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Item 1. Financial Statements

2025-02-12 compared with 2024-11-06 · 213 added, 101 removed, 385 unchanged (45% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

As of September 30, 2024, and June 30, 2024

As of December 31, 2024, and June 30, 2024

(Dollars in thousands, except per share data)

September 30,

2024 June 30,

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Common stock, $ 0.05 par value;

issued and outstanding, 2,282,395 and 2,279,948 common shares at September 30, 2024, and June 30, 2024, respectively

issued and outstanding, 2,435,979 and 2,279,948 common shares at December 31, 2024, and June 30, 2024, respectively

Additional paid-in capital 73,243 69,660

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

For the Three Months Ended September 30, 2024, and 2023

For the Three and Six Months Ended December 31, 2024, and 2023

(Dollars and shares in thousands, except per share amounts)

Three Months Ended September 30,

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

2024 2023 2024 2023

Royalties $ 14,840 $ 15,820 $ 30,486 $ 32,348

10 unchanged sentences

Rent (Note 8)

2,149 1,394 3,213 2,491

Advertising fund expense 5,490 6,808 11,131 14,034

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Other, net ( 307 ) 299 370 99

(Loss) income from operations before income taxes ( 2,035 ) 1,046

Income tax benefit 225 148

(Loss) income from continuing operations ( 1,810 ) 1,194

Income (loss) from operations before income taxes 342 ( 1,110 ) ( 1,693 ) ( 64 )

Income tax (expense) benefit ( 136 ) 107 89 255

Income (loss) from continuing operations 206 ( 1,003 ) ( 1,604 ) 191

Income from discontinued operations (Note 3) 7,439 2,000 8,396 2,000

Net (loss) income $ ( 853 ) $ 1,194

Net (loss) income per share:

(Loss) income from continuing operations $ ( 0.77 ) $ 0.51

Net income $ 7,645 $ 997 $ 6,792 $ 2,191

Net income per share:

Income (loss) from continuing operations $ 0.09 $ ( 0.43 ) $ ( 0.68 ) $ 0.08

Income from discontinued operations 3.20 0.85 3.58 0.86

Net (loss) income per share (2) $ ( 0.36 ) $ 0.51

(Loss) income from continuing operations $ ( 0.77 ) $ 0.51

Net income per share (2) $ 3.29 $ 0.43 $ 2.90 $ 0.94

Income (loss) from continuing operations $ 0.07 $ ( 0.43 ) $ ( 0.68 ) $ 0.08

Income from discontinued operations 2.63 0.85 3.58 0.84

Net (loss) income per share, diluted (2) $ ( 0.36 ) $ 0.51

Net income per share, diluted (2) $ 2.71 $ 0.43 $ 2.90 $ 0.93

Weighted average common and common equivalent shares outstanding:

8 unchanged sentences

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

For the Three Months Ended September 30, 2024, and 2023

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the Three and Six Months Ended December 31, 2024, and 2023

(Dollars in thousands)

Three Months Ended September 30,

Net (loss) income $ ( 853 ) $ 1,194

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

2024 2023 2024 2023

Net income $ 7,645 $ 997 $ 6,792 $ 2,191

Foreign currency translation adjustments ( 604 ) 292 ( 452 ) 3

Comprehensive (loss) income $ ( 701 ) $ 905

Comprehensive income $ 7,041 $ 1,289 $ 6,340 $ 2,194

_______________________________________________________________________________

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (Unaudited)

For the Three Months Ended September 30, 2024, and 2023

For the Three and Six Months Ended December 31, 2024, and 2023

(Dollars in thousands)

Three Months Ended September 30, 2024

Three Months Ended December 31, 2024

Common Stock Additional

Capital Accumulated

Comprehensive

Income Accumulated Deficit Total

Capital Accumulated Other Comprehensive Income Accumulated Deficit Total

Shares Amount

Balance, June 30, 2024 2,279,948 $ 114 $ 69,660 $ 8,584 $ ( 21,571 ) $ 56,787

Net loss — — — — ( 853 ) ( 853 )

Balance, September 30, 2024 2,282,395 $ 114 $ 69,972 $ 8,736 $ ( 22,424 ) $ 56,398

Net income — — — — 7,645 7,645

Foreign currency translation — — — ( 604 ) — ( 604 )

1 unchanged sentence

Net restricted stock activity 13,034 1 ( 52 ) — — ( 51 )

Common stock issued in connection with Alline acquisition (Note 13) 140,550 7 2,993 — — 3,000

Balance, December 31, 2024 2,435,979 $ 122 $ 73,243 $ 8,132 $ ( 14,779 ) $ 66,718

Three Months Ended December 31, 2023

Common Stock Additional

Capital Accumulated Other Comprehensive Income Accumulated Deficit Total

Shares Amount

Balance, September 30, 2023 2,278,479 $ 114 $ 67,325 $ 8,734 $ ( 111,437 ) $ ( 35,264 )

Three Months Ended September 30, 2023

Net income — — — — 997 997

Foreign currency translation — — — 292 — 292

Stock-based compensation — — 392 — — 392

Net restricted stock activity 971 — ( 7 ) — — ( 7 )

Balance, December 31, 2023 2,279,450 $ 114 $ 67,710 $ 9,026 $ ( 110,440 ) $ ( 33,590 )

Six Months Ended December 31, 2024

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Accumulated Deficit Total

Capital Accumulated Other Comprehensive Income Accumulated Deficit Total

Shares Amount

4 unchanged sentences

Net restricted stock activity 15,481 1 ( 75 ) — — ( 74 )

Balance, September 30, 2023 2,278,479 $ 114 $ 67,325 $ 8,734 $ ( 111,437 ) $ ( 35,264 )

Common stock issued in connection with Alline acquisition (Note 13) 140,550 7 2,993 — — 3,000

Balance, December 31, 2024 2,435,979 $ 122 $ 73,243 $ 8,132 $ ( 14,779 ) $ 66,718

Six Months Ended December 31, 2023

Common Stock Additional

Capital Accumulated Other Comprehensive Income Accumulated Deficit Total

Shares Amount

Balance, June 30, 2023 2,277,828 $ 114 $ 66,764 $ 9,023 $ ( 112,631 ) $ ( 36,730 )

Net income — — — — 2,191 2,191

Foreign currency translation — — — 3 — 3

Stock-based compensation — — 959 — — 959

Net restricted stock activity 1,622 — ( 13 ) — — ( 13 )

Balance, December 31, 2023 2,279,450 $ 114 $ 67,710 $ 9,026 $ ( 110,440 ) $ ( 33,590 )

_______________________________________________________________________________

(1) This activity represents the common stock issued in connection with the Alline acquisition on December 19, 2024.

See Note 13 for additional details.

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Three Months Ended September 30, 2024, and 2023

For the Six Months Ended December 31, 2024, and 2023

(Dollars in thousands)

Three Months Ended September 30,

Cash flows used in operating activities:

Net (loss) income $ ( 853 ) $ 1,194

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

Six Months Ended December 31,

Cash flows provided by (used in) operating activities:

Net income $ 6,792 $ 2,191

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

Gain from sale of OSP (Note 3) ( 8,396 ) ( 2,000 )

6 unchanged sentences

Other non-cash items affecting earnings 569 ( 29 )

Changes in operating assets and liabilities, excluding the effects of asset sales (1) ( 3,423 ) ( 6,589 )

Net cash used in operating activities ( 1,344 ) ( 2,824 )

Changes in operating assets and liabilities, excluding the effects of asset sales and business acquisitions(1) ( 4,909 ) ( 11,834 )

Net cash provided by (used in) operating activities 786 ( 6,853 )

Cash flows provided by (used in) investing activities:

Capital expenditures ( 444 ) ( 323 )

Business acquisitions, net of cash acquired and certain obligations assumed ( 18,631 ) —

Proceeds from sale of OSP, net of fees 8,463 —

Net cash provided by (used in) investing activities 941 ( 163 )

Cash flows (used in) provided by financing activities:

Net cash used in investing activities ( 10,612 ) ( 323 )

Cash flows provided by (used in) financing activities:

Proceeds from issuance of long-term debt 15,000 —

Borrowings on revolving credit facility 4,326 4,000

Repayments of revolving credit facility ( 10,237 ) —

Repayments of long-term debt ( 526 ) ( 455 )

Repayments of revolving credit facility ( 10,238 ) —

Debt refinancing fees ( 814 ) ( 1,216 )

Taxes paid for shares withheld ( 75 ) ( 13 )

Net cash (used in) provided by financing activities ( 6,495 ) 1,680

Net cash provided by financing activities 7,673 2,316

Effect of exchange rate changes on cash and cash equivalents ( 106 ) 46

4 unchanged sentences

_______________________________________________________________________________

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

(1) Changes in operating assets and liabilities exclude assets and liabilities sold and assets and liabilities acquired through business acquisitions.

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of September 30, 2024 and for the three months ended September 30, 2024 and 2023, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2024 and its consolidated results of operations, comprehensive (loss) income, shareholders' equity (deficit) and cash flows for the interim periods.

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of December 31, 2024 and for the three and six months ended December 31, 2024 and 2023, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of December 31, 2024 and its consolidated results of operations, comprehensive income, shareholders' equity (deficit) and cash flows for the interim periods.

Adjustments consist only of normal recurring items, except for any discussed in the notes below.

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The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2024, and other documents filed or furnished to the SEC during the current fiscal year.

Alline Salon Group Acquisition:

On December 19, 2024, the Company completed the previously announced transaction to acquire 100 percent ownership of Super C Group, LLC, doing business as Alline Salon Group (Alline).

Under the terms of the agreement, the Company paid cash consideration of approximately $ 19 million, stock consideration valued at $ 3.0 million, and additional amounts for working capital adjustments and transaction-related fees.

Refer to Note 13 to these unaudited Condensed Consolidated Financial Statements for additional information regarding the acquisition.

The Company’s financial results for the three and six months ended December 31, 2024, include the results of Alline subsequent to the December 19, 2024, acquisition date.

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.

An interim impairment analysis was not required in the three months ended September 30, 2024.

As of September 30, 2024, and June 30, 2024, the franchise reporting unit had goodwill of $ 173.4 million and $ 173.1 million, respectively, and the company-owned reporting unit had no goodwill for both periods.

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

As further described in Note 13 of these unaudited Condensed Consolidated Financial Statements, the acquisition of Alline resulted in a preliminary recognition of approximately $ 16.6 million in goodwill, which was assigned to the company-owned operating segment.

As of December 31, 2024, and June 30, 2024, the franchise reporting unit had goodwill of $ 172.4 million and $ 173.1 million, respectively, and the company-owned reporting unit had $ 16.6 million of goodwill at December 31, 2024.

Acquisition-Related Costs:

Acquisition-related costs of $ 1.2 million were incurred during the three and six months ended December 31, 2024, and primarily represent third-party consulting and legal expenses associated with the acquisition of Alline completed on December 19, 2024.

These costs were recorded within general and administrative expenses on the December 31, 2024, unaudited Condensed Consolidated Statement of Operations.

On December 31, 2024, the inventory balance of $ 3.3 million primarily consists of beauty products sold and used in serving our customers in our company-owned salons.

This amount is included in other current assets on the December 31, 2024, unaudited Condensed Consolidated Balance Sheet.

The preliminary inventory balance acquired in connection with the Alline acquisition consists of shampoo, conditioner, hair care tools, and various other hair care and beauty products available for sale to salon customers and used in the servicing of our customers.

The inventory is valued at the lower of cost or net realizable value, with cost determined using a weighted average.

Reverse stock split:

11 unchanged sentences

The description and terms of the Rights are set forth in a Tax Benefits Preservation Plan (the Plan), dated as of January 29, 2024, as the same may be amended from time to time between the Company and Equiniti Trust Company, LLC, as Rights Agent.

The Rights and the Plan will expire on the earliest of (i) the close of business on January 29, 2025 (or such later date as may be established by the Board of Directors prior to the Expiration Date as long as the extension is submitted to the shareholders of the Company for ratification at the next annual or special meeting of shareholders succeeding such extension), (ii) the time at which the Rights are redeemed or exchanged pursuant to the Plan, (iii) the time at which the Rights (other than Rights owned by an Acquiring Person) are exchanged pursuant to the Plan, (iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that the Plan is no longer necessary or desirable for the preservation of the Tax Benefits, or (v) the beginning of a taxable year to which the Board determines that no Tax Benefits may be carried forward.

On January 27, 2025, the Company entered into Amendment No.

1 to the Plan, extending the expiration date of the Plan from January 29, 2025, to January 29, 2028 (the Extension).

Pursuant to the terms of the Plan, the Company will submit the Extension to its shareholders for ratification at the next annual or special meeting of its shareholders.

The Rights and the Plan will now expire on the earliest of (i) the close of business on January 29, 2028 (or such later date as may be established by the Board of Directors prior to the expiration date as long as the Extension is submitted to the shareholders of the Company for ratification at the next annual or special meeting of shareholders succeeding such extension), (ii) the time at which the Rights are redeemed or exchanged pursuant to the Plan, (iii) the time at which the Rights (other than Rights owned by an Acquiring Person, as defined by the Plan) are exchanged pursuant to the Plan, (iv) the repeal of Section 382 of the U.S.

Internal Revenue Code of 1982, as amended, or any successor statute if the Board determines that the Plan is no longer necessary or desirable for the preservation of certain unrecognized tax benefits, or (v) the beginning of a taxable year to which the Board determines that no tax benefits may be carried forward.

Recently Issued Accounting Standards Not Yet Adopted:

1 unchanged sentence

2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosure of significant segment expenses that are regularly provided to the chief operating

decision maker (CODM) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the entity’s CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.

Improvements to Reportable Segment Disclosures," which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the entity’s CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The pronouncement is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and for interim periods in fiscal years beginning after December 15, 2024.

22 unchanged sentences

Information about receivables, broker fees and deferred revenue subject to the current revenue recognition guidance is as follows:

September 30,

2024 June 30,

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The following table is a rollforward of the allowance for credit losses for the period:

Three Months Ended September 30,

Six Months Ended December 31,

(Dollars in thousands)

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The following table is a rollforward of the broker fee balance for the periods indicated:

Three Months Ended September 30,

Six Months Ended December 31,

(Dollars in thousands)

3 unchanged sentences

Balance at end of period $ 6,992 $ 10,945

________________________________________________________________________________________

(1) Broker fees of $ 0.9 million were written off in connection with the Alline acquisition for the three and six months ended December 31, 2024.

Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement.

Franchise fee revenue for the three months ended September 30, 2024, and 2023 was $ 1.6 million and $ 1.7 million, respectively.

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2024, is as follows (dollars in thousands):

Franchise fee revenue for the three months ended December 31, 2024, and 2023 was $ 2.1 million and $ 1.6 million, respectively, and for the six months ended December 31, 2024, and 2023 was $ 3.7 million and $ 3.3 million, respectively.

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of December 31, 2024, is as follows (dollars in thousands):

Remainder of 2025 $ 2,110

4 unchanged sentences

As a result of the sale, the Company classified the OSP business as discontinued operations in the financial statements for all periods presented.

In the three months ended September 30, 2024, the Company received $ 957 thousand of proceeds related to the number of salons migrating to Soham's Zenoti product.

During the three and six months ended December 31, 2024, the Company received $ 7.5 million and $ 8.5 million of proceeds related to the number of salons migrating to Soham's Zenoti product, respectively.

During the three and six months ended December 31, 2023, the Company received $ 2.0 million of proceeds that had been previously held back for general indemnity provisions.

No income taxes have been allocated to discontinued operations based on the methodology required by accounting for income taxes guidance.

Cash provided by operations includes $ 957 thousand of cash from discontinued operations.

Cash used in investing activities for the six months ended December 31, 2024, includes $ 8.5 million of cash from discontinued operations .

SHAREHOLDERS' EQUITY (DEFICIT):

Stock-Based Employee Compensation:

During the three months ended September 30, 2024, and 2023, the Company granted restricted stock units as follows:

Three Months Ended September 30,

During the three and six months ended December 31, 2024, the Company granted restricted stock units as follows:

Three Months Ended December 31, 2024 Six Months Ended December 31, 2024

Restricted stock units (RSUs) 78,800 78,800

The RSUs granted during the three months ended September 30, 2023, vest in equal amounts over a three-year period subsequent to the grant date.

Total compensation cost for stock-based payment arrangements totaling $ 1.4 million and $ 0.6 million for the three months ended September 30, 2024, and 2023, respectively, was recorded within general and administrative on the unaudited Condensed Consolidated Statements of Operations.

The RSUs granted during the three and six months ended December 31, 2024, vest in equal amounts over a three-year period subsequent to the grant date.

Total compensation cost for stock-based payment arrangements totaling $ 0.2 million and $ 0.3 million, and $ 1.6 million and $ 0.9 million for the three and six months ended December 31, 2024, and 2023, respectively, were recorded within general and administrative expense on the unaudited Condensed Consolidated Statements of Operations.

Alline Acquisition:

In connection with the Alline acquisition, the Company issued 140,550 shares of common stock to affiliates of Alline, which are subject to a one-year lock-up following the closing.

Stock Warrants Issued in Connection with Long-Term Debt:

3 unchanged sentences

The warrants may also be exercised on a cashless basis under certain circumstances under the agreement.

In addition, in connection with the issuance of the warrants, the Company granted an exemption in favor of each holder pursuant to Section 36 of the Tax Benefits Preservation Plan (the Plan), dated January 29, 2024 , among the Company and Equiniti Trust Company, LLC, such that neither holder was deemed to be an “Acquiring Person” (as defined in the Plan) solely in connection with (i) the issuance of the warrants nor (ii) the acquisition of beneficial ownership of securities of the Company pursuant to the exercise of the warrants.

In addition, in connection with the issuance of the warrants, the Company granted an exemption in favor of each holder pursuant to Section 36 of the Tax Benefits Plan, dated January 29, 2024, among the Company and Equiniti Trust Company, LLC, such that neither holder was deemed to be an Acquiring Person solely in connection with (i) the issuance of the warrants nor (ii) the acquisition of beneficial ownership of securities of the Company pursuant to the exercise of the warrants.

The warrants and the shares of common stock issuable upon the exercise of such warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), and may not be sold absent registration or an applicable exemption from the registration requirements of the Securities Act.

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provided, that the volume weighted average price on the trading day immediately preceding the date the Company delivers a written call notice to a holder exceeds $ 20.00 .

As of September 30, 2024, the Company has no intentions of exercising this call provision.

As of December 31, 2024, the Company has no intentions of exercising this call provision.

The Company will reassess this provision on a quarterly basis.

Share Issuance Program:

In fiscal year 2021, the Company filed a $ 150.0 million shelf registration statement and $ 50.0 million prospectus supplement (collectively, the Share Issuance Program) with the Securities and Exchange Commission (SEC) under which it could offer and sell, from time to time, up to $ 50.0 million worth of its common stock in "at-the-market" offerings.

During the three months ended September 30, 2023, the Company did no t issue any shares under this prospectus.

The Share Issuance Program expired on February 10, 2024.

INCOME TAXES:

A summary of the income tax benefit and corresponding effective tax rate is as follows:

Three Months Ended September 30,

A summary of the income tax (expense) benefit and corresponding effective tax rate is as follows:

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

2024 2023 2024 2023

(Dollars in thousands)

Income tax benefit $ 225 $ 148

Income tax (expense) benefit $ ( 136 ) $ 107 $ 89 $ 255

Effective tax rate 39.8 % 9.6 % 5.3 % 398.4 %

The recorded tax provision and effective tax rate for the three months ended September 30, 2024, and 2023 were different than what would normally be expected, primarily due to the impact of the deferred tax valuation allowance.

The recorded tax provision and effective tax rate for the three and six months ended December 31, 2024, and 2023 were different than what would normally be expected, primarily due to the impact of the deferred tax valuation allowance.

With limited exceptions, due to net operating loss carryforwards, our federal, state, and foreign tax returns are open to examination for all years since 2014, 2013, and 2016, respectively.

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The table below reconciles the cash and cash equivalents balances and restricted cash balances recorded within other current assets on the unaudited Condensed Consolidated Balance Sheets to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statements of Cash Flows:

September 30,

2024 June 30,

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Total rent includes the following:

Three Months Ended September 30,

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

2024 2023 2024 2023

(Dollars in thousands)

Office rent (1) $ 700 $ 748 $ 1,426 $ 1,574

Lease termination expense (benefit) 52 ( 13 )

Lease termination expense 27 174 79 161

Lease liability benefit (2) ( 65 ) ( 95 ) ( 128 ) ( 223 )

3 unchanged sentences

_______________________________________________________________________________

(1) The company leases four floors at its corporate office location.

Three of the four floors have been subleased to third party tenants.

Rental income associated with the sublease of the corporate office space is recorded in other income and was $ 0.2 million and $ 0 for the three months ended September 30, 2024, and 2023, respectively.

(1) Rental income associated with the sublease of corporate office space is recorded in other income and was $ 0.3 million and $ 0.6 million for the three and six months ended December 31, 2024, respectively.

(2) Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities, which results in a net gain.

In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired.

(3) Franchise salon rent is a benefit in the three months ended September 30, 2023, due to settlements with landlords for less than previously accrued.

(3) Franchise salon rent is a benefit in the three and six months ended December 31, 2023, due to settlements with landlords for less than previously accrued.

(4) Note that this amount includes 12 days of rent related to the Alline salons acquired during the quarter.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees.

1 unchanged sentence

The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statements of Operations.

For the three months ended September 30, 2024, and 2023, franchise rental income and franchise rent expense were $ 21.6 million and $ 24.7 million, respectively.

For the three and six months ended December 31, 2024, and 2023, franchise rental income and franchise rent expense were $ 20.0 million and $ 24.1 million, and $ 41.7 million and $ 48.8 million, respectively.

These leases generally have lease terms of approximately five years .

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The Company uses the portfolio approach in applying the discount rate based on the original lease term.

The weighted average remaining lease term was 4.91 and 5.05 years, and the weighted average discount rate was 5.26 % and 5.13 % for all salon operating leases as of September 30, 2024, and June 30, 2024, respectively.

As of September 30, 2024, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (dollars in thousands):

The weighted average remaining lease term was 4.92 and 5.05 years, and the weighted average discount rate was 5.47 % and 5.13 % for all salon operating leases as of December 31, 2024, and June 30, 2024, respectively.

As of December 31, 2024, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (dollars in thousands):

Fiscal Year Leases For Franchise Salons Leases For Company-Owned Salons Corporate Leases Total Operating Lease Payments Sublease Income to be Received from Franchisees Net Rent Commitments

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The Company's debt consists of the following:

Three Months Ended September 30, 2024 Fiscal Year Balance at

September 30, 2024 Balance at

Three Months Ended December 31, 2024 Fiscal Year Balance at December 31, 2024 Balance at

June 30, 2024

1 unchanged sentence

Term loan 8.83 % 9.68 % $ 119,475 $ 105,000

Paid-in-kind interest 2,590 53

Deferred financing fees ( 13,508 ) ( 14,244 )

1 unchanged sentence

Revolving credit facility 8.83 % 9.68 % 4,326 10,237

Paid-in-kind interest 1,341 53

Fair value of warrants issued to lenders ( 1,351 ) ( 1,501 )

3 unchanged sentences

The Company incurred $ 14.2 million of refinancing fees (including $ 3.9 million of Original Issue Discount fee) that will be amortized on a straight-line basis over the term of the agreement.

As of September 30, 2024, the Company had outstanding standby letters of credit under the revolving credit facility of $ 9.2 million, primarily related to the Company's self-insurance program.

As of September 30, 2024, total available liquidity and available credit under the $ 25.0 million revolving credit facility, as defined by the amended agreement, were $ 11.9 million and $ 15.7 million, respectively.

As of September 30, 2024, the Company had cash and cash equivalents of $ 6.3 million and current liabilities of $ 101.0 million.

The interest rate on the 2024 Credit Agreement is based on secured overnight financing rate (SOFR) plus margin.

As of December 31, 2024, the Company had outstanding standby letters of credit under the revolving credit facility of $ 9.3 million, primarily related to the Company's self-insurance program.

As of December 31, 2024, total available liquidity and available credit under the $ 25.0 million revolving credit facility, as defined by the 2024 Credit Agreement Amendment, were $ 15.9 million and $ 15.7 million, respectively.

The interest rate on the 2024 Credit Agreement is based on the secured overnight financing rate (SOFR) plus margin.

The margin applicable to the 2024 Credit Agreement is subject to change based on the Company's total leverage ratio, remeasured annually on a predetermined date set by the lender.

6 unchanged sentences

In connection with the 2024 Credit Agreement, the Company issued detachable stock warrants to the debt lenders.

The Company was in compliance with its covenants and other requirements of the financing arrangements as of September 30, 2024.

The Company was in compliance with its covenants and other requirements of the financing arrangements as of December 31, 2024.

The Company's assets serve as collateral to the new credit facility.

The agreement includes scheduled quarterly payments totaling $ 1.1 million in fiscal years 2025 and 2026.

The agreement includes scheduled payments totaling $ 1.1 million in fiscal years 2025 and 2026, payable quarterly.

In fiscal years 2027, 2028, and 2029, scheduled payments total $ 2.6 million.

Additionally, excess cash swept annually per terms of the agreement.

Additionally, excess cash is swept annually per terms of the agreement.

On December 19, 2024, the Company amended the 2024 Credit Agreement (the 2024 Credit Agreement Amendment) for an additional $ 15.0 million in long-term debt in the form of a term loan.

The term loan was provided on the same terms as the original term loan, with respect to maturity and interest rate margins.

The $ 15.0 million in proceeds were used as consideration for the Alline acquisition.

The Company incurred $ 0.4 million of Original Issue Discount fee that will be amortized on a straight-line basis over the term of the agreement.

As of December 31, 2024, the Company had cash and cash equivalents of $ 10.2 million and current liabilities of $ 107.5 million.

FAIR VALUE MEASUREMENTS:

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and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Changes in the earn-out liability measured at fair value using Level 3 inputs were as follows:

(Dollars in thousands)

Earn-out liability at June 30, 2024

Addition for acquisition 3,000

Earn-out liability at December 31, 2024

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2024, and June 30, 2024, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, accounts payable and debt approximated their carrying values.

As of December 31, 2024, and June 30, 2024, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, accounts payable and debt approximated their carrying values.

The Company recorded the estimated fair value of the contingent consideration liability in the unaudited Condensed Consolidated Balance Sheets within accrued expenses and other non-current liabilities, totaling $ 3.0 million.

The earn-out liability is adjusted at fair value at each reporting date until settled, and changes in fair value will be reported in our unaudited Condensed Consolidated Statements of Operations.

The following provides information regarding fair value measurements for our remaining contingent earn-out liability as of December 31, 2024, according to the three-level fair value hierarchy:

(Dollars in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

(Level 3) Total

Recurring Fair Value Measurements:

Earn-out liability $ — $ — $ 3,000 $ 3,000

Total $ — $ — $ 3,000 $ 3,000

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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EARNINGS PER SHARE:

The Company's basic earnings per share is calculated as net (loss) income divided by weighted average common shares outstanding, excluding unvested outstanding stock options (SOs), stock appreciation rights (SARs), restricted stock units (RSUs) and stock-settled performance units (PSUs).

The Company's diluted earnings per share is calculated as net (loss) income divided by weighted average common shares and common share equivalents outstanding, which includes shares issued under the Company's stock-based compensation plans and warrants issued in connection with the June 2024 refinancing.

The Company's basic earnings per share is calculated as net income divided by weighted average common shares outstanding, excluding unvested outstanding stock options (SOs), stock appreciation rights (SARs), restricted stock units (RSUs) and stock-settled performance units (PSUs).

The Company's diluted earnings per share is calculated as net income divided by weighted average common shares and common share equivalents outstanding, which includes shares issued under the Company's stock-based compensation plans and warrants issued in connection with the Company's credit agreement.

Stock-based awards with exercise prices greater than the average market price of the Company's common stock are excluded from the computation of diluted earnings per share.

The computation of weighted average shares outstanding, assuming dilution, excluded 194,612 and 208,819 of stock-based awards during the three months ended September 30, 2024, and 2023, respectively, as they were not dilutive under the treasury stock method.

The computation of weighted average shares outstanding, assuming dilution, excluded 193,186 and 219,945 , and 191,964 and 215,656 of stock-based awards during the three and six months ended December 31, 2024, and 2023, respectively, as they were not dilutive under the treasury stock method.

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (EPS):

Three Months Ended September 30,

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

2024 2023 2024 2023

(Shares in thousands)

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The Company's reportable operating segments consisted of the following salons:

September 30,

2024 June 30,

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(1) Canadian and Puerto Rican salons are included in the North American salon totals.

(2) Salon counts as of December 31, 2024, include the 314 salons acquired as part of the Alline acquisition.

See Note 13 to these unaudited Condensed Consolidated Financial Statements for further details over the transaction.

Financial information concerning the Company's reportable operating segments is shown in the table below.

Segment information is presented in the same way that the Company internally organizes the business for assessing performance and making decisions regarding allocation of resources.

In fiscal year 2023, the Company revised its internal reporting such that the CODM’s primary measures of segment performance are revenue and segment adjusted EBITDA.

The CODM’s primary measures of segment performance are revenue and segment adjusted EBITDA.

Revenue and segment adjusted EBITDA are regularly reviewed by the CODM to make decisions about resources to be allocated to the segments, assess current performance, and forecast future performance.

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Unallocated fees include one-time professional fees and settlements, severance expense, the benefit from lease liability decreases in excess of previously impaired ROU assets, lease termination fees, asset retirement obligation costs and long-lived asset impairment charges.

Three Months Ended September 30,

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

2024 2023 2024 2023

(Dollars in thousands)

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Interest expense ( 4,848 ) ( 6,188 ) ( 9,694 ) ( 12,376 )

Income tax benefit 225 148

Income tax (expense) benefit ( 136 ) 107 89 255

Income from discontinued operations 7,439 2,000 8,396 2,000

Total net (loss) income (2) $ ( 853 ) $ 1,194

Total net income (2) $ 7,645 $ 997 $ 6,792 $ 2,191

_______________________________________________________________________________

(1) Unallocated expenses for the three months ended September 30, 2024, includes severance expenses of $ 2.3 million.

(1) Amounts from prior periods may not equal those per the prior period financials due to rounding from updating formulas for consistency purposes.

(2) Unallocated expenses for the three and six months ended December 31, 2024, include severance expenses of $ 0 and $ 2.3 million, respectively.

(3) Total is a recalculation;

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

ACQUISITIONS:

On December 19, 2024, the Company transferred consideration to acquire 100 percent of the equity interests of Alline (the Alline Acquisition), its largest franchisee, consisting of 314 salons.

The transaction provides Regis with a turn-key operating infrastructure and gets the Company closer to salon operations alongside franchisees and the salon portfolio provides a testing ground for brand and operational initiatives.

The transaction terminated the existing franchise arrangements between Regis and Alline, which resulted in the Company recognizing a loss of $ 0.2 million upon settlement, which is included in the unaudited Condensed Consolidated Financial Statements as a component of operating income for the three and six months ended December 31, 2024.

The acquisition was accounted for as a business combination with the purchase price allocated on a preliminary basis using information available as of December 31, 2024.

Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable.

The purchase price and related allocation are preliminary and will likely be revised as a result of adjustments to the purchase price, additional information obtained and revisions to the provisional estimates of fair value, including, but not limited to, the completion of independent appraisals and valuations related to property and equipment, intangible assets, right of use assets and corresponding lease obligations, and the contingent consideration arrangement.

The final valuations of assets acquired and liabilities assumed may be materially different from the estimated values shown below.

The fair value of total consideration transferred by the Company is $ 24.6 million, as detailed below.

Consideration (Dollars in thousands)

Cash, net of cash acquired (1) $ 18,631

Equity instruments ( 140,552 of Regis common shares) (2)

Contingent consideration arrangement (preliminary estimate) (3) 3,000

Fair value of total consideration $ 24,631

_______________________________________________________________________________

(1) Includes cash transferred of $ 20.0 million, net of cash acquired of $ 1.4 million

(2) The number of common shares ( 140,552 ) issued as part of the consideration paid for Alline was determined by dividing the $ 3.0 million by the 30 -trading day volume weighted average price of the common stock as reported on the Nasdaq Global Market as of and including December 17, 2024.

(3) The contingent consideration arrangement requires Regis to pay the former owners of Alline additional cash consideration if certain 4-Wall EBITDA or Adjusted EBITDA thresholds are met for each of the three subsequent annual earnout periods as well as a cumulative 4-Wall EBITDA or Adjusted EBITDA threshold for the cumulative three subsequent annual earnout periods.

The potential undiscounted amount of all future payments that Regis could be required to make under the contingent consideration arrangement is between $ 0 and $ 3 million.

Regis recognized a provisional fair value of $ 3.0 million on the acquisition date and as of December 31, 2024, which is included in accrued expenses ($ 1.0 million) and other non-current liabilities ($ 2.0 million) in the unaudited Condensed Consolidated Balance Sheet.

The fair value of the contingent consideration arrangement is provisional while the Company completes its fair value assessment.

4-Wall EBITDA is defined as EBITDA excluding general and administrative expenses.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date:

(Dollars in thousands)

Current assets $ 3,640

Property and equipment 7,414

Goodwill (1) 16,594

Right of use assets 7,292

Other assets 56

Assumed current liabilities ( 2,352 )

Assumed lease liabilities ( 8,013 )

Fair value of total consideration $ 24,631

_______________________________________________________________________________

(1) Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Specifically, the goodwill that will be recorded as part of the acquisition of Alline includes the following:

the expected synergies and other benefits that we believe will result from combining the operations of Alline with the operations of Regis;

any intangible assets that do not qualify for separate recognition.

Goodwill is not amortized and is deductible for tax purposes.

All of the goodwill related to the acquisition of Alline is related to our company-owned operating segment.

The Company has not yet obtained all the information required to finalize the valuations of the assets acquired and liabilities assumed, primarily because of the proximity of the acquisition date to the balance sheet date of December 31, 2024.

As such, we expect that goodwill could change from the amount noted above.

The Company incurred $ 1.2 million of acquisition related costs which are included in general and administrative expense in Regis’s unaudited Condensed Consolidated Statement of Operations for the periods ended December 31, 2024.

The following table provides revenues and operating income from Alline that are included in our unaudited Condensed Consolidated Financial Statements:

Three Months Ended December 31, 2024 Six Months Ended December 31, 2024

Total revenues $ 2,703 $ 2,703

Operating income 480 480

The following table presents pro forma information as if the Alline Acquisition had occurred on July 1, 2023:

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

2024 2023 2024 2023

Total revenues $ 62,161 $ 69,638 $ 125,719 $ 142,384

Operating income 8,024 5,413 10,861 12,723

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 1. Financial Statements