Earnings call transcript Q3 2023

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Biz McShane

Good morning and thank you for joining the Regis Third Quarter Fiscal 2023 Earnings Conference Call. I am your host, Biz McShane, Vice President, Corporate Controller. All participants are in a listen-only mode. The prepared remarks by our President and Chief Executive Officer, Matthew Doctor, and Executive Vice President and Chief Financial Officer, Kersten Zupfer, are accompanied by slides to help participants follow along. [Operator Instructions].

conference recorded. this reminder, a is being As

on I on earnings and forward-looking to our remind presentation comments release along measures measures. website call Presentations be with today's These the language everyone that at a made our statements Financial to X-K Today's today also would on the call on are with Supplemental filing today. documents, like along and apply the our found included in can in reconciliation of of site. corresponding GAAP section mentioned with www.regiscorp.com/investorrelations, any slides located non-GAAP the financial Statements our their Investor Investor

will turn that, call over now I to Matt. With the

Matt Doctor

Good thank everyone, and Biz. interest you you, in morning, your Thank for Regis.

third our our and For fiscal quarter fiscal today's and call, areas focus of remainder XXXX discuss I fiscal the year XXXX. for into our highlight of results, will

this Our work to our we progress the as path results growth. efforts the Regis quarter turnaround continued on towards get of to demonstrate back

We salon quarters thus EBITDA have the system, employees, our data fiscal execution representing XXXX, hard dedication, X during points and and including and in additional all Regis work, now franchisees of operating highlight far level of the income staff. entire delivered that our positive

as versus $X.X our $X.X QX upon of outperformance continue million. a of fall a below call million, sales we to now, year when I've proud by stated tighter which EBITDA and of the of QX progress relatively balance to stress combined while doing half the We has delivering last I build and our the continuing this I key management EBITDA were of been expecting cannot beat team to made to I XXXX enough to further while period XXXX The I that the have QX EBITDA due of first positive the our on provided adjusted calls, QX continue time. guidance And previous fiscal on in of that be our with stated growth. we right guidance controllables in initiatives. EBITDA With invest just short was for

I little we loss Regis an under loss time a of a QX coming ago, a and XX-month reported million half was last million. When where with in EBITDA of XXXX, off that adjusted adjusted as in a quarter of $X.X stepped CEO year of $XX.X at the EBITDA fiscal

another represent reported $XX.X nine in Now an results have $XX positive our XXXX which to on track is quarter to of with fiscal million, XXXX, months into EBITDA million for is fiscal we go, And years. Regis improvement. adjusted best plus the

our traffic. continues Regis. our in for also And remaining franchisees while platform, We to which made, profitability to against and much delivering out be train admit remain be corporate and stylists, our on done. and rolling continue partners Management G&A, winding down for customer turn the sales there be and our recruit, We our helping we sales drive strategic know will focused is must we and progress on of first will profitability streamlining portfolio, to Salon retain our technology increasing initiatives Zenoti executing franchisees, salon

I out. the fully growth our past the franchised of have accelerate stabilized it, future to these remain a our results Our have seek for and And we will believe over business, which scaled, excited we our year efforts half initiatives, proved of the and platform. through

of prior rose of Adjusted QX on to representing for highlights quarter. year-over-year quarter, of loss to now by year a $X.X versus X-month at $XX.X versus consolidated the same-store $XX.X a quarter, in EBITDA EBITDA Adjusted ago. loss $X.X a improvement. million the million million third million improved a results million year's on compared year-to-date basis was X.X% million $X.X the year's a the some prior basis Turning and $X.X sales a

increasing segment over versus franchise of $XX.X fiscal a third to year ago million compared $X.X $XX.X basis, versus the as XXXX. year quarter up EBITDA On at segment the million, $X.X our million million was million prior is period. franchise $X.X versus EBITDA Our a year-to-date

$X.X income We reported in Operating year-to-date fiscal operating row X in a of the million months million the $X noted almost loss ended has six our positive March we million a basis million third operating the $XX.X versus a year on to year-over-year. And continue should versus $XX our Regis million years. strongest QX by loss decrease versus operating our of represents first of X-month XX, XXXX, year year-to-date cash a in improved income from an prior operating cash that be of prior versus income has quarter use It 'XX. also of $XX.X perspective, the period. at for income seen

liquidity largely structure healthy another and a million Our quarter. total capital quarter as we total last to years. remaining past of business flat stabilization remain of over end at million this This the of versus quarter-to-quarter liquidity the $XX.X three historical seen $XX with position the we've versus ended the liquidity of is figure testament the with our dips

any require sales and underperforming calls before closures of so we were unburdening volume by on see, down within that for see quarter-over-quarter there something salon ensuring footprint these the to declining closed franchise declines. customers locations viable to Now the count key wants I business more And the wind our to to a loss-making from optimize turning touch salons. want on transferred up a these our and or time we locations The to initiatives, free of resources salons staff The average franchisees. salon sales of our locations quarter continue maintain $XXX,XXX. is approximately the during effort was salons closures. low-volume other raised of These system. business significant previous store I relevant as franchisor not the system is this is to for while to reality

the demonstrated revenue and rationalization growth performance to to portfolio. improve, core as see closures. expect profitability top to continue will as our we've despite impact. continues an Regis, net closure grow overall to perspective And continue the counterbalance to count ultimately able a have We that unit been to to and But we lead from of the business bottom-line to

our work over regarding mentioned to turning business which ones calls, our some headline and foundational as have are Now remain the previous updates long-term. of I these on initiatives, now our the to all same of that short business streams

balance our support strong access while down G&A We increasing and continue of have our perspective, to, franchisees rightsizing we the salon From to corporate continue being path right so programs will franchisor. manage a our to we we on do wind our loss-making that portfolio. and a to of spend find level and continue remain field as G&A tightly the

corporate a third the of of salon XX company-owned From our we quarter, as end salons perspective, had remaining.

end around salons the these and run-off Now will XX majority between closing of of XXXX. the And calendar another assuming of XX acceleration closed no closures, XXXX, that beginning will actually those X be now of with of in XXXX. the

impact currently time or left, we winding this largely at So company negative the next the XX down thus year, these remaining stores. from P&L will less salons owned have of

salon our in stylist initiatives technology, Moving recruitment. level retention and onto marketing

we platform, operationally remain as onto over Regis also only single they is of come mentioned And the we loan. Zenoti through these balance believe as on in, migration will side, payments prime go but strategically I the Zenoti of to on system. calls, want part proceeds Pro one these payments previous there success. Not software transition no these for as possible, our down financial system example point-of-sale long-term and the benefits really focused our doubt and platform we of technology to term franchisee form gain as quickly while in need as benefits and the a point-of-sale moving short-term salons consolidating as do are both On to when this maximize financial our OpenSalon onto sale. towards the paying of I think convert payments the receive And

on our group and to Zenoti franchisees while and we engage business. than last had base testers the of a priority or and this the hoped was doing migration main we stylists, migrated close force unique us user and our how for I that originally functionality spoke sake for our expected, meets ensure of salon for exactly and been brands, And On pilot the can is currently to and longer level needs to the experience can't the system while with our and stay rush moving call, urgency, are a have we is process taking and we of that. with and

migration it work that from We Zenoti of year. is position next a innovative, on are partner getting migration the hurdle being ensure upfront to few over July of only all will is payment made, acceleration us done this solution perspective, estimate resources payments value-added salons to starts a cohort payments around will migrate portion of receive and improvements needed the Regis rate with we of Zenoti closer. that an over, certain this after important the and a an months, first with has the that number combined be features, best-in-class the representing note the for to capabilities is And collaborative deal.

received of beginning be calendar will rather So be towards 'XX the end realized moment will again, and likely of payments the additional into start migrations XXXX. not but calendar the

driver Zenoti a customers technology in by a experience with of many better as our salons. for will want onto the and will we around I benefits and knowledge the provide key comments Now that service my of as have on to lifecycle platform end ultimately well a as our this loyalty reiterating marketing across to strengthen be engagement the initiatives consolidating

our made. I spent was part in customer pleased and has I've year around lot We our up business the fundamental about a quite am of progress area with Now frankly muscle the one building marketing last that our centered of regarding better efforts, lacking greatly industry, and needed, been this that and the initiatives spoken retention.

how down and data from to technology social. As us to continuing in and path this make efforts to required retention for in some we perspective. set changes ad allocated fund efforts our foundation We're a dollars and increase the go search

profiles segment handle and customer through launch we major better of And this about largely base through the SMS. week untapped of in across historical a XX, the we're research, to is starting messaging have our program and our now of X loyalty our have brands of after that is e-mail May pilot out an industry. on We revamped our area months believe and

it to not retain seek also only through for our coming a critical, after Having we visit And lapsed new customers engage but and may are I've when that important to the into on entice today, to those and heavily also some to them back is our effects it repeat given several doors as the think market, while we cycles, past, salons. guests excited to take is tests and between ability note, the with time I behavior. have in programs new have these in months haircut the the observe noted

We learn Zenoti tests parallel with the rollout. these from in will

in only to when into dovetails the retention we stronger behind previous of on a between have need initiatives marketing discussed a believe So time we our the point-of-sale. comes provide that regarding calls, and new to making at but recommendation the as entire have next the powered order the our efforts our in we foundations to and campaigns. Zenoti, we've salons we back not start a performance on some is to can phase to view This we really about chair be by of stylist and as marketing the strong our And retention traffic efforts, the towards brand start customers. point point should also introduce and stylists lot are services ensure driving recruiting place, think we system marketing bit

stylist customer what increase will opportunity on the components perspective, largely we've counts productivity salon an efforts, underlying a be stabilized recruiting from ongoing do system which in While based and we has, point. constantly retention the place current see this and of has put our staff to at

driver stylists will major of recruitment be and salons ultimately We also and a that believe retention. stylist busier

traffic, drive retain pushing those are tests promotional behavior loyalty only to will we customers. launch repeat So also and that to encourage but build habit some to not

three The years these and that have Regis profitability have can potential will franchisees given meaningful been to our G&A. the given price fixed increases the and last to translate on taken into impact our efforts is sales that over strong

any Now we put regarding retention from on have in this of signals way stylist the in recruiting. moving place elements and no

was and and our our strategies, back front. will far ever-ongoing be will in training our tremendous. be the into hands-on these And The going this Vegas Las before, the stylist mentioned I we've our events retention Getting to in how As and we've on salons where training one we holding pleased January education be in field-based June. in teams continue strides made building and I'm and been have come in efforts, key. manager differentiated Miami we in investment held like stylist like we're maintain will to one up training

We components brands and of well We will to truly those with story refining to of trips work are believe stylists set on experience. amplified that our digital looking apart ensure is social, as properly a residing that schools will join well and why all in story as on stylists start the the to these as work careers, brands continue differentiation their form foundation as our beauty should and for destination of both hiring to recruiting platforms. as us

while of it's I initiatives, towards business. the moving collective these important needle our Now on aimed to most be to before point out our that up core wrapping continue efforts feel

continually to to on for whether growth, geographies expand, to develop, potential new strategizing that are test. or brands catalysts be We concepts

laying ongoing evolution in forward for groundwork to are more efforts look We of detail future. the in platform near those the the our discussing and

related strategic all capital I bring she forward perspective and working Directors. years. broader today's touch really Regis. KeyBanc the complementary extremely on on XX Board skillsets on our of ran will her equity Benacci markets our our to looking Board a of represented be phenomenal The I as she for addition research Nancy is to announcement to an am having Nancy Board. things also with want has to background, for to relevant will joining

believe the Regis. to to just initiatives And upon a all in are together Now the making. been been and build looking taking like catalysts, part the growth done position when excitement with the forward we fourth core beyond, for quarter business progress out future reiterate I I've to when would of, potential I my our we've of we as the have that closing calls a

profitability. business largely we can the predominantly our focus and growth of With the on and of our stabilization ahead looking in sales place, accelerating franchisee

of for our And community owners, dedication to passion, your you investor their resilience, Big business to again franchise thank our thank to all in continued partners and you members, team the for company. and our Regis. interest

turn over to will more now Kersten? the detail. review Kersten financials I the call in to

Kersten Zupfer

Thanks, Matt, and good morning.

that financial share We with continued our on are delivered our third and with improved pleased to operational progress speak results. strategy to you metrics quarter

we our call, morning's enter and final this year. will For financials perspective of the the as I quarter review share

XXXX. operating The year support with Overall, systemwide health our in growth, pace third time quarter we fiscal to we income saw positive investments for pleased systemwide since we for operating revenue business, remain believe and while of further increased deliver on the our strategy. same-store sales, profit the of are and increased first made we the

through to relates and reduction from a Reviewing $X expected were decline beginning the flows a profitability. million systemwide third revenues more and declined our third our X% and of quarter performance no detail statement, down with rental primarily of on income is was year. company-owned better income grew income quarter. in and We revenue rental therefore, expense, the the revenue impact sales, franchise This the believe same-store has million in the reflection total both and and Franchise salons. quarter which prior wind $XX in revenue

continue. we expect QX revenue, into revenue to these trends Looking

lapping in increase the GAAP company-owned operating the $X charges $XX We our by controlling The of salons. posted million million quarter, in and winddown million. impairment profit prior operating incurred on G&A, $XX of loss-generating year focus of was driven GAAP a in profit

operating continue. and profit trend quarter that currently year each of We produced are have to fiscal this projecting

On near prior turn noise G&A salons. in EBITDA results, quarter. was driven an the improvement loss-generating let's was basis, of million consolidated $X reported adjusted down the the compared numbers. quarter in wind lower which company-owned eliminates million $X our breakeven third to the and adjusted to Now The by year's

to EBITDA stylist As quarter and this earnings second call, in recorded we G&A lower the retention adjusted quarter the training investments we due and our during in this quarter expected in discussed second to last one-time report quarter. compared expected to benefits quarter

closely. we The and stylist metric retention to quarter was million second quarter I due increase our a of very training is rate the $X monitor in G&A from the result in run G&A as optimize by efforts $X improved structure. to the investments year-over-year expected G&A a million approximately just mentioned. Our cost in

adjusted substantial Looking forward, $XX our be XXXX believe decrease fiscal $XX year G&A range $XX G&A we annual in will of This is run the rate a of million. to the annually. million million from

from Our core million an basis, end lost quarter compared for in buyout year. in our year loss-generating period sense when driven improvement On either over the makes quarter a improved prior same $X.X fewer segment the adjusted a million to million as current adjusted the it or we're quarter, $X just The franchise $X the business so. improvement $X closing EBITDA company-owned quarter. last million salons to $X having million achieved salons in the do company-owned by EBITDA is of economic and lease negotiating at

approximately mentioned, by will salons lease Matt next year. remaining our As of end come corporate X/Xrds to February of

company-owned XXXX. salons have of Our year the half less fiscal will significantly second in impact

space the accounting million million lease associated liabilities XX, our liquidity, had deferred pay to March financing the by leases. their of debt should in franchisees standards, long be position, of as fees, the entire our related to was responsible million liquidity, to life At debt factored salons of XX-remaining These leases. the for our our including XXXX, Regis just Turning lease to over million excluding $XXX.X lease cash. are subleasing salons $XX franchisees our of liabilities outstanding, to which Regis' over capacity shows available liabilities of and March as company-owned $XX and continue XX, $XX liabilities balance of currently. and million are serviced to not respective the is all $X office $XXX as with solely for million. Due we sheet life so obligations revolver of corporate operating they franchisees amounts

higher million X to $X million which $X.X business year, improved exiting G&A prior be cash our the used rates may $XX year by use lower interest On our cash due the million closure million approximately was of from we basis, $X.X the year-over-year of months structure, of in used In the we increased of in of offset the operations, from first QX. cash expense distribution debt. company-owned used loss-generating our to impacted and bank fiscal XXXX, in control. salons interest of partially Future primarily variability rates year due by on cannot that variable interest a

in mentioned expect cash use training in a Matt fourth retention We to hosting quarter of event are amount as as another we stylist the similar and Miami.

use XXXX. fiscal Management in significantly XXXX has cash to to improved is fiscal cash to returning committed year and compared year generation. smart cash management Our

I would in remarks. This through interest to like concludes the Q&A. to Biz, turn for you will Regis. I thank who your us lead my prepared continued and will support back again it

Biz McShane

Kersten. Thank you,

question Our Eric from to Cap from Consumer unmute, Eric. Small Research. remember first is Please Beder

Eric Beder

us in that Good bit of of a raised Could little back now seeing your I more overview prices to What people franchisees economically? you kind terms guys, that of are morning. going are general throughput they Congratulations. guess after clients and events? I work give you COVID. you're know of what seeing a

Matt Doctor

that's it. since pretty and line other about increases I significant there's a with with done then. since as up been of you pretty competitors. Matt. has appreciate XX% price mentioned, kept COVID, retail in But what Yes. lot it's Eric, Yes, XX%,

and of to interesting. throughput that's of of actually profile terms like it's done customers, In traffic customer what

those bit much who of past discussed traffic perspective. price, a those price large been a a increase little actually a taken been hasn't or an pretty minimal increase, between in there datapoints. increase price elasticity I from price a Whether price have it's think between the we steady little have and of that lot X

pricing pretty as opportunity actually we So think we that's continue why on. there's a for decent

in brands of seen profile though haven't value the range of wide we we customer, of a terms even of are in a our segment. as sit tailored much And different to customers actually lot

everything range mentioned like, anyone cares for what really for I provide just think hair about to our someone who's strong -- someone that in in I've do haircuts convenient from the a and salons can quality quick looks in between. who out convenient and looking because their past really

to So an are set the I we I is because macroeconomic but as for looking successful the up a is mentioned, what where profile environment? as great in for for a those that to is, is it's place someone folks for extent And be given in happens landing similar, that who's of well. looking think customer be spot ever-changing this absolutely, value economically going point and someone will future the price

Eric Beder

Great.

to stylist do I schools, here. have pieces, probably gap terms squeeze the between their all terms know what lag you you're capacity brand you going to are stylists In with [indiscernible] do in -- the should campaigns to normal the like want into of especially people stylists, stores. and for needed, you to is that What of back out some of the of we're pieces going times kind rolling it kind seeing adding your so trainings, the what now there's and go that ability more get that drive other to seems are be that

Matt Doctor

where Even I retention been today, stable, amplified always a went it's would is here great even it's It's couple of back a initiative, place we to past largely of recall recruiting say sit ever-ongoing an Got the it. through before will right? up more I a kind quarters. Yes. question. as stylist No, as COVID, that's we topic. key crept

doing actually We're that. the our pretty importance a decent job, to actually needing of seeing and ability as retain almost as franchisees much we're are, as So recruiting.

making the sure just good recruiting that of a we're at we're as to stylists clip. little our We that of have a bit efforts retaining

position we're we've come work to recruit this we've to to a in mentioned, in We of we're bit stronger be it's stories, to investment of I your here, lot a that given going stronger It's done the little recruiting, how possible But that best forward. as as muscle in stronger lot an in recruit. point, now think in a we're can make successfully sure ongoing going kind where the to of our further we're effort. and we're

yes, this see thing want to to time. ever to I we're an So that over going be think is ongoing going

given kind I where the think that's of why mentioned we given that and I are. meantime, in stabilization that

capacity I have of by system we is the to stylists be will we the to of that top add that think of and large in there production increase incremental and anything do on that. amount look the just

there the in forcing terms any an all on think quite it's mean maybe want, of those it current a capacity meaningful. a $X,XXX help. you very to And is or you additional So haircuts, one to whether just customers one the was. to our we salon additional extra at driving And upon be maybe on think pricing, to new, and who a haircut do net is an increase current thing actually another or extra, there this per if demonstrate didn't That's that at day, cut one that think even that's is key X in it, weekends, we $XX,XXX way call from productivity additional less, of done, rate. with coming that there which one will $X.X to of royalties if be going what folks two weekend, if is ability the base. Wouldn't million we can are

of recruiting, one busy. retention to be best back having tools of recruit Going stylist question is stylists them the original to the

a be than retention nicely only get play, but one. business of busier I rather a also of books stylists dovetail going think business from books they recruitment will busier so inflows salons, stronger or day when play to set not know they're would into And

Eric Beder

Zenoti rollout layer and the pieces, the new when these you're in That Zenoti linked? makes affinity and for game other franchisee if how terms they sense. Are of of the marketing are, brand pieces on those and does a And programs a doing? together? of systems they you of link do When lot kind how change

Matt Doctor

an a built-in and why. the OpenSalon marketing key because that lot there question to SuperSalon it's the you. great the And performance And refer driver marketing. Yes. That's reason lifecycle way Pro is have a we kind of structure others Thank rules I to yes, efforts, underlying and actually a built-in ability POS system to and that link SMS in of e-mail and the a and are itself. Zenoti loyalty and has permissioning based provide working. and send currently right

allows or that within actually, on rules message. rules it even be franchisee our are the automatically So kind all having to bridge based to of between customer Zenoti national and profiles customer

that important functionality for it's I gap When and enable is bridging folks us it's and mentioned the so currently happen. link between today. to is actually out So is this bit systems a because that there these current why are that this point-of-sale why enabling it of such is something initiatives, it because which a is is customer, onto getting that and that driver why key link a it to little a makes

Eric Beder

Great. Last question.

a of lot in-store talked training. in-store you terms about styling, In

there last mentioned kind stores pieces. was you on the how and/or I point like think of in What call is for the you. forward? refinements the the going there Thank conference expansions training central a further

Matt Doctor

thing same the it's holds. same No, Yes. concept,

going all to back engagement engaged dedicated have and are to that going in-salon field-based natural trainers that salons are staff, hands-on resource. franchisees super above. inherent members, to well, this they when think gets in-salon really and the given design a training, have you that all performing drive I trainers be team have and And you're

a a of better new I've other than have just sales mentioned ago. don't. couple we in see lot our upwards sales brands sometimes that salons been a This that of of out XX% those as that past, is program resources, is in this rolled of dedicated that So a relatively those quarters we've has of the program that

it's elsewhere. free new system But really invest continue This wouldn't means, engagement It's nice toolkit here a So to one to salons. and no should some as we where design the stories their great we're their to one that's path for that's entire going It's we They've also hires for to those that invest they of on-premise to something say, that's is of to value. brands, and tool in. we continues this the It's hope salons. train get our prove we this ultimately we team come program why to a through its they think is We'll get digital a everybody, continue raised members, career hand future and out join for want that to problem. stay. available program into and take our as about advantage someone want them franchisees. get here

Eric Beder

Great. Good Thank luck for the the rest you. year. of

Biz Murphy

Eric. Thanks,

through your you came Could continued advise the status listing the please with question the chat. next NYSE? Our of

Kersten Zupfer

have Yes. caused market million which closed $XX $XX million up March that cap. And fall to we us of the under under back $X, We requirement. in cap did to a days market couple are we

So point, as the do period to market in requirement in at the relates care it we cap this remain NYSE.

Biz Murphy

Kersten. you, Thank

appreciate All the chat great questions Looking have Thank at for joining the this Have at again. you, Regis right, We support. everyone, your we time. call. further no a day.

Regis (RGS) 3 May 232023 Q3 Earnings call transcript