Company Reports Net Income from Continuing
Operations of $4.8 Million, a $16.6 Million Increase Versus Prior
Year
Adjusted EBITDA of $20.8 Million is $2.9
Million, or 16.0% Favorable Year-Over-Year; Year-To-Date Adjusted
EBITDA of $62.9 Million Increased $5.1 Million, or 8.8%
Year-Over-Year
During the Quarter, the Company Successfully
Restructured its Company-Owned SmartStyle® Portfolio by
Closing 597 Cash Flow Negative Salons, Closed on a New Five-Year,
Unsecured Revolving Credit Facility Subsequently Increased to $295
Million and Redemption of the Company’s 5.5% High-Yield Notes and
Repurchased 586,000 Shares of Its Common Stock
Regis Corporation (NYSE: RGS):
Three MonthsEnded March
31,
Nine Months EndedMarch
31,
(Dollars in thousands)
2018 2017 (1)
2018 2017 (1) Consolidated Revenue
$300,801 $313,478 $919,189 $947,558 Consolidated Same-Store Sales
Comps 1.6% (1.7)% 0.4% (1.3)% Net Income (Loss) From
Continuing Operations $4,799 $(11,840) $54,912 $(5,118) Diluted
Earnings (Loss) per Share From Continuing Operations $0.10 $(0.26)
$1.17 $(0.11) EBITDA $6,622 $1,104 $(13,750) $34,696 as a percent
of revenue 2.2% 0.4% (1.5)% 3.7% As Adjusted(2) Consolidated
Revenue, as Adjusted $298,740 $313,478 $917,128 $947,558
Consolidated Same-Store Sales Comps, as Adjusted 0.9% (1.7)% 0.2%
(1.3)% Net Income (Loss), as Adjusted $9,909 $(1,644) $17,505
$5,752 Diluted Earnings (Loss) per Share, as Adjusted $0.21 $(0.04)
$0.37 $0.12 EBITDA, as Adjusted $20,778 $17,915 $62,912 $57,841 as
a percent of revenue, as adjusted 7.0% 5.7% 6.9% 6.1%
(1) Amounts for fiscal year 2017 have been
recast to account for mall-based business and International segment
as discontinued operations.
(2) See GAAP to non-GAAP reconciliations,
within the attached section titled "Non-GAAP Reconciliations".
Regis Corporation (NYSE: RGS), a leader in the haircare
industry, whose primary business is owning, operating and
franchising hair salons, today reported third quarter 2018 net
income from continuing operations of $4.8 million, or $0.10 per
diluted share as compared to net loss from continuing operations of
$11.8 million, or $0.26 per diluted share in the third quarter of
2017. The Company’s reported results include $3.0 million of costs
associated with securing the new revolving credit facility and
redemption of the Company’s 5.5% high-yield notes, a net $2.3
million of one-time costs associated with the restructuring of the
Company's SmartStyle® salon portfolio and $1.3 million of other
discrete costs, partially offset by $1.4 million of related tax
benefits. Excluding discrete items, and the losses from
discontinued operations, the Company reported third quarter 2018 as
adjusted net income of $9.9 million, or $0.21 earnings per diluted
share versus net loss of $1.6 million, or $0.04 earnings per
diluted share, for the same period last year.
Total revenue in the quarter of $300.8 million decreased $12.7
million, or 4.0%, year-over-year driven primarily by the closure of
597 non-performing SmartStyle salons and the conversion of 376
company-owned salons to franchised locations, partially offset by
positive same-store sales comps of 1.6%. Reported revenue includes
$2.1 million of benefit related to discounted close-out product
sales as part of the closure of the 597 non-performing SmartStyle
salons. Excluding this one-time benefit, as adjusted sales were
$298.7 million and related same-store sales comps were
approximately 0.9%. Management estimates the shift of the Easter
holiday benefited third quarter same-store sales comps by 90 basis
points.
Third quarter EBITDA of $6.6 million increased $5.5 million
versus the same period last year. As a percentage of sales, the
Company's third quarter EBITDA margin rate of 2.2% compares to 0.4%
in the third quarter last year. Third quarter adjusted EBITDA of
$20.8 million was 7.0% of adjusted sales and was $2.9 million, or
16.0% favorable year-over-year. Last year's third quarter adjusted
EBITDA margin rate was 5.7%.
On a full year basis, the Company reported net income from
continuing operations of $54.9 million, or $1.17 per diluted share
as compared to net loss from continuing operations of $5.1 million,
or $0.11 per diluted share in the prior year. On an adjusted basis,
net income from continuing operations was $17.5 million, an
increase of $11.8 million. Adjusted EBITDA of $62.9 million
increased $5.1 million, or 8.8% versus the same period last
year.
Hugh Sawyer, President and Chief Executive Officer, commented,
"We are pleased to report continued progress in our multi-year
turnaround strategy, including improvement in both our quarterly
and year-over-year adjusted EBITDA results. Mr. Sawyer continued,
"During a busy quarter we closed on our new five-year revolving
credit facility, accelerated the growth of our franchise platform
and launched an industry-exclusive sponsorship of Major League
Baseball through our Supercuts brand. We also began to consider
options to further expand our franchise concept within our
Supercuts company-owned salon portfolio where we believe it may
support our strategy and potentially improve shareholder
value."
Restructuring of Company-Owned SmartStyle®
PortfolioIn January 2018, the Company closed 597
non-performing Company-owned SmartStyle® salons. The 597
non-performing salons generated negative cash flow of approximately
$15 million during the twelve months ended September 30, 2017. The
action delivered on the Company's commitment to restructure its
salon portfolio to improve shareholder value and position the
Company for long-term growth. The Company anticipates this action
will allow the Company to reallocate capital and human resources to
strategically grow its remaining SmartStyle® salons with creative
new offerings.
Third Quarter Segment
Results
Company-Owned Salons
Three Months EndedMarch
31,
(Decrease)Increase
Nine Months EndedMarch
31,
(Decrease)Increase
(Dollars in millions) (1)
2018 2017 (2)
2018 2017 (2) Total Revenue, as
Adjusted $ 269.8 $ 294.3 (8.3 )% $ 838.6 $ 890.0 (5.8 )% Same-Store
Sales Comps, as Adjusted 0.9 % (1.7 )% 260 bps 0.2 % (1.3 )% 150
bps Year-over-Year Ticket change 3.1 % 3.1 % Year-over-Year Traffic
change (2.2 )% (2.9 )% Gross Profit, as Adjusted(3) 115.2
115.8 (0.5 )% 357.3 355.3 0.6 %
as a percent of revenue, as adjusted
42.7 % 39.4 % 330 bps 42.6 % 39.9 % 270 bps EBITDA, as
Adjusted 28.7 27.7 3.6 % 88.5 87.6 1.0 %
as a percent of revenue, as adjusted
10.6 % 9.4 % 120 bps 10.6 % 9.8 % 80 bps
(1) Variances calculated on amounts shown
in millions may result in rounding differences.
(2) Amounts for fiscal year 2017 have been
recast to account for mall-based business and International segment
as discontinued operations.
(3) Gross profit, as Adjusted, excludes
depreciation and amortization.
Third quarter revenue, as adjusted, for the Company-owned salon
segment decreased 8.3% versus the prior year to $269.8 million. The
year-over-year decline in revenue was driven by the closure of
unprofitable salons and the sale of Company-owned salons to
franchisees, partially offset by an increase in same-store sales of
0.9% driven by a 3.1% increase in average ticket, partially offset
by a decrease in traffic of 2.2%.
Third quarter adjusted EBITDA of $28.7 million increased $1.0
million, or 3.6% versus the same period last year driven primarily
by benefits from the Company's focus on cost reductions, the
closing of unprofitable salons, and same-store sales comp
increases, partially offset by salon-level compensation changes,
investments in a strategic digital marketing campaign, health
insurance costs, and the prior year inclusion of a more favorable
self-insurance reserve adjustment. The EBITDA margin rate of the
Company-owned salon segment of 10.6% increased 120 basis points
compared to the third quarter of last year.
Franchise
Three Months EndedMarch
31,
Increase(Decrease)
Nine Months EndedMarch
31,
Increase(Decrease)
(Dollars in millions) (1)
2018 2017 (2)
2018 2017 (2) Revenue Product $
8.4 $ 7.5 12.0 % $ 24.8 $ 22.5 10.2 % Product sold to The Beautiful
Group 6.5 — N/A 12.9
— N/A Total product $ 14.9 $ 7.5 98.6 %
$ 37.7 $ 22.5 67.5 % Royalties and fees 14.0
11.6 20.2 % 40.8 35.1
16.5 % Total Revenue $ 28.9 $ 19.2 51.0 % $
78.6 $ 57.6 36.4 % EBITDA, as Adjusted 10.3
8.6 19.4 % 29.9 25.3 17.9 % as a percent of revenue 35.5 % 44.9 %
(940) bps 38.0 % 44.0 % (600) bps
(1) Variances calculated on amounts shown
in millions may result in rounding differences.
(2) Amounts for fiscal year 2017 have been
recast to account for mall-based business and International segment
as discontinued operations.
Third quarter Franchise revenue was $28.9 million, a $9.8
million, or 51.0%, increase compared to the prior year quarter.
Royalties and fees were $14.0 million, a $2.4 million, or 20.2%
increase versus the same period last year. Royalties increased
11.0% driven primarily by positive same-store revenue and increased
franchise salon counts. Initial franchise fees increased $1.4
million as the Company opened, or converted, a net 144 franchised
locations in the quarter as compared to 46 in the prior year
quarter. Product sales to franchisees were $14.9 million, an
increase of $7.4 million. Product sales to The Beautiful Group
accounted for $6.5 million of this year-over-year sales
increase.
Franchise adjusted EBITDA of $10.3 million improved $1.7
million, or 19.4% year-over-year. The Franchise EBITDA margin rate
of 35.5% was negatively impacted by roughly 960 basis points due to
the low margin rate of product sales to The Beautiful Group in
accordance with the terms of our agreement. Removing the dilutive
impact of these sales, EBITDA margin rates in the Franchise segment
of 45.1% improved 20 basis points when compared to the third
quarter of last year.
Other Company Updates
Consolidated Year-Over-Year General & Administrative
("G&A") ComparabilityThe Company announced a realignment of
its field leadership team by brand during the first fiscal quarter.
An outcome of this reorganization is that the costs associated with
senior district leaders have been moved out of cost of goods sold
and site operating expense, where the expense has historically been
recorded, and into G&A. The Company notes that this change does
not impact the overall consolidated results but does result in an
$8.5 million decrease in cost of goods sold and site expense, and a
corresponding $8.5 million increase to G&A this quarter, when
compared to the comparable period last year. On a year-to-date
basis, this reclassification of expenses decreased cost of goods
sold and site expense, and had a corresponding increase to G&A
of $23.6 million versus the same period last year.
Transformational Strategy UpdateThe Company continued to
make progress implementing its transformational strategy and
operational turnaround initiatives focused on improving the
performance of Company-owned salons, while at the same time
accelerating the growth of its franchise portfolio. During the
quarter, the Company:
- Closed 597 non-performing, cash flow
negative Company-owned SmartStyle® salons in January 2018.
- Repurchased 586,000 common shares at a
total price of $9.6 million.
- Converted 126 Company-owned salons to
franchise substantially in its Supercuts and SmartStyle
brands.
- Closed on a new five-year, $260 million
unsecured revolving credit facility and redeemed the Company’s 5.5%
high-yield notes. The size of the credit facility has subsequently
increased to $295 million as an additional bank joined the
syndicate.
- Executed a number of operational
initiatives, building on its previously discussed management
initiatives, to stabilize performance and establish a platform for
longer-term revenue and earnings growth in Company-owned salons.
The Company estimates the initiatives delivered benefit in a range
of $8.0 million to $10.0 million in the third quarter of fiscal
2018.
- Announced the appointment of Virginia
Gambale to its Board of Directors, effective March 1, 2018.
- Launched an e-commerce initiative to
distribute the Company's DesignLine® brand of hair care products
through Amazon and eBay to supplement existing in-salon sales and
raise overall brand awareness.
Non-GAAP reconciliations:For
GAAP to non-GAAP reconciliations, please refer to attached section
titled "Non-GAAP Reconciliations". A complete reconciliation of
reported earnings to adjusted earnings is included in this press
release and is available on the Company’s website at
www.regiscorp.com.
Earnings WebcastRegis
Corporation will host a conference call via webcast discussing
third quarter results today, May 1, 2018, at 9 a.m., Central
time. Interested parties are invited to participate in the live
webcast by logging on to www.regiscorp.com or participate via
telephone by dialing (888) 394-8218 and entering access code
3375512. A replay of the presentation will be available later that
day. The replay phone number is (888) 203-1112, access code
3375512.
About Regis CorporationRegis Corporation (NYSE:RGS) is a
leader in beauty salons and cosmetology education. As of
March 31, 2018, the Company owned, franchised or held
ownership interests in 8,228 worldwide locations. Regis’ corporate
and franchised locations operate under concepts such as Supercuts®,
SmartStyle®, MasterCuts®, Regis Salons®, Sassoon®, Cost Cutters®,
Roosters® and First Choice Haircutters®. Regis maintains an
ownership interest in Empire Education Group in the U.S. For
additional information about the Company, including a
reconciliation of certain non-GAAP financial information and
certain supplemental financial information, please visit the
Investor Information section of the corporate website at
www.regiscorp.com. To join Regis Corporation’s email alert list,
click on this link:
http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1
This press release contains or may contain “forward-looking
statements” within the meaning of the federal securities laws,
including statements concerning anticipated future events and
expectations that are not historical facts. These forward-looking
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements in this document reflect management’s
best judgment at the time they are made, but all such statements
are subject to numerous risks and uncertainties, which could cause
actual results to differ materially from those expressed in or
implied by the statements herein. Such forward-looking statements
are often identified herein by use of words including, but not
limited to, “may,” “believe,” “project,” “forecast,” “expect,”
“estimate,” “anticipate,” and “plan.” In addition, the following
factors could affect the Company’s actual results and cause such
results to differ materially from those expressed in
forward-looking statements. These factors include the continued
ability of the Company to implement its strategy, priorities and
initiatives; our ability to attract, train and retain talented
stylists; financial performance of our franchisees; acceleration of
sale of certain salons to franchisees; the ability of the Company
to maintain a satisfactory relationship with Walmart; the success
of The Beautiful Group; marketing efforts to drive traffic; changes
in regulatory and statutory laws including increases in minimum
wages; our ability to manage cyber threats and protect the security
of sensitive information about our guests, employees, vendors or
Company information; reliance on information technology systems;
reliance on external vendors; competition within the personal hair
care industry; changes in tax exposure; changes in healthcare;
changes in interest rates and foreign currency exchange rates;
failure to standardize operating processes across brands; consumer
shopping trends and changes in manufacturer distribution channels;
financial performance of Empire Education Group; the continued
ability of the Company to implement cost reduction initiatives;
compliance with debt covenants; changes in economic conditions;
changes in consumer tastes and fashion trends; exposure to
uninsured or unidentified risks; ability to attract and retain key
management personnel; reliance on our management team and other key
personnel or other factors not listed above. Additional information
concerning potential factors that could affect future financial
results is set forth in the Company’s Annual Report on
Form 10-K for the year ended June 30, 2017. We undertake
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. However, your attention is directed to any further
disclosures made in our subsequent annual and periodic reports
filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and
Proxy Statements on Schedule 14A.
REGIS CORPORATION CONDENSED CONSOLIDATED BALANCE
SHEET (Unaudited) (Dollars in thousands, except share
data) March 31, 2018 June
30, 2017 ASSETS Current assets: Cash and cash
equivalents $ 105,200 $ 171,044 Receivables, net 33,388 19,683
Inventories 81,131 98,392 Other current assets 46,488 48,114
Current assets held for sale — 32,914 Total current
assets 266,207 370,147 Property and equipment, net 104,127
123,281 Goodwill 415,503 416,987 Other intangibles, net 10,935
11,965 Other assets 60,433 61,756 Noncurrent assets held for sale
— 27,352 Total assets $ 857,205 $ 1,011,488
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 50,913 $ 54,501 Accrued expenses 101,928 110,435
Current liabilities related to assets held for sale —
13,126 Total current liabilities 152,841 178,062 Long-term
debt, net 90,000 120,599 Other noncurrent liabilities 101,093
197,374 Noncurrent liabilities related to assets held for sale
— 7,232 Total liabilities 343,934
503,267 Commitments and contingencies Shareholders’ equity: Common
stock, $0.05 par value; issued and outstanding 46,126,249 and
46,400,367 common shares at March 31, 2018 and June 30, 2017
respectively 2,306 2,320 Additional paid-in capital 208,149 214,109
Accumulated other comprehensive income 10,407 3,336 Retained
earnings 292,409 288,456 Total shareholders’
equity 513,271 508,221 Total liabilities and
shareholders’ equity $ 857,205 $ 1,011,488
REGIS
CORPORATION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) For The Three and Nine Months Ended March 31,
2018 and 2017 (Dollars and shares in thousands, except per
share data amounts)
Three Months EndedMarch
31,
Nine Months EndedMarch
31,
2018 2017 2018
2017 Revenues: Service $ 221,926 $ 237,998 $ 680,699 $
716,698 Product 64,887 63,844 197,643 195,789 Royalties and fees
13,988 11,636 40,847
35,071 300,801 313,478
919,189 947,558 Operating expenses:
Cost of service 132,081 153,008 406,767 454,998 Cost of product
37,139 30,989 107,165 96,388 Site operating expenses 31,021 30,604
96,443 95,887 General and administrative 45,727 45,694 129,485
118,305 Rent 39,391 45,821 147,280 137,145 Depreciation and
amortization 9,558 13,576 46,764
38,331 Total operating expenses 294,917
319,692 933,904 941,054
Operating income (loss) 5,884 (6,214 ) (14,715 )
6,504 Other (expense) income: Interest expense (5,095 )
(2,125 ) (9,402 ) (6,441 ) Interest income and other, net
1,785 357 5,174 2,136
Income (loss) from continuing operations before
income taxes 2,574 (7,982 ) (18,943 ) 2,199 Income tax
benefit (expense) 2,225 (3,858 ) 73,855
(7,317 ) Income (loss) from continuing
operations 4,799 (11,840 ) 54,912
(5,118 ) Loss from discontinued operations,
net of taxes (10,605 ) (6,615 ) (50,973 )
(12,275 ) Net (loss) income $ (5,806 ) $ (18,455 ) $
3,939 $ (17,393 ) Net (loss) income per share: Basic:
Income (loss) from continuing operations $ 0.10 $ (0.26 ) $ 1.18 $
(0.11 ) Loss from discontinued operations (0.23 )
(0.14 ) (1.09 ) (0.27 ) Net (loss) income per share,
basic (1) $ (0.12 ) $ (0.40 ) $ 0.08 $ (0.38 ) Diluted:
Income (loss) from continuing operations $ 0.10 $ (0.26 ) $ 1.17 $
(0.11 ) Loss from discontinued operations (0.22 )
(0.14 ) (1.08 ) (0.27 ) Net (loss) income per share,
diluted (1) $ (0.12 ) $ (0.40 ) $ 0.08 $ (0.38 )
Weighted average common and common equivalent shares outstanding:
Basic 46,612 46,360 46,684
46,304 Diluted 47,153
46,360 47,093 46,304
(1) Total is a recalculation; line items
calculated individually may not sum to total due to rounding.
REGIS CORPORATION (NYSE: RGS) CONDENSED
CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME
(Unaudited) (Dollars in thousands)
Three Months EndedMarch
31,
Nine Months EndedMarch
31,
2018 2017 2018
2017 Net (loss) income $ (5,806 ) $ (18,455 ) $ 3,939 $
(17,393 ) Other comprehensive (loss) income, net of tax: Foreign
currency translation adjustments during the period: Foreign
currency translation adjustments (1,382 ) 248 919 (4,590 )
Reclassification adjustments for losses included in net (loss)
income — — 6,152 —
Net current period foreign currency translation adjustments
(1,382 ) 248 7,071 (4,590 ) Recognition
of deferred compensation — (22 ) —
(22 ) Other comprehensive (loss) income (1,382 )
226 7,071 (4,612 ) Comprehensive (loss)
income $ (7,188 ) $ (18,229 ) $ 11,010 $ (22,005 )
REGIS CORPORATION (NYSE: RGS) CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOW (Unaudited) (Dollars in
thousands) Nine Months Ended March 31,
2018 2017 Cash flows from operating
activities: Net income (loss) $ 3,939 $ (17,393 ) Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities: Non-cash impairment related to discontinued
operations 37,020 — Depreciation and amortization 29,736 30,709
Depreciation related to discontinued operations 3,723 10,642 Equity
in loss of affiliated companies — 50 Deferred income taxes (81,006
) 6,419 Gain on life insurance (7,986 ) — Gain from sale of salon
assets to franchisees, net (1) (255 ) (53 ) Salon asset impairments
11,099 7,622 Accumulated other comprehensive income
reclassification adjustments 6,152 — Stock-based compensation 6,483
9,498 Amortization of debt discount and financing costs 4,011 1,054
Other non-cash items affecting earnings (286 ) 150 Changes in
operating assets and liabilities, excluding the effects of asset
sales (35,268 ) (1,884 ) Net cash (used in) provided
by operating activities (22,638 ) 46,814
Cash flows from investing activities: Capital expenditures
(20,065 ) (20,296 ) Capital expenditures related to discontinued
operations (1,171 ) (5,124 ) Proceeds from sale of assets to
franchisees (1) 5,620 594 Change in restricted cash (327 ) 999
Proceeds from company-owned life insurance policies 18,108
876 Net cash provided by (used in) investing
activities 2,165 (22,951 ) Cash flows
from financing activities: Borrowings on revolving credit facility
90,000 — Repayments of long-term debt (124,230 ) — Repurchase of
common stock (9,634 ) — Taxes paid for shares withheld (2,279 )
(1,228 ) Cash settlement of equity awards (550 ) (440
) Net cash used in financing activities (46,693 )
(1,668 ) Effect of exchange rate changes on cash and cash
equivalents (30 ) (852 ) (Decrease) increase
in cash and cash equivalents (67,196 ) 21,343 Cash and cash
equivalents: Beginning of period 171,044 147,346 Cash and cash
equivalents included in current assets held for sale 1,352
— Beginning of period, total cash and cash
equivalents 172,396 147,346 End of period $ 105,200 $
168,689
(1) Excludes transaction with The
Beautiful Group.
SAME-STORE SALES (1):
For the Three Months Ended March 31, 2018
March 31, 2017 Service
Retail
Total
Service
Retail
Total
SmartStyle (1.0 ) 4.4 0.6 (1.9 ) (0.7 ) (1.5 ) Supercuts 4.0 (2.2 )
3.5 (0.5 ) (6.3 ) (1.0 ) Signature Style 1.8 (0.9 ) 1.5 (2.8 ) 0.8
(2.5 ) Consolidated 1.4 % 2.5 % 1.6 % (1.8 )% (1.1 )% (1.7 )%
For the Nine Months Ended March 31, 2018
March 31, 2017 Service
Retail
Total
Service
Retail
Total
SmartStyle (0.9 ) 1.6 (0.1 ) (1.0 ) (1.8 ) (1.2 ) Supercuts 2.9
(4.3 ) 2.2 0.1 (4.9 ) (0.4 ) Signature Style 0.2 (3.3 ) (0.2 ) (2.1
) (1.7 ) (2.1 ) Consolidated 0.5 % — % 0.4 % (1.1 )% (2.1 )% (1.3
)%
(1) Same-store sales are calculated on a
daily basis as the total change in sales for company-owned
locations that were open on a specific day of the week during the
current period and the corresponding prior period. Quarterly and
year-to-date same-store sales are the sum of the same-store sales
computed on a daily basis. Locations relocated within a one-mile
radius are included in same-store sales as they are considered to
have been open in the prior period. Same-store sales are calculated
in local currencies to remove foreign currency fluctuations from
the calculation.
REGIS CORPORATION (NYSE: RGS) System-wide
location counts March 31,
2018 June 30, 2017 COMPANY-OWNED SALONS:
SmartStyle/Cost Cutters in Walmart Stores 1,782 2,652 Supercuts 946
980 Signature Style 1,387 1,468 Mall locations (Regis and
MasterCuts) 13 898 Total North American Salons 4,128 5,998 Total
International Salons (1) — 275 Total Company-owned Salons 4,128
6,273 as a percent of total Company-owned and Franchise salons
50.7% 70.3%
FRANCHISE SALONS: SmartStyle in
Walmart Stores 322 62 Cost Cutters in Walmart Stores 120 114
Supercuts 1,732 1,687 Signature Style 755 770 Total non-mall
franchise locations 2,929 2,633 Mall franchise locations (Regis and
MasterCuts) 821 — Total North American Salons 3,750 2,633 Total
International Salons (1) 262 13 Total Franchise Salons 4,012 2,646
as a percent of total Company-owned and Franchise salons 49.3%
29.7%
OWNERSHIP INTEREST LOCATIONS: Equity
ownership interest locations 88 89 Grand Total,
System-wide 8,228 9,008
(1) Canadian and Puerto Rican salons are
included in the North American salon totals.
Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating income, net
income (loss), net income (loss) per diluted share, and other
non-GAAP financial measures provides meaningful insight into our
ongoing operating performance and an alternative perspective of our
results of operations. Presentation of the non-GAAP measures allows
investors to review our core ongoing operating performance from the
same perspective as management and the Board of Directors. These
non-GAAP financial measures provide investors an enhanced
understanding of our operations, facilitate investors’ analyses and
comparisons of our current and past results of operations and
provide insight into the prospects of our future performance. We
also believe the non-GAAP measures are useful to investors because
they provide supplemental information research analysts frequently
use to analyze financial performance.
The method we use to produce non-GAAP results is not in
accordance with U.S. GAAP and may differ from methods used by other
companies. These non-GAAP results should not be regarded as a
substitute for corresponding U.S. GAAP measures but instead should
be utilized as a supplemental measure of operating performance in
evaluating our business. Non-GAAP measures do have limitations in
that they do not reflect certain items that may have a material
impact upon our reported financial results. As such, these non-GAAP
measures should be viewed in conjunction with both our financial
statements prepared in accordance with U.S. GAAP and the
reconciliation of the selected U.S. GAAP to non-GAAP financial
measures, which are located in the Investor Information section of
the corporate website at www.regiscorp.com.
Non-GAAP reconciling items for the three and nine months
ended March 31, 2018 and 2017:
The following information is provided to give qualitative and
quantitative information related to items impacting comparability.
Items impacting comparability are not defined terms within U.S.
GAAP. Therefore, our non-GAAP financial information may not be
comparable to similarly titled measures reported by other
companies. We determine which items to consider as “items impacting
comparability” based on how management views our business, makes
financial, operating and planning decisions and evaluates the
Company’s ongoing performance. The following items have been
excluded from our non-GAAP results:
- SmartStyle restructuring discounting
and costs.
- Executive transition costs.
- Professional fees.
- Severance expense for former executive
officers.
- Legal fees.
- Gain on life insurance proceeds.
- Debt refinancing.
- Goodwill derecognition.
- Impact of tax reform.
- Discontinued operations.
REGIS CORPORATION Reconciliation of selected U.S.
GAAP to non-GAAP financial measures (Dollars in thousands,
except per share data) (unaudited)
Reconciliation of U.S. GAAP operating income (loss) and U.S.
GAAP net (loss) income to equivalent non-GAAP measures
Three Months EndedMarch 31,
2018
Nine Months EndedMarch 31,
2018
U.S. GAAP financial line item 2018
2017 2018 2017 U.S. GAAP
revenue $ 300,801 $ 313,478
$ 919,189 $ 947,558 Non-GAAP
revenue adjustments SmartStyle restructuring discounting
Product Sales (2,061 ) — (2,061 )
—
Non-GAAP revenue $ 298,740
$ 313,478 $ 917,128
$ 947,558 U.S. GAAP operating
income (loss) $ 5,884 $ (6,214
) $ (14,715 ) $ 6,504
Non-GAAP revenue adjustments (2,061 ) — (2,061 ) —
Non-GAAP operating expense adjustments (1) SmartStyle
restructuring discounting Cost of Service 190 — 190 — SmartStyle
restructuring and discounting costs Cost of Product 2,407 — 2,992 —
SmartStyle restructuring discounting Site operating expenses 487 —
487 — SmartStyle restructuring costs General and administrative
1,218 — 1,334 — Executive transition costs General and
administrative 146 — 564 — Professional fees General and
administrative (8 ) 1,037 1,628 1,711 Severance General and
administrative — 7,854 2,828 7,854 Legal fees General and
administrative — 1,405 — 1,405 Gain on life insurance proceeds
General and administrative — (100 ) (7,986 ) (100 ) SmartStyle
restructuring costs Rent — — 23,999 — SmartStyle restructuring
costs Depreciation and amortization 43 —
12,922 — Total non-GAAP
operating expense adjustments 4,483 10,196
38,958 10,870
Non-GAAP operating income (1) $
8,306 $ 3,982 $
22,182 $ 17,374 U.S.
GAAP net (loss) income $ (5,806 ) $
(18,455 ) $ 3,939 $
(17,393 ) Non-GAAP net income (loss)
adjustments: Non-GAAP revenue adjustments (2,061 ) — (2,061 ) —
Non-GAAP operating expense adjustments 4,483 10,196 38,958 10,870
Debt refinancing Interest expense 2,957 — 2,957 — Goodwill
derecognition Interest income and other, net 1,172 — 1,714 — Income
tax impact on Non-GAAP adjustments (2) Income taxes (1,441 ) —
(10,072 ) — Impact of tax reform Income taxes — — (68,903 ) —
Discontinued operations, net of income tax Loss from discontinued
operations, net of tax 10,605 6,615
50,973 12,275 Total non-GAAP net income
(loss) adjustments 15,715 16,811
13,566 23,145
Non-GAAP net income
(loss) $ 9,909 $ (1,644
) $ 17,505 $ 5,752
Notes:
(1) Adjusted operating margins for the
three months ended March 31, 2018, and 2017, were 2.8% and
1.3%, respectively, and were 2.4% and 1.8% for the nine months
ended March 31, 2018 and 2017, respectively, and are
calculated as non-GAAP operating income divided by non-GAAP revenue
for each respective period.
(2) Based on projected statutory effective
tax rate analyses, the non-GAAP tax provision was calculated to be
approximately 22% for the three and six months ended March 31,
2018, for all non-GAAP operating expense adjustments. Non-GAAP
operating expense adjustments recognized during the first quarter
of fiscal year 2018 were not tax effected as a result of the
valuation allowance. As a result of the valuation allowance,
non-GAAP adjustments were not tax effected for the three and nine
months ended March 31, 2017.
REGIS CORPORATION Reconciliation of
selected U.S. GAAP to non-GAAP financial measures (Dollars
in thousands, except per share data) (Unaudited)
Reconciliation of U.S. GAAP net (loss) income per diluted share
to non-GAAP net income (loss) per diluted share
Three Months EndedMarch
31,
Nine Months EndedMarch
31,
2018 2017 2018
2017 U.S. GAAP net (loss) income per diluted share
$ (0.123 ) $ (0.398 )
$ 0.084 $ (0.376 ) SmartStyle
restructuring discounting and costs (1) (2) 0.038 — 0.668 —
Executive transition costs (1) (2) 0.002 — 0.011 — Severance (1)
(2) — 0.169 0.050 0.168 Legal fees (1) (2) — 0.030 — 0.030
Professional fees (1) (2) — 0.022 0.031 0.037 Gain on life
insurance proceeds (1) (2) — (0.002 ) (0.170 ) (0.002 ) Debt
refinancing (1) (2) 0.049 — 0.049 — Goodwill derecognition (1) (2)
0.019 — 0.030 — Impact of tax reform — — (1.463 ) — Discontinued
operations, net of tax 0.225 0.143 1.082 0.262 Impact of change in
weighted average shares (2) — —
— 0.004
Non-GAAP net income (loss) per
diluted share (2) (3) $ 0.210 $
(0.035 ) $ 0.372 $
0.123 U.S. GAAP Weighted average shares -
basic
46,612 46,360 46,684 46,304 U.S.
GAAP Weighted average shares - diluted
47,153 46,360
47,093 46,304 Non-GAAP Weighted average shares -
diluted (3)
47,153 46,360 47,093 46,851
Notes:
(1) Based on projected statutory
effective tax rate analyses, the non-GAAP tax provision was
calculated to be approximately 22% for the three and six months
ended March 31, 2018, for all non-GAAP operating expense
adjustments. Non-GAAP operating expense adjustments recognized
during the first quarter of fiscal year 2018 were not tax effected
as a result of the valuation allowance. As a result of the
valuation allowance, non-GAAP adjustments were not tax effected for
the three and nine months ended March 31, 2017.
(2) Non-GAAP net income (loss) per
share reflects the weighted average shares associated with non-GAAP
net income (loss), which includes the dilutive effect of common
stock equivalents. The earnings per share impact of the adjustments
for the nine months ended March 31, 2017 included additional shares
for common stock equivalents of 0.5 million. The impact of the
adjustments described above result in the effect of the common
stock equivalents to be dilutive to the non-GAAP net income (loss)
per share.
(3) Total is a recalculation; line
items calculated individually may not sum to total due to
rounding.
REGIS CORPORATION Summary of Pre-Tax,
Income Taxes and Net Income Impact for Q3 FY18 Discrete Items
(Dollars in thousands) (Unaudited)
Pre-Tax Income Taxes
Net Income SmartStyle restructuring discounting and costs,
net $ 2,284 $ (503 ) $ 1,781 Executive transition costs 146 (32 )
114 Professional fees (8 ) 2 (6 ) Debt refinancing 2,957 (650 )
2,307 Goodwill derecognition 1,172 (258 )
914 $ 6,551 $ (1,441 ) $ 5,110
Discontinued operations, net of tax $ — $ —
$ 10,605
Total $ 6,551
$ (1,441 ) $ 15,715
REGIS CORPORATIONReconciliation of
reported U.S. GAAP net income (loss) to adjusted EBITDA, a non-GAAP
financial measure(Dollars in
thousands)(unaudited)
Adjusted EBITDAEBITDA represents U.S. GAAP net income
(loss) for the respective period excluding interest expense, income
taxes and depreciation and amortization expense. The Company
defines adjusted EBITDA, as EBITDA excluding identified items
impacting comparability for each respective period. For the three
and nine months ended March 31, 2018 and 2017, the items
impacting comparability consisted of the items identified in the
non-GAAP reconciling items for the respective periods. The impacts
of the debt refinancing, income tax provision adjustments
associated with the above items, impact of tax reform and the
SmartStyle restructuring costs included within depreciation and
amortization are already included in the U.S. GAAP reported net
income (loss) to EBITDA reconciliation, therefore there is no
adjustment needed for the reconciliation from EBITDA to adjusted
EBITDA.
Three Months Ended March 31, 2018
Company-owned Franchise (1)
Corporate Consolidated (2)
Consolidated reported net income (loss), as reported (U.S.
GAAP) $ 19,222 $ 10,184 $
(35,212 ) $ (5,806 ) Interest
expense, as reported — — 5,095 5,095 Income taxes, as reported — —
(2,225 ) (2,225 ) Depreciation and amortization, as reported
7,276 92 2,190 9,558 EBITDA (as
defined above)
$ 26,498 $ 10,276
$ (30,152 ) $ 6,622
SmartStyle restructuring discounting and costs, net 2,218 —
23 2,241 Executive transition costs — — 146 146 Professional fees —
— (8 ) (8 ) Goodwill derecognition — — 1,172 1,172 Discontinued
operations, net of tax — — 10,605
10,605
Adjusted EBITDA, non-GAAP financial
measure $ 28,716 $ 10,276 $
(18,214 ) $ 20,778
Three Months Ended March 31, 2017 Company-owned
Franchise Corporate Consolidated (1)
Consolidated reported net income (loss), as reported (U.S.
GAAP) $ 16,529 $ 8,518 $
(43,502 ) $ (18,455 ) Interest
expense, as reported — — 2,125 2,125 Income taxes, as reported — —
3,858 3,858 Depreciation and amortization, as reported
11,195 89 2,292 13,576 EBITDA
(as defined above)
$ 27,724 $ 8,607
$ (35,227 ) $ 1,104
Severance — — 7,854 7,854 Legal fees — — 1,405 1,405
Professional fees — — 1,037 1,037 Gain on life insurance proceeds —
— (100 ) (100 ) Discontinued operations, net of tax —
— 6,615 6,615
Adjusted EBITDA,
non-GAAP financial measure $ 27,724 $
8,607 $ (18,416 ) $
17,915
Notes:
(1) Franchise adjusted EBITDA margin for
the three months ended March 31, 2018 was 35.5%, and is
calculated as franchise EBITDA (as defined above) divided by U.S.
GAAP franchise revenue for the period. Removing the dilutive impact
of $6.5 million for the franchise product sales to The Beautiful
Group, franchise adjusted EBITDA margin for the three months ended
March 31, 2018 was 45.2%.
(2) Consolidated EBITDA margins for the
three months ended March 31, 2018, and 2017, were 2.2% and
0.4%, respectively, and are calculated as EBITDA (as defined above)
divided by U.S. GAAP revenue for each respective period.
Consolidated adjusted EBITDA margins for the three months ended
March 31, 2018, and 2017, were 7.0% and 5.7%, respectively,
and are calculated as adjusted EBITDA divided by adjusted non-GAAP
revenue for each respective period.
Nine Months Ended March 31, 2018
Company-owned Franchise
Corporate Consolidated Consolidated
reported net income (loss), as reported (U.S. GAAP) $
22,361 $ 29,583 $ (48,005
) $ 3,939 Interest expense, as reported — —
9,402 9,402 Income taxes, as reported — — (73,855 ) (73,855 )
Depreciation and amortization, as reported 39,224 275
7,265 46,764 EBITDA (as defined above)
$ 61,585 $ 29,858 $
(105,193 ) $ (13,750 )
SmartStyle restructuring discounting and costs, net 26,904 — 37
26,941 Gain on life insurance proceeds — — (7,986 ) (7,986 )
Severance — — 2,828 2,828 Professional fees — — 1,628 1,628
Executive transition costs — — 564 564 Goodwill derecognition — —
1,714 1,714 Discontinued operations, net of tax — —
50,973 50,973
Adjusted EBITDA,
non-GAAP financial measure $ 88,489 $
29,858 $ (55,435 ) $
62,912 Nine Months Ended March 31, 2017
Company-owned Franchise Corporate
Consolidated Consolidated reported net income (loss), as
reported (U.S. GAAP) $ 56,653 $
25,053 $ (99,099 ) $
(17,393 ) Interest expense, as reported — — 6,441
6,441 Income taxes, as reported — — 7,317 7,317 Depreciation and
amortization, as reported 30,993 268 7,070
38,331 EBITDA (as defined above)
$
87,646 $ 25,321 $ (78,271
) $ 34,696 Severance — — 7,854
7,854 Legal fees — — 1,405 1,405 Professional fees — — 1,711 1,711
Gain on life insurance proceeds — — (100 ) (100 ) Discontinued
operations, net of tax — — 12,275
12,275
Adjusted EBITDA, non-GAAP financial
measure $ 87,646 $ 25,321 $
(55,126 ) $ 57,841
REGIS CORPORATION Reconciliation by reportable segment of
reported U.S. GAAP total revenue to adjusted total revenue, a
non-GAAP financial measure (Dollars in thousands)
(Unaudited)
Total Revenue
Non-GAAP total revenue is U.S. GAAP
revenue adjusted for items impacting comparability for each
respective period.
Three Months Ended March 31, 2018
Company-owned Franchise
Corporate Consolidated Consolidated
total revenue, as reported (U.S. GAAP) $ 271,882
$ 28,919 $ — $ 300,801
SmartStyle restructuring discounting (2,061 ) —
— (2,061 )
Adjusted total revenue, non-GAAP
financial measure $ 269,821 $
28,919 $ — $ 298,740
Three Months Ended March 31, 2017
Company-owned Franchise Corporate
Consolidated Consolidated total revenue, U.S. GAAP and
non-GAAP $ 294,324 $ 19,154
$ — $ 313,478 Nine Months
Ended March 31, 2018 Company-owned Franchise
Corporate Consolidated Consolidated total revenue,
as reported (U.S. GAAP) $ 840,621 $
78,568 $ — $ 919,189 SmartStyle
restructuring discounting (2,061 ) — —
(2,061 )
Adjusted total revenue, non-GAAP financial measure
$ 838,560 $ 78,568 $
— $ 917,128 Nine Months Ended
March 31, 2017 Company-owned Franchise
Corporate Consolidated Consolidated total revenue,
U.S. GAAP and non-GAAP $ 889,973 $
57,585 $ — $ 947,558
REGIS CORPORATIONReconciliation by
reportable segment of reported U.S. GAAP gross profit (excluding
depreciation and amortization) to adjusted gross profit (excluding
depreciation and amortization), a non-GAAP financial
measure(Dollars in thousands)(Unaudited)
Gross profitThe Company defines gross profit as service
and product revenues less cost of service and cost of product,
excluding depreciation and amortization. Non-GAAP gross profit is
gross profit, as defined by the Company, adjusted for items
impacting comparability for each respective period.
Three Months Ended March 31, 2018
Company-owned Franchise
Corporate Consolidated Revenues: Service $
221,926 $ — $ — $ 221,926 Product 49,956 14,931
— 64,887
271,882 14,931 —
286,813 Cost of service 132,081 — — 132,081 Cost of
product 25,137 12,002 — 37,139
157,218 12,002 —
169,220 U.S. GAAP gross profit(1) $
114,664 $ 2,929 $ — $
117,593 Non-GAAP gross profit adjustments: SmartStyle
restructuring discounting 536 — — 536
Non-GAAP gross profit(1) $ 115,200 $
2,929 $ — $ 118,129
(1) Gross profit excludes depreciation and
amortization.
Three Months Ended March 31, 2017
Company-owned Franchise Corporate
Consolidated Revenues: Service $ 237,998 $ — $ — $ 237,998
Product 56,326 7,518 — 63,844
294,324 7,518 — 301,842 Cost of
service 153,008 — — 153,008 Cost of product 25,499
5,490 — 30,989
178,507
5,490 — 183,997
U.S. GAAP and Non-GAAP gross profit(1)
$ 115,817 $ 2,028 $ —
$ 117,845
(1) Gross profit excludes depreciation and
amortization.
For the Nine Months Ended March 31,
2018 Company-owned Franchise
Corporate Consolidated Revenues:
Service $ 680,699 $ — $ — $ 680,699 Product 159,922
37,721 — 197,643
840,621 37,721
— 878,342 Cost of service 406,767 — — 406,767
Cost of product 77,628 29,537 — 107,165
484,395 29,537 —
513,932 U.S. GAAP and
Non-GAAP gross profit(1) $ 356,226 $
8,184 $ — $ 364,410
Non-GAAP gross profit adjustments: SmartStyle restructuring
discounting and costs 1,121 — — 1,121
Non-GAAP gross profit(1) $ 357,347 $
8,184 $ — $ 365,531
(1) Gross profit excludes
depreciation and amortization.
For the Nine Months Ended March 31, 2017
Company-owned Franchise Corporate
Consolidated Revenues: Service $ 716,698 $ — $ — $ 716,698
Product 173,275 22,514 — 195,789
889,973 22,514 — 912,487 Cost of
service 454,998 — — 454,998 Cost of product 79,629
16,759 — 96,388
534,627
16,759 — 551,386
U.S. GAAP and Non-GAAP gross profit(1)
$ 355,346 $ 5,755 $ —
$ 361,101
(1) Gross profit excludes depreciation and
amortization.
REGIS CORPORATION Reconciliation of
reported U.S. GAAP revenue change to same-store sales
(unaudited)
Three Months EndedMarch
31,
Nine Months EndedMarch
31,
2018 2017 2018
2017 Revenue decline, as reported (U.S. GAAP)
(4.0 )% (2.8 )% (3.0 )%
(2.0 )% Effect of new company-owned stores (0.1 )
(0.5 ) (0.2 ) (0.5 ) Effect of closed salons 9.2 1.9 5.9 1.7
Franchise (3.0 ) 0.1 (2.2 ) — Foreign currency (0.3 ) (0.2 ) (0.3 )
— Other (0.2 ) (0.2 ) 0.2 (0.5 )
Same-store sales,
non-GAAP 1.6 % (1.7 )% 0.4
% (1.3 )% REGIS
CORPORATION Reconciliation of reported non-GAAP revenue
change to same-store sales, as adjusted (unaudited)
Three Months EndedMarch
31,
Nine Months EndedMarch
31,
2018 2017 2018
2017 Revenue decline, as adjusted (non-GAAP)
(4.7 )% (2.8 )% (3.2 )%
(2.0 )% Effect of new company-owned stores (0.1 )
(0.5 ) (0.2 ) (0.5 ) Effect of closed salons 9.3 1.9 5.9 1.7 Other
(0.3 ) (0.2 ) 0.2 (0.5 ) Franchise (3.0 ) 0.1 (2.2 ) — Foreign
currency (0.3 ) (0.2 ) (0.3 ) —
Same-store sales, as
adjusted non-GAAP 0.9 % (1.7 )%
0.2 % (1.3 )%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180501005594/en/
Regis CorporationPaul Dunn, 952-947-7915VP, Finance and
Investor Relations
Regis (NYSE:RGS)
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