REGIS CORP 10-Q

Item 1. Financial Statements (Unaudited) REGIS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) As of September 30, 2025, and June 30, 2025 (Dollars in thousands, except per share data) September 30, 2025 June 30, 2025 ASSETS Current assets: Cash and cash equivalents (Note 7) $ 16,560 $ 16,959 Receivables, net 9,220 9,473 Inventory 2,751 2,798 Other current assets 22,873 21,254 Total current assets 51,404 50,484 Property and equipment, net 9,928 10,085 Goodwill (Note 1) 183,082 183,436 Other intangibles, net 5,692 5,830 Right of use asset (Note 8) 224,405 229,861 Deferred tax asset (Note 5) 101,961 102,504 Other assets 15,643 16,757 Total assets $ 592,115 $ 598,957 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,194 $ 20,837 Accrued expenses 16,536 19,066 Long-term debt, current portion (Note 9) 1,650 1,100 Short-term lease liability (Note 8) 59,575 60,685 Total current liabilities 99,955 101,688 Long-term debt, net (Note 9) 109,605 109,693 Long-term lease liability (Note 8) 174,309 179,280 Other non-current liabilities 20,695 22,680 Total liabilities 404,564 413,341 Shareholders' equity: Common stock, $ 0.05 par value; issued and outstanding, 2,461,270 and 2,435,981 common shares at September 30, 2025, and June 30, 2025, respectively 123 122 Additional paid-in capital 76,110 75,243 Accumulated other comprehensive income 7,997 8,286 Retained earnings 103,321 101,965 Total shareholders' equity 187,551 185,616 Total liabilities and shareholders' equity $ 592,115 $ 598,957 _______________________________________________________________________________ The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements. 3 REGIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended September 30, 2025, and 2024 (Dollars and shares in thousands, except per share amounts) Three Months Ended September 30, 2025 2024 Revenues: Royalties $ 14,036 $ 15,646 Fees 1,784 2,352 Advertising fund contributions 5,573 5,641 Franchise rental income (Note 8) 17,354 21,636 Company-owned salon revenue 20,211 785 Total revenue 58,958 46,060 Operating expenses: General and administrative 11,351 14,034 Rent (Note 8) 3,223 1,064 Advertising fund expense 5,573 5,641 Franchise rent expense 17,354 21,636 Company-owned salon expense (1) 14,768 753 Depreciation and amortization 768 446 Long-lived asset impairment — 352 Total operating expenses 53,037 43,926 Operating income 5,921 2,134 Other (expense) income: Interest expense ( 5,271 ) ( 4,846 ) Gain on earn-out liability 1,000 — Other, net 242 677 Income (loss) from operations before income taxes 1,892 ( 2,035 ) Income tax (expense) benefit ( 536 ) 225 Income (loss) from continuing operations 1,356 ( 1,810 ) Income from discontinued operations (Note 3) — 957 Net income (loss) $ 1,356 $ ( 853 ) Net income (loss) per share: Basic: Income (loss) from continuing operations $ 0.56 $ ( 0.77 ) Income from discontinued operations — 0.41 Net income (loss) per share (2) $ 0.56 $ ( 0.36 ) Diluted: Income (loss) from continuing operations $ 0.49 $ ( 0.77 ) Income from discontinued operations — 0.41 Net income (loss) per share, diluted (2) $ 0.49 $ ( 0.36 ) Weighted average common and common equivalent shares outstanding: Basic 2,440 2,343 Diluted 2,781 2,343 _______________________________________________________________________________ (1) Includes cost of services and products sold to guests in our company-owned salons. Excludes general and administrative expense, rent, and depreciation and amortization related to company-owned salons . (2) Total is a recalculation; line items calculated individually may not sum to total due to rounding. The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements. 4 REGIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) For the Three Months Ended September 30, 2025, and 2024 (Dollars in thousands) Three Months Ended September 30, 2025 2024 Net income (loss) $ 1,356 $ ( 853 ) Foreign currency translation adjustments ( 289 ) 152 Comprehensive income (loss) $ 1,067 $ ( 701 ) _______________________________________________________________________________ The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements. 5 REGIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) For the Three Months Ended September 30, 2025, and 2024 (Dollars in thousands) Three Months Ended September 30, 2025 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shares Amount Balance, June 30, 2025 2,435,981 $ 122 $ 75,243 $ 8,286 $ 101,965 $ 185,616 Net income — — — — 1,356 1,356 Foreign currency translation — — — ( 289 ) — ( 289 ) Exercise of stock options 11,000 — 291 — — 291 Stock-based compensation — — 297 — — 297 Net restricted stock activity 1,722 — ( 19 ) — — ( 19 ) Common stock issued in connection with warrant exercise 12,567 1 298 — — 299 Balance, September 30, 2025 2,461,270 $ 123 $ 76,110 $ 7,997 $ 103,321 $ 187,551 Three Months Ended September 30, 2024 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Shares Amount Balance, June 30, 2024 2,279,948 $ 114 $ 69,660 $ 8,584 $ ( 21,571 ) $ 56,787 Net loss — — — — ( 853 ) ( 853 ) Foreign currency translation — — — 152 — 152 Stock-based compensation — — 335 — — 335 Net restricted stock activity 2,447 — ( 23 ) — — ( 23 ) Balance, September 30, 2024 2,282,395 $ 114 $ 69,972 $ 8,736 $ ( 22,424 ) $ 56,398 _______________________________________________________________________________ The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements. 6 REGIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended September 30, 2025, and 2024 (Dollars in thousands) Three Months Ended September 30, 2025 2024 Cash flows provided by (used in) operating activities: Net income (loss) $ 1,356 $ ( 853 ) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Gain from sale of OSP (Note 3) — ( 957 ) Depreciation and amortization 758 425 Deferred income taxes 462 ( 221 ) Non-cash interest 1,404 1,264 Gain on earn-out liability ( 1,000 ) — Long lived asset impairment — 352 Stock-based compensation 629 1,430 Amortization of debt discount and financing costs 906 719 Other non-cash items affecting earnings 198 ( 80 ) Ad fund 1,069 2,840 Changes in operating assets and liabilities (1) ( 3,499 ) ( 6,263 ) Net cash provided by (used in) operating activities 2,283 ( 1,344 ) Cash flows (used in) provided by investing activities: Capital expenditures ( 395 ) ( 16 ) Proceeds from sale of OSP, net of fees — 957 Net cash (used in) provided by investing activities ( 395 ) 941 Cash flows (used in) provided by financing activities: Borrowings on revolving credit facility — 4,326 Repayments of revolving credit facility — ( 10,237 ) Repayments of long-term debt ( 1,840 ) ( 263 ) Debt refinancing fees ( 8 ) ( 298 ) Proceeds from issuance of common stock, net of offering costs 589 — Taxes paid for shares withheld ( 19 ) ( 23 ) Net cash used in financing activities ( 1,278 ) ( 6,495 ) Effect of exchange rate changes on cash and cash equivalents ( 48 ) 27 Increase (decrease) in cash, cash equivalents, and restricted cash 562 ( 6,871 ) Cash, cash equivalents and restricted cash: Beginning of period 35,205 29,312 End of period $ 35,767 $ 22,441 _______________________________________________________________________________ (1) Changes in operating assets and liabilities exclude ad fund and assets and liabilities sold or acquired. The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements. 7 REGIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The unaudited Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of September 30, 2025, and for the three months ended September 30, 2025, and 2024, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2025, and its consolidated results of operations, comprehensive income (loss), shareholders' equity and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2025, and other documents filed or furnished to the SEC during the current fiscal year. Alline Salon Group Acquisition: On December 19, 2024, the Company completed the transaction to acquire 100 percent ownership of Super C Group, LLC, doing business as Alline Salon Group (Alline). Refer to Note 13 to the unaudited Condensed Consolidated Financial Statements for additional information regarding the acquisition. The Company’s financial results for the three months ended September 30, 2025, include the results of Alline. Goodwill: The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. An interim impairment analysis was not required in the three months ended September 30, 2025. As further described in Note 13 of these unaudited Condensed Consolidated Financial Statements, the acquisition of Alline resulted in recognition of approximately $ 10.3 million in goodwill, which was assigned to the company-owned operating segment. 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. 8 Tax Benefits Preservation Plan: On January 28, 2024, the Board authorized and declared a dividend of one preferred stock purchase right (a Right) for each outstanding share of common stock. The dividend was payable on February 9, 2024, (the Record Date) to the holders of record of shares of common stock as of the close of business on the Record Date. 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 submitted the Extension to its shareholders for ratification at the October 28, 2025 annual shareholders meeting, and the shareholders ratified the Plan. 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 (the Code), or any successor statute if the Board determines that the Plan is no longer necessary or desirable for the preservation of certain unrecognized tax benefits, or (v) the beginning of a taxable year to which the Board determines that no tax benefits may be carried forward. Recently Issued Accounting Standards Not Yet Adopted: 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 annual reporting periods beginning after December 15, 2024, and shall be applied prospectively. The Company is currently evaluating the impact this new guidance will have on its annual disclosures for the current fiscal year. 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. In July 2025, the FASB issued the ASC 2025-05 "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets." The ASU includes amendments which provide entities with a practical expedient to assume that current conditions as of the balance sheet date will remain unchanged for the remaining life of the assets, effectively simplifying credit loss estimations for certain situations. The guidance is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within fiscal years beginning after that date. The Company does not believe the guidance will have a material impact on its financial statements and disclosures. 9 2. REVENUE RECOGNITION: Revenue Recognition and Deferred Revenue: Revenue recognized over time Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenues are billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the Condensed Consolidated Statements of Operations. The treatment increases both the gross amount of reported revenue and expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. 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. The Company recognizes franchise rental income and expense when it is due to the landlord. Revenue recognized at point of sale Company-owned salon revenues are recognized at the time when the services are provided, or the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the guest. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized based on gift card balances with no activity over a 36-month basis. Product sales to franchisees are recorded at the time product is delivered to the franchisee. Information about receivables, broker fees, and deferred revenue subject to the revenue recognition guidance is as follows: September 30, 2025 June 30, 2025 Balance Sheet Classification (Dollars in thousands) Receivables from contracts with customers, net $ 7,497 $ 7,378 Receivables, net Broker fees 5,505 5,997 Other assets Deferred revenue: Current Gift card liability $ 402 $ 476 Accrued expenses Deferred franchise fees open salons 3,690 3,832 Accrued expenses Total current deferred revenue $ 4,092 $ 4,308 Non-current Deferred franchise fees unopened salons $ 1,396 $ 1,475 Other non-current liabilities Deferred franchise fees open salons 8,466 9,394 Other non-current liabilities Total non-current deferred revenue $ 9,862 $ 10,869 10 Receivables relate primarily to payments due for royalties, advertising fees, rent, and sales of salon services and product paid by credit card. 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. The following table is a rollforward of the allowance for credit losses for the periods indicated: Three Months Ended September 30, 2025 2024 (Dollars in thousands) Balance at beginning of period $ 5,015 $ 6,227 Provision for doubtful accounts (1) 453 689 Provision for franchisee rent (2) 267 127 Recoveries ( 714 ) ( 237 ) Other 5 243 Write-offs ( 398 ) ( 142 ) Balance at end of period $ 4,628 $ 6,907 ________________________________________________________________________________________ (1) The provision for doubtful accounts is recognized as general and administrative expense in the Condensed Consolidated Statements of Operations. (2) The provision for franchisee rent is recognized as rent in the Condensed Consolidated Statements of Operations. Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as general and administrative expense over the term of the franchise agreement in the Condensed Consolidated Statements of Operations. The following table is a rollforward of the broker fee balance for the periods indicated: Three Months Ended September 30, 2025 2024 (Dollars in thousands) Balance at beginning of period $ 5,997 $ 9,369 Amortization ( 492 ) ( 617 ) Write-offs — ( 192 ) Balance at end of period $ 5,505 $ 8,560 Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended September 30, 2025, and 2024, was $ 1.0 million and $ 1.6 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2025, is as follows (dollars in thousands): Remainder of 2026 $ 2,766 2027 3,303 2028 2,624 2029 1,702 2030 692 Thereafter 1,069 Total $ 12,156 11 3. DISCONTINUED OPERATIONS: On June 30, 2022, the Company sold its Opensalon ® Pro (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 no proceeds from the sale in the three months ended September 30, 2025. In the three months ended September 30, 2024, the Company received $ 1.0 million of proceeds related to the number of salons migrating to Soham's Zenoti product. Income taxes have been allocated to continuing and discontinued operations based on the methodology required by accounting for income taxes guidance. There was no tax impact in the prior year quarter, due to a valuation allowance. Cash provided by operations includes $ 1.0 million of cash from discontinued operations in the prior year period. 12 4. SHAREHOLDERS' EQUITY: Stock-Based Employee Compensation: During the three months ended September 30, 2025, and 2024, the Company granted restricted stock units as follows: Three Months Ended September 30, 2025 2024 Restricted stock units (RSUs) 24,100 — The RSUs granted during the three months ended September 30, 2025, vest in equal amounts over a three-year period subsequent to the grant date. Total compensation cost for stock-based payment arrangements totaling $ 0.6 million and $ 1.4 million for the three months ended September 30, 2025, and 2024, respectively, was recorded within general and administrative on the Condensed Consolidated Statements of Operations. Stock Warrants Issued in Connection with Long-Term Debt: In connection with the 2024 Credit Agreement (as defined in Note 9 to the unaudited Condensed Consolidated Financial Statements), 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 common stock of the Company, par value $ 0.05 per share (Common Stock), at an exercise price equal to $ 7.00 per share. The warrants are exercisable for a seven-year period beginning June 24, 2024. 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 granted an exemption in favor of each holder pursuant to Section 36 of the Tax Benefits Preservation Plan, dated January 29, 2024, as the same may be amended from time to time, 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. The warrants and the shares of Common Stock issuable upon the exercise of such warrants have not been registered under the Securities Act of 1933, as amended (Securities Act), and may not be sold absent registration or an applicable exemption from the registration requirements of the Securities Act. 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 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 amounted 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 . 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 September 30, 2025, the Company has no intention of exercising either call provision. The Company will reassess this intention on a quarterly basis. 13 Stock Warrants Issued in Connection with Consulting Services Agreement: 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 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, at an exercise price of $ 24.20 per share (the Coverage Warrant). At issuance, the fair value of these warrants was determined to be $ 0.5 million using the Black-Scholes model as described below. The warrant is not remeasured in future periods as it meets the conditions for equity classification. 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. The Company valued the warrants, based on a Black-Scholes Option Pricing Method, using the life of the warrants as the expected term, expected volatility of 177 % , a risk-free interest rate of 4.03 %, and a forfeiture rate of 38.8 % under the assumption that only $ 0.3 million of the Initial Warrant would be exercised. On September 11, 2025, Forum3 Inc. exercised $ 300,000 of the Initial Warrant at the 10 -day average closing price of $ 23.87 per share for a total of 12,567 shares . 14 5. INCOME TAXES: A summary of the income tax (expense) benefit and corresponding effective tax rate is as follows: Three Months Ended September 30, 2025 2024 (Dollars in thousands) Income tax (expense) benefit $ ( 536 ) $ 225 Effective tax rate 28.3 % 11.1 % The Company’s effective tax rate differed from the U.S. federal statutory tax rate primarily due to the impact of non-deductible items, certain nonrecurring discrete tax items, and the impact of tax credits. The income tax provision for the quarter ended September 30, 2025, is primarily a non-cash deferred tax expense, which is no longer offset by a valuation allowance as a result of the valuation allowance release that occurred for the year ended June 30, 2025. On July 4, 2025, legislation known as the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA makes changes to the United States corporate income tax system, including, among other provisions, the modification of the limitation on business interest deductions under Section 163(j) of the Code, 100 percent bonus depreciation on qualified property and expansion of the 45B FICA Tip Tax Credit provisions applicable to the beauty salon industry. The impacts of the OBBBA are reflected in our results for the quarter ended September 30, 2025. With limited exceptions, due to net operating loss carryforwards, our federal, state, and foreign tax returns are open to examination for all years since 2014, 2013, and 2016, respectively. 6. COMMITMENTS AND CONTINGENCIES: The Company is a plaintiff or defendant in various lawsuits and claims arising out of the normal course of business. Like certain other franchisors, the Company has faced allegations of franchise regulation and agreement violations. Additionally, because the Company may be the tenant under a master lease for a location subleased to a franchisee, the Company has faced allegations of nonpayment of rent and associated charges. Further, similar to other retail employers, the Company has faced, and may continue to face, allegations of purported class-wide consumer and wage and hour violations. Litigation is inherently unpredictable, and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could incur judgments in the future or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period. 7. CASH, CASH EQUIVALENTS AND RESTRICTED CASH: The table below reconciles the cash and cash equivalents balances and restricted cash balances recorded within other current assets on the Condensed Consolidated Balance Sheets to the amount of cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows: September 30, 2025 June 30, 2025 (Dollars in thousands) Cash and cash equivalents $ 16,560 $ 16,959 Restricted cash, included in other current assets (1) 19,207 18,246 Total cash, cash equivalents and restricted cash $ 35,767 $ 35,205 _______________________________________________________________________________ (1) Restricted cash within other current assets primarily relates to consolidated advertising cooperatives funds, which can only be used to settle obligations of the respective cooperatives, and contractual obligations to collateralize the Company's self-insurance programs. 15 8. LEASES: At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. 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 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 includes the following: Three Months Ended September 30, 2025 2024 (Dollars in thousands) Office rent (1) $ 754 $ 726 Lease termination expense (2) 123 52 Lease liability benefit (3) ( 56 ) ( 62 ) Franchise salon rent ( 242 ) 71 Company-owned salon rent (4) 2,644 277 Total $ 3,223 $ 1,064 _______________________________________________________________________________ (1) Rental income associated with the sublease of the corporate office space is recorded in other income and was $ 0.3 million and $ 0.2 million for the three months ended September 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. (4) Includes rent related to the Alline salons acquired in December 2024. See Note 13. The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease-related costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the Condensed Consolidated Statements of Operations. For the three months ended September 30, 2025, and 2024, franchise rental income and franchise rent expense were $ 17.4 million and $ 21.6 million, respectively. These leases generally have lease terms of approximately five years . The Company expects to renew the SmartStyle master lease and certain leases for locations subleased to our franchisees upon expiration of those leases. Other leases are expected to be renewed by the franchisee upon expiration. All the Company's leases are operating leases. 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 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 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. Generally, the non-lease components, such as real estate taxes and other occupancy expenses, are separate from rent expense within the lease and are not included in the measurement of the lease liability because these charges are variable. 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 expected lease term. The weighted average remaining lease term was 4.73 and 4.68 years, and the weighted average discount rate was 6.61 % and 6.45 % for all salon operating leases as of September 30, 2025, and June 30, 2025, respectively. 16 As of September 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 (dollars in thousands): Fiscal Year Leases for Franchise Salons Leases for Company-Owned Salons Corporate Leases Total Operating Lease Payments Sublease Income to be Received from Franchisees Net Rent Commitments Remainder of 2026 $ 48,879 $ 5,560 $ 1,028 $ 55,467 $ ( 48,879 ) $ 6,588 2027 57,725 5,679 1,401 64,805 ( 57,725 ) 7,080 2028 48,508 3,886 1,436 53,830 ( 48,508 ) 5,322 2029 38,279 2,237 1,472 41,988 ( 38,279 ) 3,709 2030 25,301 1,099 1,509 27,909 ( 25,301 ) 2,608 Thereafter 27,897 218 — 28,115 ( 27,897 ) 218 Total future obligations $ 246,589 $ 18,679 $ 6,846 $ 272,114 $ ( 246,589 ) $ 25,525 Less amounts representing interest 35,737 1,860 633 38,230 Present value of lease liability $ 210,852 $ 16,819 $ 6,213 $ 233,884 Less short-term lease liability 52,152 6,279 1,144 59,575 Long-term lease liability $ 158,700 $ 10,540 $ 5,069 $ 174,309 9. FINANCING ARRANGEMENTS: The Company's debt consists of the following: Three Months Ended September 30, 2025 Fiscal Year Balance at September 30, 2025 Balance at June 30, 2025 2025 (Average cash interest rate %) (Dollars in thousands) Term loan (1) 8.80 % 9.14 % $ 117,035 $ 118,875 Paid-in-kind interest 6,780 5,376 Deferred financing fees ( 11,420 ) ( 12,174 ) Term loan, net 112,395 112,077 Revolving credit facility (1) 8.80 % 9.14 % 1,030 1,030 Fair value of warrants issued to lenders ( 2,170 ) ( 2,314 ) Total debt, net 111,255 110,793 Less: long-term debt, current portion ( 1,650 ) ( 1,100 ) Total long-term debt, net $ 109,605 $ 109,693 _______________________________________________________________________________ (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. 17 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 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. The 2024 Credit Agreement is considered a troubled debt restructuring, which resulted in a $ 94.6 million ($ 39.83 per weighted average diluted share) gain on the extinguishment of the prior agreement. 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. 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 4 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 September 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 September 30, 2025, total available liquidity, net of the $ 10.0 million minimum liquidity covenant, and available credit under the $ 25.0 million revolving credit facility, as defined by the amended agreement, were $ 25.5 million and $ 19.0 million, respectively. The Company was in compliance with its covenants and other requirements of the financing arrangements as of September 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 the secured overnight financing rate (SOFR) plus margin. The margin applicable to the 2024 Credit Agreement is subject to change based on the Company's total leverage ratio, remeasured annually on a predetermined date set by the lender. 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 %. If the Company's leverage ratio is less than 3.75 to 1.00, the margin rate is 8.50 %. In either scenario, 4.50 % 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 SOFR base rate applicable to the debt has a floor of 2.50 % per annum. The interest rate applicable to any letter of credit is 5.25 % and paid currently in cash. 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 the terms of the agreement and there is a balloon payment required upon maturity of the agreement in 2029. In the three months ended September 30, 2025, the Company paid $ 1.5 million to satisfy the annual mandatory prepayment of 75 % of excess cash flow as defined in the 2024 Credit Agreement. This amount was applied as a prepayment of the term loan and reduced the Company's unrestricted cash balance accordingly. 18 10. FAIR VALUE MEASUREMENTS: Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). Assets and Liabilities Measured at Fair Value on a Recurring Basis As of September 30, 2025, and June 30, 2025, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, accounts payable and debt approximated their carrying values. The Company recorded the estimated fair value of the contingent consideration liability assumed with the acquisition of Alline. The estimated fair value of the contingent consideration liability is included in the Condensed Consolidated Balance Sheets within other noncurrent liabilities. The earn-out liability is adjusted at fair value quarterly until settled utilizing the Monte Carlo simulation, and changes in fair value are reported in our Condensed Consolidated Statements of Operations. As of September 30, 2025, management's revised estimates indicated a fair value of zero dollars. The change in the earn-out liability measured at fair value using significant unobservable inputs (Level 3) is as follows: (Dollars in thousands) Earn-out liability at June 30, 2025 $ 1,000 Less: gain on earn-out liability 1,000 Earn-out liability at September 30, 2025 $ — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis 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. 11. EARNINGS PER SHARE: 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), 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 Company's credit and consulting services agreements. 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): Three Months Ended September 30, 2025 2024 (Shares in thousands) Denominator for basic EPS - weighted average common shares 2,440 2,343 Dilutive shares associated with option plans 341 — Denominator for diluted EPS - weighted average common shares and dilutive potential common shares 2,781 2,343 Options excluded from EPS calculation - anti-dilutive 180 195 19 12. SEGMENT INFORMATION: 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. 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. The Company's CODM does not evaluate reportable segments using assets and capital expenditure information. Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest, income taxes, depreciation, amortization, and impairment. Consistent with our internal management reporting, unallocated expenses include certain items impacting comparability. These unallocated items are not defined terms within GAAP. They are based on how management views the business, makes financial, operating and planning decisions and evaluates the Company's ongoing performance and are not attributable to either segment. Unallocated fees include one-time professional fees and settlements, severance expense, the benefit from lease liability decreases in excess of previously impaired ROU assets, lease termination fees, asset retirement obligation costs, goodwill and long-lived asset impairment charges, and the benefit from the Company's debt refinancing. Financial information concerning the Company's reportable operating segments is shown in the tables below. Three Months Ended September 30, 2025 (Dollars in thousands) Franchise Company-owned Consolidated Total revenue $ 38,747 $ 20,211 $ 58,958 Expenses General and administrative $ 10,209 $ 1,142 $ 11,351 Rent 430 2,793 3,223 Non-margin expenses (1) 22,927 — 22,927 Company-owned salon expense — 14,768 14,768 Depreciation and amortization 210 558 768 Operating income $ 4,971 $ 950 $ 5,921 Unallocated expense, net ( 4,565 ) Total net income $ 1,356 Segment adjusted EBITDA $ 6,384 $ 1,581 $ 7,965 _______________________________________________________________________________ (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. 20 Financial information reconciling the Company's reportable operating segments Operating income to Adjusted EBITDA is shown in the table below. Three Months Ended September 30, 2025 (Dollars in thousands) Franchise Company-owned Consolidated Operating income $ 4,971 $ 950 $ 5,921 Depreciation and amortization 210 558 768 Other, net 242 — 242 Gain on earn-out liability 1,000 — 1,000 Stock-based compensation expense 629 — 629 Discrete items (1) ( 668 ) 73 ( 595 ) Segment adjusted EBITDA $ 6,384 $ 1,581 $ 7,965 _______________________________________________________________________________ (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. Three Months Ended September 30, 2024 (Dollars in thousands) Franchise Company-owned Consolidated Total revenue $ 45,275 $ 785 $ 46,060 Expenses General and administrative $ 13,982 $ 52 $ 14,034 Rent 723 341 1,064 Non-margin expenses (1) 27,277 — 27,277 Company-owned salon expense — 753 753 Depreciation and amortization 361 85 446 Long-lived asset impairment 352 — 352 Operating income (loss) $ 2,580 $ ( 446 ) $ 2,134 Unallocated expenses, net ( 2,987 ) Total net loss $ ( 853 ) Segment adjusted EBITDA $ 7,986 $ ( 349 ) $ 7,637 _______________________________________________________________________________ (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. 21 Financial information reconciling the Company's reportable operating segments Operating income (loss) to Adjusted EBITDA is shown in the table below. For the Three Months Ended September 30, 2024 (Dollars in thousands) Franchise Company-owned Consolidated Operating income (loss) $ 2,580 $ ( 446 ) $ 2,134 Depreciation and amortization 361 85 446 Long lived asset impairment 352 — 352 Other, net 677 — 677 Stock-based compensation expense 1,430 — 1,430 Discrete items (1) 2,586 12 2,598 Segment adjusted EBITDA $ 7,986 $ ( 349 ) $ 7,637 _______________________________________________________________________________ (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. 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. Company-owned salons offer high quality, convenient and value priced hair care and beauty services and retail products. Supercuts, Cost Cutters and other regional trade names operating in the U.S. 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: 22 September 30, 2025 June 30, 2025 FRANCHISE SALONS: Supercuts 1,688 1,711 SmartStyle/Cost Cutters in Walmart stores 1,032 1,049 Portfolio Brands 802 816 Total North American salons 3,522 3,576 Total International salons (1) 71 71 Total franchise salons 3,593 3,647 as a percent of total franchise and company-owned salons 92.6 % 92.5 % COMPANY-OWNED SALONS: Supercuts 99 100 Portfolio Brands 187 194 Total company-owned salons 286 294 as a percent of total franchise and company-owned salons 7.4 % 7.5 % Total franchise and company-owned salons 3,879 3,941 _______________________________________________________________________________ (1) Canadian and Puerto Rican salons are included in the North American salon totals. 13. ACQUISITIONS: On December 19, 2024, the Company transferred consideration to acquire 100 percent of the equity interests of Alline (the Alline Acquisition), its largest franchisee, consisting of 314 salons. The transaction provides Regis with a turn-key operating infrastructure and gets the Company closer to salon operations alongside franchisees and the salon portfolio provides a testing ground for brand and operational initiatives. The acquisition was accounted for as a business combination with the purchase price allocated 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 were 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. There were no adjustments made to these allocations in the three months ended September 30, 2025. 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) 3,000 Contingent consideration arrangement (3) 1,000 Fair value of total consideration $ 22,621 23 _______________________________________________________________________________ (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 earn-out periods as well as a cumulative 4-Wall EBITDA or Adjusted EBITDA threshold for the cumulative three subsequent annual earn-out 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 in the Company's Annual Report on Form 10-K for the year ended June 30, 2025. As of September 30, 2025, the Company determined the value of the contingent consideration arrangement is $ 0 , and recognized a gain on earn-out liability of $ 1.0 million in our Condensed Consolidated Statements of Operations for the three months ended September 30, 2025. 4-Wall EBITDA is defined as earnings before interest, tax, depreciation and amortization and excluding corporate general and administrative expenses for acquired salons. The earn-out liability is adjusted at fair value quarterly until settled utilizing the Monte Carlo simulation, and changes in fair value will be reported in our Condensed Consolidated Statements of Operations. Refer to Note 10 to the Condensed Consolidated Financial Statements for additional information regarding the valuation. 24 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: a. the expected synergies and other benefits that we believe will result from combining the operations of Alline with the operations of Regis; and b. 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 includes $ 2.4 million related to the preliminary fair value of reacquired rights and $ 1.4 million related to the fair value of favorable leasehold interests, net. a. 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. b. 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 was 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 following table provides revenues and operating income from Alline that are included in our Condensed Consolidated Financial Statements: Three Months Ended September 30, 2025 (Dollars in thousands) Total revenues $ 19,529 Operating income 1,185 The following table presents pro forma information as if the Alline Acquisition had occurred on July 1, 2024: Three months ended September 30, 2025 2024 (Dollars in thousands) Total revenues $ 58,958 $ 64,208 Operating income 5,921 3,161 25