Regis Corporation Q3 FY2026 earnings call

New CEO Introduction & Strategic Direction • New CEO Susan Linton-Smith has served on Regis' board since January 2025, most recently as board chair, with 35+ years of leadership experience in consumer brands, multi-unit retail franchising, and beauty services. Her approach is franchisee-centric, focused on supporting franchisee success and improving the guest experience to move the business from post-COVID stability to sustainable growth.

Core Growth Priorities

1. Grow Supercuts via the three-pillar North Star transformation plan: • Evolve brand strategy: Completed new brand positioning with the tagline "confidence without compromise", with insights integrated into stylist recruitment and future salon remodeling plans. • Modernize digital experience: Strengthening the post-2024 launched loyalty program to build a robust CRM platform, shifting from transactional guest relationships to personalized, digitally-enabled engagement. Evaluating POS, web and mobile platform enhancements, and AI tools for scheduling, staffing optimization, and real-time salon KPI dashboards, which will be piloted in company-owned salons first before system-wide scaling. • Drive operational excellence: Investing in training programs to ensure consistent guest experience and technical excellence, with plans to build a modern, scalable education ecosystem for stylist training and franchise business development. System-wide franchise consolidation efforts match exiting owners with growth-focused operators to reduce net salon closures.
2. Strengthen company-owned salons as a best-in-class test-and-learn platform: • Regis acquired ~300 salons from a large franchisee in December 2024, split evenly between Supercuts, Cost Cutters, and Holiday Hair. A dedicated EVP now leads the segment full-time to test innovations and scale successful practices across the system. Initial pricing adjustments moved salon pricing from below to slightly above brand averages, offsetting labor cost increases from updated stylist pay plans and minimum wage hikes.
3. Turn around underperforming SmartStyle: • The second-largest brand and royalty stream is developing turnaround initiatives focused on improving traffic, retention, and salon economics aligned with its Walmart-hosted retail positioning of fast, convenient, affordable services. Further details will be shared in future calls.

Financial Foundation & Capital Updates • Six consecutive quarters of positive operating cash flow, with continued disciplined G&A reduction: adjusted G&A decreased to $9.5 million in Q3 from $10.2 million year-over-year. The company is actively pursuing debt refinancing to lower cost of capital and enhance financial flexibility, with a new board member added with deep credit market expertise to support this effort.

Consolidated total third quarter 2026 revenue was $52.4 million, an 8.1% year-over-year decrease driven primarily by lower non-cash franchise fee recognition. Consolidated adjusted EBITDA was $7.7 million, an 8.5% year-over-year increase from $7.1 million in the prior year quarter, driven by lower G&A expenses and stronger performance from the company-owned salon segment.

Franchise Segment: Adjusted EBITDA for the franchise segment was $6.2 million, a $100,000 year-over-year decrease, due to lower royalties and non-cash franchise fees partially offset by lower G&A expenses. Franchise EBITDA as a percentage of franchise revenue improved to 18.7%, up from 16.5% in the prior year quarter. Supercuts, the flagship brand, accounts for nearly 50% of total salons and over 60% of the company's royalty revenue, and delivered 5% same-store sales growth in Q3. SmartStyle, the second-largest brand by royalty contribution, is currently underperforming.

Company-Owned Salon Segment: Adjusted EBITDA for the company-owned salon segment improved by $600,000 year-over-year to $1.4 million. The segment delivered 9.6% same-store sales growth in Q3, driven primarily by pricing actions and portfolio optimization of closing underperforming locations. Consolidated same-store sales growth across all segments was 2.6% for the quarter.

• Net franchise location declines in the fourth quarter of fiscal 2026 are expected to be consistent with the recent run rate of ~50 net closures per quarter, a meaningful improvement from annual net declines of 414 in fiscal 2024 and 430 in fiscal 2025. • Full-year fiscal 2026 unrestricted cash generated from core operations is expected to increase meaningfully year-over-year, supported by continued operational strength, full-year results from acquired company-owned salons, and the absence of prior year one-time expenses, though quarterly cash generation may vary due to working capital timing. • Accumulated ad fund surplus will be deployed in the first quarter of fiscal 2027, when new marketing creative is ready, to increase marketing spend and drive guest awareness and traffic.

• Supercuts' same-store sales results may continue to fluctuate during the brand transformation, and sustained performance improvement requires durable long-term traffic gains that have not yet been achieved. • Company-owned salon traffic trends have remained negative since the 2024 acquisition, even after initial improvements, and additional work is needed to drive sustainable traffic growth and expand margins through improved labor efficiency. • SmartStyle remains an underperforming brand that continues to weigh on overall company growth. • Pricing power is limited by competitive market conditions, and the full extent of pricing elasticity for Regis services is still being evaluated.

Q: A asks for details on salon-level four-wall break-even dynamics and how they inform Regis' pricing strategy, plus context on average ticket pricing headroom. / A: Linton-Smith declines to share standardized break-even data, noting it varies widely by location based on rent, labor costs, and other factors. She confirms the company's core focus is improving salon-level profitability for both corporate and franchise locations, by driving top-line traffic growth while expanding margins. She states that pricing elasticity and maximum ticket size is still being evaluated, but believes Regis still has some limited additional pricing power, and will monitor competitive pricing and value offers to guide future pricing decisions.

Q: A asks to compare performance of company-owned salons (which do not include SmartStyle locations) to the broader franchise system, and explains the 9.6% same-store sales growth for company-owned salons. / A: Linton-Smith confirms that performance quartiles for Supercuts and Cost Cutters locations are comparable between company-owned and franchise systems. She notes the 9.6% growth was driven primarily by recent pricing actions that moved company salon pricing from below the system average to slightly above average, combined with targeted operational improvements.

Q: A asks if the new CEO can share any relevant operational learnings from her prior industry experience that apply to Regis. / A: Linton-Smith states her experience operating franchise beauty service locations is directly transferable to Regis. She highlights that her core focus coming into the role is prioritizing front-line stylists, investing in their training and development, and ensuring consistent delivery of the brand promise to guests in every salon, which aligns with Regis' current strategic priorities.

Q: A asks for an update on the company's ongoing debt refinancing process. / A: Linton-Smith confirms refinancing is ongoing, the company is making good progress, and will share a public update as soon as more information is available to disclose.