the six months ended December 31, 2022, cash used in financing activities was $1.6 million, primarily as a result of debt refinancing fees of $4.4 million, partially offset by a net $2.8 million borrowing under the Company's revolving credit facility.

During the six months ended December 31, 2021, cash provided by financing activities was $43.6 million, primarily as a result of net proceeds related to the issuance of common stock and a net draw on the Company's revolving credit facility.

Financing Arrangements

See Note 9 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and Note 8 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, for additional information regarding our financing arrangements.

See Note 9 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 and Note 8 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, for additional information regarding our financing arrangements.

Debt to Capitalization Ratio

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Capitalization (1)

September 30, 2022 119.8 %

December 31, 2022 120.9 %

June 30, 2022 120.8 %

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(1) Excludes the long-term lease liability as that liability is offset by the ROU asset.

The decrease in the debt to capitalization ratio as of September 30, 2022 as compared to June 30, 2022, was primarily due to the improvement in shareholders' deficit as a result of net income in the quarter.

The debt to capitalization ratio as of December 31, 2022 did not change significantly compared to June 30, 2022.

Share Issuance Program

In February 2021, the Company filed a $150.0 million shelf registration statement and $50.0 million prospectus supplement with the SEC under which it may offer and sell, from time to time, up to $50.0 million worth of its Class A common stock in "at-the-market" offerings.

During the three months ended September 30, 2022, the Company did not issue shares under the prospectus supplement.

As of September 30, 2022, 9.3 million shares have been cumulatively issued for $38.4 million, and $11.6 million remains outstanding under the share issuance program.

During the six months ended December 31, 2022, the Company did not issue shares under the prospectus supplement.

As of December 31, 2022, 9.3 million shares have been cumulatively issued for $38.4 million, and $11.6 million remains outstanding under the share issuance program.

Share Repurchase Program

In May 2000, the Board approved a stock repurchase program with no stated expiration date.

Since that time and through September 30, 2022, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program.

Since that time and through December 31, 2022, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program.

All repurchased shares become authorized but unissued shares of the Company.

The timing and amounts of any repurchases depend on many factors, including the market price of the common stock and overall market conditions.

During the three months ended September 30, 2022, the Company did not repurchase any shares.

As of September 30, 2022, 30.0 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remains outstanding under the approved stock repurchase program.

During the six months ended December 31, 2022, the Company did not repurchase any shares.

As of December 31, 2022, 30.0 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remains outstanding under the approved stock repurchase program.

SAFE HARBOR PROVISIONS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis