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Item 8. Financial Statements and Supplementary Data

2025-09-03 compared with 2024-08-28 · 501 added, 258 removed, 974 unchanged (44% of the section changed)

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Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Regis Corporation (a Minnesota corporation) and subsidiaries (the “Company”) as of June 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Regis Corporation (a Minnesota corporation) and subsidiaries (the “Company”) as of June 30, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements.

We determined that there are no critical audit matters.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Realizability of deferred tax assets

As described further in Note 1 and 10 to the consolidated financial statements, the Company recognized a change in the deferred tax asset valuation allowance of $116.3 million during the year ended June 30, 2025 primarily related to a partial release of its valuation allowance.

Deferred tax assets are reduced by a valuation allowance, if based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

During the year ended June 30, 2025, the Company released $116.3 million of its previously recorded valuation allowance.

The Company considered the achievement three years of cumulative income as well as forecasted income to be significant positive evidence.

The Company determined that the positive evidence outweighed the negative evidence and supported a partial release of the valuation allowance.

We identified the release of a portion of the Company’s valuation allowance as a critical audit matter.

The principal consideration for our determination that the partial release of its valuation allowance is a critical audit matter is that auditing management’s assessment of the realizability of the Company’s deferred tax assets involved complex judgments due to the significant assumptions required in measuring the future utilization of deferred tax assets.

Our audit procedures related to the partial release of the valuation allowance included the following, among others.

• We analyzed the significant assumptions used by management, including forecasted revenue and forecasted income to (1) historical results, and (2) current industry trends and evaluated whether economic trends and other factors support the significant assumptions.

• We evaluated management’s historical ability to forecast income.

• We evaluated whether the estimates of forecasted income were consistent with evidence obtained in other areas of the audit.

• With the assistance of professionals with specialized skills and knowledge, we evaluated (1) the application of tax laws in the Company’s scheduling of the release of existing taxable temporary differences and carryforward amounts, and (2) the ability to utilize the deferred tax assets.

Goodwill Quantitative Impairment Assessment – Franchise Reporting Unit

As described further in Note 1 to the consolidated financial statements, the Company’s goodwill balance attributable to their Franchise reporting unit was $173.2 million as of June 30, 2025.

Management performed the Company’s annual quantitative impairment assessment for the Franchise reporting unit as of April 30, 2025, to test goodwill for impairment.

As a result of the assessment performed, the Company determined that the fair value of the Franchise reporting unit was more likely than not greater than the carrying value of the reporting unit as of April 30, 2025.

We identified the goodwill quantitative impairment assessment of the Franchise reporting unit as a critical audit matter.

The principal considerations for our determination that the goodwill quantitative impairment assessment of the Franchise reporting unit is a critical audit matter are that subjective auditor judgment was required to evaluate:

(1) the assumptions used by management engaged professionals with specialized skills and knowledge, including the accuracy of data provided to management’s specialist to determine the fair value;

and (2) the assumptions used by management to calculate the undiscounted cash flows, including assumptions of franchisee store openings and closures.

Our audit procedures related to the annual goodwill quantitative impairment assessment of the Franchise reporting unit included the following, among others.

• We evaluated management’s historical ability to forecast income.

• We evaluated whether the estimates of forecasted income were consistent with evidence obtained in other areas of the audit.

• With the assistance of professionals with specialized skill and knowledge, we tested management’s process for calculating the goodwill impairment assessment, including the reasonableness of the valuation methodology and certain significant assumptions used in the calculations including the discount rate applied to the estimated future cash flows.

/s/ GRANT THORNTON LLP

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Minneapolis, Minnesota

August 28, 2024

September 3, 2025

REGIS CORPORATION

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Receivables, net 9,473 9,434

Inventory 2,798 818

Other current assets 21,254 21,732

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229,861 287,912

Deferred tax asset (Note 10)

Other assets 16,757 21,297

Total assets $ 598,957 $ 530,496

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

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Accrued expenses 19,066 21,644

Long-term debt, current portion (Note 8)

Short-term lease liability (Note 6)

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Commitments and contingencies (Note 9)

Shareholders' equity (deficit):

Shareholders' equity:

Common stock, $ 0.05 par value;

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Accumulated other comprehensive income 8,286 8,584

Accumulated deficit ( 21,571 ) ( 112,631 )

Total shareholders' equity (deficit) 56,787 ( 36,730 )

Total liabilities and shareholders' equity (deficit) $ 530,496 $ 607,377

Retained earnings (deficit) 101,965 ( 21,571 )

Total shareholders' equity 185,616 56,787

Total liabilities and shareholders' equity $ 598,957 $ 530,496

______________________________________________________________________________

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Franchise rent expense (Note 6) 76,599 95,258 111,441

Company-owned salon expense (1) 5,080 8,827 21,952

Company-owned salon expense (Note 1) 31,103 5,080 8,827

Depreciation and amortization 2,966 3,945 7,716

Long-lived asset impairment (Note 1)

Goodwill impairment (Note 5)

Total operating expenses 190,195 182,092 224,547

Operating income (loss) 20,890 8,779 ( 28,898 )

Operating income 19,939 20,890 8,779

Other (expense) income:

Interest expense ( 20,252 ) ( 25,393 ) ( 22,141 )

Loss from sale of salon assets to franchisees, net — — ( 2,334 )

Gain on extinguishment of long-term debt, net — 94,611 —

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Income (loss) from operations before income taxes 1,536 89,936 ( 11,998 )

Income tax (expense) benefit ( 869 ) 655 ( 2,017 )

Income tax benefit (expense) 115,496 ( 869 ) 655

Income (loss) from continuing operations 117,032 89,067 ( 11,343 )

Income (loss) from discontinued operations (Note 3) 1,993 3,958 ( 39,398 )

Income from discontinued operations, net of income taxes (Note 3) 6,504 1,993 3,958

Net income (loss) $ 123,536 $ 91,060 $ ( 7,385 )

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Income (loss) from continuing operations $ 49.51 $ 38.08 $ ( 4.88 )

Income (loss) from discontinued operations 0.85 1.70 ( 18.08 )

Income from discontinued operations 2.75 0.85 1.70

Net income (loss) per share, basic (1) $ 52.26 $ 38.93 $ ( 3.18 )

Income (loss) from continuing operations $ 43.67 $ 37.50 $ ( 4.88 )

Income (loss) from discontinued operations 0.84 1.70 ( 18.08 )

Income from discontinued operations 2.43 0.84 1.70

Net income (loss) per share, diluted (1) $ 46.10 $ 38.34 $ ( 3.18 )

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_____________________________________________________________________________

(1) Includes cost of service and product sold to guests in our company-owned salons.

Excludes general and administrative expense, rent and depreciation and amortization related to company-owned salons.

(1) Total is a recalculation;

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Comprehensive

Income Accumulated Deficit Total

Income Retained Earnings (Deficit) Total

Shares Amount

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Foreign currency translation (Note 1) — — — ( 448 ) — ( 448 )

Issuance of common stock, net of offering costs 464,781 23 37,182 — — 37,205

Stock-based compensation — — 2,077 — — 2,077

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

Net loss — — — — ( 7,385 ) ( 7,385 )

Net income — — — — 91,060 91,060

Foreign currency translation (Note 1) — — — ( 321 ) — ( 321 )

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Net restricted stock activity 2,120 — ( 18 ) — — ( 18 )

Stock warrants issued in connection with debt (2) — — 1,292 — — 1,292

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

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Stock-based compensation — — 1,413 — — 1,413

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

Recognition of deferred compensation (Note 11)

— — — ( 121 ) — ( 121 )

Net restricted stock activity 2,120 — ( 18 ) — — ( 18 )

Common stock issued in connection with Alline acquisition (1) 140,552 7 2,993 — — 3,000

Stock warrants issued in connection with debt (2) — — 1,252 — — 1,252

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_______________________________________________________________________________

(1) This activity represents the stock warrants issued in connection with the new credit facility agreement signed June 24, 2024.

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

See Note 16 for additional details.

(2) This activity represents the stock warrants issued in connection with the new credit facility agreement and amendment.

Stock warrant value shown net of allocated financing costs.

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Net income (loss) $ 123,536 $ 91,060 $ ( 7,385 )

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

(Gain) loss from sale of OSP (Note 3) ( 2,000 ) ( 4,562 ) 36,143

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

Gain from sale of OSP (Note 3) ( 8,396 ) ( 2,000 ) ( 4,562 )

Depreciation and amortization (Note 1) 2,876 3,403 7,189

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Non-cash interest 5,299 3,418 3,790

Loss from sale of salon assets to franchisees, net — — 2,334

Gain on extinguishment of long-term debt, net — ( 94,611 ) —

Goodwill impairment — — 16,000

Stock-based compensation 1,940 1,558 2,316

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Receivables ( 37 ) 848 943

Inventories 871 851 ( 182 )

Income tax receivable ( 137 ) 1,230 ( 577 )

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Other assets 4,402 5,829 6,818

Ad fund 8,363 ( 2,435 ) 1,781

Accounts payable ( 504 ) 831 ( 2,278 )

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Other non-current liabilities ( 7,186 ) ( 9,538 ) ( 9,817 )

Net cash used in operating activities:

Net cash provided by (used in) operating activities:

13,744 ( 2,040 ) ( 7,889 )

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Net proceeds from sale of OSP 8,463 2,000 4,500

Net cash provided by investing activities:

Business acquisitions, net of cash acquired and certain obligations assumed ( 18,621 ) — —

Net cash (used in) provided by investing activities:

( 11,453 ) 1,624 4,019

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Proceeds from issuance of long-term debt 15,000 105,000 —

Borrowings on revolving credit facility

14,238 13,357 10,000

Repayments of long-term debt ( 1,125 ) ( 96,499 ) ( 11,083 )

Proceeds from issuance of common stock, net of offering costs — — 37,185

Borrowings on revolving credit facility 4,326 14,238 13,357

Repayments of revolving credit facility ( 13,534 ) — —

Debt refinancing fees ( 1,003 ) ( 14,360 ) ( 4,383 )

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The business is evaluated in two segments, franchise salons and company-owned salons.

Franchise salons in operation decreased from 4,795 at June 30, 2023 to 4,391 at June 30, 2024, primarily due to the closure of 429 salons.

Company-owned salons in operation decreased from 68 at June 30, 2023 to 17 at June 30, 2024, primarily due to the closure of 41 salons.

See Note 15 to the Consolidated Financial Statements.

Salons are located in leased space in strip center locations, malls or Walmart.

Franchise salons in operation decreased from 4,391 at June 30, 2024, to 3,647 at June 30, 2025.

Company-owned salons in operation increased from 17 at June 30, 2024, to 294 at June 30, 2025, primarily due to the Company's strategic acquisition of Alline Salon Group as described below.

See Note 15 and Note 16 to the Consolidated Financial Statements for information regarding our Segments and Acquisitions, respectively.

Salons are located in leased space in strip center locations, malls, or Walmart stores.

Alline Salon Group Acquisition:

On December 19, 2024, the Company completed the 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 16 to the Consolidated Financial Statements for additional information regarding the acquisition.

The Company’s financial results for the fiscal year ended June 30, 2025, include the results of Alline subsequent to the December 19, 2024, acquisition date.

Acquisition-Related Costs:

Acquisition-related costs of $ 1.4 million were incurred during the fiscal year ended June 30, 2025, 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 in the Consolidated Statements of Operations for the year ended June 30, 2025.

COVID-19 Impact:

The global coronavirus pandemic (COVID-19) had an adverse impact on operations.

As a result, the Company received Canadian rent relief, Canadian wage relief and a grant from the state of North Carolina.

In fiscal years 2024, 2023, and 2022, the Company received the following assistance:

2024 2023 2022

Financial Statement Caption (Dollars in thousands)

Canadian rent relief Rent $ — $ — $ 1,235

Canadian wage relief Company-owned salon expense — — 1,966

North Carolina COVID-19 grant Other, net — 1,106 —

Additionally, in both December 2022 and December 2021, the Company paid $ 2.5 million of social security contributions that had been deferred under the CARES Act.

As a result, the Company received funds in prior years, including a grant from the state of North Carolina of $ 1.1 million in fiscal year 2023, which was recorded within Other, net on the Consolidated Statements of Operations.

No funds were received in fiscal years 2025, or 2024.

Consolidation:

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Total cash, cash equivalents and restricted cash $ 35,205 $ 29,312

_______________________________________________________________________________

(1) The increase in restricted cash in fiscal year 2024 is related to temporarily cash collateralizing the letters of credit as the Company transitioned to the new lender.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Receivables and Allowance for Credit Losses:

The receivable balance on the Company's Consolidated Balance Sheets primarily includes accounts and notes receivable from franchisees, credit card receivables and receivables related to salons sold to franchisees.

The receivable balance on the Company's Consolidated Balance Sheets primarily includes accounts and notes receivable from franchisees and credit card receivables.

The balance is presented net of an allowance for credit losses (i.e., doubtful accounts), related to receivables from the Company's franchisees.

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As of June 30, 2025, and 2024, the allowance for credit losses was $ 5.0 million and $ 6.2 million, respectively.

The allowance for credit losses decreased in fiscal year 2024 due to the write-off of past due receivables previously reserved for related to underperforming franchise salons.

See Note 2 to the Consolidated Financial Statements.

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In fiscal year 2021, the Company announced it would transition away from its wholesale product distribution model in favor of a third-party distribution model.

As a result, the Company exited its two distribution centers in fiscal year 2022 and previously stored inventory at a third-party facility through the second of quarter fiscal year 2024.

As a result, the Company exited its two distribution centers in fiscal year 2022 and previously stored inventory at a third-party facility through the second quarter of fiscal year 2024.

To facilitate the exit of the distribution centers, the Company sold inventory at discounts.

Additionally, the reduction in company-owned salons decreased the Company's ability to redistribute inventory from closed locations to other salons to be sold or used.

The inventory valuation reserve as of June 30, 2025, and 2024 was $ 0.0 million and $ 0.3 million, respectively.

As of June 30, 2023, the Company had inventory related to discontinued operations of $ 1.2 million, offset by a reserve of $ 1.2 million.

See Note 3 to the Consolidated Financial Statements.

During fiscal year 2023, the Company recorded a total inventory reserve charge of $ 1.2 million, which was recorded in inventory reserve in the Consolidated Statements of Operations.

During fiscal year 2022, the Company recorded a total inventory reserve charge of $ 10.5 million, of which $ 7.7 million and $ 2.8 million were recorded in inventory reserve and company-owned salon expense, respectively, in the Consolidated Statements of Operations.

Inventory of $ 0.8 million and $ 1.7 million as of June 30, 2024 and June 30, 2023, respectively, is included in Current Assets, see Note 4 to the Consolidated Financial Statements.

Property and Equipment:

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If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease.

The Company leases its company-owned salons and some of its corporate facilities under operating leases.

The Company leases its company-owned salons and corporate facilities under operating leases.

The original terms of the salon leases range from one to 11 years with many leases renewable for an additional five to 10-year term at the option of the Company.

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The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed.

The right of use (ROU) asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any.

The right of use (ROU) asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less accrued lease payments and unamortized lease incentives received, if any.

Expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2024, and 2023, the franchise reporting unit had $ 173.1 million and $ 173.8 million, respectively, of goodwill and the company-owned reporting unit had no goodwill for both periods.

As further described in Note 16, the acquisition of Alline resulted in the recognition of approximately $ 10.3 million in goodwill, which was assigned to the company-owned operating segment.

As of June 30, 2025, and 2024, the franchise reporting unit had goodwill of $ 173.2 million and $ 173.1 million, respectively, and the company-owned reporting unit had $ 10.3 million and $ 0.0 million goodwill as of June 30, 2025, and 2024, respectively.

See Note 5 to the Consolidated Financial Statements for changes to the goodwill balance.

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The following is a description of the goodwill impairment assessments for each of the fiscal years:

The Company engaged a third-party valuation specialist to perform its annual impairment assessment as of April 30.

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

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

The Company compared the carrying value of the reporting units, including goodwill, to their estimated fair values.

The results of this assessment indicated that the estimated fair values of the Company's franchise and company-owned reporting units exceeded the carrying values, resulting in no goodwill impairment charge.

The company-owned reporting unit had substantial headroom and the franchise reporting unit had headroom of approximately 5 %.

The fair value of the franchise reporting unit was determined based on a discounted cash flow analysis and comparable market multiples.

The assumptions used in determining fair value were the number of salons in operation, projected salon generated royalties, projected salon closures, projected salon development, weighted average cost of capital, general and administrative expenses and utilization of net operating loss benefits.

We selected the assumptions by considering our historical financial performance and trends, historical same store sales, and estimated same store sales.

The preparation of our fair value estimate includes uncertain factors and requires significant judgments and estimates which are subject to change.

A 100 basis point increase in our weighted average cost of capital within the franchise reporting unit would result in a reduction in headroom to approximately 3 %.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other uncertain factors or events exist which may result in a future triggering event and require us to perform an interim impairment analysis with respect to the carrying value of goodwill for the franchise reporting unit prior to our annual assessment.

These internal and external factors include but are not limited to the following:

• Changes in the company-owned and franchise salon strategy,

• Future market earnings multiples deterioration,

• Our financial performance falls short of our projections due to internal operating factors,

• Economic recession,

• Reduced salon traffic,

• Deterioration of industry trends,

• Increased competition,

• Inability to reduce general and administrative expenses, or

• Other factors causing our cash flow to deteriorate.

If the triggering event analysis indicates the fair value of the franchise reporting unit has potentially fallen below the 5 % headroom, we may be required to perform an updated impairment assessment which may result in a non-cash impairment charge to reduce the carrying value of goodwill.

As of June 30, 2025, the Company's estimated fair value, as determined by the sum of our reporting units' fair values, fell within a reasonable range of our market capitalization, which included an assumed control premium of 23.7 %.

Assessing goodwill for impairment requires management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates, which can be affected by economic conditions and other factors that can be difficult to predict.

The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it uses to calculate impairment losses of goodwill.

However, if actual results are not consistent with the estimates and assumptions used in the calculations, or if there are significant changes to the Company's planned strategy for franchise salons, the Company may be exposed to future impairment losses that could be material.

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.

For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and a 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During fiscal year 2022, the Company performed a quantitative impairment test over goodwill during the second quarter due to a triggering event experienced in the quarter.

This determination was made considering the sustained decrease in share price and a change in the Company's chief operating decision maker.

In the second quarter, the franchise reporting unit was determined to have a fair value in excess of its carrying value and no impairment was recorded.

A quantitative goodwill impairment was performed in the third quarter due to a triggering event experienced during the quarter.

This determination was made considering a decrease in forecasted revenue due to slower than expected recovery from COVID-19.

In the third quarter, the franchise reporting unit was determined to have a carrying value in excess of its fair value, resulting in a goodwill impairment charge of $ 16.0 million.

The Company performed its annual impairment assessment as of April 30.

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.

Management's assumptions related to revenue growth rates were reduced and management increased expected salon closures compared to valuations in prior years.

These changes, along with a decline in value from the market approach, reduced the fair value of the reporting unit.

The discount rate of 20.0 % was also a key assumption utilized in the discounted cash flows.

As a result of the impairment testing, the franchise reporting unit was determined to have a fair value in excess of its carrying value.

The Company derecognized $ 38.4 million of goodwill in fiscal year 2022 in connection to the sale of OSP.

The $ 38.4 million represents the portion of goodwill related to the OSP business based on relative fair value.

See Notes 3 and 5 to the Consolidated Financial Statements.

Reverse Stock Split:

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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.

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.

Self-Insurance Accruals:

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The Company estimates self-insurance liabilities using a number of factors, primarily based on independent third-party actuarially determined amounts, historical claims experience, estimates of incurred but not reported claims, demographic factors, and severity factors.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Although the Company does not expect the amounts ultimately paid to differ significantly from the estimates, self-insurance accruals could be affected if future claims experience differs significantly from historical trends and actuarial assumptions.

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As of June 30, 2024, the Company had $ 1.7 million and $ 4.7 million recorded in current liabilities and non-current liabilities, respectively, related to the Company's workers' compensation and general liability self-insurance accruals.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition and Deferred Revenue:

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Advertising fund contributions - Sales-based advertising fund contributions received from franchisees.

Franchise rental income - Rental income earned as a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees.

Company-owned salon revenue - Service revenue and revenue derived from sales of product in company-owned salons.

Cost of product sales to franchisees - Direct cost of inventory and freight and other costs of sales.

Franchise rental expense - Expense incurred as a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees.

Company-owned salon expense - Cost of service and product sold to guests in our company-owned salons and other salon-related costs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Distribution Costs:

In fiscal year 2022, the Company exited its two distribution centers and changed the wholesale product distribution model in favor of a third-party distribution model, reducing the cost in fiscal years 2022 and 2023.

Beginning in the second half of fiscal year 2022, the Company began storing inventory at a third-party facility.

Prior to closing the distribution centers in fiscal year 2022, the Company incurred costs to store, move, and ship product from the Company's distribution centers to salons.

Distribution costs related to product shipped to company-owned locations are included in company-owned salon expenses in the Consolidated Statements of Operations.

Distribution costs, including distribution center overhead, related to shipping product to franchise locations totaled $ 2.3 million during fiscal year 2022, and are included in general and administrative in the Consolidated Statements of Operations.

There were no such charges during fiscal years 2024 or 2023.

Advertising and Advertising Funds:

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The Company records all advertising funds as assets and liabilities within the Company's Consolidated Balance Sheets.

As of June 30, 2024, and 2023, approximately $ 8.8 million and $ 11.1 million, respectively, representing the advertising funds' assets and liabilities, were recorded within total assets and total liabilities in the Company's Consolidated Balance Sheets.

As of June 30, 2025, approximately $ 17.4 million, and as of June 30, 2024, approximately $ 8.8 million, representing the advertising funds' assets and liabilities, were recorded within total assets and total liabilities in the Company's Consolidated Balance Sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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Due to the interest rate increases over the debt term, the Company recorded more interest expense than interest paid in cash in fiscal years 2023 and 2024.

On June 24, 2024, Regis entered into a new credit agreement with a variable interest rate based on SOFR plus margin.

On June 24, 2024, Regis entered into a new credit agreement with a variable interest rate based on SOFR plus margin which was amended on December 19, 2024.

The margin applicable to the new term loan and revolving credit facility is 9.00 %.

1 unchanged sentence

In either scenario, 4.5 % of the margin is paid-in-kind (PIK) interest (added to the principal balance and thereafter accruing interest), and the remainder is paid currently in cash.

The margin applicable to any letter of credit is 5.25 % and paid currently in cash.

See additional discussion in Note 8 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

The interest rate applicable to any letter of credit is 5.25 % and paid currently in cash.

The SOFR base rate applicable to the debt has a floor of 2.50 % per annum.

See additional discussion in Note 8 to the Consolidated Financial Statements.

Gain on Extinguishment of Long-Term Debt, Net

10 unchanged sentences

The Company has a valuation allowance on its deferred tax assets of $ 60.5 million and $ 181.8 million at June 30, 2025, and 2024, respectively.

The decline in fiscal year 2024 is primarily due to utilization of its U.S.

net operating loss and a reduction to the corresponding valuation allowance.

If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make necessary adjustments to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Significant changes to the valuation allowance which occurred during fiscal year 2025 are as follows:

• We have determined that it is more likely than not that the majority of our U.S.

federal and state deferred tax assets will be realizable as of June 30, 2025.

In determining the need, or continued need, for a valuation allowance, we considered the weighting of the positive and negative evidence, which includes, among other things, recent historical income and losses, future growth, forecasted earnings and future taxable income.

As of June 30, 2025, we achieved three years of cumulative U.S.

income when considering pre-tax income adjusted for permanent differences and other comprehensive losses.

Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded that it is more likely than not that the majority of our U.S.

federal and state deferred tax assets will be realizable.

As such, we released $ 110.2 million of our valuation allowance associated with the U.S.

federal and state deferred tax assets.

A valuation allowance will remain on certain US tax credit carryforwards and state deferred tax assets in which we have concluded that it is more likely than not that they will expire unused.

• We have determined that it is more likely than not that a portion of our Canadian deferred tax assets will be realizable as of June 30, 2025, and released $ 6.1 million of our Canadian valuation allowance.

The Company reserves for unrecognized tax benefits, interest and penalties related to anticipated tax audit positions in the U.S.

8 unchanged sentences

The Company's basic earnings per share is calculated as net income (loss) divided by weighted average common shares outstanding, excluding unvested outstanding stock awards.

The Company's dilutive earnings per share is calculated as net income divided by weighted average common shares and common share equivalents outstanding, which includes shares issuable under the Company's stock option plan and long-term incentive plan and dilutive securities, including warrants issued in connection with the June 2024 credit agreement.

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

8 unchanged sentences

Accounting Standards Recently Adopted by the Company:

On July 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASC 326”).

This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.

CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, such as accounts receivable.

The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted:

In November 2023, the FASB issued ASU No.

On June 30, 2025 the Company adopted Accounting Standards Update (ASU) No.

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.

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.

We do not expect the adoption of this pronouncement to impact our consolidated financial statements beyond the expansion of our reportable segment disclosures.

The adoption of ASU 2023-07 did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted:

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The ASU is effective for fiscal years beginning after December 15, 2024, and shall be applied prospectively.

The Company is evaluating the standard and determining the extent of additional disclosures that will be required.

In November 2024, the FASB issued the ASC 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-04) Disaggregation of Income Statement of Expenses" which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses.

The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as disclosures about selling expenses.

The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

The requirements will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7 unchanged sentences

Franchise fees are billed and received upon the signing of the franchise agreement.

Recognition of these fees is deferred until the salon opens and is then recognized over the term of the franchise agreement, which is typically 10 years .

Recognition of these fees is deferred until the salon opens and typically recognized over 10 years .

Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees.

22 unchanged sentences

Receivables relate primarily to payments due for royalties, advertising fees, rent, franchise product sales, and sales of salon services and product paid by credit card.

The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), related to receivables from franchisees.

The receivables balance is presented net of an allowance for expected credit losses (i.e., doubtful accounts), related to receivables from franchisees.

Management estimates the allowance based on the age of the receivable and creditworthiness of the franchisee.

2 unchanged sentences

Balance at beginning of period $ 6,227 $ 7,297

Provision for doubtful accounts (1) 3,040 538

Provision for franchisee rent (2) 790 1,538

Reclass of accrued rent (3) — 325

Recoveries ( 2,266 ) 47

5 unchanged sentences

(2) The provision for franchisee rent is recognized as rent in the Consolidated Statements of Operations.

(3) The amounts billed in fiscal year 2023 and the related accrual were reclassified to allowance for credit losses.

Broker fees are the costs associated with using external brokers to identify new franchisees.

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

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

The Company received $ 13.0 million in proceeds in June 2022 and received an additional $ 5.0 million in proceeds in fiscal year 2023, offset by a $ 0.5 million transaction fee.

In fiscal year 2024, the Company received an additional $ 2.0 million of proceeds that had been previously held back for general indemnity provisions.

In fiscal year 2025, the Company expects to receive additional proceeds related to salon migration to the Zenoti platform.

As a result of the sale, the Company classified the OSP business, which had been included in the Company's franchise segment, as discontinued operations in the financial statements for all years presented.

In fiscal year 2024, the Company received $ 2.0 million of proceeds that had been previously held back for general indemnity provisions.

In fiscal year 2025, the Company received additional proceeds of $ 8.5 million related to the number of salons migrating to Soham's Zenoti product.

Cash (used in) provided by investing activities for the years ended June 30, 2025, 2024, and 2023, includes $ 8.5 million, $ 2.0 million, and $ 4.5 million respectively, of cash from discontinued operations.

The following summarizes the results of discontinued operations for the periods presented:

3 unchanged sentences

Fees $ — $ — $ ( 226 )

Cost of product sales to franchisees — — ( 1,037 )

General and administrative — — ( 27 )

Rent — — ( 351 )

Depreciation and amortization — — ( 1,322 )

Goodwill impairment (1) — — ( 2,880 )

Interest expense — — ( 715 )

Gain (loss) from sale of OSP 1,993 4,562 ( 36,143 )

Income (loss) from discontinued operations, before taxes 1,993 3,958 ( 41,997 )

Income tax benefit from discontinued operations (2) — — 2,599

Income (loss) from discontinued operations, net of tax $ 1,993 $ 3,958 $ ( 39,398 )

Gain from sale of OSP 8,396 1,993 4,562

Income from discontinued operations, before taxes 8,396 1,993 3,958

Income tax expense from discontinued operations (1) ( 1,892 ) — —

Income from discontinued operations, net of tax $ 6,504 $ 1,993 $ 3,958

_______________________________________________________________________________

(1) Goodwill impairment included in discontinued operations represents the portion of impairment allocated to the OSP business based on relative fair value.

(1) Income taxes have been allocated to continuing and discontinued operations based on the methodology required by accounting for income taxes guidance.

The tax expense in fiscal year 2025 is due to a GAAP and tax difference in timing of the gain recognition and does not reflect a current or cash tax liability.

There was no tax impact in fiscal years 2024, or 2023, due to a valuation allowance.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company exited its office space in Fremont, California, but remains liable for lease payments through September 2024.

The related liability is included in accrued expenses as of June 30, 2024, in the Consolidated Balance Sheets.

The following summarizes the gain (loss) from the sale of OSP for the periods presented:

The following summarizes the gain from the sale of OSP for the periods presented:

2025 2024 2023

1 unchanged sentence

Cash proceeds $ 8,463 $ 2,000 $ 5,000

Goodwill derecognition — — ( 38,358 )

Software write-off (1) — — ( 64 )

1 unchanged sentence

Other, net, including professional fees ( 67 ) ( 7 ) ( 7 )

Gain (loss) from sale of OSP $ 1,993 $ 4,562 $ ( 36,143 )

Gain from sale of OSP $ 8,396 $ 1,993 $ 4,562

_______________________________________________________________________________

1 unchanged sentence

(2) Prior to the sale, hardware used to run OSP was sold to franchisees.

As a result of the sale, the Company wrote-down the value of the hardware to its net realizable value and the charge is included in the gain (loss) on the sale of OSP.

The following summarizes capital expenditures related to discontinued operations for the periods presented:

2024 2023 2022

(Dollars in thousands)

Capital expenditures $ — $ — $ 1,067

As a result of the sale, the Company wrote down the value of the hardware to its net realizable value and the charge is included in the gain on the sale of OSP.

The Company exited its office space in Fremont, California, but was liable for lease payments through September 2024.

The related liability is included in accrued expenses as of June 30, 2024, in the Consolidated Balance Sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5 unchanged sentences

Restricted cash 18,246 19,246

Inventory 818 1,681

Other 1,646 1,802

12 unchanged sentences

Rent and related real estate costs 2,105 3,237

Gift card liability

Deferred revenue 3,832 4,738

16 unchanged sentences

Franchise agreements 20 7,402 ( 6,910 ) 492 20 7,391 ( 6,774 ) 617

Lease intangibles (3) 8 1,380 ( 93 ) 1,287 N/A — — —

Reacquired rights (3) 4 2,400 — 2,400 N/A — — —

Other 20 280 ( 251 ) 29 20 280 ( 241 ) 39

3 unchanged sentences

(2) The change in the gross carrying value and accumulated amortization of other intangible assets is impacted by foreign currency.

(3) Lease intangibles and reacquired rights consist of intangible assets acquired in the Alline Acquisition.

Total amortization expense related to intangible assets during fiscal years 2025, 2024, and 2023 was approximately $ 0.4 million, $ 0.3 million, and $ 0.3 million, respectively.

9 unchanged sentences

Non-cash investing activities:

Unpaid capital expenditures 8 25 35

Stock issued in connection with Alline Acquisition 3,000 — —

_______________________________________________________________________________

10 unchanged sentences

_______________________________________________________________________________

(1) The change in the gross carrying value of goodwill relates to foreign currency translation adjustments.

The table below contains details related to the Company's goodwill related to the franchise reporting unit:

(1) The change in the gross carrying value of goodwill relates to the $ 10.3 million of goodwill obtained through the Alline Acquisition (Note 16) and foreign currency translation adjustments.

The table below contains details related to the Company's goodwill:

(Dollars in thousands)

Balance at beginning of period $ 173,146 $ 173,791

Additions 10,252 —

Translation rate adjustments 38 ( 645 )

3 unchanged sentences

The Company leases its company-owned salons and some of its corporate facilities under operating leases.

The original terms of the salon leases range from one to 11 years with many leases renewable for an additional five to 10-year term at the option of the Company.

The Company leases its company-owned salons and its corporate facilities under operating leases.

The original terms range from one to 11 years with many leases renewable for an additional five to 10-year term at the option of the Company.

In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels.

For most leases, the Company is required to pay real estate taxes and other occupancy expenses.

Total rent from continuing operations includes the following:

Total rent includes the following:

2025 2024 2023

7 unchanged sentences

_______________________________________________________________________________

(1) During fiscal years 2024 and 2023, the Company incurred costs of $ 0.1 million and $ 1.6 million, respectively, to exit salons before the lease end date in order to relieve the company of future lease obligations.

During fiscal year 2022, lease termination expense includes $ 0.9 million to exit the Company's distribution centers before the lease end dates and $ 0.9 million to exit salons before the lease end dates in order to relieve the Company of future lease obligations.

(1) Rental income associated with the sublease of corporate office space is recorded in other income and was $ 1.2 million and $ 0.2 million for the years ended June 30, 2025, and 2024, respectively.

(2) Costs incurred to exit salons before the lease end date in order to relieve the company of future lease obligations.

(3) 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4) Includes rent related to the Alline salons acquired in December 2024.

See Note 16 to the Consolidated Financial Statements.

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

7 unchanged sentences

The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any.

The ROU asset is initially and subsequently measured throughout the expected lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any.

Expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed.

1 unchanged sentence

The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined.

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

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

The weighted average remaining lease term was 4.68 years and 5.05 years, and the weighted average discount rate was 6.45 % and 5.13 % for all salon operating leases as of June 30, 2025, and 2024, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2025, 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 (in thousands):

17 unchanged sentences

_______________________________________________________________________________

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Cash paid for amounts included in the measurement of lease liabilities includes rent, termination fees, settlements and legal fees, and commission payments.

Other than Walmart, franchisees pay landlords directly.

(1) Cash paid for amounts included in the measurement of lease liabilities includes rent, common area maintenance, termination fees, settlements and legal fees, and commission payments.

Other than leases with Walmart, franchisees pay landlords directly.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6 unchanged sentences

As of June 30, 2025, and 2024, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, debt, and accounts payable approximated their carrying values.

The Company recorded the estimated fair value of the contingent consideration liability assumed with the acquisition of Alline.

The estimated fair value of the contingent consideration liability is included in the Consolidated Balance Sheets within other noncurrent liabilities, totaling $ 1.0 million at June 30, 2025.

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

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 1,000

Earn-out liability at June 30, 2025

The following provides information regarding fair value measurements for our remaining contingent earn-out liability as of June 30, 2025, 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 $ — $ — $ 1,000 $ 1,000

Total $ — $ — $ 1,000 $ 1,000

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets, including the Company's equity method investments, tangible fixed and other assets, and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired.

We measure certain assets, including the Company's tangible fixed and other assets, and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired.

The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.

2 unchanged sentences

(Dollars in thousands)

Goodwill impairment $ — $ — $ 16,000

Long-lived asset impairment $ 352 $ 798 $ 101

4 unchanged sentences

The Company's financing arrangements consist of the following:

Twelve months ended

Twelve months ended June 30,

2025 2024 2025 2024

1 unchanged sentence

Term loan (1) 9.14 % 9.68 % $ 118,875 $ 105,000

9.68 % 9.54 % $ 105,000 $ 172,268

Paid-in-kind interest 5,376 53

Deferred financing fees ( 12,174 ) ( 14,244 )

( 14,244 ) ( 6,471 )

Term loan, net 112,077 90,809

90,756 165,797

Revolving credit facility (1) 9.14 % 9.68 % 1,030 10,237

9.68 % 9.54 % 10,237 10,000

Paid-in-kind interest

Fair value of warrants issued to lenders (Note 14)

Total long-term debt, net

$ 99,545 $ 176,830

Fair value of warrants issued to lenders ( 2,314 ) ( 1,501 )

Total debt, net $ 110,793 $ 99,545

Long-term debt, current portion ( 1,100 ) —

Long-term debt, net $ 109,693 $ 99,545

_______________________________________________________________________________

(1) June 30, 2023, term loan and revolving credit facility had a maturity date of August 31, 2025.

(2) June 30, 2024, term loan and revolving credit facility matures on June 24, 2029.

(1) The term loan and revolving credit facility mature on June 24, 2029.

The interest rate applicable to any letter of credit is 5.25 % and paid currently in cash.

In June 2024, the Company entered into a new credit agreement (the 2024 Credit Agreement).

The 2024 Credit Agreement includes a $ 105.0 million term loan and a $ 25.0 million revolving credit facility, with a $ 10.0 million minimum liquidity covenant and is set to expire June 2029.

The 2024 Credit Agreement includes a $ 105.0 million term loan and a $ 25.0 million revolving credit facility, with a $ 10.0 million minimum liquidity covenant and is set to expire on June 24, 2029.

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.

1 unchanged sentence

Any unamortized financing fees that existed at the date of the new agreement were written off upon the signing date of the 2024 Credit Agreement.

As of June 30, 2024, the unused available credit under the revolving credit facility was $ 9.8 million and the Company's total liquidity was $ 19.9 million.

In connection with the transition of the letters of credit, the available liquidity is reduced by $ 5.0 million dollars at June 30, 2024.

As of June 30, 2024, the Company had cash and cash equivalents of $ 10.1 million.

The $ 10.2 million drawn on the credit facility at June 30, 2024 related to restricted cash temporarily collateralizing letters of credit as the Company transitioned to the new lender.

See Note 16 for subsequent event related to letters of credit, cash collateralization, and revolver availability.

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

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

The Company issued additional warrants to affiliates of TCW Asset Management Company, LLC, and Asilia Investments in connection with the 2024 Credit Agreement Amendment.

See Note 14 for additional details.

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 June 30, 2025, the Company had outstanding standby letters of credit under the revolving credit facility of $ 6.0 million, primarily related to the Company's self-insurance program.

As of June 30, 2025, total available liquidity and available credit under the $ 25.0 million revolving credit facility, as defined by the 2024 Credit Agreement Amendment, were $ 25.9 million and $ 19.0 million, respectively.

The Company was in compliance with its covenants and other requirements of the financing arrangements as of June 30, 2025.

The Company's assets serve as collateral to the 2024 Credit Agreement.

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

The margin applicable to 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.

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.

When the Company's total leverage ratio is greater than or equal to 3.75 to 1.00, the margin applicable to the new term loan and revolving credit facility is 9.00 %.

2 unchanged sentences

The SOFR base rate applicable to the debt has a floor of 2.5 % per annum.

The margin applicable to any letter of credit is 5.25 %, and paid currently in cash.

The interest rate applicable to any letter of credit is 5.25 % and paid currently in cash.

The previous credit agreement utilized an interest rate margin that was subject to annual increases.

6 unchanged sentences

Due to the interest rate increasing over the debt term, the Company recorded more interest expense than interest paid in cash in fiscal years 2024 and 2023.

The agreement contains typical provisions and financial covenants regarding maximum leverage and minimum fixed-charge coverage and a minimum liquidity threshold of $ 10.0 million.

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

See Note 14 for additional details.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2024 Credit Agreement includes scheduled payments totaling $ 1.1 million in fiscal year 2026, payable quarterly.

In fiscal years 2027, 2028, and 2029, scheduled payments total $ 3.0 million.

Additionally, excess cash is swept annually per terms of the agreement and there is a balloon payment required upon maturity of the agreement in 2029.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COMMITMENTS AND CONTINGENCIES

11 unchanged sentences

Further, similar to other large retail employers, the Company has faced, and may continue to face, allegations of purported class-wide consumer and wage and hour violations.

During fiscal year 2024, the Company recorded $ 0.2 million of expense related to litigation and paid $ 0.2 million in fees related to settlements of claims.

Legal costs are expensed as incurred.

During fiscal year 2023, the Company recorded $ 1.0 million of expense related to litigation and paid $ 1.5 million in fees related to settlements of claims.

The Company's previous point-of-sale system supplier had challenged the development of certain parts of the Company's technology systems in litigation brought in the Northern District of California.

The Company and the supplier entered into an agreement, effective June 25, 2021, that provided for the dismissal of the lawsuit and set forth a Transition Services Agreement pursuant to which the supplier will assist in the transfer of franchise salons from its point-of-sale system to the Company's salon management system, OSP.

The Company and the supplier entered into an amendment to the Settlement Agreement, effective June 15, 2022, in which the Company agreed to pay $ 2.0 million to the supplier in installments commencing on June 15, 2022, and ending on December 10, 2022, in consideration of a release of claims arising out of or related to the Transition Services Agreement and for the supplier to continue to provide the services set forth in that agreement.

As of June 30, 2024, the Company has made all payments under the agreement.

The company recorded the following charges related to litigation and settlements:

2025 2024 2023

(Dollars in thousands)

Litigation expense $ 32 $ 192 $ 978

Fees related to settlements of claims $ 27 $ 256 $ 1,464

Litigation is inherently unpredictable, and the outcome of these matters cannot presently be determined.

8 unchanged sentences

$ 1,536 $ 89,936 $ ( 11,998 )

The provision (benefit) for income taxes consists of:

The (benefit) provision for income taxes consists of:

2025 2024 2023

2 unchanged sentences

International — ( 77 ) ( 428 )

Deferred (1):

( 109,886 ) 531 ( 270 )

1 unchanged sentence

$ ( 115,496 ) $ 869 $ ( 655 )

The provision (benefit) for income taxes differs from the amount of income tax determined by applying the applicable U.S.

_______________________________________________________________________________

(1) The deferred income tax benefit in fiscal year 2025 is primarily due to the release of a prior year valuation allowance in the U.S.

of $ 110.2 million and Canada of $ 6.1 million.

The (benefit) provision for income taxes differs from the amount of income tax determined by applying the applicable U.S.

statutory rate to income (loss) from continuing operations before income taxes, as a result of the following:

8 unchanged sentences

Deferred tax rate remeasurement ( 78.4 ) — ( 3.6 )

Executive compensation limitation 10.0 — ( 0.9 )

Acquired deferred taxes ( 2.3 ) — —

Tax attribute expiration (2) 428.4 — ( 1.1 )

Other, net (3) 8.7 ( 0.3 ) 1.9

1 unchanged sentence

_______________________________________________________________________________

(1) The change in valuation allowance for fiscal year 2024 primarily relates to the utilization of federal and state net operating losses used to offset taxable income generated from the extinguishment of long-term debt.

(1) The change in valuation allowance for fiscal year 2025 primarily relates to a release of a majority of the U.S.

prior year valuation allowance and a release of a portion of the Canadian prior year valuation allowance.

(2) The tax attribute expiration primarily relates to the expiration of a capital loss generated in fiscal year 2020, which was not offset by subsequent capital gains and is subject to a five-year carryforward period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) The 8.7 % of other, net in fiscal year 2025 includes the rate impact of the federal provision to return true-up and permanent adjustments of 6.2 % and 2.5 %, respectively.

The ( 0.3 )% of other, net in fiscal year 2024 does not include the rate impact of any items in excess of 5% of computed tax.

The ( 0.1 )% of other, net in fiscal year 2023 includes the rate impact of the federal provision to return true-up, tax attribute expirations and miscellaneous items of 1.3 %, ( 1.1 )%, and ( 0.3 )%, respectively.

The 1.9 % of other, net in fiscal year 2023 includes the rate impact of the federal provision to return true-up and miscellaneous items of 1.3 % and 0.6 %, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of the net deferred tax assets and liabilities are as follows:

17 unchanged sentences

Total deferred tax liabilities ( 93,662 ) ( 111,538 )

Net deferred tax liability $ ( 11,402 ) $ ( 10,936 )

_______________________________________________________________________________

(1) The decline in fiscal year 2024 is a result of US net operating loss utilization, primarily due to taxable income generated from the extinguishment of long-term debt.

(2) The $ 6.3 million of Other in fiscal year 2024 includes $ 3.0 million of deferred tax assets with a corresponding valuation allowance of the same amount related to discontinued operations.

The $ 8.6 million of Other in fiscal year 2023 includes $ 3.4 million of deferred tax assets with a corresponding valuation allowance of the same amount related to discontinued operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net deferred tax asset (liability) $ 102,504 $ ( 11,402 )

At June 30, 2025, the Company has tax-effected federal, state, Canada, and U.K.

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The Company's tax credit carryforward of $ 37.4 million primarily consists of Work Opportunity Tax Credits that will expire from fiscal years 2031 to 2044.

The Company's capital loss carryforward of $ 5.9 million will expire in fiscal year 2025.

We consider the earnings of certain non-U.S.

The Company's prior year capital loss carryforward of $ 5.9 million expired in fiscal year 2025.

The current year capital loss carryforward will expire in fiscal year 2030.

The Company considers the earnings of certain non-U.S.

subsidiaries to be indefinitely invested outside the U.S.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A rollforward of the unrecognized tax benefits is as follows:

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Additions based on tax positions related to the current year 3 3

Additions (reductions) based on tax positions of prior years 12 ( 663 )

Additions based on tax positions of prior years 8 12

Reductions on tax positions related to the expiration of the statute of limitations ( 49 ) ( 176 )

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The discretionary employer contribution profit-sharing portion of the RRSP is a noncontributory defined contribution component covering full-time and part-time employees of the Company who have at least one year of eligible service, defined as 1,000 hours of service during the RRSP year, are employed by the Company on the last day of the RRSP year and are Salon Support employees, field leaders, artistic directors or consultants, and that are not highly compensated employees as defined by the Code.

Participants' interest in the noncontributory defined contribution component become 20.0 % vested after completing two years of service with vesting increasing 20.0 % for each additional year of service with participants becoming fully vested after six full years of service.

Participants' interest in the noncontributory defined contribution component becomes 20.0 % vested after completing two years of service with vesting increasing 20.0 % for each additional year of service with participants becoming fully vested after six full years of service.

Nonqualified Deferred Salary Plan:

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The Company's basic earnings per share is calculated as net income (loss) divided by weighted average common shares outstanding, excluding unvested outstanding stock options (SOs), outstanding 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 (loss) 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.

Stock-based awards and warrants 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.

For fiscal years 2023 and 2022, 24,636 and 30,425 common stock equivalents of dilutive common stock, respectively, were excluded from the diluted earnings per share calculation due to net loss from continuing operations.

The computation of weighted average shares outstanding, assuming dilution, excluded the following stock-based awards as they were not dilutive under the treasury stock method:

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 stock-based awards as detailed below, 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):

2025 2024 2023

Equity-based compensation awards 216,929 197,797 113,467

(Shares in thousands)

Denominator for basic EPS - weighted average common shares 2,364 2,339 2,323

Dilutive shares associated with option plans 316 36 —

Denominator for diluted EPS - weighted average common shares and dilutive potential common shares 2,680 2,375 2,323

Stock-based awards excluded from EPS calculation - anti-dilutive 189 217 198

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCK-BASED COMPENSATION

The Company grants long-term equity-based awards under the 2018 Long Term Incentive Plan (the 2018 Plan).

The 2018 Plan, which was approved by the Company's shareholders at its 2018 Annual Meeting of Shareholders, provides for the granting of nonqualified SOs, equity-based SARs and cash-settled SARs, RSUs and PSUs, to employees and non-employee directors of the Company.

Under the 2018 Plan, a maximum of 190,945 shares are approved for issuance.

The 2018 Plan incorporates a fungible share design, under which full value awards (such as RSUs and PSUs) count against the shares reserved for issuance at a rate 2.0 times higher than appreciation awards (such as SARs and SOs).

As of June 30, 2024, a maximum of 51,366 shares were available for grant under the 2018 Plan.

The Company grants long-term equity-based awards under the Amended and Restated 2018 Long Term Incentive Plan (the Amended and Restated 2018 Plan).

The Amended and Restated 2018 Plan, which was approved by the Company's shareholders at its 2025 Annual Meeting of Shareholders, provides for the granting of non-qualified SOs, equity-based SARs and cash-settled SARs, RSUs and PSUs, to employees and non-employee directors of the Company.

Under the Amended and Restated 2018 Plan, a maximum of 415,945 shares are approved for issuance.

As of June 30, 2025, a maximum of 228,989 shares were available for grant under the Amended and Restated 2018 Plan.

All unvested awards are subject to forfeiture in the event of termination of employment, unless accelerated.

SAR and RSU awards granted under the 2018 Plan generally include various acceleration terms, including upon retirement for participants aged 62 years or older or who are aged 55 years or older and have 15 years of continuous service.

SAR and RSU awards granted under the Amended and Restated 2018 Plan generally include various acceleration terms, including upon retirement for participants aged 62 years or older or who are aged 55 years or older and have 15 years of continuous service.

The Company also has outstanding awards under the 2016 Long Term Incentive Plan (the 2016 Plan), although the 2016 Plan terminated in October 2018 and no additional awards have since been or will be made under the 2016 Plan.

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The Company also has outstanding awards under the Amended and Restated 2004 Long Term Incentive Plan (the 2004 Plan), although the 2004 Plan terminated in October 2016 and no additional awards have since been or will be made under the 2004 Plan.

The 2004 Plan provided for the granting of nonqualified SOs, SARs, RSAs, RSUs and PSUs, as well as cash-based performance grants, to employees and non-employee directors of the Company.

Under the 2018 Plan, 2016 Plan, and the 2004 Plan, stock-based awards are granted at an exercise price or initial value equal to the fair market value on the date of grant.

The fair value of cash-settled SARs granted in fiscal year 2022 are re-valued on a quarterly basis.

The 2004 Plan provided for the granting of non-qualified SOs, SARs, RSAs, RSUs and PSUs, as well as cash-based performance grants, to employees and non-employee directors of the Company.

Under the Amended and Restated 2018 Plan, 2016 Plan, and the 2004 Plan, stock-based awards are granted at an exercise price or initial value equal to the fair market value on the date of grant.

Using the fair value of each grant on the date of grant, the weighted average fair values per stock-based compensation award granted during fiscal years 2025, 2024, and 2023 were as follows (1):

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The fair value of market-based RSUs granted are estimated on the date of grant using the closing stock price on the date of grant.

The significant assumptions used in determining the estimated fair value of the market-based awards granted during fiscal years 2024, 2023, and 2022 were as follows:

The significant assumptions used in determining the estimated fair value of the market-based awards held during fiscal years 2025, 2024, and 2023 were as follows:

2025 2024 2023

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Total stock-based compensation expense (recorded in general and administrative) 1,940 1,558 2,316

Income tax benefit (3) — — —

Income tax expense (2) ( 407 ) — —

Total stock-based compensation expense, net of tax $ 1,533 $ 1,558 $ 2,316

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(1) The credit balance in fiscal year 2024 is due to adjustments made for quarterly revaluations resulting from a decrease in stock price during the year.

(2) A benefit was recognized in fiscal year 2022 due to forfeiture of SOs.

(3) Federal statutory income tax rate utilized of 0 % due to a valuation allowance in fiscal years 2024, 2023, and 2022.

(2) Federal statutory income tax rate of 21% utilized in fiscal year 2025.

Federal statutory income tax rate of 0 % utilized due to a valuation allowance in fiscal years 2024 and 2023.

Stock Appreciation Rights:

SARs granted under the 2018 Plan, 2016 Plan, and the 2004 Plan generally vest 20 %, 20 %, and 60 % over a three-year period subsequent to the grant date or vest ratably over a three to five-year period on each of the annual grant date anniversaries and expire 10 years from the grant date.

SARs granted in fiscal year 2024 were awarded to the Company's executives and are liability-classified awards that vest ratably over a three-year period and are revalued each reporting period.

SARs awarded to the Company's executives are liability-classified awards that vest ratably over a three-year period and are revalued each reporting period.

SARs granted prior to fiscal year 2023 vest 20 %, 20 %, and 60 % over a three-year period or vest ratably over a three-year period, with the exception of the April 2017 grant to the former Chief Executive Officer, which vested in full after two years .

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Forfeited/Expired ( 9 ) $ 40.32

Exercised — —

Outstanding balance at June 30, 2025 96 $ 137.69 4.12 $ ( 11,093 )

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Unvested awards, net of estimated forfeitures 7 $ 30.40 7.16 $ ( 57 )

As of June 30, 2024, there was $ 0.1 million of unrecognized expense related to SARs that is to be recognized over a weighted average period of one year .

As of June 30, 2025, there was $ 0.0 million of unrecognized expense related to SARs that is to be recognized over a weighted average period of zero years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options:

SOs granted under the 2018 Plan, 2016 Plan, and the 2004 Plan generally vest 20 %, 20 %, and 60 % over a three-year period subsequent to the grant date or vest ratably over a three to five-year period on each of the annual grant date anniversaries and expire 10 years from the grant date.

SOs granted under the Amended and Restated 2018 Plan, 2016 Plan, and the 2004 Plan generally vest 20 %, 20 %, and 60 % over a three-year period subsequent to the grant date or vest ratably over a three to five-year period on each of the annual grant date anniversaries and expire 10 years from the grant date.

The SOs granted during fiscal year 2023 were awarded to the Company's executives and vest ratably over a three-year period and SOs granted to non-employee directors vest in equal amounts over a one-year period from the Company's previous annual shareholder meeting date and exercises are deferred until the director's board service ends.

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Unvested awards, net of estimated forfeitures 11 $ 30.40 7.16 $ ( 89 )

As of June 30, 2024, there was $ 0.6 million of unrecognized expense related to SOs that is to be recognized over a weighted average period of one year .

As of June 30, 2025, there was $ 0.0 million of unrecognized expense related to SOs that is to be recognized over a weighted average period of zero years .

Restricted Stock Units:

RSUs granted to employees under the 2018 Plan, 2016 Plan, and 2004 Plan generally vest 20 %, 20 %, and 60 % over a three-year period subsequent to the grant date, vest ratably over a one to five-year period on each of the annual grant date anniversaries or vest entirely after a one , three , or five-year period subsequent to the grant date.

RSUs granted to non-employee directors under the 2018 Plan, 2016 Plan, and 2004 Plan generally vest in equal monthly amounts over a one-year period from the Company's previous annual shareholder meeting date and distributions are deferred until the director's board service ends.

RSUs granted to employees under the Amended and Restated 2018 Plan, 2016 Plan, and 2004 Plan generally vest 20 %, 20 %, and 60 % over a three-year period subsequent to the grant date, vest ratably over a one to five-year period on each of the annual grant date anniversaries or vest entirely after a one , three , or five-year period subsequent to the grant date.

RSUs granted to non-employee directors under the Amended and Restated 2018 Plan, 2016 Plan, and 2004 Plan generally vest in equal monthly amounts over a one-year period from the Company's previous annual shareholder meeting date and distributions are deferred until the director's board service ends.

Activity for all the Company's RSUs is as follows:

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The Company has 5.0 million shares of capital stock authorized, par value $ 0.05 , of which all outstanding shares, and shares available under the Stock Option Plans, have been designated as common stock.

Alline Acquisition:

In connection with the Alline Acquisition, the Company issued 140,552 shares of common stock to affiliates of Alline, which are subject to a one-year lock-up following the closing.

Stock Warrants Issues in Connection with Long-Term Debt:

In connection with the new credit agreement, the Company issued detachable warrants to affiliates of TCW Asset Management Company, LLC, and Asilia Investments.

In connection with the 2024 Credit Agreement, the Company issued detachable warrants to affiliates of TCW Asset Management Company, LLC, and Asilia Investments.

Pursuant to the warrants, the holders can purchase up to an aggregate 407,542 shares of the Company’s common stock, par value $ 0.05 per share, at an exercise price equal to $ 7.00 per share.

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

In December 2024, the Company amended the 2024 Credit Agreement.

The Company issued additional warrants to affiliates of TCW Asset Management Company, LLC, and Asilia Investments.

In connection with this amendment, the warrant holders can purchase up to an aggregate 64,372 shares of Common Stock, at an exercise price equal to $ 23.86 per share.

The warrants are exercisable for a seven-year period beginning December 19, 2024.

The warrants may also be exercised on a cashless basis if, at the time of exercise, there is no effective registration statement registering, or the prospectus therein is not available for, the issuance of the shares of common stock underlying the warrants.

In addition, in connection with the issuance of the warrants, the Company has granted an exemption in favor of each holder pursuant to Section 36 of the Tax Benefits Preservation Plan, dated January 29, 2024, among the Company and Equiniti Trust Company, LLC (the “Plan”), 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.

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Based in part upon the representations of each holder in each warrant, the offering and sale of each warrant is exempt from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

The warrants were valued at $ 1.5 million using a relative fair value method, and were accounted for through additional paid-in capital.

Further, the related financing fees incurred as a result of warrant issuance is recorded through a contra-equity account, and amounts to $ 0.2 million.

Prior to the second anniversary of the issue date, the Company may call for cancellation up to an aggregate 203,771 shares of Common Stock underlying the warrants for consideration equal to $ 15.00 per share;

The combined value of these warrants was valued at $ 2.8 million using a relative fair value method and accounted for through additional paid-in capital.

Further, the related financing fees incurred as a result of warrant issuance are recorded through a contra-equity account and amount to $ 0.2 million.

For the warrants originally issued in June 2024, prior to the second anniversary of the issue date, the Company may call for cancellation up to an aggregate 203,771 shares of Common Stock underlying the warrants for consideration equal to $ 15.00 per share;

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 June 30, 2024 the Company has no intentions on exercising this call provision.

For the warrants issued in December 2024, prior to the second anniversary of the issue date, the Company may call for cancellation up to an aggregate 32,186 shares of Common Stock underlying the warrants for consideration equal to $ 51.13 per share;

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 $ 68.17 .

As of June 30, 2025, the Company has no intention of exercising either call provision.

The Company will reassess this intention on a quarterly basis.

Share Issuance Program:

In February 2021, the Company filed a $ 150.0 million shelf registration and $ 50.0 million prospectus supplement with the Securities and Exchange Commission under which it had the ability to offer and sell, from time to time, up to $ 50.0 million worth of its common stock in "at-the-market" offerings.

In fiscal year 2022, 464,781 shares were issued for $ 38.4 million under the prospectus.

During fiscal years 2023 and 2024, the Company did no t issue any shares under this prospectus.

The share issuance program expired on February 10, 2024.

Share Repurchase Program

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

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SEGMENT INFORMATION

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

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

In the second quarter of fiscal year 2023, the Company revised its internal reporting such that the Chief Operating Decision Maker's (CODM) primary measures of segment performance are revenue and segment adjusted EBITDA.

The Company's Chief Operating Decision Maker's (CODM) primary measures of segment performance are revenue and segment adjusted EBITDA.

The Company’s Chief Executive Officer is the CODM.

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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Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest, income taxes, depreciation, amortization, and impairment.

Beginning in fiscal year 2025, management determined that stock-based compensation expenses will be excluded from adjusted EBITDA.

This change has been retrospectively applied to all prior periods presented in this report.

Consistent with our internal management reporting, unallocated expenses include certain items impacting comparability.

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Unallocated fees include distribution center wind down fees, inventory reserve, 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, goodwill and long-lived asset impairment charges, and the benefit from the Company's debt refinancing.

Figures for prior reporting periods have been restated to conform to the current period.

The Franchise reportable operating segment is comprised of 4,391 franchise salons located mainly in strip center locations and Walmart.

Franchise salons offer high quality, convenient and value priced hair care and beauty services and retail products.

This segment operates primarily in the U.S., Puerto Rico, and Canada and primarily includes the Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters, and Magicuts concepts.

The company-owned salons reportable operating segment is comprised of 17 company-owned salons located mainly in strip center locations and Walmart.

Company-owned salons offer high quality, convenient and value priced hair care and beauty services and retail products.

SmartStyle, Supercuts, Cost Cutters and other regional trade names operating in the U.S.

and Canada are generally within the company-owned salons segment.

Figures for prior reporting periods have been restated to conform with the accounting requirements of the current period.

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

For the Year Ended June 30, 2025

(Dollars in thousands)

Franchise Company-owned Consolidated

Total revenue $ 166,403 $ 43,731 $ 210,134

General and administrative $ 42,769 $ 3,995 $ 46,764

Rent 3,413 7,074 10,487

Non-margin expenses (1) 98,523 — 98,523

Company-owned salon expense — 31,103 31,103

Depreciation and amortization 1,194 1,772 2,966

Long-lived asset impairment 352 — 352

Operating income (loss) $ 20,152 $ ( 213 ) $ 19,939

Unallocated income, net (2) 103,597

Total net income $ 123,536

Segment adjusted EBITDA $ 28,362 $ 3,213 $ 31,575

_______________________________________________________________________________

(1) Non-margin expenses include advertising fund and franchise rent expenses which are offset in total revenue and, as such, not used as a primary measure of performance by our CODM.

(2) Unallocated income, net includes release of valuation allowance.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financial information reconciling the Company's reportable operating segments Operating income (loss) to Adjusted EBITDA is shown in the tables below.

For the Year Ended June 30, 2025

(Dollars in thousands)

Franchise Company-owned Consolidated

Operating income (loss) $ 20,152 $ ( 213 ) $ 19,939

Depreciation and amortization 1,194 1,772 2,966

Other, net 1,624 — 1,624

Discrete items (1) 5,392 1,654 7,046

Segment adjusted EBITDA $ 28,362 $ 3,213 $ 31,575

_______________________________________________________________________________

(1) Discrete items include one-time professional fees and legal settlements, severance expense, the benefit from lease liability decreases in excess of previously impaired right of use asset, lease termination fees and asset retirement obligation costs.

For the Year Ended June 30, 2024

(Dollars in thousands)

Franchise $ 195,659 $ 223,237 $ 255,762

Company-owned 7,323 10,089 20,205

Franchise Company-owned Consolidated

Total revenue $ 195,659 $ 7,323 $ 202,982

Cost of product sales to franchisees $ 436 $ — $ 436

General and administrative 44,778 609 45,387

Rent 3,450 2,075 5,525

Non-margin expenses (1) 120,921 — 120,921

Company-owned salon expense — 5,080 5,080

Depreciation and amortization 3,095 850 3,945

Long-lived asset impairment 798 — 798

Operating income (loss) $ 22,181 $ ( 1,291 ) $ 20,890

Unallocated income, net (2) 70,170

Total net income $ 91,060

Segment adjusted EBITDA $ 27,815 $ ( 323 ) $ 27,492

Franchise 26,257 22,799 7,730

Company-owned ( 323 ) ( 1,789 ) ( 9,529 )

Total 25,934 21,010 ( 1,799 )

Unallocated benefits (expenses) 94,138 ( 3,050 ) ( 9,843 )

_______________________________________________________________________________

(1) Non-margin expenses include advertising fund and franchise rent expenses which are offset in total revenue and, as such, not used as a primary measure of performance by our CODM.

(2) Unallocated income, net includes extinguishment of long-term debt.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financial information reconciling the Company's reportable operating segments Operating income (loss) to Adjusted EBITDA is shown in the tables below.

For the Year Ended June 30, 2024

(Dollars in thousands)

Franchise Company-owned Consolidated

Operating income (loss) $ 22,181 $ ( 1,291 ) $ 20,890

Depreciation and amortization 3,095 850 3,945

Other, net ( 172 ) — ( 172 )

Discrete items (1) 2,711 118 2,829

Segment adjusted EBITDA $ 27,815 $ ( 323 ) $ 27,492

_______________________________________________________________________________

For the Year Ended June 30, 2023

(Dollars in thousands)

Franchise Company-owned Consolidated

Total revenue $ 223,237 $ 10,089 $ 233,326

Cost of product sales to franchisees $ 3,540 $ — $ 3,540

Inventory reserve — 1,228 1,228

General and administrative 50,074 677 50,751

Rent 4,664 4,532 9,196

Non-margin expenses (1) 143,188 — 143,188

Company-owned salon expense — 8,827 8,827

Depreciation and amortization 6,919 797 7,716

Long-lived asset impairment 101 — 101

Goodwill impairment — — ( 13,120 )

Interest expense ( 25,393 ) ( 22,141 ) ( 12,914 )

Income tax (expense) benefit ( 869 ) 655 ( 2,017 )

Income (loss) from discontinued operations 1,993 3,958 ( 39,398 )

Total net income (loss) $ 91,060 $ ( 7,385 ) $ ( 85,857 )

Operating income (loss) $ 14,751 $ ( 5,972 ) $ 8,779

Unallocated income, net ( 16,164 )

Total net loss $ ( 7,385 )

Segment adjusted EBITDA $ 25,107 $ ( 1,788 ) $ 23,319

_______________________________________________________________________________

(1) Non-margin expenses include advertising fund and franchise rent expenses which are offset in total revenue and, as such, not used as a primary measure of performance by our CODM.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financial information reconciling the Company's reportable operating segments Operating income (loss) to Adjusted EBITDA is shown in the tables below.

For the Year Ended June 30, 2023

(Dollars in thousands)

Franchise Company-owned Consolidated

Operating income (loss) $ 14,751 $ ( 5,972 ) $ 8,779

Depreciation and amortization 6,919 797 7,716

Other, net ( 86 ) 1,450 1,364

Discrete items (1) 3,523 1,937 5,460

Segment adjusted EBITDA $ 25,107 $ ( 1,788 ) $ 23,319

_______________________________________________________________________________

(1) Discrete items include one-time professional fees and legal settlements, inventory reserve, severance expense, the benefit from lease liability decreases in excess of previously impaired right of use asset, lease termination fees and asset retirement obligation costs.

The Franchise reportable operating segment is comprised of franchise salons located mainly in strip center locations and Walmart stores.

Franchise salons offer high quality, convenient and value-priced hair care and beauty services and retail products.

This segment operates primarily in the U.S., Puerto Rico, and Canada and primarily includes the Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters, and Magicuts concepts.

The company-owned salons reportable operating segment is comprised of company-owned salons located mainly in strip center locations and Walmart stores.

Company-owned salons offer high quality, convenient and value priced hair care and beauty services and retail products.

SmartStyle, Supercuts, Cost Cutters and other regional trade names operating in the U.S.

and Canada are generally within the company-owned salons segment.

Segment information is prepared on the same basis that the CODM reviews financial information for operational decision-making purposes.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FRANCHISE SALONS:

SmartStyle/Cost Cutters in Walmart stores

Portfolio Brands

Total North American salons

Total International salons (1)

Total franchise salons

as a percent of total franchise and company-owned salons

92.5 % 99.6 %

COMPANY-OWNED SALONS (2):

SmartStyle/Cost Cutters in Walmart stores

Portfolio Brands

Total company-owned salons

as a percent of total franchise and company-owned salons

Total franchise and company-owned salons

_______________________________________________________________________________

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

(2) Salon counts as of June 30, 2025, include salons acquired as part of the Alline Acquisition.

See Note 16 to the Consolidated Financial Statements.

Total revenues and property and equipment, net associated with business operations in the U.S.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ACQUISITIONS:

FOOTNOTE OPEN PENDING FINALIZATION OF VALUATION

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 Consolidated Financial Statements as a component of operating income for the year ended June 30, 2025.

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.

As of June 30, 2025, the purchase price and related allocation have been revised as a result of 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.

The fair value of total consideration transferred by the Company upon acquisition is $ 22.6 million, as detailed below.

Consideration (Dollars in thousands)

Cash, net of cash acquired (1) $ 18,621

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

Contingent consideration arrangement (3) 1,000

Fair value of total consideration $ 22,621

_______________________________________________________________________________

(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 $ 3.0 million.

Regis recognized a fair value of $ 1.0 million as of June 30, 2025, which is included in other noncurrent liabilities in the Consolidated Balance Sheets.

4-Wall EBITDA is defined as earnings before interest, tax, depreciation and amortization and excluding corporate general and administrative expenses for acquired salons.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(Dollars in thousands)

Current assets $ 3,630

Property and equipment 7,976

Goodwill (1) 10,252

Intangible assets (2) 3,780

Right of use assets 7,292

Other assets 56

Assumed current liabilities ( 2,352 )

Assumed lease liabilities ( 8,013 )

Fair value of total consideration $ 22,621

_______________________________________________________________________________

(1) Preliminary 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 the goodwill related to the acquisition of Alline is related to our company-owned operating segment.

The Company has obtained all the information required to finalize the valuation of the assets acquired and liabilities assumed, except for information related to certain assumed liabilities.

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

(2) Intangible assets include $ 2.4 million related to the fair value of reacquired rights and $ 1.4 million related to the fair value of favorable leasehold interests, net.

The reacquired rights were valued using a form of the income approach where the asset's value is determined by its ability to generate future cash flows by isolating and discounting the cash flows attributable to the asset.

The Company assumed a four-year life based on the weighted average remaining contract term, assuming no renewals.

Upon acquisition, the Company assumed lease agreements with lease payments fixed at a rate below the current market rate.

As a result, a favorable lease asset of $ 1.4 million has been recorded on the balance sheet.

This asset represents the benefit the Company receives from having lease payments below market and will be amortized to rent expense on a straight-line basis over the remaining terms of the respective leases.

The Company incurred $ 1.4 million of acquisition related costs which are included in general and administrative expense in Regis’s Consolidated Statements of Operations for the year ended June 30, 2025, respectively.

The following table provides revenues and operating income from Alline that are included in our Consolidated Financial Statements since the date of acquisition:

December 19, 2024 through June 30, 2025

Total revenues $ 40,813

Operating income 2,424

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents pro forma information as if the Alline Acquisition had occurred on July 1, 2022:

For the Fiscal Year Ended June 30,

2025 2024 2023

Total revenues $ 239,350 $ 277,210 $ 309,025

Operating income 24,066 22,575 10,230

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SUBSEQUENT EVENTS:

Workforce Reduction:

In August 2024, the Company executed a workforce reduction.

As a result of the workforce reduction, the Company expects to incur lower salary and wage related expenses, partially offset by severance expense and investments back into the business.

We are unable to estimate the net impact of workforce reduction, severance expense and related investments into the business.

Revolving Credit Facility/Restricted Cash:

As the Company transitioned to its new lender in June 2024, the Company temporarily drew $ 10.2 million on the revolving credit facility to cash collateralize its outstanding letters of credit issued by the Company’s former lenders.

This cash is included in restricted cash as of June 30, 2024.

Subsequent to June 30, 2024, under the 2024 Credit Agreement, the Company issued letters of credit in the amount of $ 9.25 million and paid down the revolving credit facility by $ 5.8 million and restricted cash was reduced accordingly.

As of August 23, 2024, the Company's current revolver availability is $ 15.6 million.

Chief Executive Officer Transition:

On June 20, 2025, Matthew Doctor, the President and Chief Executive Officer and a member of the Board of Directors (the "Board") of the Company notified the Board that he would resign his positions, effective June 30, 2025.

Upon receiving such notice, the Board appointed Jim Lain, the Company’s Executive Vice President, Brand Operations - Supercuts and Cost Cutters, to serve as Interim President and Chief Executive Officer, effective July 1, 2025, after which Mr.

Doctor continued to provide services to the Company as a part-time employee through August 31, 2025, pursuant to a Resignation and Transition Letter Agreement between the Company and Mr.

The Board has commenced a comprehensive search for a permanent successor.

The Board has formed a Succession Planning Committee and has engaged a leading executive search firm to help identify the next CEO, from among both internal and external candidates.

In the interim, Jim Lain, current EVP Brand Operations – Supercuts and Cost Cutters, will work closely with the executive team and Board to ensure a seamless transition and continued execution of the Company’s strategic priorities.

Lain joined the Company in 2013, bringing with him more than 30 years of operations leadership experience.

Since then, he has spearheaded initiatives that drove operational excellence and enhanced the performance of iconic brands including Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters, and other legacy names within the Company's portfolio.

Prior to joining the Company, Mr.

Lain made significant contributions at Gap, Inc., where he served as Vice President of Operations for Gap Specialty Stores in the U.S.

In this role, he was responsible for steering a $ 2.5 billion business across 750 stores, enhancing operational efficiency and driving growth in a highly competitive market.

Prior to his experience with Gap, Inc., Mr.

Lain was Vice President of Operations at Galyan’s Trading Company, Inc.

/ Dick’s Sporting Goods and held several field management positions at Target Stores, Inc.

Warrant Issuance:

On August 1, 2025, as part of a consulting services agreement, the Company issued two warrants to purchase common stock of the Company to Forum3 Inc., consisting of:

(i) a warrant, exercisable through October 31, 2025, to purchase up to $ 490,000 in aggregate value of shares of common stock of the Company at an exercise price of the greater of $ 22 per share and the 10 -day average closing price immediately prior to any exercise (the Initial Warrant);

and (ii) a warrant to purchase up to an additional 35,000 shares of common stock of the Company, at an exercise price of $ 24.20 per share (the Coverage Warrant).

The fair value of the warrants has not yet been determined.

The Coverage Warrant is eligible to vest proportionally to the extent the Initial Warrant is exercised, and, to the extent vested, will remain exercisable until August 1, 2028.

Legislative Impacts:

On July 4, 2025, H.R.

1, commonly known as the “One Big Beautiful Bill Act” (OBBBA), was enacted into law.

OBBBA is a reconciliation bill impacting businesses as it includes a broad range of tax reform provisions.

The Company does not expect any material net impact to its consolidated financial statements as a result of OBBBA.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data