What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-05 compared with 2025-11-12 · 66 added, 68 removed, 175 unchanged (43% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) provides management's perspective on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

This MD&A should be read in conjunction with the MD&A included in our June 30, 2025, Annual Report on Form 10-K and other documents filed or furnished with the SEC during the current fiscal year.

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

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

As of December 31, 2025, the Company franchised or owned 3,829 locations, primarily in North America.

Our locations consisted of 3,551 franchised salons and 278 company-owned salons.

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.

As of December 31, 2025, the Company had 1,732 employees of which 1,565 were acquired as part of the Alline acquisition.

CRITICAL ACCOUNTING ESTIMATES

The interim unaudited Condensed Consolidated Financial Statements are prepared in conformity with U.S.

In preparing the interim unaudited Condensed Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could have a significant impact on the results reported in the interim unaudited Condensed Consolidated Financial Statements.

We base these estimates on historical experience and other assumptions believed to be reasonable under the circumstances.

Estimates are considered to be critical if they meet both of the following criteria:

(1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period.

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

There have been no material changes to our critical accounting estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

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 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.

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

As of December 31, 2025, and June 30, 2025, the franchise reporting unit had goodwill of $173.1 million and $173.2 million, respectively, and the company-owned reporting unit had goodwill of $10.3 million as of both December 31, 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.

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

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

In the six months ended December 31, 2025, a net 96 franchise salons and 16 company-owned salons have closed.

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

Three Months Ended September 30,

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

2025 2024 2025 2024

(Dollars in millions)

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

Three Months Ended September 30,

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

2025 2024 2025 2024 2025 2024 2025 2024

(dollars in millions) % of Total

Revenue (Decrease) Increase

Revenue Increase (Decrease) (dollars in millions) % of Total

Revenue Increase (Decrease)

Royalties $ 13.6 $ 14.8 23.8 % 31.7 % (790) $ 27.7 $ 30.5 23.9 % 32.9 % (900)

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Other, net 0.5 (0.3) 0.9 (0.6) 150 0.8 0.4 0.7 0.4 30

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

Income tax (expense) benefit (3) (1.0) (0.1) 68.7 39.8 N/A (1.5) 0.1 45.9 5.3 N/A

Income (loss) from continuing operations (2) 0.5 0.2 0.9 0.4 50 1.8 (1.6) 1.6 (1.7) 330

Income from discontinued operations — 7.4 — 15.8 (1,580) — 8.4 — 9.1 (910)

Net income (loss) (2) 1.4 (0.9) 2.4 (2.0) 440

Net income (2) 0.5 7.6 0.9 16.3 (1,540) 1.8 6.8 1.6 7.3 (570)

_______________________________________________________________________________

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

Three 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.

Three and Six Months Ended December 31, 2025, Compared with Three and Six Months Ended December 31, 2024

During the three and six months ended December 31, 2025, royalties decreased $1.2 million and $2.8 million, or 8.1% and 9.2%, respectively, primarily due to a decrease in franchise salon count caused by franchise salon closures and the Alline acquisition.

During the three and six months ended December 31, 2025, fees decreased $1.1 million and $1.8 million, or 37.9% and 34.0%, respectively, primarily due to terminated franchise fees related to the Alline acquisition in the prior year periods and salon closures.

Advertising Fund Contributions

Advertising fund contributions remained relatively flat year over year.

During the three and six months ended December 31, 2025, advertising fund contributions decreased $0.2 million and $0.2 million, or 3.6% and 1.8%, respectively, primarily due to lower salon count.

Franchise Rental Income

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.

During the three and six months ended December 31, 2025, franchise rental income decreased $2.8 million and $7.1 million, or 14.0% and 17.0%, respectively, primarily due to the decrease in franchise salon count caused by franchise salon closures and the Alline acquisition.

Company-Owned Salon Revenue

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.

During the three and six months ended December 31, 2025, company-owned salon revenue increased $15.7 million and $35.2 million, respectively, from $3.5 million to $19.2 million and $4.2 million to $39.4 million, respectively, due to the increase in company-owned salon count because of the Alline acquisition.

General and Administrative

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.

General and administrative expense for the three and six months ended December 31, 2025, decreased $0.9 million and $3.6 million, or 8.0% and 14.3%, respectively, primarily due to lower broker fees, severance, and stock-based compensation expense in the current year period.

Rent expense increased $1.5 million and $3.6 million, or 71.4% and 112.5%, respectively, during the three and six months ended December 31, 2025, as a result of rent expense associated with the salons from the Alline acquisition.

Advertising Fund Expense

Advertising fund expense remained relatively flat year over year.

During the three and six months ended December 31, 2025, advertising fund expense decreased $0.2 million and $0.2 million, or 3.6% and 1.8%, respectively, primarily due to lower salon count.

Franchise Rent Expense

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.

During the three and six months ended December 31, 2025, franchise rent expense decreased $2.8 million and $7.1 million, or 14.0% and 17.0%, respectively, primarily due to the decrease in franchise salon count caused by franchise salon closures and the Alline acquisition.

Company-Owned Salon Expense

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.

Company-owned salon expense, for the three and six months ended December 31, 2025, increased $11.8 million and $25.8 million from $1.9 million to $13.7 million and from $2.7 million to $28.5 million, respectively, primarily due to the Alline acquisition in the prior year period.

Depreciation and Amortization

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.

Depreciation and amortization for the three and six months ended December 31, 2025, increased $0.3 million and $0.7 million, or 60.0% and 77.8%, respectively, primarily due to depreciation expense associated with the assets acquired in the Alline acquisition.

Long-Lived Asset Impairment

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.

In the three and six months ended December 31, 2025, the Company did not record any long-lived asset impairments.

In the three and six months ended December 31, 2024, the Company recorded long-lived asset impairment charges of $0 and $0.4 million, respectively, related to the right-of-use asset associated with the corporate office lease.

Interest Expense

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.

The $0.5 million and $0.8 million increase in interest expense for the three and six months ended December 31, 2025, respectively, was primarily due to higher debt outstanding compared to the three and six months ended December 31, 2024.

Cash interest increased $0.2 million for the three and six months ended December 31, 2025, compared to the prior year periods.

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.

The $1.0 million gain on earn-out liability in the six months ended December 31, 2025, is due to a change in the estimated fair value expected to be paid in conjunction with the Alline acquisition.

Other, net primarily relates to corporate sublease income and foreign currency gains and losses.

Other, net increased $0.8 million and $0.4 million, respectively, in the three and six months ended December 31, 2025, primarily due to a higher unfavorable currency adjustment in the prior year periods.

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.

During the three months ended December 31, 2025, the Company recognized a tax expense of $1.0 million, with a corresponding effective tax rate of 68.7%, as compared to recognizing a tax expense of $0.1 million, with a corresponding effective tax rate of 39.8% during the three months ended December 31, 2024.

During the six months ended December 31, 2025, the Company recognized a tax expense of $1.5 million, with a corresponding effective tax rate of 45.9%, as compared to recognizing a tax benefit of $0.1 million, with a corresponding effective tax rate of 5.3% during the six months ended December 31, 2024.

See Note 5 to the unaudited Condensed Consolidated Financial Statements.

Income from Discontinued Operations

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.

Income from discontinued operations in the three and six months ended December 31, 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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See Note 12 to the unaudited Condensed Consolidated Financial Statements.

Significant results of continuing operations are discussed below with respect to each of these segments.

Significant results of continuing operations are discussed below for each of these segments.

Franchise Salons

Three Months Ended September 30,

2025 2024 Decrease (1)

(Dollars in millions)

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

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

(Dollars in millions) (Dollars in millions)

Royalties $ 13.6 $ 14.8 $ (1.2) $ 27.7 $ 30.5 $ (2.8)

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

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

Three and Six Months Ended December 31, 2025, Compared with Three and Six Months Ended December 31, 2024

Franchise Revenue

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 revenue decreased $5.4 million and $11.8 million during the three and six months ended December 31, 2025.

The decrease in franchise revenue during the three and six months ended December 31, 2025, was primarily due to the decrease in franchise salon count caused by salon closures and the Alline acquisition..

Franchise Adjusted EBITDA

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.

During the three and six months ended December 31, 2025, franchise adjusted EBITDA totaled $6.2 million and $12.6 million, a decrease of $0.2 million and $1.8 million, respectively, compared to the three and six months ended December 31, 2024.

The decline in the three and six months ended December 31, 2025, was primarily due to a decrease in royalties and fees, offset partially by decreased general and administrative expenses.

Company-Owned Salons

Three Months Ended September 30,

2025 2024 Increase (1)

(Dollars in millions)

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

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

(Dollars in millions) (Dollars in millions)

Company-owned salon revenue $ 19.2 $ 3.5 $ 15.7 $ 39.4 $ 4.2 $ 35.2

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

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

Three and Six Months Ended December 31, 2025, Compared with Three and Six Months Ended December 31, 2024

Company-Owned Salon Revenue

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 revenue increased $15.7 million and $35.2 million during the three and six months ended December 31, 2025, respectively, primarily due to the Alline acquisition.

Company-Owned Salon Adjusted EBITDA

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.

In the three and six months ended December 31, 2025, company-owned salon adjusted EBITDA improved $1.1 million and $2.9 million, respectively, primarily due to the salons acquired in the Alline acquisition generating income for the current year periods.

LIQUIDITY AND CAPITAL RESOURCES

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 June 2024, the Company entered into a 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 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.

As of December 31, 2025, cash and cash equivalents were $18.4 million, with $17.6 million and $0.8 million within the United States and Canada, respectively.

As of December 31, 2025, the Company's borrowing arrangements include a $116.7 million term loan, $8.3 million of paid-in-kind interest and a $25.0 million revolving credit facility that matures in June 2029.

As of December 31, 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 $27.4 million.

See Note 9 to the unaudited Condensed Consolidated Financial Statements.

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Cash Requirements

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

The Company's most significant contractual cash requirements as of December 31, 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 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.

During the six months ended December 31, 2025, cash provided by operating activities was $3.9 million compared to $0.8 million in the six months ended December 31, 2024, primarily due to higher operating income in the current year period.

Cash Flows from Investing Activities

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.

During the six months ended December 31, 2025, cash used in investing activities of $1.2 million was primarily due to capital expenditures.

During the six months ended December 31, 2024, cash used in investing activities of $10.6 million primarily related to the $18.6 million used in the Alline acquisition, partially offset by proceeds from the sale of OSP of $8.5 million.

Cash Flows from Financing Activities

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.

During the six months ended December 31, 2025, cash used in financing activities was $1.4 million, primarily as a result of the repayment of long-term debt of $2.1 million, partially offset by proceeds from the issuance of common stock.

During the six months ended December 31, 2024, cash provided by financing activities was $7.7 million, primarily as a result of $15.0 million of proceeds from the issuance of long-term debt and $4.3 million of borrowings under the revolving credit facility partially offset by repayments of the revolving credit facility of $10.2 million.

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.

See Note 9 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended December 31, 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

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Capitalization (1)

September 30, 2025 40.3 %

December 31, 2025 40.0 %

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 September 30, 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 December 31, 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 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.

As of December 31, 2025, a total accumulated 1.5 million shares have been cumulatively repurchased for $595.4 million.

At December 31, 2025, $54.6 million remain outstanding under the approved stock repurchase program.

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

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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