What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2024-01-31 · 90 added, 88 removed, 203 unchanged (47% of the section changed)

4 unchanged sentences

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

As of December 31, 2023, the Company franchised or owned 4,709 locations, primarily in North America.

As of March 31, 2024, the Company franchised or owned 4,557 locations, primarily in North America.

Our locations consisted of 4,537 franchised salons and 20 company-owned salons.

Regis’ franchised and corporate locations operate under concepts such as Supercuts ® , SmartStyle ® , Cost Cutters ® , Roosters ® and First Choice Haircutters ® .

As of December 31, 2023, the Company had 397 employees worldwide.

As of March 31, 2024, the Company had 296 employees.

Merchandising Strategy

4 unchanged sentences

Corporate Strategy Update

On November 1, 2023, the Company announced that the Board has initiated a strategic review to proactively assess the Company’s capital structure with support of legal and financial advisors.

On November 1, 2023, the Company announced that the Board has initiated a strategic review to proactively assess the Company’s capital structure with the support of legal and financial advisors.

The Board has established a Special Committee to evaluate the various strategic alternatives and initiatives.

The Company is continuing on such strategic review and there is no set timetable for this process, and there can be no assurances as to the results of the review.

The Company is continuing with such strategic review and there is no set timetable for this process, and there can be no assurances as to the results of the review.

The Company does not intend to comment further on developments or status of this process until it deems further disclosure is appropriate or required by law.

Tax Benefit Preservation Plan

On January 28, 2024, the Board adopted a Tax Benefits Preservation Plan (the “Plan”).

By adopting the Plan, the Board is seeking to protect the Company’s ability to use its net operating loss carryforwards and other tax attributes to offset potential future income tax liabilities.

See Note 1 of the unaudited Condensed Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

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The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

The Company determined a triggering event occurred related to a decrease in the Company's stock price, resulting in a quantitative impairment test performed over goodwill.

Accordingly, the Company engaged a third-party valuation specialist to perform an impairment analysis on the Franchise reporting unit of the business as of November 30, 2023.

For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and market approach to evaluate the Franchise reporting unit.

The discounted cash flows model reflects management's assumptions regarding discount rates, revenue growth rates, economic and market trends, cost structure, and other expectations about the anticipated short-term and long-term operating results.

These assumptions are inherently uncertain.

An increase in the discount rate or a decrease in revenue growth rate or market trends would have a negative impact on the fair value of the reporting unit which could be material.

As a result of the impairment testing, the Franchise reporting unit was determined to have a fair value in excess of its carrying value of 6%, resulting in no goodwill impairment charge.

As of December 31, 2023 and June 30, 2023, the Franchise reporting unit had goodwill of $173.8 million.

An interim impairment analysis was not required in the three months ended March 31, 2024.

As of March 31, 2024 and June 30, 2023, the Franchise reporting unit had goodwill of $173.3 million and $173.8 million, respectively

Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Part II, Item 8 of the June 30, 2023 Annual Report on Form 10-K.

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We believe system-wide sales information aids in understanding how we derive royalty revenue and in evaluating performance.

In the six months ended December 31, 2023, a net 144 franchise salons have closed, which will reduce future royalty income.

In the nine months ended March 31, 2024, a net 258 franchise salons have closed, which will reduce future royalty income.

The following table summarizes system-wide revenue and system-wide same-store sales by concept:

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

Three Months Ended March 31, Nine Months Ended March 31,

2024 2023 2024 2023

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

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

Three Months Ended March 31, Nine Months Ended March 31,

2024 2023 2024 2023 2024 2023 2024 2023

8 unchanged sentences

Company-owned salon revenue 1.3 2.2 2.6 3.9 (130) 5.0 7.9 3.3 4.4 (110)

Cost of product sales to franchisees 0.1 1.3 100.0 118.2 (1,820) 0.4 1.8 80.0 112.5 (3,250)

Cost of product sales to franchisees (1) — 1.0 — 166.7 N/M 0.4 2.8 80.0 127.3 (4,730)

Inventory reserve — — — — — — 1.2 — 0.7 (70)

9 unchanged sentences

Other, net (0.3) 0.4 (0.6) 0.7 (130) (0.2) 1.2 (0.1) 0.7 (80)

Income tax benefit (4) 0.1 — 9.6 — N/A 0.3 — 398.4 (0.6) N/A

(Loss) income from continuing operations (1.0) (2.5) (2.0) (4.2) 220 0.2 (4.4) 0.2 (2.1) 230

Income tax (expense) benefit (4) (0.1) 0.2 (2.3) 10.0 N/A 0.2 0.2 8.3 3.2 N/A

Loss from continuing operations (2.4) (2.2) (4.9) (3.9) (100) (2.2) (6.5) (1.4) (1.2) (20)

Income from discontinued operations 0.1 0.5 0.2 0.9 (70) 2.1 4.0 1.4 2.3 (90)

Net income (loss) (3) 1.0 (2.4) 2.0 (4.0) 600 2.2 (0.9) 2.1 (0.7) 280

Net loss (3) (2.3) (1.6) (4.7) (2.9) (180) (0.1) (2.6) (0.1) (1.5) 140

_______________________________________________________________________________

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

The basis point change is not meaningful.

(2) Includes cost of services and products sold to guests in our Company-owned salons.

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

Three and Six Months Ended December 31, 2023 Compared with Three and Six Months Ended December 31, 2022

During the three and six months ended December 31, 2023, royalties decreased $0.4 million and $1.0 million, or 2.5% and 3.0%, respectively, primarily due to a decrease in franchise salon count.

During the three and six months ended December 31, 2023, fees decreased $0.7 million and $0.7 million, respectively, primarily due to a decrease in terminated development agreements.

Three and Nine Months Ended March 31, 2024 Compared with Three and Nine Months Ended March 31, 2023

During the three and nine months ended March 31, 2024, royalties decreased $0.3 million and $1.4 million, or 2.2% and 2.7%, respectively, primarily due to a decrease in franchise salon count.

During the three months ended March 31, 2024, fees increased $0.1 million due to an increase in terminated development agreements in the current year quarter.

During the nine months ended March 31, 2024, fees decreased $0.6 million, primarily due to a decrease in terminated development agreements and lower fees from franchise product vendors.

Product Sales to Franchisees

Product sales to franchisees in the three and six months ended December 31, 2023 were less than the three and six months ended December 31, 2022, primarily due to the Company's shift in its product business from a wholesale model to a third-party distribution model.

Product sales to franchisees in the three and nine months ended March 31, 2024 decreased $0.6 million and $1.7 million, or 100.0% and 79.4%, respectively, compared to the three and nine months ended March 31, 2023.

The decreases are primarily due to the Company's shift in its product business from a wholesale model to a third-party distribution model.

Product sales to franchisees are not expected to be material for the remainder of fiscal year 2024.

Advertising Fund Contributions

Advertising fund contributions decreased $1.2 million and $2.2 million, or 15.0% and 13.6%, during the three and six months ended December 31, 2023, respectively, primarily due to the decrease in franchise salon count.

Advertising fund contributions decreased $2.0 million and $4.2 million, or 25.9% and 17.5%, during the three and nine months ended March 31, 2024, respectively, primarily due to the decrease in franchise salon count and lower contribution rates.

Franchise Rental Income

During the three and six months ended December 31, 2023, franchise rental income decreased $4.8 million and $10.4 million, or 16.6% and 17.6%, respectively, primarily due to the decrease in franchise salon count.

During the three and nine months ended March 31, 2024, franchise rental income decreased $2.8 million and $13.3 million, or 10.7% and 15.5%, respectively, primarily due to the decrease in franchise salon count and franchisees signing their own leases.

Company-Owned Salon Revenue

During the three and six months ended December 31, 2023, company-owned salon revenue decreased $0.8 million and $2.0 million, or 30.8% and 35.1%, respectively, due to the decrease in company-owned salon count.

During the three and nine months ended March 31, 2024, company-owned salon revenue decreased $0.9 million and $2.9 million, or 38.9% and 36.2%, respectively, due to the decrease in company-owned salon count.

Cost of Product Sales to Franchisees

The decrease in cost of product as a percent of product revenues during the three and six months ended December 31, 2023 was primarily due to the Company's shift in its product business from a wholesale model to a third-party distribution model.

The decrease in cost of product as a percent of product revenues during the three and nine months ended March 31, 2024 was primarily due to the Company's shift in its product business from a wholesale model to a third-party distribution model.

Cost of product sales to franchisees is not expected to be material for the remainder of fiscal year 2024.

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.

There were no similar charges during the three and six months ended December 31, 2023.

There were no inventory reserve charges in the three months ended March 31, 2024 or 2023.

In the nine months ended March 31, 2023, the Company recorded an inventory reserve charge of $1.2 million related to slow moving products.

There were no similar charges during the nine months ended March 31, 2024.

General and Administrative

General and administrative expense for the three months ended December 31, 2023 remained consistent with the prior period.

General and administrative expense for the six months ended December 31, 2023 decreased $3.6 million, or 13.8%, primarily due to lower headcount resulting in lower compensation expense and lower legal, insurance and professional fees.

Rent expense decreased $0.7 million and $1.3 million, or 33.3% and 34.2%, during the three and six months ended December 31, 2023, respectively, primarily due to a reduction in company-owned salon count.

General and administrative expense for the three and nine months ended March 31, 2024 decreased $1.9 million and $5.5 million, or 14.1% or 13.9%, respectively, primarily due to lower headcount resulting in lower compensation expense and lower legal, insurance and professional fees.

Rent expense decreased $0.3 million and $1.6 million, or 15.0% and 28.1%, during the three and nine months ended March 31, 2024, respectively, primarily due to a reduction in company-owned salon count.

Advertising Fund Expense

Advertising fund expense decreased $1.2 million and $2.2 million, or 15.0% and 13.6%, during the three and six months ended December 31, 2023, respectively, primarily due to the decrease in franchise salon count.

Advertising fund expense decreased $2.0 million and $4.2 million, or 25.6% and 17.5%, during the three and nine months ended March 31, 2024, respectively, primarily due to the decrease in franchise salon count and and lower contribution rates.

Franchise Rent Expense

During the three and six months ended December 31, 2023, franchise rent expense decreased $4.8 million and $10.4 million, or 16.6% and 17.6%, respectively, primarily due to the decrease in franchise salon count.

During the three and nine months ended March 31, 2024, franchise rent expense decreased $2.8 million and $13.3 million, or 10.7% and 15.5%, respectively, primarily due to the decrease in franchise salon count and franchisees signing their own leases.

Company-Owned Salon Expense

Company-owned salon expense for the three and six months ended December 31, 2023 decreased $0.9 million and $2.4 million, or 40.9% and 46.2%, respectively, primarily due to the reduction in company-owned salon count.

Company-owned salon expense, for the three and nine months ended March 31, 2024, decreased $0.6 million and $3.0 million, or 28.0% and 41.0%, respectively, primarily due to the reduction in company-owned salon count.

Depreciation and Amortization

Depreciation and amortization decreased $3.1 million and $4.0 million, or 81.6% and 80.0%, during the three and six months ended December 31, 2023, respectively.

The decreases were primarily due to a $2.6 million accelerated depreciation charge related to the consolidation of office space within the Company's corporate headquarters in the second quarter of fiscal year 2023 and the decrease in company-owned salon count.

Depreciation and amortization was $1.0 million in the three months ended March 31, 2024 and 2023.

Depreciation and amortization decreased $4.0 million, or 66.0%, during the nine months ended March 31, 2024.

The decrease was primarily due to a $2.6 million accelerated depreciation charge related to the consolidation of office space within the Company's corporate headquarters in the second quarter of fiscal year 2023 and the decrease in company-owned salon count.

Long-Lived Asset Impairment

In the three and six months ended December 31, 2023, the Company recorded a long-lived asset impairment charge of $0.2 million related to the right-of-use asset associated with the corporate office lease.

There were no similar charges recorded in the three and six months ended December 31, 2022.

In the three months ended March 31, 2024 and 2023, there were no significant long-lived asset impairment charges.

In the nine months ended March 31, 2024, the Company recorded a long-lived asset impairment charge of $0.2 million related to the right-of-use asset associated with the corporate office lease.

There were no similar charges recorded in the nine months ended March 31, 2023.

Interest Expense

The $1.7 million and $4.1 million increase in interest expense for the three and six months ended December 31, 2023, respectively, was primarily due to a higher weighted average interest rate on outstanding borrowings.

Cash interest increased $1.0 million and $2.6 million in the three and six months ended December 31, 2023, respectively.

Other, net decreased $0.9 million and $0.7 million for the three and six months ended December 31, 2023, 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, 2023, the Company recognized a tax benefit of $0.1 million, with a corresponding effective tax rate of 9.6%, as compared to recognizing no tax benefit during the three months ended December 31, 2022.

During the six months ended December 31, 2023, the Company recognized a tax benefit of $0.3 million, with a corresponding effective tax rate of 398.4%, as compared to recognizing a tax expense of $0.03 million, with a corresponding effective tax rate of (0.6)% during the six months ended December 31, 2022.

The $1.4 million and $5.4 million increase in interest expense for the three and nine months ended March 31, 2024, respectively, was primarily due to a higher weighted average interest rate on outstanding borrowings.

Cash interest increased $0.7 million and $3.3 million in the three and nine months ended March 31, 2024, respectively.

Other, net decreased $0.7 million for the three months ended March 31, 2024, primarily due to fluctuations in the Canadian dollar.

Other, net decreased $1.4 million in the nine months ended March 31, 2024, primarily due to a $1.1 million grant received in fiscal year 2023 from the state of North Carolina related to COVID-19 relief.

Income Tax (Expense) Benefit

During the three months ended March 31, 2024, the Company recognized a tax expense of $0.1 million, with a corresponding effective tax rate of (2.3)%, as compared to recognizing a tax benefit of $0.2 million during the three months ended March 31, 2023, for an effective tax rate of 10.0%.

During the nine months ended March 31, 2024, the Company recognized a tax benefit of $0.2 million, with a corresponding effective tax rate of 8.3%, as compared to recognizing a tax benefit of $0.2 million, with a corresponding effective tax rate of 3.2% during the nine months ended March 31, 2023.

See Note 5 to the unaudited Condensed Consolidated Financial Statements.

Income from Discontinued Operations

In the three and six months ended December 31, 2023, the Company recorded a gain from discontinued operations of $2.0 million, due primarily to the earning of $2.0 million in sales proceeds in December 2023.

Income from discontinued operations decreased $0.4 million in the three months ended March 31, 2024 due to sales proceeds in the prior year of $0.5 million.

Income from discontinued operations decreased $1.9 million in the nine months ended March 31, 2024, due primarily to the recognition of $5.0 million of sales proceeds in fiscal year 2023 compared to $2.0 million in fiscal year 2024.

See Note 3 to the unaudited Condensed Consolidated Financial Statements.

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Franchise Salons

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

2023 2022 Decrease (1) 2023 2022 (Decrease) Increase (1)

Three Months Ended March 31, Nine Months Ended March 31,

2024 2023 (Decrease) Increase (1) 2024 2023 (Decrease) Increase (1)

(Dollars in millions) (Dollars in millions)

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Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

Three and Six Months Ended December 31, 2023 Compared with Three and Six Months Ended December 31, 2022

Three and Nine Months Ended March 31, 2024 Compared with Three and Nine Months Ended March 31, 2023

Franchise Revenue

Franchise revenue decreased $8.1 million and $15.4 million during the three and six months ended December 31, 2023, respectively.

The decreases in franchise revenue during the three and six months ended December 31, 2023 were primarily due to the decrease in franchise salon count.

During the twelve months ended December 31, 2023, franchisees constructed (net of relocations) and closed 8 and 553 franchise salons, respectively.

Franchise revenue decreased $5.7 million and $21.1 million during the three and nine months ended March 31, 2024, respectively.

The decreases in franchise revenue during the three and nine months ended March 31, 2024 were primarily due to the decrease in franchise salon count.

During the twelve months ended March 31, 2024, franchisees opened (net of relocations) and closed 10 and 540 franchise salons, respectively, and and purchased (net of Company buybacks) 10 salons from the Company during the same period..

Franchise Adjusted EBITDA

During the three and six months ended December 31, 2023, franchise adjusted EBITDA totaled $6.4 million and $14.3 million, respectively, a decrease of $1.1 million and increase of $1.8 million compared to the three and six months ended December 31, 2022, respectively.

The decline of $1.1 million for the three months ended December 31, 2023, was due to a decrease in royalties and fees.

The improvement of $1.8 million for the six months ended December 31, 2023, was primarily due to a decrease in general and administrative expense, partially offset by a decrease in royalties and fees.

During the three and nine months ended March 31, 2024, franchise adjusted EBITDA totaled $5.8 million and $20.1 million, respectively, an increase of $1.0 million and $2.8 million compared to the three and nine months ended March 31, 2023, respectively.

The improvement in both periods was primarily due to a decrease in general and administrative expense, partially offset by a decrease in royalties and fees.

Company-Owned Salons

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

Three Months Ended March 31, Nine Months Ended March 31,

2024 2023 Decrease (1) 2024 2023 Decrease (1)

(Dollars in millions) (Dollars in millions)

Total revenue $ 1.8 $ 2.6 $ (0.8) $ 3.7 $ 5.7 $ (2.0)

Company-owned salon revenue $ 1.3 $ 2.2 $ (0.9) $ 5.0 $ 7.9 $ (2.9)

Company-owned salon adjusted EBITDA $ (0.8) $ (0.6) $ (0.2) $ (1.6) $ (1.5) $ (0.1)

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line items calculated individually may not sum to total due to rounding.

Three and Six Months Ended December 31, 2023 Compared with Three and Six Months Ended December 31, 2022

Three and Nine Months Ended March 31, 2024 Compared with Three and Nine Months Ended March 31, 2023

Company-Owned Salon Revenue

Company-owned salon revenue decreased $0.8 million and $2.0 million during the three and six months ended December 31, 2023, respectively, primarily due to the decrease in company-owned salon count.

Company-owned salon revenue decreased $0.9 million and $2.9 million during the three and nine months ended March 31, 2024, respectively, primarily due to the decrease in company-owned salon count.

Company-Owned Salon Adjusted EBITDA

During the three months ended December 31, 2023, company-owned salon adjusted EBITDA decreased $0.6 million due primarily to a $1.1 million grant received from the state of North Carolina related to COVID-19 relief in the prior fiscal year.

In the six months ended December 31, 2023, company-owned salon adjusted EBITDA decreased $0.1 million, primarily due to the lapping of the North Carolina Covid-19 relief grant received in the prior fiscal year, partially offset by the closure of loss-generating company-owned salons.

During the three months ended March 31, 2024, company-owned salon adjusted EBITDA decreased $0.2 million due primarily to expenses associated with closing Canadian salons in the quarter.

In the nine months ended March 31, 2024, company-owned salon adjusted EBITDA decreased $0.1 million, primarily due to the lapping of a North Carolina COVID-19 relief grant of $1.1 million received in the prior fiscal year, partially offset by the closure of loss-generating company-owned salons.

LIQUIDITY AND CAPITAL RESOURCES

Following the amendment of the Company's credit agreement in August 2022, the facility matures in August 2025.

In addition to a $10.0 million minimum liquidity covenant, the amended credit agreement includes typical provisions and financial covenants, including leverage and fixed-charge coverage ratio covenants, the latter two of which were not tested until December 31, 2023.

The Company's credit agreement in August 2022, the facility matures on August 31, 2025.

See Note 9 to the unaudited Condensed Consolidated Financial Statements.

Sources of Liquidity

Funds generated by operating activities, available cash and cash equivalents and our borrowing agreements are our most significant sources of liquidity.

Funds generated by operating activities, available cash and cash equivalents and our credit agreement are our most significant sources of liquidity.

The Company believes it has sufficient liquidity, cash on hand and borrowing capacity to meet its obligations in the next twelve months and until maturity of the credit agreement in August 2025.

In conducting the Company’s current operations, all cash in excess of the amounts needed to support existing operating activities is used to pay the interest on the amounts outstanding under the credit agreement, and we are periodically borrowing additional amounts to cover these costs.

As of December 31, 2023, cash and cash equivalents were $7.2 million, with $5.8 and $1.4 million within the United States and Canada, respectively.

As of December 31, 2023, the Company's borrowing arrangements include a $171.8 million term loan, $3.0 million of paid-in-kind interest and a $55.0 million revolving credit facility that expires in August 2025.

As of December 31, 2023, the unused available credit under the revolving credit facility was $31.0 million, the credit agreement has a minimum liquidity covenant of $10.0 million, and total liquidity per the agreement was $38.1 million.

As of March 31, 2024, cash and cash equivalents were $5.9 million, with $5.0 million and $0.9 million within the United States and Canada, respectively.

As of March 31, 2024, the Company's borrowing arrangements include a $169.8 million term loan, $4.1 million of paid-in-kind interest and a $55.0 million revolving credit facility that matures in August 2025.

As of March 31, 2024, the unused available credit under the revolving credit facility was $30.9 million, the credit agreement has a minimum liquidity covenant of $10.0 million, and total liquidity per the agreement was $36.7 million.

See Note 9 to the unaudited Condensed Consolidated Financial Statements.

Additionally, 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." Net proceeds from sales of shares under the "at-the-market" program, if any, may be used to, among other things, fund working capital requirements, repay debt and support our brands and franchisees.

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 and six months ended December 31, 2023 and 2022, the Company did not issue shares under the prospectus supplement.

As of December 31, 2023, $11.6 million remains outstanding under the share issuance program.

The program expires on February 10, 2024.

On June 30, 2022, the Company sold its OSP software-as-a-service solution to Soham Inc.

for a purchase price of $20.0 million in cash plus additional cash proceeds contingent upon the number of salons that migrate to Soham's Zenoti product as their salon technology platform.

As of March 31, 2024, the Company has received $20 million in cash proceeds.

The Company is not expecting any additional proceeds in fiscal year 2024 and overall is expecting less proceeds than the maximum amount contemplated under the contract due to the decrease in salon count and the longer than anticipated migration period.

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 December 31, 2023 were lease commitments and interest payments.

The Company's most significant contractual cash requirements as of March 31, 2024 were lease commitments and interest payments.

See Notes 8 and 9 to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Cash Flows from Operating Activities

During the six months ended December 31, 2023 and 2022, cash used in operating activities was $6.9 million.

Excluding the $1.1 million grant received from the state of North Carolina related to COVID-19 relief in fiscal year 2023, cash used in operating activities improved due primarily to our lower cost structure.

During the nine months ended March 31, 2024, cash used in operating activities was $7.1 million compared to an $8.5 million cash use in the nine months ended March 31, 2023.

Cash used in operating activities improved year over year due primarily to our lower cost structure, resulting from a lower headcount.

Cash Flows from Investing Activities

During the six months ended December 31, 2023, cash used in investing activities of $0.3 million was primarily related to salon capital improvements.

During the six months ended December 31, 2022, cash provided by investing activities of $3.6 million was primarily due to cash received of $4.0 million from the sale of OSP, net of a $0.5 million transaction fee.

During the nine months ended March 31, 2024, cash provided by investing activities of $1.6 million was primarily due to $2.0 million of OSP sales proceeds, offset by salon capital improvements.

During the nine months ended March 31, 2023, cash provided by investing activities of $4.2 million was primarily due to cash received of $5.0 million from the sale of OSP, net of a $0.5 million transaction fee.

Cash Flows from Financing Activities

During the six months ended December 31, 2023, cash provided by financing activities was $2.3 million, primarily as a result of a net $3.5 million borrowing under the Company's revolving credit facility.

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 nine months ended March 31, 2024, cash used in financing activities was $1.1 million, primarily as a result of fees associated with our strategic review, partially offset by net borrowings of $1.5 million under the Company's revolving credit facility.

During the nine months ended March 31, 2023, cash used in financing activities was $2.6 million, primarily as a result of debt refinancing fees of $4.4 million, partially offset by a net $1.9 million borrowing under 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 December 31, 2023 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, 2023 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 March 31, 2024 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, 2023 for additional information regarding our financing arrangements.

Debt to Capitalization Ratio

1 unchanged sentence

Capitalization (1)

December 31, 2023 121.6 %

March 31, 2024 123.6 %

June 30, 2023 125.1 %

1 unchanged sentence

(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 December 31, 2023 was primarily due to the increase in outstanding debt.

The decrease in the debt to capitalization ratio as of March 31, 2024 was primarily due to the increase in outstanding debt.

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 common stock in "at-the-market" offerings.

During the six months ended December 31, 2023, the Company did not issue shares under the prospectus supplement.

As of December 31, 2023, $11.6 million remains outstanding under the share issuance program.

The program expires on February 10, 2024.

During the nine months ended March 31, 2024, the Company did not issue shares under the prospectus supplement.

The Share Issuance Program expired on February 10, 2024.

Share Repurchase Program

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

Since that time and through December 31, 2023, 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 March 31, 2024, 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 six months ended December 31, 2023, the Company did not repurchase any shares.

As of December 31, 2023, approximately 1.5 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remains outstanding under the approved stock repurchase program.

During the nine months ended March 31, 2024, the Company did not repurchase any shares.

As of March 31, 2024, approximately 1.5 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remains outstanding under the approved stock repurchase program.

The Company does not anticipate repurchasing shares of common stock for the foreseeable future.

45 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis