What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-05-13 · 70 added, 93 removed, 173 unchanged (49% of the section changed)

7 unchanged sentences

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

As of March 31, 2025, the Company franchised or owned 4,087 locations, primarily in North America.

As of September 30, 2025, the Company franchised or owned 3,879 locations, primarily in North America.

Our locations consisted of 3,593 franchised salons and 286 company-owned salons.

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

As of March 31, 2025, the Company had 1,860 employees, of which 1,666 were acquired as part of the Alline Acquisition.

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

As of September 30, 2025, the Company had 1,745 employees of which 1,577 were acquired as part of the Alline Acquisition.

CRITICAL ACCOUNTING ESTIMATES

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Changes in these estimates could have a material effect on our interim unaudited Condensed Consolidated Financial Statements.

Business Combinations

We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date.

The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill.

When determining the fair value of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets.

Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Once the purchase accounting is finalized, any subsequent adjustments are reflected in the consolidated statements of operations.

Acquisition costs, such as legal and consulting fees, are expensed as incurred.

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

An interim impairment analysis was not required in the three months ended March 31, 2025.

As of March 31, 2025, and June 30, 2024, the franchise reporting unit had goodwill of $172.2 million and $173.1 million, respectively, and the company-owned reporting unit had goodwill of $12.1 million and $0.0 million as of March 31, 2025, and June 30, 2024, respectively.

An interim impairment analysis was not required in the three months ended September 30, 2025.

As of September 30, 2025, and June 30, 2025, the franchise reporting unit had goodwill of $172.8 million and $173.2 million, respectively, and the company-owned reporting unit had goodwill of $10.3 million as of both September 30, 2025, and June 30, 2025.

Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Part II, Item 8 of the June 30, 2025, Annual Report on Form 10-K.

There have been no changes to our critical accounting policies from those disclosed on our Form 10-K for the year ended June 30, 2024, except as noted above.

There have been no changes to our critical accounting policies from those disclosed on our Form 10-K for the year ended June 30, 2025.

RESULTS OF OPERATIONS

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

In the nine months ended March 31, 2025, a net 301 franchise salons, excluding any impact from the Alline Acquisition, have closed.

An additional 314 salons were acquired as part of the Alline Acquisition, which will reduce future royalty income.

The Alline Acquisition will increase future company-owned salon revenue and expenses.

In the three months ended September 30, 2025, a net 54 franchise salons and eight company-owned salons have closed.

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

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

2025 2024 2025 2024

Three Months Ended September 30,

(Dollars in millions)

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

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

Three Months Ended September 30,

2025 2024 2025 2024

(Dollars in millions) % of Total

Revenue (5) (Decrease) Increase (Dollars in millions) % of Total

Revenue (Decrease) Increase

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Fees 1.8 2.4 3.1 5.2 (210)

Product sales to franchisees — — — — — — 0.5 — 0.3 (30)

Advertising fund contributions 5.6 5.6 9.5 12.2 (270)

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Company-owned salon revenue 20.2 0.8 34.2 1.7 3,250

Cost of product sales to franchisees (1) — — — — N/M — 0.4 — 80.0 N/M

General and administrative 11.4 14.0 19.3 30.4 (1,110)

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Interest expense (5.3) (4.8) (9.0) (10.4) (140)

Gain on earn-out liability 1.0 — 1.7 — 170

Other, net 0.2 0.7 0.3 1.5 (120)

Income tax (expense) benefit (4) — (0.1) (0.4) (2.3) N/A 0.1 0.2 6.2 8.3 N/A

Income tax (expense) benefit (3) (0.5) 0.2 28.3 11.1 N/A

Income (loss) from continuing operations (2) 1.4 (1.8) 2.4 (3.9) 630

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_______________________________________________________________________________

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

The basis point change is not meaningful (N/M).

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

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

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

Three and Nine Months Ended March 31, 2025, Compared with Three and Nine Months Ended March 31, 2024

During the three and nine months ended March 31, 2025, royalties decreased $2.2 million and $4.0 million, or 14.0% and 8.3%, respectively, primarily due to a decrease in franchise salon count and negative same-store sales.

During the three and nine months ended March 31, 2025, fees remained relatively flat year over year, primarily due to terminated franchise fees related to the acquisition of Alline salons, offset by lower rebate fees from franchise product vendors.

Three Months Ended September 30, 2025, Compared with Three Months Ended September 30, 2024

During the three months ended September 30, 2025, royalties decreased $1.6 million, or 10.3%, primarily due to a decrease in franchise salon count caused by franchise salon closures and the Alline Acquisition.

During the three months ended September 30, 2025, fees decreased $0.6 million, or 25.0%, primarily due to salon closures and lower rebate fees from our franchise product vendor.

Advertising Fund Contributions

Advertising fund contributions decreased $0.6 million and $3.5 million, or 10.3% and 17.7%, during the three and nine months ended March 31, 2025, respectively, primarily due to the decrease in franchise salon count and lower contribution rates.

Advertising fund contributions remained relatively flat year over year.

Franchise Rental Income

During the three and nine months ended March 31, 2025, franchise rental income decreased $6.9 million and $14.0 million, or 29.0% and 19.3%, respectively, primarily due to the decrease in franchise salon count and franchisees signing their own leases.

During the three months ended September 30, 2025, franchise rental income decreased $4.2 million, or 19.4%, primarily due to the decrease in franchise salon count.

Company-Owned Salon Revenue

During the three and nine months ended March 31, 2025, company-owned salon revenue increased $17.7 million and $18.2 million, or 1,361.5% and 364.0%, respectively, primarily due to the Alline Acquisition.

During the three months ended September 30, 2025, company-owned salon revenue increased $19.4 million from $0.8 million to $20.2 million, due to the increase in company-owned salon count as a result of the Alline Acquisition.

General and Administrative

For the three and nine months ended March 31, 2025, general and administrative expense increased $0.0 million and $2.7 million, or 0.0% and 8.0%, respectively, primarily due to severance costs of $0.4 million and $2.7 million, respectively.

Additionally, the nine month period includes $1.4 million of acquisition costs associated with the Alline Acquisition.

Rent expense increased $2.3 million and $3.0 million, or 127.8% and 69.8%, during the three and nine months ended March 31, 2025, respectively.

The increase is primarily due to Alline Acquisition salon rent expense.

General and administrative expense for the three months ended September 30, 2025, decreased $2.6 million, or 18.6%, primarily due to lower severance and stock-based compensation expense in the current year period.

Rent expense increased $2.1 million, or 190.9%, during the three months ended September 30, 2025, as a result of rent expense associated with the acquired Alline salons.

Advertising Fund Expense

Advertising fund expense decreased $0.6 million and $3.5 million, or 10.3% and 17.7%, during the three and nine months ended March 31, 2025, respectively, primarily due to the decrease in franchise salon count and lower contribution rates.

Advertising fund expense remained relatively flat year over year.

Franchise Rent Expense

During the three and nine months ended March 31, 2025, franchise rent expense decreased $6.9 million and $14.0 million, or 29.0% and 19.3%, respectively, primarily due to the decrease in franchise salon count and franchisees signing their own leases.

During the three months ended September 30, 2025, franchise rent expense decreased $4.2 million, or 19.4%, primarily due to the decrease in franchise salon count.

Company-Owned Salon Expense

Company-owned salon expense increased $12.3 million and $12.2 million, or 820.0% and 283.7% for the three and nine months ended March 31, 2025, respectively, primarily due to the Alline Acquisition.

Company-owned salon expense, for the three months ended September 30, 2025, increased $14.0 million from $0.8 million to $14.8 million, primarily due to the strategic Alline Acquisition.

Depreciation and Amortization

Depreciation and amortization decreased $0.3 million and $0.5 million, or 30.0% and 23.8%, for the three and nine months ended March 31, 2025, respectively, primarily due to company-owned salon closures, partially offset by the Alline Acquisition.

Depreciation and amortization for the three months ended September 30, 2025, increased $0.4 million, or 100.0%, primarily due to depreciation expense associated with the assets acquired in the Alline Acquisition.

Long-Lived Asset Impairment

During the three and nine months ended March 31, 2025, the Company recorded long-lived asset impairment charges of $0.0 million and $0.4 million, respectively, related to the right-of-use asset associated with the corporate office lease.

Long-lived asset impairment charges for the three and nine months ended March 31, 2024, were $0.0 million and $0.2 million, respectively.

In the three months ended September 30, 2025, the Company did not record any long-lived asset impairments.

In the three months ended September 30, 2024, the Company recorded a long-lived asset impairment charge of $0.4 million related to the right-of-use asset associated with the corporate office lease.

Interest Expense

Interest expense was $5.1 million and $14.8 million, which included non-cash interest of $1.3 million and $3.8 million in the three and nine months ended March 31, 2025, respectively.

The $1.1 million and $3.7 million decreases in interest expense for the three and nine months ended March 31, 2025, respectively, were primarily due to less debt outstanding compared to the three and nine months ended March 31, 2024.

Other, net increased $0.6 million in the three months ended March 31, 2025, primarily due to a favorable currency adjustment and corporate sublease income.

Other, net increased $0.9 million in the nine months ended March 31, 2025, primarily due to unclaimed property and corporate office sublease income, partially offset by an unfavorable currency adjustment.

Income Tax Benefit (Expense)

During the three months ended March 31, 2025, the Company recognized a tax benefit of $0.0 million, with a corresponding effective tax rate of (0.4)%, as compared to recognizing a tax expense of $0.1 million during the three months ended March 31, 2024, for an effective tax rate of (2.3)%.

During the nine months ended March 31, 2025, the Company recognized a tax benefit of $0.1 million, with a corresponding effective tax rate of 6.2%, as compared to recognizing a tax benefit of $0.2 million, with a corresponding effective tax rate of 8.3% during the nine months ended March 31, 2024.

The $0.5 million increase in interest expense for the three months ended September 30, 2025, was primarily due to higher debt outstanding compared to the three months ended September 30, 2024.

Cash interest remained relatively flat at $3.0 million for the three months ended September 30, 2025, and 2024.

Gain on Earn-out Liability

The $1.0 million gain on earn-out liability in the three months ended September 30, 2025, is due to a change in the estimated fair value expected to be paid in conjunction with the Alline Acquisition.

Other, net decreased $0.5 million in the three months ended September 30, 2025, primarily due to an unfavorable currency adjustment and unclaimed property revenue in the prior year period, offset partially by corporate office sublease income.

Income Tax (Expense) Benefit

During the three months ended September 30, 2025, the Company recognized a tax expense of $0.5 million, with a corresponding effective tax rate of 28.3%, as compared to recognizing a tax benefit of $0.2 million, with a corresponding effective tax rate of 11.1% during the three months ended September 30, 2024.

See Note 5 to the unaudited Condensed Consolidated Financial Statements.

Income from Discontinued Operations

Income from discontinued operations decreased $0.1 million in the three months ended March 31, 2025.

Income from discontinued operations increased $6.3 million in the nine months ended March 31, 2025, due primarily to receiving proceeds from the sale of OSP related to the number of salons migrating to the Zenoti platform.

Income from discontinued operations in the three months ended September 30, 2024, relates to proceeds received from the sale of OSP related to the number of salons migrating to the Zenoti platform.

See Note 3 to the unaudited Condensed Consolidated Financial Statements.

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Franchise Salons

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

2025 2024 (Decrease) Increase (1) 2025 2024 (Decrease) Increase (1)

(Dollars in millions) (Dollars in millions)

Three Months Ended September 30,

2025 2024 Decrease (1)

(Dollars in millions)

Royalties $ 14.0 $ 15.6 $ (1.6)

Fees 1.8 2.4 (0.6)

Product sales to franchisees — — — — 0.5 (0.5)

Advertising fund contributions 5.6 5.6 —

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

Three and Nine Months Ended March 31, 2025, Compared with Three and Nine Months Ended March 31, 2024

Three Months Ended September 30, 2025, Compared with Three Months Ended September 30, 2024

Franchise Revenue

Franchise revenue decreased $9.9 million and $22.1 million during the three and nine months ended March 31, 2025, respectively.

The decreases in franchise revenue during the three and nine months ended March 31, 2025, were primarily due to the decrease in franchise salon count and negative same-store sales, as well as lower franchise rental income and lower advertising fund revenues, which provide no contribution margin.

Franchise revenue decreased $6.6 million during the three months ended September 30, 2025.

The decrease in franchise revenue during the three months ended September 30, 2025, was primarily due to the decrease in franchise salon count.

Franchise Adjusted EBITDA

During the three months ended March 31, 2025, and 2024, franchise adjusted EBITDA increased $0.2 million to $6.3 million.

During the nine months ended March 31, 2025, franchise adjusted EBITDA totaled $20.7 million, a decrease of $0.6 million compared to the nine months ended March 31, 2024.

The decrease was primarily due to a decrease in royalties partially offset by a lower general and administration expense structure.

During the three months ended September 30, 2025, franchise adjusted EBITDA totaled $6.4 million, a decrease of $1.6 million compared to the three months ended September 30, 2024.

The decline was primarily due to a decrease in royalties and fees, offset partially by decreased general and administrative expenses.

Company-Owned Salons

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

2025 2024 Increase (1) 2025 2024 Increase (1)

(Dollars in millions) (Dollars in millions)

Three Months Ended September 30,

2025 2024 Increase (1)

(Dollars in millions)

Company-owned salon revenue $ 20.2 $ 0.8 $ 19.4

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

Three and Nine Months Ended March 31, 2025, Compared with Three and Nine Months Ended March 31, 2024

Three Months Ended September 30, 2025, Compared with Three Months Ended September 30, 2024

Company-Owned Salon Revenue

Company-owned salon revenue increased $17.7 million and $18.2 million during the three and nine months ended March 31, 2025, respectively.

The increases are primarily driven by the Alline Acquisition, partially offset by other company-owned store closures.

Company-owned salon revenue increased $19.4 million during the three months ended September 30, 2025, primarily due to the Alline Acquisition.

Company-Owned Salon Adjusted EBITDA

In the three and nine months ended March 31, 2025, company-owned salon adjusted EBITDA improved $1.6 million and $2.8 million, respectively, primarily due to the Alline Acquisition, partially offset by the wind-down of underperforming company-owned stores.

In the three months ended September 30, 2025, company-owned salon adjusted EBITDA improved $1.9 million, primarily due to increased revenues generated by the greater salon count.

LIQUIDITY AND CAPITAL RESOURCES

The Company has a credit agreement with TCW Asset Management Company, LLC, and MidCap Financial Trust, which matures in June 2029.

In June 2024, the Company entered into a new credit agreement with TCW Asset Management Company, LLC, and MidCap Financial Trust, which matures in June 2029.

In addition to a $10.0 million minimum liquidity covenant, the agreement includes typical provisions and financial covenants, including leverage and fixed-charge coverage ratio covenants.

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The Company believes it has sufficient liquidity, cash on hand and borrowing capacity to meet its obligations in the next twelve months and until maturity of the credit agreement in June 2029.

As of March 31, 2025, cash and cash equivalents were $13.3 million, with $12.1 million and $1.2 million within the United States and Canada, respectively.

As of March 31, 2025, the Company's borrowing arrangements include a $119.2 million term loan, $3.9 million of paid-in-kind interest and a $25.0 million revolving credit facility that matures in June 2029.

As of March 31, 2025, the unused available credit under the revolving credit facility was $15.7 million, the credit agreement has a minimum liquidity covenant of $10.0 million, and total available liquidity per the agreement was $19.0 million.

As of September 30, 2025, cash and cash equivalents were $16.6 million, with $15.9 million and $0.7 million within the United States and Canada, respectively.

As of September 30, 2025, the Company's borrowing arrangements include a $117.0 million term loan, $6.8 million of paid-in-kind interest and a $25.0 million revolving credit facility that matures in June 2029.

As of September 30, 2025, the unused available credit under the revolving credit facility was $19.0 million, and total available liquidity, net of the $10.0 million minimum liquidity covenant, was $25.5 million.

See Note 9 to the unaudited Condensed Consolidated Financial Statements.

On June 30, 2022, the Company sold its OSP software-as-a-service solution to Soham, Inc., for a purchase price of $20.0 million in cash plus additional cash proceeds contingent upon the number of salons that migrate to Soham's Zenoti product as their salon technology platform.

As of March 31, 2025, the Company has received $28.5 million in cash proceeds related to the sale of and completed migration to the Zenoti platform.

The Company closely manages its liquidity and capital resources.

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Cash Requirements

The Company's most significant contractual cash requirements as of March 31, 2025, were lease commitments and interest payments.

The Company's most significant contractual cash requirements as of September 30, 2025, were lease commitments and interest payments.

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

Cash Flows from Operating Activities

During the nine months ended March 31, 2025, cash provided by operating activities was $7.0 million compared to cash used in operating activities of $7.1 million during the nine months ended March 31, 2024.

Cash flows from operating activities improved year over year due primarily to our lower cost structure, less cash used for working capital, and lower cash interest.

During the three months ended September 30, 2025, cash provided by operating activities was $2.3 million compared to $1.3 million cash used in operating activities in the three months ended September 30, 2024.

Cash provided by (used in) operating activities improved year over year due primarily to a build in restricted ad fund cash and net income in the current year period compared to a net loss in the three months ended September 30, 2024.

Cash Flows from Investing Activities

During the nine months ended March 31, 2025, cash used in investing activities of $10.9 million was primarily due to cash used in the acquisition of Alline of $18.6 million, partially offset by the receipt of OSP sale proceeds of $8.5 million.

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

During the three months ended September 30, 2025, cash used in investing activities of $0.4 million was primarily due to capital expenditures.

During the three months ended September 30, 2024, cash provided by investing activities of $0.9 million primarily related to OSP sale proceeds.

Cash Flows from Financing Activities

During the nine months ended March 31, 2025, cash provided by financing activities was $7.2 million, primarily as a result of $15.0 million in proceeds from issuance of long-term debt, partially offset by net payments on the revolving credit facility of $5.9 million.

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

During the three months ended September 30, 2025, cash used in financing activities was $1.3 million, primarily as a result of the repayment of long-term debt of $1.8 million, partially offset by $0.6 million of proceeds from the issuance of common stock.

During the three months ended September 30, 2024, cash used in financing activities was $6.5 million, primarily as a result of repayments of the revolving credit facility of $10.2 million, partially offset by $4.3 million of borrowings under the revolving credit facility.

Financing Arrangements

See Note 9 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and Note 8 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, for additional information regarding our financing arrangements.

See Note 9 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, and Note 8 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, for additional information regarding our financing arrangements.

Debt to Capitalization Ratio

Our debt to capitalization ratio, calculated as the principal amount of debt, including paid-in-kind interest accrued, as a percentage of the principal amount of debt and shareholders' equity (deficit) at fiscal quarter end, was as follows:

Capitalization (1)

March 31, 2025 64.8 %

September 30, 2025 40.3 %

June 30, 2025 40.3 %

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

Since that time and through March 31, 2025, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program.

Since that time and through September 30, 2025, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program.

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

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

During the nine months ended March 31, 2025, the Company did not repurchase any shares.

As of March 31, 2025, approximately 1.5 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remain outstanding under the approved stock repurchase program.

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

The Company last purchased shares through this program in fiscal year 2020.

As of September 30, 2025, a total accumulated 1.5 million shares have been cumulatively repurchased for $595.4 million.

At September 30, 2025, $54.6 million remain outstanding under the approved stock repurchase program.

The Company does not expect to repurchase shares in fiscal year 2026.

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

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laws and regulations could require us to modify current business practices and incur increased costs including increases in minimum wages;

changes in general economic environment;

changes in the general economic environment;

changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns;

compliance with Nasdaq listing requirements;

our ability to realize the anticipated benefits of the Alline Acquisition;

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the effectiveness of our enterprise risk management program;

potential challenges with the planning or implementation of our new enterprise resource planning system;

our ability to minimize risks associated with owning and operating additional salons;

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potential liabilities related to the employee retention credit received by Alline;

changes in trade policies, treaties, tariffs and customs duties and taxes;

reliance on our management team and other key personnel;

reliance on our management team and other key personnel, including a successful search for a new CEO;

the ability to attract and retain key personnel;

the continued ability to maintain an effective system of internal control over financial reporting;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis