RGS - Earnings call transcript Q2 2022

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Biz McShane

Good morning. And thank you for joining the Regis Second Quarter 2022 Earnings Release Conference Call. All participants are in a listen-only mode. The prepared remarks by our Interim Chief Executive Officer, Matthew Doctor, and Executive Vice President and Chief Financial Officer, Kersten Zupfer, are accompanied by slides to help participants follow along. After the prepared remarks, we will have time for questions. feature your chat ask feature the question. a use or hand raise to Please and this Kersten Lain, Matt joining Also on Operations our call Officer. Chief Jim is Vice I and Biz your McShane, am Controller. host, President

our with remind can on with slides earnings today. reconciliation this comments GAAP call found With conference supplemental today, www.regiscorp.com/investorrelations, made website, to a site. our forward-looking recorded. I like language As mentioned Today's investor a These the X-K that, with everyone of in filing along presentation the measures is the our over financial will financial reminder, to on any that the including our call turn section are documents, and I along measures. on being be their would the Matt. to non-GAAP release statements, located in apply today’s of on call corresponding now also

Matthew Doctor

morning, everyone. Biz. Thanks, Good

start the a well I'm our believe am this performance, by my Regis. quarter I Since let saying new excited step Let I before are background I CEO about at and second interim positioned share me to we me for as growth role, future . opportunity why just here how given bit in be discuss to in

that in our on means Additionally, go-forward our profitability I announcements down, spending together York. drive do different an the over normalized way background, continue you tied I discuss basis, historically New rollout priorities time to there, of and and we've well like development career operating regarding also XXXX years business I'd International XXXX Restaurant into G&A our never will made franchise all many global business efforts franchising, I owe year organizational quite to to we wind think perspective. I up After as of past our several what on spend actions guidance, forward. model. product development having started the and our a several a to more of fully development roles given completely taken to changes, model world in the this focused that we ended held in and I have joined Hortons. I a mainly in can of changes, we've Brands but than distribution entering all. as call banker And something fiscal from back. course looked Opensalon that my more the PRO, company move the there, leading haven't showing King By investment and We've for many Burger deliver what performance to this and franchising as brand, looked on for Tim led the the franchisee

desire the I my like. And it step of the While of back large I a had Tim benefits side and career, to After years in Hortons in a become global the inside just I was of what always working ownership then and the knew opportunity hit franchisor, be the franchisee mind an never the entrepreneur. other table my progressing would scale to look I decided the selling franchisee system. of on large, me.

consultant. unprecedented fundamental as of most And hit Regis, culminating as I need. After pandemic, in here and unique Strategy at the the a of end in time. ultimately franchisor sale the Regis, in doubt, a restaurants, and of energized saw part our opportunities navigate to I being of started that franchisee So, platform represents tremendous so restaurants, no with the a XX industry became been Chief wanted the as I this restaurants of hard a Officer. February my full be I to became consultant had the potential I for franchisee. by I XXXX. initially our grew a an XXXX And ended opportunity I've both that, up I And in XXXX. by joining the time the of helping sale partners has Regis

to like you I'd background, my to respect believe there's I some other know transparency. addition In qualities in about. and

can hear things big accountability. a on also You expect well going balanced that the execution. and I'm big that we're on view the challenges to I'm are facing. on

results. themes Turning the in we've quarter much to second still with same previous calls. touched very our on dealing We're

customer by challenged and compared Our sales levels. active lower recovery pre-COVID to counts continues to be stylists

Our retention that of are of as levels. number have these customers items, line salons back that demonstrated stylists have that priorities are a each existing addressing and/or with in of built active validates greater around we encouraging sales data of XXXX

come the significantly initiatives reduced in our to That quarter, business and for segment, With our two-year represents owned losses second model, XXXX starting year quarter, and and our our rolled saw profit the salons time have being performance. pandemic. the out In to had million go-forward US a with are turned since taken comps fiscal down current company remaining XX% said, in a Franchise the during $X.X XX% dampening we we've of segment operating where product our shift even profit the our model a really results. first which light in salons. business OSP for only quarter our that sales business in the We

step the did and our encouraging results is franchisor forward this asset-light an expectations, new not our potential While the model. shows meet of

growth that we the and and of Yes, I to has the recognize such prospects to I'd this all I'd challenging are Now, future. the time. like us. to for we no why going for take mindset things share doubt time the in have a well company believe reframe positioned is But like exciting

need is have First, that a going that industry an scale in represents fundamental we not away.

network them. collectively have stylists. of brands We large years with of well-known equity behind have a We

beauty we scale at estate. our have large schools, in and real Given size, we presence have inroads

as of We relationship have a one with tenants. largest Walmart their

and to the an needs stylist operators we seasoned demands, a consumer a flexibility necessary as and have enable in the this large ever-changing base. these as succeed there's proprietary of environment. We all have franchisee meet equation and to well Within technology elements, platform

been great, a but inherited team. of I I of committed think a over them have management Second, team good an last all say this behalf we are I on spot. know in of there's speak I I when year, can the evolution

We am skill here and, on remained our have and complementary have And mix sets legacy this importantly, changes, each trust knowledge a most journey to other. the who players with new resilient, employees at be and incredibly I grateful represent Regis. we everyone through all of

Regis' our corporate salons passionate the model, during not pandemic. the either to business right of moved have few Third, last before franchisee These we been majority franchise dedicated an from have years base. and And extremely given easy. or changing

to our environment difficult recognized. have Our franchisees worked Regis, driver them ensuring look importance way. the paramount their feedback along closely incorporate to to forward be businesses working success industry. of base strengthening during needs to and the and our success partnership, that the And run I The key of and of our tirelessly most the with for that we is franchisee their

to which is enable to turn drive helps Regis. in goal Our maximize profits, franchisees

generation. revenue lead model, which a streams we cash to predictable more ultimately business transformed have and flow will Finally,

for that finalized the I revisit important stage the during our business future. accomplishments to it's and transformation key think XXXX the sets

company. and XXXX over a to savings a operating This million lost understand that was of we use to implemented around million. down at drove fiscal of Regis our the a And our EBITDA as under a any over for now status public of and rollout a First, started salons. during cost began OSP today. We loss of loans a challenge. to of call it, from the $XX we X,XXX become salons remaining Opensalon as operating our exited PPP were We distribution we tune we business financial to cutting. in relate EBITDA and business, these $XX XXX lot PRO, cash items pandemic company the are of unable that wound is as that I or major X,XXX given that qualify logistical product G&A mitigation

coincide of earlier, in our items mentioned our the come our this control However, had focus XXXX savings with business. we're resulted of on I results. in to the in million EBITDA of And efforts QX future fiscal starting The to of year we a $XX on see our that uncertainty, bear these in as also based XXXX over to culmination results.

Before normalized Kersten? after little which over call can post and our I and what current return our our business quarter to go the a priorities, I'd little discuss second into more share to remarks I'll a Kersten's items. bit achieve these results, deeper in dig to turn to like Kersten

Kersten Zupfer

good now the continuing And consolidated our morning. salons reported, the declined $XX model franchise million XX% Total pandemic the XX% second prior to business transition compared of basis, to due in the our fully from labor $XX the a a franchised revenues to year. of year reflect market. of on impact revenues quarter Matt. on we million the and Thanks, that Yesterday, being prior

quarter and below expectations and the reflect persistence continued revenues shortages Second the labor our were pandemic. of

We increased and have seen have quarter-over-quarter stylist their salons hours improve. are encouraged by that sales

salons increased For XX% by and XX% increase approximately XX% a hours in example, of our saw comps.

addressing our top issues As Matt of labor is priorities. one noted,

total a systemwide a salons, prior-year and an by same million at basis, a store in down consolidated company an of savings year's EBITDA two-year results and million a improvement million initiatives, of quarter salons, of an XX%. increased franchise from includes lower sales the basis, owned non-cash which sales On adjusted due driven The revenue, our higher prior in systemwide sales quarter. $X second systemwide year, to operating quarter. On improved sales, adjusted loss systemwide Our from comparable company-owned higher compared $XX million from improvement costs. significant benefits. comparison income, improvement XX% increase of and prior an loss in wind $XX pre-COVID, $XX a Adjusted is in G&A few one-time operating $X the to in the million the of EBITDA comps an was down which during were quarter. We quarter, reported to our operating loss

approximately do that not benefits reoccur Additionally, quarter benefited $X from we to next expect of to the couple million non-cash a amounting quarter.

loss achieved $X.X prior core to Our business in year. of compared a adjusted million Franchise $X.X the EBITDA of million

loss charge predict. of an including and, are variant the initiatives million. EBITDA which $X to EBITDA third recorded will caution quarter. increase reflects likely approximately savings Omicron we $X million, see the But impact The by reserve pandemic a do We approximately the results the segment We cannot particular, in cost pleased to the an adjusted that undertaken. positive have inventory to company-owned we in extent,

of Our serve expect our cost to centers structure franchisees salon our exit is rate. run operations terms better in support reorganized in what completed distribution the costs. and our the reduce go-forward quarter We nearing we and of a

million $X reversal in the from approximately expense and the stock of benefited one-time a of G&A million compensation in of $X quarter approximately other quarter. Second benefits quarter

our We level range. believe expect continue million we will to run of we achieve will the annually, that $XX be end at in range the of $XX low likely in to G&A that rate state quarter. million fourth the end And

Turning to liquidity.

December of cash. million available of liquidity, and $XX we revolver million capacity As of had of XX, including million $XXX $XX

was minimum with our credit of which the as certain refranchising liquidity permitted back proceeds in requirements shortfall available covenant reflects net agreement. December the Our and liquidity XX $XX of accordance our million, add in

we with of Our asset-light us security in million which related XXXX. $XX liquidity fiscal franchisor. operate part from had consistent used that of navigate our relief cash $X.X year and was flexibility In we sufficient operational social to second in as operations, first cash executive with the the and quarter. December million pure as deferred contributions the of financial and is Included the bonus provides to COVID we quarter, remitted use a recovery

continued forward recovery And for my in call to for our the the of return growth half the your interest year pandemic Regis. of the now the in cash and structure. Matt. and This profitability in lower like expect I'll we thank as to believe the our from a second used cost to due year. to prepared to to continued is concludes decline remarks. poised I'd and We operations emerge back We turn continue you sustained Regis in second look support to half

Matthew Doctor

Kersten. Thanks,

sales and what to earlier, this internal like is I'd certainly for get basis what like our with you normalized level additional clear, a and complete and sales XXXX current this there that Starting assuming rollout back the a what Opensalon a gets we PRO. want infrastructure EBITDA is to also royalties. frame shifts looks of relevant we be calls Taking platform royalties demonstrated these looks we've achieve, at XX% least I As able isn't place This all that excited our on know. or assuming count, maintain to for to levels, the from get plus million. go-forward rather like the have resulting store salons we salons this If and are team royalties in pre-COVID X,XXX, of major to levels, as I if model today, $XX versus current back any achieve count to how get mentioned change, but levels, business assuming here. franchise we XXXX million. $XX our exact resulting within are salon to XXXX being XX%

P&L, Moving to of franchise product rebate fees monthly PRO are our partners. full distribution resulting the fees, rebates set revenue which Opensalon $XX primarily the fees and rate, product franchise million. that at is the our consists plus currently fees and Opensalon PRO, through rollout At of flowing from

our business, no the and our latest also corporate both resources here. range. franchise business We've $XX be as results, and guidance the given in legacy our infrastructure so well come on confident, million our corporate PRO. company-owned financial going For I million. structure. wound G&A are And is and as that end cost the approximately as million. to Kersten closer in to this this impact generally between equals for this assume Opensalon that exercise, corporate that to mentioned, reiterate includes lastly, want and as $XX of feel the will down, for G&A rent, salons we And $XX we'll distribution rent Layering lower G&A

risks versus is guaranteed current EBITDA million to our XX% keeping strong timeline predicated not to at count; to this million XX% getting XXXX $XX bringing plus levels reiterate on $XX all margin. So to this the salon want together, demonstrates that I XXXX is levels two, done. again is of But are of XXXX and back Anything us, of sales to potential of our one, minus aspects is there and rolling certainly we the this achieving three, is business. exercise work fundamental maintaining But is There those which and these returning been. all Opensalon and have sales figures; be to upside. results. PRO, are we've out and what our challenges where beyond to

our growth we return to you will continue Regis and stabilize to through six me profitability? walk priorities. how Let and So key sales

First, starting with our capital structure.

our out debt of maturities in both key XXXX to advisors evaluating debt capital, it help of makes including a bank capital Our March alternatives currently And our seek initiative. we're structure to new address equity. sources with and/or

exit of lease multiple expiration. our lease corporate extent salons. at consists continuing current our pipeline, ceasing One, is down the Next This possible, remaining strategies. and deal the of buyouts, wind negotiated closures operations to

done within I near-term noted is that, overcomplicate are that, be is to time. that longer-term will are these should the are it note closer Our we Shifting and results, all current of remainder to them. ever buyouts order, of short with the to bring the priorities. fundamental have initiatives to business drivers pipeline or But relationships. these these running XXX of than which should our being We negotiated strengthening our ensure to out to priorities, around they we take absolutely and need foundational still of them to to off not us And the while brand in of drive are the franchisee look mark there as needed. negotiated support some franchisee of. provide community all either our initiatives this and some strategy well. And groundwork to to life, should said, clear deals these be want meant salon to also

this initiatives feedback as their incorporate into back going way to look the during environment different is working past. building to are our than We

pushing is building to our shoulder it executing the our will a relationship. on brand and work establish to them road been franchise franchisor/franchisee in with their I've business day meeting is with into critical to and their strategies to feedback day our be and continue shoulder. hands, Given best-in-class to forward partners

we're that with from schools. recruitment leaning well to efforts application priority. and funnel, offer, and we is We as our them To challenging the currently where on stylists, application how to that offer need sits labor culture AI the work interview them a through to stylists leveraging place Given as scale We marketing and convert major quickly salons of To out to fill make with making remove an quickly social to beauty our easy tool from stylists a want through key rolled to stylists convert for the and offers retain it are retaining and earn funnel recruitment stylists and pipeline them media recruiting tool. a hiring to that environment business, want seamless franchisees on be platforms application wage. the barriers, and our core fill apply competitive a training. salon and

We key of our have that, salons speed that environment, in to the up on the hire. have signed learned this this is now labor platform. we majority And competitive

that and will standards front need as Lastly, we which career we to for retain stylists relevant as platforms training, ongoing this provide well around training to ensuring that salon their strong the on key cultures, is drive be journey. and have. built brand stylists Efforts

to the is stylist destination and work. the become job it goal career to development, easy of opportunities can as be, a make for Our provide preferred

will is be priority traffic, fourth customer marketing Our driven and experience. by customer driving which

the retain to visiting currently the salons. are opportunity marketing is immediate customers who our the On front,

acquisition customer traffic with in We counts have help to to for the follow. convert an strategies will opportunity brand building to customer business, term more near which broader national our repeat increase new

out and to these promises and guest be uniform will solidify to our the upholding uphold standards brand adherence and value experience standards key and brand On be proposition. Measuring we'll ensuring front, rolling metrics. our satisfaction

convenient customers to designed and guest will a stylist include differentiated relate experience. value where to with place a that strong quality, for salon all training, haircuts visit things money. seamless, deliver Our standards experience quality salons to with a culture, need customer look to haircut Brand be for

Our fifth is technology. priority

view access about real tool a differentiator provide We in Opensalon salons provide customers, their best what each curve strategies, of this PRO go, operating intended and And constructive our very hair, Opensalon inside is to are down our our with run having in their more The franchisees OSP We on easy recent what as our can their is better focus salon time that to We slowed proposition OSP has to which for need they to for do in making proprietary them needs. data excited platform. to our is for on adoption in marketing franchisee equation meet a and key feedback it This the the to we've to drive book enable a as analyze received operations. another way the brands salons. our this for is after and streamlined platform to businesses, pay. because that PRO business value business work franchisee great stylists be to doing the to months. allow us

it So, we're taking their roadmap. feedback and our into current working

more also a on option We cost a perspective. been from effective into OSP device. looking Until work to singular have now, tablet has adoption coded a been

that with should So, lockstep out can hardware, pleased we eliminating that combined with Web-based franchisee a rolling adoption purchase. importance this for is ramp to need we that are This offering to feature, on we our us are will it alternative ensuring back existing best-in-class soon tablet particular But me up. functionality, be enable ran in of be franchisees. the a

brands. our Our relates Regis to final priority and

performance, our they relevant our to have of today's near-term a reassess ensure consumer. are busy opportunity in unique front to brands also and are we we While salon driving us

dynamics go-forward to real build then assess strategies strengths brands, the We growth initiatives in forward. forward opportunity for the and together gaps our for keeping back getting range I at our at drive the different provided, and reason excited innovate The that and net visit midpoint accordingly, updated model of to work business fill going potential of the meet to The dramatically our and potential to want to potential look upside. and shifting stylists. may am the to account. adding has customers very these a take levels on a forefront and business brands combination I be Regis our of time. progress. XXXX marketplace to and duty needs be weaknesses of a sales our million EBITDA salon potential and respond you sales of the the and and with priorities, $XX marketing customers We XXXX have all stylists fiscal into Tying incremental about

to recovery expect services in complete. by leadership transition to to and and fully of with is not a a this hair We challenge market we progress. our actions The fiscal continue will is model leverage the impacted franchisor XXXX to continuing industry. have the back. of taking associated is balance we the Labor year costs pandemic be improve about The our fiscal experience hold. benefits and be our XXXX to continue the in is clear actions. But position our are our And performance priorities to

what As I to to and us excited to has the the be in us any for insights today. grateful through the Biz call so to will back now and am Thank I call I provide for future. potential some mentioned I lead lead position you joining our turn over on Q&A. the earlier, Regis about very

Biz McShane

for the you your through question Q&A stylists? please recruiting plans can speak to retaining first and Our is,

Matthew Doctor

a our and there. growing retain it's our one initiatives. And it well. about as have mentioned through destination ones for we stylist, priorities, brand the for preferred but we And have hiring top of them as kind to new, a it's I just As relates not work this to key a in becoming the is all place brand to

through done making development training. to initiatives opportunities them environment in creating key are those that for as can and life possible around have for culture salon. work in, we the easy great as a providing technology, the And through them be So, career

kind on to a need platforms provide class that ongoing salon that and back of start, best the things environment. get is fill Beauty which to development hire at job and and school in but can need only also of enrollment training inside do training, career training the Our we Also, we up. be differentiated is progression not the the pipeline quickly. pretty continuous to just to

we're ahead an higher to money that, environment into make stylists in where also, rate salons. can need work just and good we earn leveraging of converting back to ensure beauty schools a and ensuring at And scale, our they our them a So getting we're wage. competitive giving that

those these So, to We're working We're feedback have. working and are franchisees. the to all bear we're this new these on time look things with to bringing we and our use on. the forward receiving and ones tool the recruit as retain a

Biz McShane

exists question next the of given? is Our obstacles the PRO? chat reasons from adoption what are a Opensalon is, to If what total resisting, franchisee

Matthew Doctor

question. here of another I top And as OSP again, that's No, the intent is mentioned, great of just a is one. good mind

and have this a to filled world experience ultimately is culture, to provide key. differentiator where and out, And For for salons us in customer technology. be build salon this value is to proposition with really a our that going

between appointments and and to back things is doing there, is operational better exactly we queue from expecting, the of the times. nuances things a greater great to in been meet ensure things in So, is to businesses, needs last and there of I do. that tools reality the actually but office to meeting this we're relates And working tool it this for intending have, has needs, now been could integration feedback franchisee that it's said, what as their as meets to what be have it it for it checking to several months they're it

points. So again, be that this pushing all want we're something the them. great that these And things we just something are franchisees onto not want, to

So, control the platform that feedback, the what do in is roadmap work back, can solve development the quickly we've thing do the taking and that have we this we done issues. good is fact we've we it those and that and taken

to quickly this system, forward effective around are between it and the be franchisees to the rolled the with POS Web-based two the be be to issues is out, working iteration these those new option will ensure really great as the is solving rollout and which should the continuous path just things a be of going product So, here. cost

Biz McShane

from now live from are question to We take Jeffries. going Grace a Menk

Grace Menk

questions So, actually. couple of a

see Firstly, on at relative basis AUV check the pre-pandemic and the system in sales, we're to where levels. to want on just an

Biz McShane

I that grace. can take

stack, in So, a the script, levels. approximately to as we we're two-year on pre-COVID down mentioned XX%

Grace Menk

the fees revenue, of break versus tech franchise one-time much rendition able you are fees? the On is to how that the fees out

Biz McShane

Grace, about? you about deck, that what to is relates Matt's the… talking as you're it talking Are

Grace Menk

Either one in kind the that That quarter. of forecasts helpful. at or the be the looking would current you're in

Matthew Doctor

It's Matt here.

call talking Opensalon PRO Maybe So, on that third less a third forward are of of the about franchise around it, tech around fees. call and go And fees, the are, comprised so million $XX than bucket, a roughly half is, fees. the product a we're it, or rest rebates little the training.

Grace Menk

I previously months level today. you X, G&A had out Lastly, from the puts signaled had to at XX run that that And you you're we talking think a rate expected. to as a be

of find? trim more to costs? new a you're if find Were kind cut did you able little we're bit earlier? just Or elaborate you you wondering to areas the on So cuts to could just able things

Biz McShane

given we we've able year. this we'd of that to $XX in guidance lower end previously, hitting million, I fiscal run think narrow $XX to be expectation down the had that we've that that been of the QX million that rate to No, always the range. that had And

G&A we know, of be when you thought year, as would last throughout evaluated is it in the fiscal there. terms of we meeting we at our continuously So, expectations year, this fiscal but end the

Matthew Doctor

feel of range, kind through after it, to living the that we When kind range. going going a out we be that's that way we of Matt. few we And end we're felt put of would that It's always more be. quarters confident and lower where in that

Biz McShane

and through traffic? talk paid how the next is, Our be marketing chat advertising question about more can the driving you And coming will for?

Matthew Doctor

that goes a occurring I go us a hand some the at as well. in we look customers we customer have is have gets one seen bring for there hand low ensure road after. that retaining job numbers hanging haven't levels that with that stylists. is of of one thing we pretty back. natural us very that demand to of big actually stylists think the great fruit are good It's This What the the necessarily to as existing done it's have. is And walking we've But do to excited, traffic we we

XX% we there kind those come seeing range when are there's Whereas XX in back salons of our that about a those XX-day kind retention a that today. near of salons levels drop plus big we the versus sales XX traffic back for term XX, in of And days. was within really XXXX are off level see So, to level within XX, pre-COVID to XX bit at XX, drivers, opportunity pre-COVID, levels. We're those those to is coming plus. have This below a this think that levels. that that

So, it's in, as effort we have put we encouraging think about where natural we that traffic. should

or of only the those folks is near about through but to and So, and converting when we decision with attract extent really customers campaigns, after the that continuing they addressing customer we into promotions incentivize we top constant to communication to being when will that a to to them salons too. near-term targeted retained traffic, have There's it them and chats baseline. going can ROI move mind go help think time fact through the for term, does to repeat long existing marketing that the when get journey traffic The is thing and just can about give lapsed. Not come XX-day foundational reasons dollars move good to through up the reset made leave a number to kind is ads, helps traffic term haircut the we their back. retention of long the provide that CRM come to levels. way back a has that, There's

So, and add on keep when building then, we retaining start other. each the they new new

us is of relates drive. term this So, kind a to priority near traffic near-term as for it big

Biz McShane

Thank Matt. our Have Those very earnings are you the for much, Thank you day. Regis wonderful a call. for joining today. questions

Regis (RGS) 3 Feb 222022 Q2 Earnings call transcript