What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-09-01 compared with 2025-09-03 · 56 added, 77 removed, 260 unchanged (34% of the section changed)

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As of June 30, 2026, the Company franchised or owned 3,712 salons in North America and the United Kingdom.

Each of the Company's salon concepts generally offer similar salon products and services and serve the mass market.

Each of the Company's salon concepts generally offer similar salon products and hair services.

As of June 30, 2026, we had 1,611 corporate employees worldwide.

See discussion within Part I, Item 1 of this Form 10-K.

In December 2024, the Company acquired the Alline Salon Group (the Alline Acquisition), its largest franchisee, consisting of 314 salons.

In December 2024, the Company acquired the Alline Salon Group (the Alline Acquisition), its largest franchisee, consisting of 314 salons, of which 261 salons remain in operation as of June 30, 2026.

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.

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

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

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

In fiscal year 2025, the Company received $8.5 million in additional proceeds related to salons migrating to Zenoti.

The Zenoti migration was successfully completed in fiscal year 2025.

In fiscal year 2024, the Company received $2.0 million of proceeds that had been previously held back for general indemnity provisions, and in fiscal year 2025, the Company received $8.5 million in additional proceeds related to salons migrating to Zenoti.

The Zenoti migration was successfully completed in fiscal year 2025 and therefore the Company did not receive any additional proceeds from Zenoti in fiscal year 2026.

As a result of the sale, the Company classified the OSP business as discontinued operations in the financial statements as discussed in Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

The Company shifted its product business from a wholesale model to a third-party distribution model as part of its asset-light transformation.

In fiscal year 2022, the Company exited its distribution centers and ceased selling products to franchisees.

Franchisees source product from a third-party distribution partner and the Company receives a royalty payment based on franchisee purchases.

This change has significantly decreased both the Company's franchise product revenue and general and administrative expense, including the franchise distribution costs discussed in Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

In fiscal year 2023, the Company experienced an inventory reserve charge of $1.2 million related to the exit of the distribution centers.

RESULTS OF OPERATIONS

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franchise salons and company-owned salons.

COVID-19 Impact:

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

As a result, in fiscal year 2023, the Company received a $1.1 million grant from the state of North Carolina included in Other, net on the Consolidated Statements of Operations in Part II, Item 8, of this Form 10-K.

System-wide results

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

In fiscal year 2025, a net 430 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 fiscal year 2026, a net 199 and 30 franchise and company-owned salons, respectively, have closed.

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

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Company-owned salon revenue 78.3 43.7 7.3 34.9 20.8 3.6 1,410 1,720

Cost of product sales to franchisees — 0.4 3.5 N/A 80.0 125.0 N/A (4,500)

Inventory reserve — — 1.2 — — 0.5 — (50)

Cost of product sales to franchisees — — 0.4 N/A N/A 80.0 N/A N/A

General and administrative 42.0 46.8 45.4 18.7 22.3 22.4 (360) (10)

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Gain on extinguishment of long-term debt, net — — 94.6 — — 46.6 N/A N/A

Gain on earn-out liability 1.0 — — 0.4 — — 40 —

Other, net 1.1 1.8 (0.2) 0.5 0.9 (0.1) (40) 100

1 unchanged sentence

Income from discontinued operations — 6.5 2.0 — 3.1 1.0 (310) 210

Net income (loss) (2) 123.5 91.1 (7.4) 58.8 44.9 (3.2) 1,390 4,810

Net income (2) 6.9 123.5 91.1 3.1 58.8 44.9 (5,570) 1,390

____________________________________________________________________________

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

(3) Computed as a percent of income (loss) from continuing operations before income taxes.

(3) Computed as a percent of income from continuing operations before income taxes.

The income taxes basis point change is noted as not applicable (N/A) as the discussion below is related to the effective income tax rate.

Fiscal Year Ended June 30, 2026, Compared with Fiscal Year Ended June 30, 2025

During fiscal year 2025, royalties decreased $5.9 million, or 9.2%, mainly due to a decrease in franchise salon count primarily caused by franchise salon closures and the Alline Acquisition.

During fiscal year 2025, fees decreased $0.5 million, or 4.9%, primarily due to salon closures and lower rebate fees from franchise product vendors, offset partially by terminated franchise fees related to the acquisition of the Alline salons.

Product Sales to Franchisees

Product sales to franchisees decreased $0.5 million, or 100.0%, during fiscal year 2025, due to the Company's shift in its product business to a third-party distribution model.

During fiscal year 2026, royalties decreased $3.6 million, or 6.2%, mainly due to a decrease in franchise salon count primarily caused by franchise salon closures and the conversion of franchise salons acquired in the Alline Acquisition to company-owned in December 2024.

During fiscal year 2026, fees decreased $2.5 million, or 25.8%, primarily due to salon closures.

Additionally, the prior year results include the recognition of terminated franchise fees related to the acquisition of Alline.

Advertising Fund Contributions

Advertising fund contributions decreased $3.8 million, or 14.8%, during fiscal year 2025, primarily due to the decrease in franchise salon count and a decrease in advertising fund contribution rates.

Advertising fund contributions decreased $0.5 million, or 2.3%, during fiscal year 2026, primarily due to lower salon count.

Franchise Rental Income

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Company-Owned Salon Revenue

During fiscal year 2025, company-owned salon revenue increased $36.4 million, or 498.6%, due primarily to the Alline Acquisition.

Cost of Product Sales to Franchisees

Cost of product sales to franchisees decreased $0.4 million, or 100.0%, as a result of the Company's shift in its product business to a third-party distribution model.

During fiscal year 2026, company-owned salon revenue increased $34.6 million, or 79.2%, due to additional revenues generated by the increase in salon count as a result of the Alline Acquisition in the second quarter of fiscal year 2025.

General and Administrative

The increase of $1.4 million, or 3.1%, in general and administrative expense during fiscal year 2025 was primarily due to acquisition related costs of $1.4 million, as well as operating expenses related to Alline, offset partially by company-wide cost saving measures.

The increase of $5.0 million, or 90.9%, in rent expense during fiscal year 2025 was primarily due to Alline Acquisition salon rent expense.

The decrease of $4.8 million, or 10.3%, in general and administrative expense during fiscal year 2026 was primarily due to lower corporate compensation and franchise brokerage expenses, as well as lower education event costs, partially offset by higher company-owned general and administrative expense.

The increase of $3.0 million, or 28.6%, in rent expense during fiscal year 2026 was primarily due to rent expense associated with the salons acquired in the Alline Acquisition.

Advertising Fund Expense

Advertising fund expense decreased $3.8 million, or 14.8%, during fiscal year 2025, primarily due to the decrease in franchise salon count and a decrease in advertising fund contribution rates.

Advertising fund expense decreased $0.5 million, or 2.3%, during fiscal year 2026, primarily due to lower salon count.

Franchise Rent Expense

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Company-Owned Salon Expense

Company-owned salon expense increased $26.0 million, or 509.8%, during fiscal year 2025, as a result of the strategic Alline Acquisition.

Company-owned salon expense increased $24.9 million, or 80.1%, during fiscal year 2026, primarily due to the full year of expenses generated by the salons acquired in the Alline Acquisition.

Depreciation and Amortization

The decrease of $0.9 million, or 23.1%, in depreciation and amortization during fiscal year 2025 was primarily due to company-owned salon closures, partially offset by the Alline Acquisition.

The increase of $1.1 million, or 36.7%, in depreciation and amortization during fiscal year 2026 was primarily due to depreciation expense associated with the assets acquired in the Alline Acquisition.

Long-Lived Asset Impairment

The Company recorded long-lived asset impairment charges of $0.1 million and $0.4 million in fiscal years 2026 and 2025, respectively.

The decrease in long-lived asset impairment was primarily due to more right-of-use assets being impaired in fiscal year 2024 resulting from subleasing excess corporate office space to unrelated third parties.

The decrease in long-lived asset impairment charges in fiscal year 2026 is due to recognizing impairment on a single salon while the fiscal year 2025 impairment related to subleasing excess corporate office space to unrelated third parties.

Interest Expense

The $5.1 million decrease in interest expense during fiscal year 2025 was primarily due to less debt outstanding.

Gain on Extinguishment of Long-Term Debt, Net

In June 2024, the Company recorded a gain of $94.6 million related to the extinguishment of long-term debt.

Additionally, the net gain includes the write off of paid-in-kind interest accruals and the write off of unamortized debt financing fees.

Other, net improved $2.0 million in fiscal year 2025, primarily due to unclaimed property and corporate office sublease income.

Income Tax Benefit (Expense)

During fiscal year 2025, the Company recognized an income tax benefit of $115.5 million with a corresponding effective tax rate of (7,519.3)% primarily due to the partial release of the valuation allowance on our deferred tax assets, compared to recognizing an income tax expense of $0.9 million, with a corresponding effective tax rate of 1.0% during fiscal year 2024.

The $0.4 million increase in interest expense during fiscal year 2026 was primarily due to higher debt outstanding, offset partially by declining interest rates.

Gain on Earn-Out Liability

The $1.0 million gain on earn-out liability in fiscal year 2026 is due to a change in the estimated fair value expected to be paid in conjunction with the Alline Acquisition.

Other, net declined $0.7 million in fiscal year 2026, primarily due to foreign currency adjustments.

Income Tax Benefit

During fiscal year 2026, the Company recognized an income tax benefit of $1.1 million with a corresponding effective tax rate of (18.3)%.

During fiscal year 2025, the Company recognized an income tax benefit of $115.5 million, with a corresponding effective tax rate of (7,519.3)%, primarily due to the partial release of the valuation allowance on our deferred tax assets.

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

Income from Discontinued Operations, net of tax

The Company recorded income from discontinued operations, net of tax of $6.5 million and $2.0 million in fiscal years 2025 and 2024, respectively.

Income in fiscal year 2025 is due to proceeds from the sale of OSP related to the number of salons migrating to the Zenoti platform, partially offset by a non-cash income tax expense allocated to discontinued operations, and income in fiscal year 2024 is due to the receipt of sales proceeds related to the sale of OSP that had previously been held back for general indemnity provisions.

The Company recorded no income from discontinued operations, net of tax, in fiscal year 2026 compared to $6.5 million in fiscal year 2025, related to contingent proceeds earned based on the number of salons that migrated to the Zenoti platform, partially offset by a non-cash income tax expense allocated to discontinued operations.

See Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

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Franchise same-store sales (2) 0.6 % (0.6) % 0.6 %

Franchise adjusted EBITDA $ 28.4 $ 27.8 $ 25.1 $ 0.6 $ 2.7

Total franchise salons 3,448 3,647 4,391 (199) (744)

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Franchise revenue decreased $20.2 million during fiscal year 2026.

The decrease in franchise revenue was primarily due to the decrease in franchise rental income, royalties, and advertising fund collections as a result of lower salon count, primarily driven by the Alline portfolio moving to the Company-owned segment.

The decrease in franchise revenue was primarily due to the decrease in franchise rental income, royalties, and fees as a result of lower salon count, primarily driven by the Alline portfolio moving to the Company-owned segment mid-fiscal year 2025.

During fiscal year 2026, franchisees constructed (net of relocations) and closed 8 and 207 franchise salons, respectively.

Franchise Adjusted EBITDA

During fiscal year 2025, franchise adjusted EBITDA totaled $28.4 million, an improvement of $0.6 million compared to fiscal year 2024.

The improvement is primarily due to a decrease in general and administrative expense, partially offset by lower royalties and fees.

Company-Owned Salons

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Total revenue $ 78.3 $ 43.7 $ 7.3 $ 34.6 $ 36.4

Company-owned salon adjusted EBITDA $ 3.2 $ (0.3) $ (1.8) $ 3.5 $ 1.5

Company-owned same-store sales (2) 4.0 % (2.8) % 3.5 %

Total company-owned salons 264 294 17 (30) 277

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

(2) Company-owned same-store sales are calculated as the total change in sales for company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period.

Year-to-date company-owned same-store sales are the sum of the company-owned same-store sales computed on a daily basis.

Fiscal Year Ended June 30, 2026, Compared with Fiscal Year Ended June 30, 2025

Company-Owned Salon Revenue

Company-owned salon revenue improved $36.4 million in fiscal year 2025, primarily due to the Alline Acquisition, partially offset by the closure of loss-generating company-owned salons.

Company-Owned Salon Adjusted EBITDA

During fiscal year 2025, company-owned salon adjusted EBITDA improved $3.5 million, primarily due to the Alline Acquisition, partially offset by the wind-down of underperforming company-owned stores.

Company-owned salon revenue improved $34.6 million in fiscal year 2026, primarily due to a full year of income generated by the salons acquired in the Alline Acquisition.

Recent Accounting Pronouncements

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During fiscal year 2026, cash provided by operating activities was $13.1 million.

Cash provided by operations improved year over year due primarily to an $8.4 million build in restricted ad fund cash, our lower cost structure, less cash used for working capital, and lower cash interest.

Cash provided by operations decreased slightly year over year due primarily to the use of restricted ad fund cash in fiscal year 2026, versus a build of restricted ad fund cash in the prior fiscal year, offset partially by our lower cost structure.

Cash Flows from Investing Activities

During fiscal year 2025, cash used in investing activities of $11.5 million was primarily related to $18.6 million used in the Alline Acquisition, partially offset by $8.5 million received related to the sale of OSP.

During fiscal year 2026, cash used in investing activities of $2.0 million was primarily related to capital expenditures.

Cash Flows from Financing Activities

During fiscal year 2025, cash provided by financing activities of $3.6 million was primarily a result of proceeds from issuance of long-term debt, partially offset by net payments on the revolving credit facility.

During fiscal year 2026, cash used in financing activities of $2.3 million was primarily related to repayments of long-term debt, partially offset by proceeds from issuance of common stock related to options and warrants exercised.

Financing Arrangements

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Term loan (1) 8.42% 9.14% $ 116,135 $ 118,875

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

Paid-in-kind interest 11,101 5,376

Deferred financing fees (2) (9,392) (12,174)

Term loan, net 117,844 112,077

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

In June 2024, the Company entered into a new credit agreement between TCW Asset Management Company, LLC, and MidCap Financial Trust Company which includes a $25.0 million revolving credit facility, a term loan of $105.0 million with a $10.0 million minimum liquidity covenant that expires in June 2029.

On December 19, 2024, the Company amended the 2024 Credit Agreement for an additional $15.0 million term loan.

(2) Deferred financing fees, inclusive of $4.3 million of Original Issue Discount fees, are amortized on a straight-line basis over the term of the related agreement.

The Company's 2024 Credit Agreement, as amended, includes a $120.0 million term loan and a $25.0 million revolving credit facility, with a $10.0 million minimum liquidity covenant, is secured by the Company's assets, and expires June 24, 2029.

The 2024 Credit Agreement, as amended, includes typical provisions and financial covenants, including leverage and fixed-charge coverage ratio covenants.

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

The agreement utilizes an interest rate margin that is subject to change year-over-year.

The margin applicable to the new term loan and revolving credit facility is subject to change based on the Company's total leverage ratio, remeasured at a specific point during the year.

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%.

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

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

In either scenario, the Company has elected the option to pay 4.5% of the margin as 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.

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

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 year end, was as follows:

As of June 30, Debt to

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(1) Excludes the long-term lease liability as that liability is offset by the right-of-use (ROU) asset.

The decrease in the debt to capitalization ratio as of June 30, 2025, compared to June 30, 2024, was primarily due to higher total shareholder's equity as of June 30, 2025, as a result of earnings during the 2025 period.

Contractual Obligations and Commercial Commitments

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Our debt obligations are primarily composed of our 2024 Credit Agreement, as amended, at June 30, 2026.

Non-current deferred benefits of $5.6 million includes $1.6 million related to a non-qualified deferred salary plan, a salary deferral program of $1.6 million and a bonus deferral plan of $2.4 million related to established contractual payment obligations under retirement and severance agreements for a small number of employees.

Non-current deferred benefits of $5.7 million include $1.5 million related to a non-qualified deferred salary plan, a salary deferral program of $1.4 million and a bonus deferral plan of $2.8 million related to established contractual payment obligations under retirement and severance agreements for a small number of employees.

See Note 4 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

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Regarding franchisee subleases, we generally retain the right to the related salon assets, net of any outstanding obligations, in the event of a default by a franchise owner.

Additionally, as a result of having assigned its interest in obligations under certain real estate leases directly to franchisees, the Company is secondarily liable on such lease agreements as guarantor.

Declines in system-wide revenue in certain brands over the past few years have increased the risk of default by franchisees, which may be material.

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We believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

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

As of June 30, 2026, and 2025, the franchise reporting unit had $172.4 million and $173.1 million of goodwill, respectively, and the company-owned segment had goodwill of $10.3 million in each period related to the Alline Acquisition.

See Note 5 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

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However, if the reporting unit's fair value is less than the carrying value, an impairment charge is recorded for the difference between the fair value and carrying value of the reporting unit.

In applying the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting units is less than its carrying value (Step 0).

Qualitative factors may include, but are not limited to, economic, market and industry conditions, cost factors, and overall financial performance of the reporting unit.

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The fair value of the right of use asset is estimated by determining what a market participant would pay over the life of the primary asset in the group, discounted back to June 30, 2026.

During fiscal years 2025, 2024, and 2023, the Company recognized long-lived asset impairment charges of $0.4 million, $0.8 million, and $0.1 million, respectively, related to ROU assets on the Consolidated Statements of Operations in Part II, Item 8 of this Form 10-K.

During fiscal years 2026, 2025, and 2024, the Company recognized long-lived asset impairment charges of $0.1 million, $0.4 million, and $0.8 million, respectively, on the Consolidated Statements of Operations in Part II, Item 8 of this Form 10-K.

The impairment loss for each salon asset group that was recognized was allocated among the long-lived assets of the group on a pro-rata basis using their relative carrying amounts.

Additionally, the impairment losses did not reduce the carrying amount of an individual asset below its fair value, including the ROU assets included in the salon asset groups.

Additionally, the impairment losses did not reduce the carrying amount of an individual asset below its fair value, including the assets included in the salon asset groups.

Assessing the long-lived assets for impairment requires management to make assumptions and to apply judgment which can be affected by economic conditions and other factors that can be difficult to predict.

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The Company has a valuation allowance on its deferred tax assets amounting to $57.7 million and $60.5 million at June 30, 2026, and 2025, respectively.

The significant change to the valuation allowance that occurred during fiscal year 2026 is as follows:

• As of June 30, 2026, we determined that an additional $3.2 million of our U.S.

tax credit carryforwards will be realizable.

Therefore, we released the associated valuation allowance and recorded a corresponding tax benefit.

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

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

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

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

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

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

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

• As of June 30, 2025, we determined that it is more likely than not that the majority of our U.S.

federal and state deferred tax assets will be realizable.

12 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis