Regis Corporation Q1 FY2026 earnings call

Management Statement and Operational Highlights

• Supercuts Modernization: Same-store sales up 2.5%, loyalty program participation increased. Brand modernization ongoing with pilots for digital interaction on website and app. Completed customer research informing brand story and creative direction.
• Company-owned Salons: Focus on operational discipline, implemented new status pay plan, improved stylist productivity and retention. Three quarters into operating acquired salons, showing positive trends.
• Key Initiatives: Advancing secondary initiatives like technology and digital acceleration, extending Supercuts transformation to portfolio brands, focusing on people and culture with insights from stylist research.
• Financials: Total first-quarter revenue was $59 million, up 28% due to acquired company-owned salons and same-store sales, offset by lower franchise rental income. GAAP operating income was $5.9 million, up from $2.1 million year-ago.

Segment Performance

• Consolidated: Consolidated same-store sales increased 0.9% in 2026 Q1. Adjusted EBITDA was $8 million, up from $7.6 million year-over-year. Operating cash flow was $2.3 million, a $3.6 million improvement versus the prior year.
• Supercuts: Same-store sales for Supercuts were up 2.5% in Q1. Loyalty program participation grew from 36% in the prior quarter to 40% in fiscal Q1.
• Company-owned salons: Acquired over 300 salons earlier in the year. Q1 delivered month-over-month gains in traffic and same-store sales, with adjusted EBITDA of $1.6 million.
• Franchise segment: Adjusted EBITDA for the franchise segment was $6.4 million in Q1, down from $8 million in the prior year quarter, primarily due to lower royalties and fees.
• Company-owned salons segment: Adjusted EBITDA for company-owned salons improved by $1.9 million year over year to $1.6 million for the quarter, driven by an increased number of company-owned salons.

Guidance

• Cash Flow: Anticipate meaningful increase in unrestricted cash generated from core operations in fiscal 2026, supported by operational strength and absence of one-time expenses. Ad fund cash to be deployed in 2026 to support growth initiatives.
• Debt: No near-term refinancing due to unfavorable economics, but will assess as debt agreements mature and market conditions evolve.

Risks

• Franchise Closures: Underperforming stores closed, with a performance gap of approximately $350,000 between closed stores and top-performing units.
• Refinancing Uncertainty: Current debt terms not favorable for near-term refinancing, impacting shareholder interest.
• Brand Transformation: Full system alignment for Supercuts modernization will take time.

Question and Answer

Q: Provide more details about pricing actions you have taken and impact on traffic, if any?

A: Franchisees use third-party competitive surveys, corporate salons adjust prices based on factors like minimum wage. Traffic trends show typical seasonality, no significant deviations.

Q: Can you talk about traffic trends at Supercuts Smart Style, if any?

A: There are improvements in same-store sales, and focus on addressing traffic and performance in the SmartStyle brand.

Q: Is store closures guidance available?

A: Not providing specific guidance on closures, as it depends on lease expirations and other unforeseen factors.

Q: What's the impact of the FICA tax tip credit on franchisees?

A: Significant positive impact for franchisees, with industry work ongoing to ensure proper implementation.

Q: Can you give more insight into G&A for this year?

A: Anticipate G&A to be in the range of 40 to 43 million annually, including Align transaction-related costs.

Q: Do company-owned stores all consist of aligned stores now?

A: Primarily Align-acquired salons with a few additional select salons.

Q: How is the Supercuts prototype store rollout planned?

A: Work on design with outside service, construction expected in early 2026, focusing on affordability and brand alignment.

Q: Update on CEO search?

A: Interim CEO Jim Lane is working closely with the board, final decision expected in coming months.

Q: When does near term for refinancing mean?

A: Near term means no immediate refinancing due to current economics, but will evaluate as agreements mature.