☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended December 31, 2021
|
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OR | |||||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to |
Minnesota | 41-0749934 | |||||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
3701 Wayzata Boulevard, | Minneapolis | Minnesota | 55416 | |||||||||||
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||
Emerging growth company | ☐ |
Title of each class | Trading symbol | Name of exchange | ||||||||||||
Common Stock, $0.05 par value | RGS | NYSE |
December 31,
2021 |
June 30,
2021 |
|||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 35,442 | $ | 19,191 | ||||||||||
Receivables, net | 16,624 | 27,372 | ||||||||||||
Inventories | 16,008 | 22,993 | ||||||||||||
Other current assets | 15,439 | 17,103 | ||||||||||||
Total current assets | 83,513 | 86,659 | ||||||||||||
Property and equipment, net | 22,244 | 23,113 | ||||||||||||
Goodwill | 229,028 | 229,582 | ||||||||||||
Other intangibles, net | 3,474 | 3,761 | ||||||||||||
Right of use asset (Note 7)
|
548,598 | 611,880 | ||||||||||||
Other assets | 39,301 | 41,388 | ||||||||||||
Total assets | $ | 926,158 | $ | 996,383 | ||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 18,579 | $ | 27,157 | ||||||||||
Accrued expenses | 39,041 | 54,857 | ||||||||||||
Short-term lease liability (Note 7) | 110,597 | 116,471 | ||||||||||||
Total current liabilities | 168,217 | 198,485 | ||||||||||||
Long-term debt, net (Note 8)
|
194,177 | 186,911 | ||||||||||||
Long-term lease liability (Note 7)
|
457,924 | 518,866 | ||||||||||||
Other non-current liabilities | 67,552 | 75,075 | ||||||||||||
Total liabilities | 887,870 | 979,337 | ||||||||||||
Commitments and contingencies (Note 5)
|
||||||||||||||
Shareholders' equity: | ||||||||||||||
Common stock, $0.05 par value; issued and outstanding 45,490,074 and 35,795,844 common shares at December 31, 2021 and June 30, 2021, respectively
|
2,277 | 1,790 | ||||||||||||
Additional paid-in capital | 61,601 | 25,102 | ||||||||||||
Accumulated other comprehensive income | 9,105 | 9,543 | ||||||||||||
Accumulated deficit | (34,695) | (19,389) | ||||||||||||
Total shareholders' equity | 38,288 | 17,046 | ||||||||||||
Total liabilities and shareholders' equity | $ | 926,158 | $ | 996,383 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||
Royalties | $ | 16,125 | $ | 12,749 | $ | 32,726 | $ | 24,154 | ||||||||||||||||||
Fees | 4,867 | 2,438 | 8,132 | 4,480 | ||||||||||||||||||||||
Product sales to franchisees | 2,428 | 14,236 | 10,436 | 27,978 | ||||||||||||||||||||||
Advertising fund contributions | 8,021 | 4,715 | 16,136 | 9,224 | ||||||||||||||||||||||
Franchise rental income (Note 7)
|
33,772 | 32,285 | 67,534 | 64,568 | ||||||||||||||||||||||
Company-owned salon revenue | 5,043 | 37,897 | 13,048 | 85,312 | ||||||||||||||||||||||
Total revenue | 70,256 | 104,320 | 148,012 | 215,716 | ||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Cost of product sales to franchisees | 3,419 | 11,324 | 11,532 | 22,003 | ||||||||||||||||||||||
General and administrative | 15,984 | 26,690 | 37,773 | 52,837 | ||||||||||||||||||||||
Rent (Note 7)
|
3,088 | 12,902 | 4,891 | 26,127 | ||||||||||||||||||||||
Advertising fund expense | 8,021 | 4,715 | 16,136 | 9,224 | ||||||||||||||||||||||
Franchise rent expense | 33,772 | 32,285 | 67,534 | 64,568 | ||||||||||||||||||||||
Company-owned salon expense (1) | 5,067 | 33,611 | 13,011 | 76,554 | ||||||||||||||||||||||
Depreciation and amortization | 1,980 | 6,388 | 3,849 | 13,764 | ||||||||||||||||||||||
Long-lived asset impairment | 52 | 3,160 | 215 | 8,984 | ||||||||||||||||||||||
Total operating expenses | 71,383 | 131,075 | 154,941 | 274,061 | ||||||||||||||||||||||
Operating loss | (1,127) | (26,755) | (6,929) | (58,345) | ||||||||||||||||||||||
Other (expense) income: | ||||||||||||||||||||||||||
Interest expense | (3,449) | (3,701) | (6,755) | (7,463) | ||||||||||||||||||||||
Loss from sale of salon assets to franchisees, net | (615) | (3,226) | (1,695) | (3,888) | ||||||||||||||||||||||
Interest income and other, net | 99 | 403 | (140) | 517 | ||||||||||||||||||||||
Loss from operations before income taxes | (5,092) | (33,279) | (15,519) | (69,179) | ||||||||||||||||||||||
Income tax benefit | 164 | 400 | 213 | 1,035 | ||||||||||||||||||||||
Net loss | $ | (4,928) | $ | (32,879) | $ | (15,306) | $ | (68,144) | ||||||||||||||||||
Net loss per share: | ||||||||||||||||||||||||||
Basic and diluted:
|
||||||||||||||||||||||||||
Net loss per share, basic and diluted (2) | $ | (0.11) | $ | (0.92) | $ | (0.37) | $ | (1.90) | ||||||||||||||||||
Weighted average common and common equivalent shares outstanding: | ||||||||||||||||||||||||||
Basic and diluted | 45,721 | 35,931 | 41,274 | 35,889 | ||||||||||||||||||||||
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
Net loss | $ | (4,928) | $ | (32,879) | $ | (15,306) | $ | (68,144) | ||||||||||||||||||
Foreign currency translation adjustments | 36 | 835 | (438) | 1,337 | ||||||||||||||||||||||
Comprehensive loss | $ | (4,892) | $ | (32,044) | $ | (15,744) | $ | (66,807) |
Three Months Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Common Stock |
Additional
Paid-In Capital |
Accumulated
Other Comprehensive Income |
Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2021 | 43,964,489 | $ | 2,198 | $ | 58,310 | $ | 9,069 | $ | (29,767) | $ | 39,810 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | (4,928) | (4,928) | ||||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | 36 | — | 36 | ||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | 1,223,314 | 61 | 4,931 | — | — | 4,992 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | (1,374) | — | — | (1,374) | ||||||||||||||||||||||||||||||||
Net restricted stock activity | 302,271 | 18 | (266) | — | — | (248) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 45,490,074 | $ | 2,277 | $ | 61,601 | $ | 9,105 | $ | (34,695) | $ | 38,288 |
Three Months Ended December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
Common Stock |
Additional
Paid-In Capital |
Accumulated
Other Comprehensive Income |
Retained Earnings | Total | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 | 35,665,783 | $ | 1,783 | $ | 20,596 | $ | 7,951 | $ | 59,211 | $ | 89,541 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | (32,879) | (32,879) | ||||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | 835 | — | 835 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 1,314 | — | — | 1,314 | ||||||||||||||||||||||||||||||||
Net restricted stock activity | 102,303 | 5 | 166 | — | — | 171 | ||||||||||||||||||||||||||||||||
Minority interest | — | — | — | — | (534) | (534) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | 35,768,086 | $ | 1,788 | $ | 22,076 | $ | 8,786 | $ | 25,798 | $ | 58,448 |
Six Months Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
Common Stock |
Additional
Paid-In Capital |
Accumulated
Other Comprehensive Income |
Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 | 35,795,844 | $ | 1,790 | $ | 25,102 | $ | 9,543 | $ | (19,389) | $ | 17,046 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | (15,306) | (15,306) | ||||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | (438) | — | (438) | ||||||||||||||||||||||||||||||||
Issuance of common stock, net of offering costs | 9,295,618 | 465 | 36,720 | — | — | 37,185 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 305 | — | — | 305 | ||||||||||||||||||||||||||||||||
Net restricted stock activity | 398,612 | 22 | (526) | — | — | (504) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 45,490,074 | $ | 2,277 | $ | 61,601 | $ | 9,105 | $ | (34,695) | $ | 38,288 |
Six Months Ended December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
Common Stock |
Additional
Paid-In Capital |
Accumulated
Other Comprehensive Income |
Retained Earnings | Total | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | 35,625,716 | $ | 1,781 | $ | 22,011 | $ | 7,449 | $ | 94,462 | $ | 125,703 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | (68,144) | (68,144) | ||||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | 1,337 | — | 1,337 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 89 | — | — | 89 | ||||||||||||||||||||||||||||||||
Net restricted stock activity | 142,370 | 7 | (24) | — | — | (17) | ||||||||||||||||||||||||||||||||
Minority interest | — | — | — | — | (520) | (520) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | 35,768,086 | $ | 1,788 | $ | 22,076 | $ | 8,786 | $ | 25,798 | $ | 58,448 |
Six Months Ended December 31, | ||||||||||||||
2021 | 2020 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net loss | $ | (15,306) | $ | (68,144) | ||||||||||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||||||||
Depreciation and amortization | 3,284 | 11,123 | ||||||||||||
Long-lived asset impairment | 215 | 8,984 | ||||||||||||
Deferred income taxes | (529) | (669) | ||||||||||||
Loss from sale of salon assets to franchisees, net | 1,695 | 3,888 | ||||||||||||
Stock-based compensation | 305 | 89 | ||||||||||||
Amortization of debt discount and financing costs | 920 | 875 | ||||||||||||
Other non-cash items affecting earnings | 551 | 202 | ||||||||||||
Changes in operating assets and liabilities, excluding the effects of asset sales (1) | (15,463) | (21,812) | ||||||||||||
Net cash used in operating activities | (24,328) | (65,464) | ||||||||||||
Cash flows from investing activities: | ||||||||||||||
Capital expenditures | (2,947) | (7,502) | ||||||||||||
Proceeds from sale of assets to franchisees | — | 7,148 | ||||||||||||
Costs associated with sale of salon assets to franchisees | — | (222) | ||||||||||||
Proceeds from company-owned life insurance policies | — | 1,200 | ||||||||||||
Net cash (used in) provided by investing activities | (2,947) | 624 | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Borrowings on revolving credit facility | 10,000 | — | ||||||||||||
Repayments of revolving credit facility | (2,734) | — | ||||||||||||
Proceeds from issuance of common stock, net of offering costs | 37,185 | — | ||||||||||||
Taxes paid for shares withheld | (823) | (212) | ||||||||||||
Minority interest buyout | — | (562) | ||||||||||||
Distribution center lease payments | — | (478) | ||||||||||||
Net cash provided by (used in) financing activities | 43,628 | (1,252) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (134) | (68) | ||||||||||||
Increase (decrease) in cash, cash equivalents, and restricted cash | 16,219 | (66,160) | ||||||||||||
Cash, cash equivalents and restricted cash: | ||||||||||||||
Beginning of period | 29,152 | 122,880 | ||||||||||||
End of period | $ | 45,371 | $ | 56,720 |
December 31,
2021 |
June 30,
2021 |
Balance Sheet Classification | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Receivables from contracts with customers, net | $ | 9,238 | $ | 19,112 | Receivables, net | |||||||||||||||
Broker fees | 17,288 | 19,254 | Other assets | |||||||||||||||||
Deferred revenue: | ||||||||||||||||||||
Current | ||||||||||||||||||||
Gift card liability | $ | 2,131 | $ | 2,240 | Accrued expenses | |||||||||||||||
Deferred franchise fees unopened salons | 21 | 40 | Accrued expenses | |||||||||||||||||
Deferred franchise fees open salons | 5,897 | 5,884 | Accrued expenses | |||||||||||||||||
Total current deferred revenue | $ | 8,049 | $ | 8,164 | ||||||||||||||||
Non-current | ||||||||||||||||||||
Deferred franchise fees unopened salons | $ | 4,128 | $ | 6,571 | Other non-current liabilities | |||||||||||||||
Deferred franchise fees open salons | 29,761 | 32,365 | Other non-current liabilities | |||||||||||||||||
Total non-current deferred revenue | $ | 33,889 | $ | 38,936 |
Balance as of June 30, 2021 | $ | 7,774 | ||||||
Provision for doubtful accounts (1) | (41) | |||||||
Provision for franchisee rent (2) | 811 | |||||||
Reclass of accrued rent (3) | 396 | |||||||
Write-offs | (589) | |||||||
Balance as of December 31, 2021 | $ | 8,351 |
Balance as of June 30, 2021 | $ | 19,254 | ||||||
Additions | 25 | |||||||
Amortization | (1,625) | |||||||
Write-offs | (366) | |||||||
Balance as of December 31, 2021 | $ | 17,288 |
Remainder of 2022 | $ | 3,034 | ||||||
2023 | 5,724 | |||||||
2024 | 5,489 | |||||||
2025 | 5,096 | |||||||
2026 | 4,630 | |||||||
Thereafter | 11,685 | |||||||
Total | $ | 35,658 |
Three Months Ended December 31, 2021 | Six Months Ended December 31, 2021 | |||||||||||||||||||
Restricted stock units (RSUs) | 770,309 | 773,296 | ||||||||||||||||||
Stock options (SOs) | 537,500 | 537,500 | ||||||||||||||||||
Stock appreciation rights (SARs) | 487,500 | 487,500 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
Income tax benefit | $ | 164 | $ | 400 | $ | 213 | $ | 1,035 | ||||||||||||||||||
Effective tax rate | 3.2 | % | 1.2 | % | 1.4 | % | 1.5 | % |
December 31,
2021 |
June 30,
2021 |
|||||||||||||
(Dollars in thousands) | ||||||||||||||
Cash and cash equivalents | $ | 35,442 | $ | 19,191 | ||||||||||
Restricted cash, included in other current assets (1) | 9,929 | 9,961 | ||||||||||||
Total cash, cash equivalents and restricted cash | $ | 45,371 | $ | 29,152 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
Office and warehouse rent | $ | 1,248 | $ | 1,194 | $ | 2,917 | $ | 2,397 | ||||||||||||||||||
Lease termination expense (1) | 238 | 1,117 | 1,578 | 6,670 | ||||||||||||||||||||||
Lease liability benefit (2) | (496) | (2,226) | (2,927) | (8,286) | ||||||||||||||||||||||
Franchise salon rent | 246 | 440 | 575 | 1,158 | ||||||||||||||||||||||
Company-owned salon rent | 1,852 | 12,377 | 2,748 | 24,188 | ||||||||||||||||||||||
Total | $ | 3,088 | $ | 12,902 | $ | 4,891 | $ | 26,127 |
Fiscal Year | Leases for Franchise Salons | Leases for Company-owned Salons | Corporate Leases | Total Operating Lease Payments | Sublease Income To Be Received From Franchisees | Net Rent Commitments | ||||||||||||||||||||||||||||||||
Remainder of 2022 | $ | 64,122 | $ | 2,548 | $ | 1,163 | $ | 67,833 | $ | (64,122) | $ | 3,711 | ||||||||||||||||||||||||||
2023 | 116,691 | 4,361 | 2,365 | 123,417 | (116,691) | 6,726 | ||||||||||||||||||||||||||||||||
2024 | 102,001 | 2,579 | 1,486 | 106,066 | (102,001) | 4,065 | ||||||||||||||||||||||||||||||||
2025 | 85,465 | 808 | 1,525 | 87,798 | (85,465) | 2,333 | ||||||||||||||||||||||||||||||||
2026 | 72,253 | 447 | 1,563 | 74,263 | (72,253) | 2,010 | ||||||||||||||||||||||||||||||||
Thereafter | 180,236 | 499 | 6,498 | 187,233 | (180,236) | 6,997 | ||||||||||||||||||||||||||||||||
Total future obligations | $ | 620,768 | $ | 11,242 | $ | 14,600 | $ | 646,610 | $ | (620,768) | $ | 25,842 | ||||||||||||||||||||||||||
Less amounts representing interest | 75,330 | 619 | 2,140 | 78,089 | ||||||||||||||||||||||||||||||||||
Present value of lease liabilities | $ | 545,438 | $ | 10,623 | $ | 12,460 | $ | 568,521 | ||||||||||||||||||||||||||||||
Less current lease liabilities | 104,122 | 4,606 | 1,869 | 110,597 | ||||||||||||||||||||||||||||||||||
Long-term lease liabilities | $ | 441,316 | $ | 6,017 | $ | 10,591 | $ | 457,924 |
Maturity Date |
December 31,
2021 |
December 31,
2021 |
June 30,
2021 |
|||||||||||||||||||||||
(Fiscal Year) | (Interest rate %) | (Dollars in thousands) | ||||||||||||||||||||||||
Revolving credit facility | 2023 | 5.125% | $ | 194,177 | $ | 186,911 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
Long-lived asset impairment (1) | $ | 52 | $ | 3,160 | $ | 215 | $ | 8,984 |
December 31,
2021 |
June 30,
2021 |
|||||||||||||
FRANCHISE SALONS:
|
||||||||||||||
SmartStyle/Cost Cutters in Walmart Stores
|
1,676 | 1,666 | ||||||||||||
Supercuts
|
2,345 | 2,386 | ||||||||||||
Portfolio Brands
|
1,386 | 1,357 | ||||||||||||
Total North American salons
|
5,407 | 5,409 | ||||||||||||
Total International salons (1)
|
146 | 154 | ||||||||||||
Total Franchise salons
|
5,553 | 5,563 | ||||||||||||
as a percent of total Franchise and Company-owned salons
|
97.4 | % | 95.3 | % | ||||||||||
COMPANY-OWNED SALONS:
|
||||||||||||||
SmartStyle/Cost Cutters in Walmart Stores
|
63 | 91 | ||||||||||||
Supercuts
|
22 | 35 | ||||||||||||
Portfolio Brands
|
65 | 150 | ||||||||||||
Total Company-owned salons
|
150 | 276 | ||||||||||||
as a percent of total Franchise and Company-owned salons
|
2.6 | % | 4.7 | % | ||||||||||
OWNERSHIP INTEREST LOCATIONS:
|
||||||||||||||
Equity ownership interest locations
|
76 | 78 | ||||||||||||
Grand Total, System-wide
|
5,779 | 5,917 |
Three Months Ended December 31, 2021 | ||||||||||||||||||||
Franchise | Company-owned | Consolidated | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Royalties | $ | 16,125 | $ | — | $ | 16,125 | ||||||||||||||
Fees | 4,867 | — | 4,867 | |||||||||||||||||
Product sales to franchisees | 2,428 | — | 2,428 | |||||||||||||||||
Advertising fund contributions | 8,021 | — | 8,021 | |||||||||||||||||
Franchise rental income | 33,772 | — | 33,772 | |||||||||||||||||
Company-owned salon revenue | — | 5,043 | 5,043 | |||||||||||||||||
Total revenue | 65,213 | 5,043 | 70,256 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of product sales to franchisees | 3,419 | — | 3,419 | |||||||||||||||||
General and administrative | 14,922 | 1,062 | 15,984 | |||||||||||||||||
Rent | 1,355 | 1,733 | 3,088 | |||||||||||||||||
Advertising fund expense | 8,021 | — | 8,021 | |||||||||||||||||
Franchise rent expense | 33,772 | — | 33,772 | |||||||||||||||||
Company-owned salon expense | — | 5,067 | 5,067 | |||||||||||||||||
Depreciation and amortization | 1,503 | 477 | 1,980 | |||||||||||||||||
Long-lived asset impairment | 128 | (76) | 52 | |||||||||||||||||
Total operating expenses | 63,120 | 8,263 | 71,383 | |||||||||||||||||
Operating income (loss) | $ | 2,093 | $ | (3,220) | $ | (1,127) | ||||||||||||||
Three Months Ended December 31, 2020 | ||||||||||||||||||||
Franchise | Company-owned | Consolidated | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Royalties | $ | 12,749 | $ | — | $ | 12,749 | ||||||||||||||
Fees | 2,438 | — | 2,438 | |||||||||||||||||
Product sales to franchisees | 14,236 | — | 14,236 | |||||||||||||||||
Advertising fund contributions | 4,715 | — | 4,715 | |||||||||||||||||
Franchise rental income | 32,285 | — | 32,285 | |||||||||||||||||
Company-owned salon revenue | — | 37,897 | 37,897 | |||||||||||||||||
Total revenue | 66,423 | 37,897 | 104,320 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of product sales to franchisees | 11,324 | — | 11,324 | |||||||||||||||||
General and administrative | 24,255 | 2,435 | 26,690 | |||||||||||||||||
Rent | 1,058 | 11,844 | 12,902 | |||||||||||||||||
Advertising fund expense | 4,715 | — | 4,715 | |||||||||||||||||
Franchise rent expense | 32,285 | — | 32,285 | |||||||||||||||||
Company-owned salon expense | — | 33,611 | 33,611 | |||||||||||||||||
Depreciation and amortization | 2,077 | 4,311 | 6,388 | |||||||||||||||||
Long-lived asset impairment | 94 | 3,066 | 3,160 | |||||||||||||||||
Total operating expenses | 75,808 | 55,267 | 131,075 | |||||||||||||||||
Operating loss | $ | (9,385) | $ | (17,370) | $ | (26,755) | ||||||||||||||
Six Months Ended December 31, 2021 | ||||||||||||||||||||
Franchise | Company-owned | Consolidated | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Royalties | $ | 32,726 | $ | — | $ | 32,726 | ||||||||||||||
Fees | 8,132 | — | 8,132 | |||||||||||||||||
Product sales to franchisees | 10,436 | — | 10,436 | |||||||||||||||||
Advertising fund contributions | 16,136 | — | 16,136 | |||||||||||||||||
Franchise rental income | 67,534 | — | 67,534 | |||||||||||||||||
Company-owned salon revenue | — | 13,048 | 13,048 | |||||||||||||||||
Total revenue | 134,964 | 13,048 | 148,012 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of product sales to franchisees | 11,532 | — | 11,532 | |||||||||||||||||
General and administrative | 36,165 | 1,608 | 37,773 | |||||||||||||||||
Rent | 3,032 | 1,859 | 4,891 | |||||||||||||||||
Advertising fund expense | 16,136 | — | 16,136 | |||||||||||||||||
Franchise rent expense | 67,534 | — | 67,534 | |||||||||||||||||
Company-owned salon expense | — | 13,011 | 13,011 | |||||||||||||||||
Depreciation and amortization | 3,125 | 724 | 3,849 | |||||||||||||||||
Long-lived asset impairment | 128 | 87 | 215 | |||||||||||||||||
Total operating expenses | 137,652 | 17,289 | 154,941 | |||||||||||||||||
Operating loss | $ | (2,688) | $ | (4,241) | $ | (6,929) | ||||||||||||||
Six Months Ended December 31, 2020 | ||||||||||||||||||||
Franchise | Company-owned | Consolidated | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Royalties | $ | 24,154 | $ | — | $ | 24,154 | ||||||||||||||
Fees | 4,480 | — | 4,480 | |||||||||||||||||
Product sales to franchisees | 27,978 | — | 27,978 | |||||||||||||||||
Advertising fund contributions | 9,224 | — | 9,224 | |||||||||||||||||
Franchise rental income | 64,568 | — | 64,568 | |||||||||||||||||
Company-owned salon revenue | — | 85,312 | 85,312 | |||||||||||||||||
Total revenue | 130,404 | 85,312 | 215,716 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of product sales to franchisees | 22,003 | — | 22,003 | |||||||||||||||||
General and administrative | 47,426 | 5,411 | 52,837 | |||||||||||||||||
Rent | 2,337 | 23,790 | 26,127 | |||||||||||||||||
Advertising fund expense | 9,224 | — | 9,224 | |||||||||||||||||
Franchise rent expense | 64,568 | — | 64,568 | |||||||||||||||||
Company-owned salon expense | — | 76,554 | 76,554 | |||||||||||||||||
Depreciation and amortization | 4,371 | 9,393 | 13,764 | |||||||||||||||||
Long-lived asset impairment | 704 | 8,280 | 8,984 | |||||||||||||||||
Total operating expenses | 150,633 | 123,428 | 274,061 | |||||||||||||||||
Operating loss | $ | (20,229) | $ | (38,116) | $ | (58,345) | ||||||||||||||
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
SmartStyle | 13.2 | % | (32.2) | % | 15.1 | % | (33.0) | % | ||||||||||||||||||
Supercuts | 30.8 | (32.9) | 30.6 | (33.2) | ||||||||||||||||||||||
Portfolio Brands | 16.6 | (30.0) | 17.6 | (30.1) | ||||||||||||||||||||||
Consolidated system-wide same-store sales | 22.1 | % | (32.0) | % | 22.6 | % | (32.3) | % |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2021 | 2021 | 2020 | 2021 | 2020 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) |
% of Total
Revenues (1) |
Increase (Decrease) | ($ in millions) |
% of Total
Revenues (1) |
Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Royalties | $ | 16.1 | $ | 12.7 | 23.0 | % | 12.2 | % | 1,080 | $ | 32.7 | $ | 24.2 | 22.1 | % | 11.2 | % | 1,090 | ||||||||||||||||||||||||||||||||||||||||||||
Fees | 4.9 | 2.4 | 7.0 | 2.3 | 470 | 8.1 | 4.5 | 5.5 | 2.1 | 340 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Product sales to franchisees | 2.4 | 14.2 | 3.4 | 13.6 | (1,020) | 10.4 | 28.0 | 7.0 | 13.0 | (600) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising fund contributions | 8.0 | 4.7 | 11.4 | 4.5 | 690 | 16.1 | 9.2 | 10.9 | 4.3 | 660 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Franchise rental income | 33.8 | 32.3 | 48.1 | 31.0 | 1,710 | 67.5 | 64.6 | 45.7 | 29.9 | 1,580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Company-owned salon revenue | 5.0 | 37.9 | 7.1 | 36.4 | (2,930) | 13.0 | 85.3 | 8.8 | 39.5 | (3,070) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of product sales to franchisees (2) | 3.4 | 11.3 | 141.7 | 79.6 | 6,210 | 11.5 | 22.0 | 110.6 | 78.6 | 3,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 16.0 | 26.7 | 22.8 | 25.6 | (280) | 37.8 | 52.8 | 25.6 | 24.5 | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Rent | 3.1 | 12.9 | 4.4 | 12.4 | (800) | 4.9 | 26.1 | 3.3 | 12.1 | (880) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising fund expense | 8.0 | 4.7 | 11.4 | 4.5 | 690 | 16.1 | 9.2 | 10.9 | 4.3 | 660 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Franchise rent expense | 33.8 | 32.3 | 48.1 | 31.0 | 1,710 | 67.5 | 64.6 | 45.7 | 29.9 | 1,580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Company-owned salon expense | 5.1 | 33.6 | 7.3 | 32.2 | (2,490) | 13.0 | 76.6 | 8.8 | 35.5 | (2,670) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 2.0 | 6.4 | 2.8 | 6.1 | (330) | 3.8 | 13.8 | 2.6 | 6.4 | (380) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-lived asset impairment | 0.1 | 3.2 | 0.1 | 3.1 | (300) | 0.2 | 9.0 | 0.1 | 4.2 | (410) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating loss (3) | (1.1) | (26.8) | (1.6) | (25.7) | 2,410 | (6.9) | (58.3) | (4.7) | (27.0) | 2,230 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (3.4) | (3.7) | (4.8) | (3.5) | (130) | (6.8) | (7.5) | (4.6) | (3.5) | (110) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss from sale of salon assets to franchisees, net | (0.6) | (3.2) | (0.9) | (3.1) | 220 | (1.7) | (3.9) | (1.2) | (1.8) | 60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income and other, net | 0.1 | 0.4 | 0.1 | 0.4 | (30) | (0.1) | 0.5 | (0.1) | 0.2 | (30) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax benefit (4) | 0.2 | 0.4 | 3.2 | 1.2 | N/A | 0.2 | 1.0 | 1.4 | 1.5 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss (3) | (4.9) | (32.9) | (7.0) | (31.6) | 2,460 | (15.3) | (68.1) | (10.4) | (31.6) | 2,120 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||||||||||||||
2021 | 2020 | Increase (Decrease) (1) | 2021 | 2020 | Increase (Decrease) (1) | |||||||||||||||||||||||||||||||||
(Dollars in millions) | (Dollars in millions) | |||||||||||||||||||||||||||||||||||||
Royalties | $ | 16.1 | $ | 12.7 | $ | 3.4 | $ | 32.7 | $ | 24.2 | $ | 8.5 | ||||||||||||||||||||||||||
Fees | 4.9 | 2.4 | 2.5 | 8.1 | 4.5 | 3.6 | ||||||||||||||||||||||||||||||||
Product sales to franchisees | 2.4 | 14.2 | (11.8) | 10.4 | 28.0 | (17.6) | ||||||||||||||||||||||||||||||||
Advertising fund contributions | 8.0 | 4.7 | 3.3 | 16.1 | 9.2 | 6.9 | ||||||||||||||||||||||||||||||||
Franchise rental income | 33.8 | 32.3 | 1.5 | 67.5 | 64.6 | 2.9 | ||||||||||||||||||||||||||||||||
Total franchise revenue (1) | $ | 65.2 | $ | 66.4 | $ | (1.2) | $ | 135.0 | $ | 130.4 | $ | 4.6 | ||||||||||||||||||||||||||
Franchise same-store sales (2) | 22.4 | % | (31.1) | % | 23.0 | % | (31.5) | % | ||||||||||||||||||||||||||||||
Operating income (loss) | $ | 2.1 | $ | (9.4) | $ | 11.5 | $ | (2.7) | $ | (20.2) | $ | 17.5 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||||||||||||||
2021 | 2020 | (Decrease) Increase (1) | 2021 | 2020 | (Decrease) Increase (1) | |||||||||||||||||||||||||||||||||
(Dollars in millions) | (Dollars in millions) | |||||||||||||||||||||||||||||||||||||
Total revenue | $ | 5.0 | $ | 37.9 | $ | (32.9) | $ | 13.0 | $ | 85.3 | $ | (72.3) | ||||||||||||||||||||||||||
Operating loss | $ | (3.2) | $ | (17.4) | $ | 14.2 | $ | (4.2) | $ | (38.1) | $ | 33.9 | ||||||||||||||||||||||||||
Total company-owned salons | 150 | 1,037 | (887) |
Debt to
Capitalization (1) |
||||||||
December 31, 2021 | 83.5 | % | ||||||
June 30, 2021 | 91.6 | % |
Period | Total Number of Shares Issued (1) | Average Price per Share | Total Number of Shares Issued As Part of Publicly Announced Plans | Gross Proceeds Received in Q2 | ||||||||||||||||||||||
10/1/21 - 10/31/21 | 1,223,314 | $ | 4.25 | 9,295,618 | $ | 5,197,617 | ||||||||||||||||||||
11/1/21 - 11/30/21 | — | — | 9,295,618 | — | ||||||||||||||||||||||
12/1/21 - 12/31/21 | — | — | 9,295,618 | — | ||||||||||||||||||||||
Total | 1,223,314 | $ | 4.25 | 9,295,618 | $ | 5,197,617 |
Offer letter, between Matthew Doctor and Regis Corporation, dated December 22, 2021. | ||||||||
Offer letter, between Jim B. Lain and Regis Corporation, dated December 22, 2021. | ||||||||
President and Chief Executive Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||
Executive Vice President and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||
Chief Executive Officer and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||||||
Exhibit 101 |
The following financial information from Regis Corporation's Quarterly Report on Form 10-Q for the quarterly and year-to-date periods ended December 31, 2021, formatted in Inline Xtensible Business Reporting Language (iXBRL) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Loss; (iv) the Condensed Consolidated Statements of Shareholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements.
|
|||||||
Exhibit 104 |
The cover page from Regis Corporation's Quarterly Report on Form 10-Q for the quarterly and year-to-date periods ended December 31, 2021, formatted in iXBRL (included as Exhibit 101).
|
Date: February 3, 2022 | By: | /s/ Kersten D. Zupfer | ||||||
Kersten D. Zupfer | ||||||||
Executive Vice President and Chief Financial Officer | ||||||||
(Principal Accounting Officer) | ||||||||
February 3, 2022 | ||||||||
/s/ Matthew Doctor | ||||||||
Matthew Doctor, Interim President and Chief Executive Officer |
February 3, 2022 | ||||||||
/s/ Kersten D. Zupfer | ||||||||
Kersten D. Zupfer, Executive Vice President and Chief Financial Officer |
February 3, 2022 | ||||||||
/s/ Matthew Doctor | ||||||||
Matthew Doctor, Interim President and Chief Executive Officer | ||||||||
February 3, 2022 | ||||||||
/s/ Kersten D. Zupfer | ||||||||
Kersten D. Zupfer, Executive Vice President and Chief Financial Officer |