MINNEAPOLIS--(BUSINESS WIRE)--Regis Corporation (NYSE: RGS):
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
(Dollars in thousands) | 2019 | 2018 (1) | 2019 | 2018 (1) | ||||||||||||
Consolidated Revenue | $258,343 | $305,783 | $820,849 | $935,096 | ||||||||||||
System-wide Revenue | $437,547 | $448,089 | $1,302,217 | $1,308,200 | ||||||||||||
System-wide Same-Store Sales Comps | (2.4 | )% | 2.2 | % | (0.5 | )% | 1.1 | % | ||||||||
System-wide Same-Store Sales Comps, excluding TBG mall locations (3) | (2.0 | )% | NA | (0.1 | )% | NA | ||||||||||
Company-owned Same-Store Sales Comps | (2.5 | )% | 1.6 | % | (0.4 | )% | 0.4 | % | ||||||||
Franchise Same-Store Sales Comps, excluding TBG mall locations (3) | (1.3 | )% | NA | 0.4 | % | NA | ||||||||||
Franchise Same-Store Sales Comps | (2.2 | )% | 3.3 | % | (0.5 | )% | 2.5 | % | ||||||||
Operating (Loss) Income | $(22,162 | ) | $4,339 | $(20,284 | ) | $(18,540 | ) | |||||||||
Net (Loss) Income From Continuing Operations | $(14,811 | ) | $3,585 | $(14,857 | ) | $54,122 | ||||||||||
Diluted (Loss) Earnings per Share From Continuing Operations | $(0.37 | ) | $0.08 | $(0.35 | ) | $1.15 | ||||||||||
EBITDA (4) | $(1,401 | ) | $5,024 | $25,322 | $(18,560 | ) | ||||||||||
as a percent of revenue | (0.5 | )% | 1.6 | % | 3.1 | % | (2.0 | )% | ||||||||
As Adjusted (2) | ||||||||||||||||
Consolidated Revenue, as Adjusted | $258,343 | $303,722 | $820,849 | $933,035 | ||||||||||||
Net Income, as Adjusted | $15,404 | $8,695 | $34,760 | $13,747 | ||||||||||||
Diluted Earnings per Share, as Adjusted | $0.37 | $0.18 | $0.79 | $0.29 | ||||||||||||
EBITDA, as Adjusted (4) | $37,158 | $19,180 | $82,907 | $58,102 | ||||||||||||
as a percent of revenue, as Adjusted | 14.4 | % | 6.3 | % | 10.1 | % | 6.2 | % | ||||||||
(1) | Amounts for fiscal year 2018 have been adjusted to account for the adoption of "ASC 606 - Revenue From Contracts With Customers." | |
(2) | See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations". | |
(3) | Same-store sales include salons that have been a franchise location for more than one year, therefore TBG is not included in 2018 same-store sales. | |
(4) | See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations" for a reconciliation of EBITDA to Adjusted EBITDA | |
Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is franchising, owning and operating hair salons, today reported a third quarter 2019 net loss from continuing operations of $14.8 million, or $0.37 per diluted share as compared to net income from continuing operations of $3.6 million, or $0.08 per diluted share in the third quarter of 2018. The Company’s reported results include $15.9 million of non-cash goodwill derecognition associated with the sale of 245 salons to franchisees, $20.7 million of TBG mall location non-cash restructuring costs and $2.1 million of other discrete costs, partially offset by $8.5 million of related tax benefits. Excluding discrete items, and the income from discontinued operations, the Company reported third quarter 2019 as adjusted net income of $15.4 million, or $0.37 earnings per diluted share versus adjusted net income of $8.7 million, or $0.18 earnings per diluted share, for the same period last year.
Total revenue in the quarter of $258.3 million decreased $47.4 million, or 15.5%, year-over-year driven primarily by the net closure of 117 salons and the conversion of 635 company-owned salons to the Company's asset-light franchise portfolio over the past 12 months and a 250 basis point decline in company-owned same-store sales. The Company estimates that the shift of the lead up to the Easter holiday into the fourth quarter this fiscal year negatively impacted third quarter company-owned same store sales by approximately 90 basis points. In addition, prior year same-store-sales included 70 basis points of one-time discounted close-out product sales as part of the closure of 597 non-performing SmartStyle salons. Excluding the lead up to the Easter holiday shift and the one-time SmartStyle impact in the prior year, the Company estimates that company-owned same-store sales declined approximately 90 basis points during the quarter. The negative company-owned same-store sales performance was the result of a 6.1% decline in year-over-year transactions, partially offset by a 3.6% increase in ticket. These reductions were partially offset by revenue growth in the Company's Franchise segment.
Third quarter adjusted EBITDA of $37.2 million was $18.0 million, or 93.7% favorable versus the same period last year. Excluding the $27.4 million and $1.4 million gain from the sale of company-owned salons during the current and prior year quarter, respectively, adjusted EBITDA of $9.7 million was $8.0 million, or 45.2% unfavorable versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 635 company-owned salons that were profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.
On a full year basis, adjusted EBITDA of $82.9 million was $24.8 million, or 42.7% favorable versus the same period last year. Excluding the $43.9 million and $2.0 million gain from the sale of company-owned salons during the current and prior year, respectively, adjusted EBITDA of $39.0 million was $17.1 million, or 30.5% unfavorable versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 635 company-owned salons that were profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.
Hugh Sawyer, President and Chief Executive Officer, commented, "We remain focused on the ongoing transformation of our business and maximizing shareholder value. Among other items, this includes initiatives underway in technology, marketing and advertising, merchandise, data science, stylist recruiting and training, real estate and new capabilities to establish frictionless relationships with customers and franchisees. As in prior quarters, the gains generated from the sale and conversion of our company-owned salons met our financial objectives for these transactions” Mr. Sawyer added, “Given our success, we expect to consider additional opportunities to franchise company-owned salons in circumstances where we believe it will add to shareholder value and support an evolving strategy for our business."
Third Quarter Segment Results
Company-Owned Salons |
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Three Months Ended |
(Decrease) |
Nine Months Ended |
(Decrease) | |||||||||||||||||||||||||
(Dollars in millions) (1) | 2019 | 2018 (2) | 2019 | 2018 (2) | ||||||||||||||||||||||||
Total Revenue, as Adjusted | $ | 221.2 | $ | 269.9 | (18.0 | )% | $ | 705.3 | $ | 838.8 | (15.9 | )% | ||||||||||||||||
Company-owned Same-Store Sales Comps | (2.5 | )% | 1.6 | % | (410) bps | (0.4 | )% | 0.4 | % | (80) bps | ||||||||||||||||||
Year-over-Year Ticket change | 3.6 | % | 4.4 | % | ||||||||||||||||||||||||
Year-over-Year Transaction (3) change | (6.1 | )% | (4.8 | )% | ||||||||||||||||||||||||
Gross Profit, as Adjusted(4) | 89.6 | 115.3 | (22.3 | )% | 295.6 | 357.6 | (17.4 | )% | ||||||||||||||||||||
as a percent of revenue, as adjusted | 40.5 | % | 42.7 | % | (220) bps | 41.9 | % | 42.6 | % | (70) bps | ||||||||||||||||||
EBITDA, as Adjusted | 17.2 | 28.8 | (40.2 | )% | 66.1 | 88.8 | (25.5 | )% | ||||||||||||||||||||
as a percent of revenue | 7.8 | % | 10.7 | % | (290) bps | 9.4 | % | 10.6 | % | (120) bps | ||||||||||||||||||
Total Company-owned Salons | 3,376 | 4,128 | (18.2 | )% | ||||||||||||||||||||||||
as a percent of total Company-owned and Franchise salons | 43.6 | % | 50.7 | % | (710) bps | |||||||||||||||||||||||
(1) | Variances calculated on amounts shown in millions may result in rounding differences. | |
(2) | Amounts for fiscal year 2018 have been recast to account for the adoption of "ASC 606 - Revenue From Contracts With Customers." | |
(3) | Defined as total transactions and is what the Company had historically referred to as Traffic | |
(4) | Gross profit, as Adjusted, excludes depreciation and amortization. | |
Third quarter revenue, as adjusted, for the Company-owned salon segment decreased $48.7 million, or 18.0%, versus the prior year to $221.2 million. The year-over-year decline in revenue was driven by the decrease of 635 salons profitably sold and converted to the Company's asset-light franchise portfolio over the past 12 months, the closure of 117 unprofitable salons over the past 12 months and by a decline in Company-owned same-store sales of 2.5%. The year-over-year decline in company-owned same store sales was driven by a 6.1% decrease in transactions, partially related to the shift of the lead up to the Easter holiday into the fourth quarter this year, partially offset by a 3.6% increase in average ticket.
Third quarter adjusted EBITDA of $17.2 million decreased $11.6 million, or 40.2% versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 635 company-owned salons that were profitably sold and converted to the Company's asset-light franchise portfolio over the past 12 months and strategic investments in marketing and advertising, including the support of the Company's Supercuts MLB sponsorship partially offset by management initiatives.
Franchise |
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Three Months Ended |
Increase |
Nine Months Ended |
Increase |
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(Dollars in millions) (1) | 2019 | 2018 (2) | 2019 | 2018 (2) | ||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||
Product | $ | 10.6 | $ | 8.4 | 26.4 | % | $ | 31.3 | $ | 24.8 | 26.3 | % | ||||||||||||||||
Product sold to TBG mall locations | 3.7 | 6.5 | (42.9 | )% | 16.5 | 12.9 | 27.5 | % | ||||||||||||||||||||
Total product | $ | 14.3 | $ | 14.9 | (4.0 | )% | $ | 47.8 | $ | 37.7 | 26.7 | % | ||||||||||||||||
Royalties and fees | 22.8 | 18.9 | 20.8 | % | 67.8 | 56.5 | 20.0 | % | ||||||||||||||||||||
Total Revenue | $ | 37.1 | $ | 33.8 | 9.8 | % | $ | 115.6 | $ | 94.2 | 22.7 | % | ||||||||||||||||
Franchise Same-Store Sales Comps, excluding TBG mall locations (3) | (1.3 | )% | NA | 0.4 | % | NA | ||||||||||||||||||||||
Franchise Same-Store Sales Comps | (2.2 | )% | 3.3 | % | (550 bps) | (0.5 | )% | 2.5 | % | (300 bps) | ||||||||||||||||||
EBITDA, as Adjusted | 9.8 | 8.6 | 13.5 | % | 28.1 | 25.7 | 9.2 | % | ||||||||||||||||||||
as a percent of revenue | 26.3 | % | 25.5 | % | 80 bps | 24.3 | % | 27.3 | % | (300) bps | ||||||||||||||||||
Total Franchise Salons | 4,375 | 4,012 | 9.0 | % | ||||||||||||||||||||||||
as a percent of total Company-owned and Franchise salons | 56.4 | % | 49.3 | % | 710 bps | |||||||||||||||||||||||
(1) | Variances calculated on amounts shown in millions may result in rounding differences. | |
(2) | Amounts for fiscal year 2018 have been recast to account for the adoption of "ASC 606 - Revenue From Contracts With Customers." | |
(3) | Same-store sales include salons that have been a franchise location for more than one year, therefore TBG is not included in 2018 same-store sales. | |
Third quarter Franchise revenue was $37.1 million, a $3.3 million, or 9.8% increase compared to the prior year quarter. Royalties and fees were $22.8 million, a $3.9 million, or 20.8% increase versus the same period last year. Royalties and fees increased due to increased franchise salon counts. Product sales to franchisees of $14.3 million decreased $0.6 million versus the same period last year driven primarily by lower sales to TBG, partially offset by increased franchise salon counts.
Franchise adjusted EBITDA of $9.8 million improved $1.2 million, or 13.5% year-over-year primarily driven by the increase in salon counts, partially offset by planned strategic G&A investments to enhance the Company's franchisor capabilities and support the increased volume and cadence of transactions and conversions into the Franchise portfolio along with a decrease in margins on product sold to franchisees.
Other Company Updates
Adoption of New Accounting Standard
On July 1, 2018, the Company adopted amended revenue recognition guidance. For comparability the Company has adjusted prior reporting periods, including the three and nine months ended March 31, 2018. As a result, future financial statements will be comparable to the prior year results, but they will not be comparable to the financial results issued previously.
Other Key Events
- The Company repurchased 2,100,000 common shares, which is approximately 5% of its total common stock, at an average price of $18.47 per share for a total of $37.9 million.
- The Company profitably sold and transferred 245 Company-owned salons to its asset-light franchise portfolio. The impact of these transactions is as follows:
Three Months Ended March 31, |
Increase |
Nine Months Ended March 31, |
(Decrease) |
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(Dollars in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Salons sold to franchisees (1) | 245 | 126 | 119 | 502 | 1,437 | (935 | ) | ||||||||||||||||||||||
Cash proceeds received in quarter | $ | 30,569 | $ | 2,924 | $ | 27,645 | $ | 54,619 | $ | 5,620 | $ | 48,999 | |||||||||||||||||
Gain on sale of venditions, excluding goodwill derecognition | $ | 27,421 | $ | 1,409 | $ | 26,012 | $ | 43,922 | $ | 1,969 | $ | 41,953 | |||||||||||||||||
Non-cash goodwill derecognition | (15,932 | ) | (1,172 | ) | 14,760 | (33,528 | ) | (1,714 | ) | 31,814 | |||||||||||||||||||
Gain from sale of salon assets to franchisees, net | $ | 11,489 | $ | 237 | $ | 11,252 | $ | 10,394 | $ | 255 | $ | 10,139 | |||||||||||||||||
(1) | In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 salons, and substantially all of its International segment, representing approximately 250 salons in the UK, to The Beautiful Group (TBG). No cash proceeds were recorded as part of the transaction with TBG. | |
Transformational Strategy Update
The Company continued to make progress during the quarter implementing elements of its transformational strategy which includes among other initiatives:
- The appointment of Mr. James Townsend as Executive Vice President and Chief Marketing Officer
- Accelerating the growth of the Company's asset-light franchise portfolio where it believes it will add to shareholder value and support an evolving strategy for the business
- The elimination of non-core, non-essential G&A
- Investments in technology to establish a frictionless relationship with customers, franchisees and stylists
- Additional franchisor capabilities and services
- Trend-driven merchandise offerings
- Differentiated digital advertising and the Company's MLB relationship
- Customer data and analytics
- Stylist recruiting and training
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 Webcast
Regis Corporation will host a conference call via webcast discussing third quarter results today, April 30, 2019, 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 (800) 667-5617 and entering access code 6867095. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 6867095.
About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in beauty salons and cosmetology education. As of March 31, 2019, the Company owned, franchised or held ownership interests in 7,838 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 Beautiful Group's ability to transition and operate its salons successfully, as well as maintain adequate working capital; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic; changes in regulatory and statutory laws including increases in minimum wages; our ability to maintain and enhance the value of our brands; premature termination of agreements with our franchisees; 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, 2018. 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, |
June 30, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 71,146 | $ | 110,399 | ||||
Receivables, net | 33,737 | 52,430 | ||||||
Inventories | 90,869 | 79,363 | ||||||
Other current assets | 32,386 | 47,867 | ||||||
Total current assets | 228,138 | 290,059 | ||||||
Property and equipment, net | 83,629 | 99,288 | ||||||
Goodwill | 378,560 | 412,643 | ||||||
Other intangibles, net | 9,346 | 10,557 | ||||||
Other assets | 32,768 | 37,616 | ||||||
Non-current assets held for sale | 6,529 | 6,572 | ||||||
Total assets | $ | 738,970 | $ | 856,735 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 57,021 | $ | 57,738 | ||||
Accrued expenses | 83,490 | 100,716 | ||||||
Total current liabilities | 140,511 | 158,454 | ||||||
Long-term debt | 90,000 | 90,000 | ||||||
Long-term lease liability | 17,505 | — | ||||||
Other noncurrent liabilities | 115,144 | 121,843 | ||||||
Total liabilities | 363,160 | 370,297 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.05 par value; issued and outstanding 39,433,124 and 45,258,571 common shares at March 31, 2019 and June 30, 2018 respectively | 1,972 | 2,263 | ||||||
Additional paid-in capital | 93,515 | 194,436 | ||||||
Accumulated other comprehensive income | 9,050 | 9,656 | ||||||
Retained earnings | 271,273 | 280,083 | ||||||
Total shareholders’ equity | 375,810 | 486,438 | ||||||
Total liabilities and shareholders’ equity |
$ | 738,970 | $ | 856,735 | ||||
REGIS CORPORATION | ||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | ||||||||||||||||||||
For The Three and Nine Months Ended March 31, 2019 and 2018 | ||||||||||||||||||||
(Dollars and shares in thousands, except per share data amounts) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Revenues: | ||||||||||||||||||||
Service | $ | 181,809 | $ | 222,022 | $ | 580,076 | $ | 680,930 | ||||||||||||
Product | 53,766 | 64,911 | 173,006 | 197,701 | ||||||||||||||||
Royalties and fees | 22,768 | 18,850 | 67,767 | 56,465 | ||||||||||||||||
258,343 | 305,783 | 820,849 | 935,096 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of service | 111,632 | 132,081 | 348,060 | 406,767 | ||||||||||||||||
Cost of product | 31,167 | 37,139 | 99,698 | 107,165 | ||||||||||||||||
Site operating expenses | 34,339 | 37,548 | 106,723 | 116,175 | ||||||||||||||||
General and administrative | 41,694 | 45,727 | 135,257 | 129,485 | ||||||||||||||||
Rent | 32,332 | 39,391 | 102,952 | 147,280 | ||||||||||||||||
Depreciation and amortization | 8,630 | 9,558 | 27,732 | 46,764 | ||||||||||||||||
TBG mall location restructuring | 20,711 | — | 20,711 | — | ||||||||||||||||
Total operating expenses | 280,505 | 301,444 | 841,133 | 953,636 | ||||||||||||||||
Operating (loss) income | (22,162 | ) | 4,339 | (20,284 | ) | (18,540 | ) | |||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest expense | (1,354 | ) | (5,095 | ) | (3,432 | ) | (9,402 | ) | ||||||||||||
Gain from sale of salon assets to franchisees, net | 11,489 | 237 | 10,394 | 255 | ||||||||||||||||
Interest income and other, net | 464 | 1,495 | 1,453 | 3,934 | ||||||||||||||||
(Loss) income from continuing operations before income taxes | (11,563 | ) | 976 | (11,869 | ) | (23,753 | ) | |||||||||||||
Income tax (expense) benefit | (3,248 | ) | 2,609 | (2,988 | ) | 77,875 | ||||||||||||||
(Loss) income from continuing operations | (14,811 | ) | 3,585 | (14,857 | ) | 54,122 | ||||||||||||||
Income (loss) from TBG discontinued operations, net of taxes | 178 | (10,605 | ) | 6,027 | (50,973 | ) | ||||||||||||||
Net (loss) income | $ | (14,633 | ) | $ | (7,020 | ) | $ | (8,830 | ) | $ | 3,149 | |||||||||
Net (loss) income per share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
(Loss) income from continuing operations | $ | (0.37 | ) | $ | 0.08 | $ | (0.35 | ) | $ | 1.16 | ||||||||||
Income (loss) from TBG discontinued operations | 0.00 | (0.23 | ) | 0.14 | (1.09 | ) | ||||||||||||||
Net (loss) income per share, basic (1) | $ | (0.36 | ) | $ | (0.15 | ) | $ | (0.21 | ) | $ | 0.07 | |||||||||
Diluted: | ||||||||||||||||||||
(Loss) income from continuing operations | $ | (0.37 | ) | $ | 0.08 | $ | (0.35 | ) | $ | 1.15 | ||||||||||
Income (loss) from TBG discontinued operations | 0.00 | (0.22 | ) | 0.14 | (1.08 | ) | ||||||||||||||
Net (loss) income per share, diluted (1) | $ | (0.36 | ) | $ | (0.15 | ) | $ | (0.21 | ) | $ | 0.07 | |||||||||
Weighted average common and common equivalent shares outstanding: | ||||||||||||||||||||
Basic | 40,314 | 46,612 | 42,900 | 46,684 | ||||||||||||||||
Diluted | 40,314 | 47,153 | 42,900 | 47,093 | ||||||||||||||||
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(1) Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
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REGIS CORPORATION | |||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME (Unaudited) | |||||||||||||||||||
For The Three and Nine Months Ended March 31, 2019 and 2018 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
March 31, | March 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Net (loss) income | $ | (14,633 | ) | $ | (7,020 | ) | $ | (8,830 | ) | $ | 3,149 | ||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Foreign currency translation adjustments during the period: | |||||||||||||||||||
Foreign currency translation adjustments | 905 | (1,372 | ) | (606 | ) | 904 | |||||||||||||
Reclassification adjustments for losses included in net (loss) income | — | — | — | 6,152 | |||||||||||||||
Net current period foreign currency translation adjustments | 905 | (1,372 | ) | (606 | ) | 7,056 | |||||||||||||
Comprehensive (loss) income | $ | (13,728 | ) | $ | (8,392 | ) | $ | (9,436 | ) | $ | 10,205 | ||||||||
REGIS CORPORATION |
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) |
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(Dollars and shares in thousands, except per share data amounts) |
|||||||||||||||||||||||||||||
Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||
Common Stock |
Additional |
Accumulated |
Retained Earnings |
Total |
|||||||||||||||||||||||||
Shares |
Amount | ||||||||||||||||||||||||||||
Balance, December 31, 2018 |
41,472,468 | $ | 2,074 |
$ |
128,964 | $ | 8,145 | $ | 285,827 | $ | 425,010 | ||||||||||||||||||
Net loss | — | — |
— |
|
— |
|
(14,633 |
) |
|
(14,633 |
) | ||||||||||||||||||
Foreign currency translation adjustments | — |
|
— |
|
— |
|
905 |
|
— |
|
905 |
||||||||||||||||||
Stock repurchase program | (2,050,430 | ) | (102 |
) |
|
(37,818 |
) |
|
— |
|
— |
|
(37,920 |
) | |||||||||||||||
Exercise of SARs | 7,080 |
|
— |
(101 |
) |
|
— |
|
— |
|
(101 |
) | |||||||||||||||||
Stock-based compensation | — |
|
— |
2,512 |
|
— |
|
— |
|
2,512 |
|||||||||||||||||||
Net restricted stock activity | 4,006 | — |
(42 |
) |
|
— |
|
— |
|
(42 |
) | ||||||||||||||||||
Minority interest | — |
|
— |
— |
|
— |
|
79 |
|
79 |
|||||||||||||||||||
Balance, March 31, 2019 | 39,433,124 | $ | 1,972 |
$ |
93,515 |
$ | 9,050 | $ | 271,273 | $ | 375,810 | ||||||||||||||||||
Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||||
Common Stock |
Additional |
Accumulated |
Retained |
Total |
|||||||||||||||||||||||||
Shares |
Amount |
||||||||||||||||||||||||||||
Balance, December 31, 2017 | 46,688,423 |
$ |
2,335 |
$ |
216,301 | $ | 11,843 | $ | 283,694 | $ | 514,173 | ||||||||||||||||||
Net loss | — | — |
|
— |
|
— |
|
(7,020 |
) |
|
(7,020 |
) | |||||||||||||||||
Foreign currency translation adjustments | — |
|
— |
— |
|
(1,372 |
) |
|
— |
|
(1,372 |
) | |||||||||||||||||
Stock repurchase program | (585,967 | ) | (30 | ) |
(9,605 |
) |
|
— |
|
— |
|
(9,635 |
) | ||||||||||||||||
Exercise of SARs | 18,697 |
|
1 |
(184 |
) |
|
— |
|
— |
|
(183 |
) | |||||||||||||||||
Stock-based compensation | — |
|
— |
1,690 |
|
— |
|
— |
|
1,690 |
|||||||||||||||||||
Net restricted stock activity | 5,096 | — |
(53 |
) |
|
— |
|
— |
|
(53 |
) | ||||||||||||||||||
Minority interest | — |
|
— |
— |
|
— |
|
67 |
|
67 |
|||||||||||||||||||
Balance, March 31, 2018 | 46,126,249 | $ | 2,306 |
|
$ |
208,149 | $ | 10,471 | $ | 276,741 | $ | 497,667 | |||||||||||||||||
Nine Months Ended March 31, 2019 | |||||||||||||||||||||||||||||
Common Stock |
Additional |
Accumulated |
Retained |
Total |
|||||||||||||||||||||||||
Shares |
Amount |
||||||||||||||||||||||||||||
Balance, June 30, 2018 | 45,258,571 | $ | 2,263 |
|
$ |
194,436 | $ | 9,656 | $ | 280,083 | $ | 486,438 | |||||||||||||||||
Net loss | — | — |
— |
|
— |
|
(8,830 |
) |
|
(8,830 |
) | ||||||||||||||||||
Foreign currency translation adjustments | — |
|
— |
— |
|
(606 |
) |
|
— |
|
(606 |
) | |||||||||||||||||
Stock repurchase program | (6,023,523 | ) | (301 | ) |
(105,951 |
) |
|
— |
|
— |
|
(106,252 |
) | ||||||||||||||||
Exercise of SARs | 15,412 |
|
1 |
(205 |
) |
|
— |
|
— |
|
(204 |
) | |||||||||||||||||
Stock-based compensation | — |
|
— |
7,065 |
|
— |
|
— |
|
7,065 |
|||||||||||||||||||
Net restricted stock activity | 182,664 |
|
9 |
(1,830 |
) |
|
— |
|
— |
|
(1,821 |
) | |||||||||||||||||
Minority interest | — |
|
— |
— |
|
— |
|
|
20 |
|
20 |
||||||||||||||||||
Balance, March 31, 2019 | 39,433,124 | $ | 1,972 |
$ |
93,515 | $ | 9,050 | $ | 271,273 | $ | 375,810 | ||||||||||||||||||
Nine Months Ended March 31, 2018 | |||||||||||||||||||||||||||||
Common Stock |
Additional |
Accumulated |
Retained |
Total |
|||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance, June 30, 2017 | 46,400,367 | $ | 2,320 |
$ |
214,109 | $ | 3,415 | $ | 273,776 | $ | 493,620 | ||||||||||||||||||
Net income | — | — |
— |
|
— |
|
3,149 |
|
3,149 |
||||||||||||||||||||
Foreign currency translation adjustments | — | — |
— |
|
7,056 |
|
— |
|
7,056 |
||||||||||||||||||||
Stock repurchase program | (585,967 | ) | (30 | ) |
(9,605 |
) |
|
— |
|
— |
|
(9,635 |
) | ||||||||||||||||
Exercise of SARs | 27,793 |
|
2 |
(278 |
) |
|
— |
|
— |
|
(276 |
) | |||||||||||||||||
Stock-based compensation | — |
|
— |
5,933 |
|
— |
|
— |
|
5,933 |
|||||||||||||||||||
Shares issued through franchise stock incentive program | 522 | — |
7 |
|
— |
|
— |
|
7 |
||||||||||||||||||||
Net restricted stock activity | 283,534 |
|
14 |
(2,017 |
) |
|
— |
|
— |
|
(2,003 |
) | |||||||||||||||||
Minority interest | — |
|
— |
— |
|
— |
|
|
(184 |
) |
|
(184 |
) | ||||||||||||||||
Balance, March 31, 2018 | 46,126,249 | $ | 2,306 |
$ |
208,149 | $ | 10,471 | $ | 276,741 | $ | 497,667 | ||||||||||||||||||
REGIS CORPORATION |
||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) |
||||||||||
(Dollars in thousands) |
||||||||||
Nine Months Ended March 31, | ||||||||||
2019 | 2018 | |||||||||
Cash flows from operating activities: | ||||||||||
Net (loss) income | $ | (8,830 | ) | $ | 3,149 | |||||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||
Non-cash impairment and other adjustments related to TBG discontinued operations | (163 | ) | 37,020 | |||||||
Depreciation and amortization | 24,727 | 29,736 | ||||||||
Depreciation related to TBG discontinued operations | — | 3,723 | ||||||||
Deferred income taxes | (6,034 | ) | (85,026 | ) | ||||||
Gain on life insurance | — | (7,986 | ) | |||||||
Non-cash TBG mall location restructuring charge | 20,711 | — | ||||||||
Gain from sale of salon assets to franchisees, net | (10,394 | ) | (255 | ) | ||||||
Salon asset impairments | 3,005 | 11,099 | ||||||||
Accumulated other comprehensive income reclassification adjustment | — | 6,152 | ||||||||
Stock-based compensation | 7,065 | 6,483 | ||||||||
Amortization of debt discount and financing costs | 206 | 4,011 | ||||||||
Other non-cash items affecting earnings | (492 | ) | (287 | ) | ||||||
Changes in operating assets and liabilities, excluding the effects of asset sales | (50,074 | ) | (29,483 | ) | ||||||
Net cash (used in) operating activities | (20,273 | ) | (21,664 | ) | ||||||
Cash flows from investing activities: | ||||||||||
Capital expenditures | (23,160 | ) | (20,065 | ) | ||||||
Capital expenditures related to TBG discontinued operations | — | (1,171 | ) | |||||||
Proceeds from sale of assets to franchisees | 54,619 | 5,620 | ||||||||
Proceeds from company-owned life insurance policies | 24,617 | 18,108 | ||||||||
Net cash provided by investing activities | 56,076 | 2,492 | ||||||||
Cash flows from financing activities: | ||||||||||
Borrowings on revolving credit facilities | — | 90,000 | ||||||||
Repayment of long-term debt and capital lease obligations | — | (124,230 | ) | |||||||
Repurchase of common stock | (105,364 | ) | (9,634 | ) | ||||||
Settlement of equity awards | — | (550 | ) | |||||||
Taxes paid for shares withheld | (2,447 | ) | (2,279 | ) | ||||||
Net proceeds from sale and leaseback transaction | 18,068 | — | ||||||||
Net cash used in financing activities | (89,743 | ) | (46,693 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 5 | (30 | ) | |||||||
Decrease in cash, cash equivalents, and restricted cash | (53,935 | ) | (65,895 | ) | ||||||
Cash, cash equivalents and restricted cash: | ||||||||||
Beginning of period | 148,774 | 208,634 | ||||||||
Cash, cash equivalents and restricted cash included in current assets held for sale | — | 1,352 | ||||||||
Beginning of period, total cash, cash equivalents and restricted cash | 148,774 | 209,986 | ||||||||
End of period | $ | 94,839 | $ | 144,091 | ||||||
REGIS CORPORATION |
||||||||||||||||||||||||
Same-Store sales |
||||||||||||||||||||||||
SYSTEM-WIDE SAME-STORE SALES (1): |
||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||
SmartStyle | 1.3 | % | (1.3 | )% | 0.6 | % | (0.9 | )% | 4.4 | % | 0.6 | % | ||||||||||||
Supercuts | (1.7 | ) | (9.2 | ) | (2.2 | ) | 3.7 | (3.0 | ) | 3.2 | ||||||||||||||
Signature Style | (3.3 | ) | (7.9 | ) | (3.9 | ) | 2.7 | (1.7 | ) | 2.2 | ||||||||||||||
Total, excluding TBG mall locations | (1.6 | )% | (4.6 | )% | (2.0 | )% | NA | NA | NA | |||||||||||||||
TBG mall locations | (4.0 | ) | (8.7 | ) | (4.7 | ) | NA | NA | NA | |||||||||||||||
Total | (1.9 | )% | (5.2 | )% | (2.4 | )% | 2.3 | % | 1.3 | % | 2.2 | % | ||||||||||||
For the Nine Months Ended | ||||||||||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||
SmartStyle | 2.2 | % | (1.2 | )% | 1.2 | % | (0.9 | )% | 1.6 | % | (0.1 | )% | ||||||||||||
Supercuts | 0.2 | (6.2 | ) | (0.2 | ) | 3.1 | (5.2 | ) | 2.5 | |||||||||||||||
Signature Style | (0.5 | ) | (4.1 | ) | (1.0 | ) | 0.9 | (2.3 | ) | 0.6 | ||||||||||||||
Total, excluding TBG mall locations | 0.4 | % | (3.0 | )% | (0.1 | )% | NA | NA | NA | |||||||||||||||
TBG mall locations | (3.4 | ) | (7.0 | ) | (4.0 | ) | NA | NA | NA | |||||||||||||||
Total | — | % | (3.4 | )% | (0.5 | )% | 1.5 | % | (0.7 | )% | 1.1 | % | ||||||||||||
____________________________________ |
(1) | System-wide same-store sales are calculated as the total change in sales for system-wide company-owned and franchise locations for more than one year (including TBG mall locations in 2019) that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date system-wide same-store sales are the sum of the system-wide same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. 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. System-wide same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. | |
COMPANY-OWNED SAME-STORE SALES (1):
For the Three Months Ended | |||||||||||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||||||||||
Service | Retail | Total | Service | Retail | Total | ||||||||||||||
SmartStyle | 1.6 | % | — | % | 1.1 | % | (1.0 | )% | 4.4 | % | 0.6 | % | |||||||
Supercuts | (5.2 | ) | (9.6 | ) | (5.6 | ) | 4.0 | (2.2 | ) | 3.5 | |||||||||
Signature Style | (4.3 | ) | (8.7 | ) | (4.7 | ) | 1.8 | (0.9 | ) | 1.5 | |||||||||
Total | (2.4 | )% | (3.0 | )% | (2.5 | )% | 1.4 | % | 2.5 | % | 1.6 | % | |||||||
For the Nine Months Ended | |||||||||||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||||||||||
Service | Retail | Total | Service | Retail | Total | ||||||||||||||
SmartStyle | 2.4 | % | (0.3 | )% | 1.6 | % | (0.9 | )% | 1.6 | % | (0.1 | )% | |||||||
Supercuts | (1.7 | ) | (5.9 | ) | (2.1 | ) | 2.9 | (4.3 | ) | 2.2 | |||||||||
Signature Style | (1.3 | ) | (3.8 | ) | (1.5 | ) | 0.2 | (3.3 | ) | (0.2 | ) | ||||||||
Total |
(0.1 | )% | (1.7 | )% | (0.4 | )% | 0.5 | % | — | % | 0.4 | % | |||||||
____________________________________ |
(1) | Company-owned same-store sales are calculated 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 company-owned same-store sales are the sum of the company-owned 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. Company-owned same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. | |
FRANCHISE SAME-STORE SALES (2):
For the Three Months Ended | ||||||||||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||
SmartStyle | (1.4 | )% | (15.4 | )% | (5.2 | )% | 1.4 | % | (5.7 | )% | 0.9 | % | ||||||||||||
Supercuts | (0.1 | ) | (8.9 | ) | (0.6 | ) | 3.6 | (3.8 | ) | 3.1 | ||||||||||||||
Signature Style | (1.6 | ) | (6.6 | ) | (2.2 | ) | 4.9 | (3.0 | ) | 3.7 | ||||||||||||||
Total, excluding TBG mall locations | (0.5 | )% | (9.0 | )% | (1.3 | )% | NA | NA | NA | |||||||||||||||
TBG mall locations | (4.0 | ) | (8.7 | ) | (4.7 | ) | NA | NA | NA | |||||||||||||||
Total | (1.4 | )% | (8.9 | )% | (2.2 | )% | 3.9 | % | (3.4 | )% | 3.3 | % | ||||||||||||
For the Nine Months Ended | ||||||||||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||||||||
SmartStyle | 0.1 | % | (16.6 | )% | (4.7 | )% | (3.7 | )% | (11.5 | )% | (4.3 | )% | ||||||||||||
Supercuts | 1.3 | (6.5 | ) | 0.8 | 3.3 | (6.2 | ) | 2.7 | ||||||||||||||||
Signature Style | 1.0 | (4.6 | ) | 0.1 | 2.8 | (0.7 | ) | 2.2 | ||||||||||||||||
Total, excluding TBG mall locations | 1.2 | % | (6.8 | )% | 0.4 | % | NA | NA | NA | |||||||||||||||
TBG mall locations | (3.4 | ) | (7.0 | ) | (4.0 | ) | NA | NA | NA | |||||||||||||||
Total | 0.3 | % | (6.9 | )% | (0.5 | )% | 3.1 | % | (3.5 | )% | 2.5 | % | ||||||||||||
____________________________________ |
(2) | Franchise same-store sales are calculated as the total change in sales for salons that have been a franchise location for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. 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. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. TBG is not included in 2018 same-store sales as it was not a franchise location in the previous year. |
REGIS CORPORATION |
||||||||
System-wide location counts |
||||||||
March 31, 2019 | June 30, 2018 | |||||||
COMPANY-OWNED SALONS: | ||||||||
SmartStyle/Cost Cutters in Walmart Stores | 1,591 | 1,660 | ||||||
Supercuts | 568 | 928 | ||||||
Signature Style | 1,217 | 1,378 | ||||||
Total Company-owned Salons | 3,376 | 3,966 | ||||||
as a percent of total Company-owned and Franchise salons | 43.6 | % | 49.1 | % | ||||
FRANCHISE SALONS: | ||||||||
SmartStyle/Cost Cutters in Walmart Stores | 591 | 561 | ||||||
Supercuts | 2,164 | 1,739 | ||||||
Signature Style | 740 | 745 | ||||||
Total franchise locations, excluding TBG mall locations | 3,495 | 3,045 | ||||||
as a percent of total Company-owned and Franchise salons | 45.1 | % | 37.7 | % | ||||
Total North America TBG mall locations (1) | 617 | 807 | ||||||
as a percent of total Company-owned and Franchise salons | 8.0 | % | 10.0 | % | ||||
Total North American Salons | 4,112 | 3,852 | ||||||
Total International TBG Salons (1) | 263 | 262 | ||||||
as a percent of total Company-owned and Franchise salons | 3.4 | % | 3.2 | % | ||||
Total Franchise Salons | 4,375 | 4,114 | ||||||
as a percent of total Company-owned and Franchise salons | 56.4 | % | 50.9 | % | ||||
OWNERSHIP INTEREST LOCATIONS: | ||||||||
Equity ownership interest locations | 87 | 88 | ||||||
Grand Total, System-wide | 7,838 | 8,168 | ||||||
____________________________________ |
(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 (loss) income, net income, net income 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 ended months ended March 31, 2019 and 2018:
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.
- SmartStyle restructuring costs.
- Executive transition costs.
- Professional fees.
- Severance expense.
- Legal fees.
- Gain on life insurance proceeds.
- TBG restructuring.
- Debt refinancing.
- Goodwill derecognition.
- Impact of tax reform.
- TBG 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 (loss) income and U.S. GAAP net income to equivalent non-GAAP measures | |||||||||||||||||||||||
Three Months |
Nine Months Ended |
||||||||||||||||||||||
U.S. GAAP financial line item | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
U.S. GAAP revenue | $ | 258,343 | $ | 305,783 | $ | 820,849 | $ | 935,096 | |||||||||||||||
Non-GAAP revenue adjustments | |||||||||||||||||||||||
SmartStyle restructuring discounting | Product Sales | — | (2,061 | ) | — | (2,061 | ) | ||||||||||||||||
Non-GAAP revenue | $ | 258,343 | $ | 303,722 | $ | 820,849 | $ | 933,035 | |||||||||||||||
U.S. GAAP operating (loss) income | $ | (22,162 | ) | $ | 4,339 | $ | (20,284 | ) | $ | (18,540 | ) | ||||||||||||
Non-GAAP revenue adjustments | — | (2,061 | ) | — | (2,061 | ) | |||||||||||||||||
Non-GAAP operating expense adjustments (1) | |||||||||||||||||||||||
SmartStyle restructuring discounting | Cost of Service | — | 190 | — | 190 | ||||||||||||||||||
SmartStyle restructuring 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 | 1,579 | (8 | ) | 5,629 | 1,628 | |||||||||||||||||
Severance | General and administrative | 515 | — | 3,305 | 2,828 | ||||||||||||||||||
Legal fees | General and administrative | — | — | 439 | — | ||||||||||||||||||
Gain on life insurance proceeds | General and administrative | — | — | — | (7,986 | ) | |||||||||||||||||
SmartStyle restructuring costs, net | Rent | — | — | — | 23,999 | ||||||||||||||||||
SmartStyle restructuring costs | Depreciation and amortization | — | 43 | — | 12,922 | ||||||||||||||||||
TBG restructuring | TBG restructuring | 20,711 | — | 20,711 | — | ||||||||||||||||||
Total non-GAAP operating expense adjustments | 22,805 | 4,483 | 30,084 | 38,958 | |||||||||||||||||||
Non-GAAP operating (loss) income (1) | $ | 643 | $ | 6,761 | $ | 9,800 | $ | 18,357 | |||||||||||||||
U.S. GAAP net (loss) income | $ | (14,633 | ) | $ | (7,020 | ) | $ | (8,830 | ) | $ | 3,149 | ||||||||||||
Non-GAAP net income adjustments: | |||||||||||||||||||||||
Non-GAAP revenue adjustments | — | (2,061 | ) | — | (2,061 | ) | |||||||||||||||||
Non-GAAP operating expense adjustments | 22,805 | 4,483 | 30,084 | 38,958 | |||||||||||||||||||
Debt refinancing | Interest expense | — | 2,957 | — | 2,957 | ||||||||||||||||||
Goodwill derecognition | Interest income and other, net | 15,932 | 1,172 | 33,528 | 1,714 | ||||||||||||||||||
Income tax impact on Non-GAAP adjustments (2) | Income taxes | (8,522 | ) | (1,441 | ) | (13,995 | ) | (10,072 | ) | ||||||||||||||
Impact of tax reform | Income taxes | — | — | — | (71,871 | ) | |||||||||||||||||
TBG discontinued operations, net of income tax | Loss from discontinued operations, net of tax | (178 | ) | 10,605 | (6,027 | ) | 50,973 | ||||||||||||||||
Total non-GAAP net income adjustments | 30,037 | 15,715 | 43,590 | 10,598 | |||||||||||||||||||
Non-GAAP net income | $ | 15,404 | $ | 8,695 | $ | 34,760 | $ | 13,747 | |||||||||||||||
____________________________________ |
|
Notes: |
||
(1) | Adjusted operating margins for the three months ended March 31, 2019, and 2018, were 0.2% and 2.2%, and were 1.2% and 2.0% for the nine months ended March 31, 2019, and 2018, respectively, and are calculated as non-GAAP operating income divided by U.S. 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 nine months ended March 31, 2019, and 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. |
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 per diluted share | ||||||||||||||||||||
|
Three Months Ended March 31, |
Nine Months Ended March 31, | ||||||||||||||||||
|
2019 |
2018 | 2019 | 2018 | ||||||||||||||||
U.S. GAAP net (loss) income per diluted share | $ | (0.363 | ) | $ | (0.149 | ) | $ | (0.206 | ) | $ | 0.067 | |||||||||
SmartStyle restructuring costs, net | — | 0.038 | — | 0.668 | ||||||||||||||||
Severance (1) | 0.010 | — | 0.059 | 0.050 | ||||||||||||||||
Professional fees (1) | 0.030 | — | 0.100 | 0.031 | ||||||||||||||||
Legal fees | — | — | 0.008 | — | ||||||||||||||||
Gain on life insurance proceeds (1) | — | — | — | (0.170 | ) | |||||||||||||||
Executive transition costs (1) | — | 0.002 | — | 0.011 | ||||||||||||||||
TBG restructuring | 0.390 | — | 0.368 | — | ||||||||||||||||
Debt refinancing (1) (2) | — | 0.049 | — | 0.049 | ||||||||||||||||
Goodwill derecognition (1) | 0.300 | 0.019 | 0.596 | 0.030 | ||||||||||||||||
Impact of tax reform | — | — | — | (1.526 | ) | |||||||||||||||
TBG discontinued operations, net of tax | (0.003 | ) | 0.225 | (0.138 | ) | 1.082 | ||||||||||||||
Impact of change in weighted average shares (3) | 0.010 | — | 0.005 | — | ||||||||||||||||
Non-GAAP net income per diluted share (2) | $ | 0.373 | $ | 0.184 | $ | 0.792 | $ | 0.292 | ||||||||||||
U.S. GAAP Weighted average shares - basic | 40,314 | 46,612 | 42,900 | 46,684 | ||||||||||||||||
U.S. GAAP Weighted average shares - diluted | 40,314 | 47,153 | 42,900 | 47,093 | ||||||||||||||||
Non-GAAP Weighted average shares - diluted (3) | 41,337 | 47,153 | 43,907 | 47,053 | ||||||||||||||||
____________________________________ |
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 nine months ended March 31, 2019, and 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. | |
(2) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. | |
(3) | Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which includes the dilutive effect of common stock equivalents. The earnings per share impact of the adjustments for the three and nine months ended March 31, 2019 included additional shares for common stock equivalents of 1.0 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 per share. |
REGIS CORPORATION |
|||||||||||||||
Summary of Pre-Tax, Income Taxes and Net Income Impact for Q3 FY19 Discrete Items |
|||||||||||||||
(Dollars in thousands) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Pre-Tax | Income Taxes | Net Income | |||||||||||||
Professional fees | $ | 1,579 | $ | (347 | ) | $ | 1,232 | ||||||||
Severance | 515 | (113 | ) | 402 | |||||||||||
TBG restructuring | 20,711 | (4,557 | ) | 16,154 | |||||||||||
Goodwill derecognition | 15,932 | (3,505 | ) | 12,427 | |||||||||||
$ | 38,737 | $ | (8,522 | ) | $ | 30,215 | |||||||||
TBG discontinued operations, net of tax | $ | (224 | ) | $ | 46 | $ | (178 | ) | |||||||
Total | $ | 38,513 | $ | (8,476 | ) | $ | 30,037 | ||||||||
REGIS CORPORATION
Reconciliation of reported U.S. GAAP
net income (loss) to adjusted EBITDA, a non-GAAP financial measure
(Dollars
in thousands)
(unaudited)
Adjusted EBITDA
EBITDA 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, 2019, the items impacting comparability consisted of the items identified in the non-GAAP reconciling items for the respective periods. The impacts of the income tax provision adjustments associated with the above items 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, 2019 | ||||||||||||||||||||
Company- |
Franchise | Corporate | Consolidated (1) | |||||||||||||||||
Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 10,730 | $ | (11,180 | ) | $ | (14,183 | ) | $ | (14,633 | ) | |||||||||
Interest expense, as reported | — | — | 1,354 | 1,354 | ||||||||||||||||
Income taxes, as reported | — | — | 3,248 | 3,248 | ||||||||||||||||
Depreciation and amortization, as reported | 6,519 | 240 | 1,871 | 8,630 | ||||||||||||||||
EBITDA (as defined above) | $ | 17,249 | $ | (10,940 | ) | $ | (7,710 | ) | $ | (1,401 | ) | |||||||||
Professional fees | — | — | 1,579 | 1,579 | ||||||||||||||||
Severance | — | — | 515 | 515 | ||||||||||||||||
TBG restructuring | — | 20,711 | — | 20,711 | ||||||||||||||||
Goodwill derecognition | — | — | 15,932 | 15,932 | ||||||||||||||||
TBG discontinued operations, net of tax | — | — | (178 | ) | (178 | ) | ||||||||||||||
Adjusted EBITDA, non-GAAP financial measure | $ | 17,249 | $ | 9,771 | $ | 10,138 | $ | 37,158 | ||||||||||||
Three Months Ended March 31, 2018 | ||||||||||||||||||||
Company- |
Franchise | Corporate | Consolidated (1) | |||||||||||||||||
Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 19,341 | $ | 8,520 | $ | (34,881 | ) | $ | (7,020 | ) | ||||||||||
Interest expense, as reported | — | — | 5,095 | 5,095 | ||||||||||||||||
Income taxes, as reported | — | — | (2,609 | ) | (2,609 | ) | ||||||||||||||
Depreciation and amortization, as reported | 7,276 | 92 | 2,190 | 9,558 | ||||||||||||||||
EBITDA (as defined above) | $ | 26,617 | $ | 8,612 | $ | (30,205 | ) | $ | 5,024 | |||||||||||
SmartStyle restructuring costs, net | 2,218 | — | 23 | 2,241 | ||||||||||||||||
Executive transition costs | — | — | 146 | 146 | ||||||||||||||||
Professional fees | — | — | (8 | ) | (8 | ) | ||||||||||||||
Goodwill derecognition | — | — | 1,172 | 1,172 | ||||||||||||||||
TBG discontinued operations | — | — | 10,605 | 10,605 | ||||||||||||||||
Adjusted EBITDA, non-GAAP financial measure | $ | 28,835 | $ | 8,612 | $ | (18,267 | ) | $ | 19,180 | |||||||||||
____________________________________ |
Notes: |
||
(1) | Consolidated EBITDA margins for the three months ended March 31, 2019, and 2018, were (0.5)% and 1.6%, 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, 2019 and 2018 were 14.4% and 6.3%, respectively, and are calculated as adjusted EBITDA divided by adjusted non-GAAP revenue for each respective period. | |
For the Nine Months Ended March 31, 2019 | ||||||||||||||||
Company-owned | Franchise | Corporate | Consolidated (1) | |||||||||||||
Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 44,844 | $ | 6,780 | $ | (60,454 | ) | $ | (8,830 | ) | ||||||
Interest expense, as reported | — | — | 3,432 | 3,432 | ||||||||||||
Income taxes, as reported | — | — | 2,988 | 2,988 | ||||||||||||
Depreciation and amortization, as reported | 21,304 | 613 | 5,815 | 27,732 | ||||||||||||
EBITDA (as defined above) | $ | 66,148 | $ | 7,393 | $ | (48,219 | ) | $ | 25,322 | |||||||
Professional fees | — | — | 5,629 | 5,629 | ||||||||||||
Severance | — | — | 3,305 | 3,305 | ||||||||||||
Legal fees | — | — | 439 | 439 | ||||||||||||
TBG restructuring | — | 20,711 | — | 20,711 | ||||||||||||
Goodwill derecognition | — | — | 33,528 | 33,528 | ||||||||||||
TBG discontinued operations | — | — | (6,027 | ) | (6,027 | ) | ||||||||||
Adjusted EBITDA, non-GAAP financial measure | $ | 66,148 | $ | 28,104 | $ | (11,345 | ) | $ | 82,907 | |||||||
For the Nine Months Ended March 31, 2018 | ||||||||||||||||
Company-owned | Franchise | Corporate | Consolidated (1) | |||||||||||||
Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 22,650 | $ | 25,469 | $ | (44,970 | ) | $ | 3,149 | |||||||
Interest expense, as reported | — | — | 9,402 | 9,402 | ||||||||||||
Income taxes, as reported | — | — | (77,875 | ) | (77,875 | ) | ||||||||||
Depreciation and amortization, as reported | 39,224 | 275 | 7,265 | 46,764 | ||||||||||||
EBITDA (as defined above) | $ | 61,874 | $ | 25,744 | $ | (106,178 | ) | $ | (18,560 | ) | ||||||
SmartStyle restructuring 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 | ||||||||||||
TBG discontinued operations | — | — | 50,973 | 50,973 | ||||||||||||
Adjusted EBITDA, non-GAAP financial measure | $ | 88,778 | $ | 25,744 | $ | (56,420 | ) | $ | 58,102 | |||||||
____________________________________ |
Notes: |
||
(1) | Consolidated EBITDA margins for the nine months ended March 31, 2019, and 2018 were 3.1% and (2.0)%, 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 nine months ended March 31, 2019 and 2018, were 10.1% and 6.2%, respectively, and are calculated as adjusted EBITDA divided by adjusted non-GAAP revenue for each respective period. | |
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, 2019 | ||||||||||||||||||||
Company- |
Franchise | Corporate | Consolidated | |||||||||||||||||
Consolidated total revenue, U.S. GAAP and non-GAAP | $ | 221,236 | $ | 37,107 | $ | — | $ | 258,343 | ||||||||||||
Three Months Ended March 31, 2018 | ||||||||||||||||||||
Company- |
Franchise | Corporate | Consolidated | |||||||||||||||||
Consolidated total revenue, as reported (U.S. GAAP) | $ | 272,002 | $ | 33,781 | $ | — | $ | 305,783 | ||||||||||||
SmartStyle restructuring discounting | (2,061 | ) | — | — | (2,061 | ) | ||||||||||||||
Adjusted total revenue, non-GAAP financial measure | $ | 269,941 | $ | 33,781 | $ | — | $ | 303,722 | ||||||||||||
Nine Months Ended March 31, 2019 | ||||||||||||||||||||
Company- |
Franchise | Corporate | Consolidated | |||||||||||||||||
Consolidated total revenue, U.S. GAAP and non-GAAP | $ | 705,296 | $ | 115,553 | $ | — | $ | 820,849 | ||||||||||||
Nine Months Ended March 31, 2018 | ||||||||||||||||||||
Company- |
Franchise | Corporate | Consolidated | |||||||||||||||||
Consolidated total revenue, as reported (U.S. GAAP) | $ | 840,910 | $ | 94,186 | $ | — | $ | 935,096 | ||||||||||||
SmartStyle restructuring discounting | (2,061 | ) | — | — | (2,061 | ) | ||||||||||||||
Adjusted total revenue, non-GAAP financial measure | $ | 838,849 | $ | 94,186 | $ | — | $ | 933,035 | ||||||||||||
REGIS CORPORATION
Reconciliation 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 profit
The 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, 2019 | |||||||||||||||||||
Company-owned | Franchise | Corporate | Consolidated | ||||||||||||||||
Revenues: | |||||||||||||||||||
Service | $ | 181,809 | $ | — | $ | — | $ | 181,809 | |||||||||||
Product | 39,427 | 14,339 | — | 53,766 | |||||||||||||||
221,236 | 14,339 | — | 235,575 | ||||||||||||||||
Cost of service | 111,632 | — | — | 111,632 | |||||||||||||||
Cost of product | 19,992 | 11,175 | — | 31,167 | |||||||||||||||
131,624 | 11,175 | — | 142,799 | ||||||||||||||||
U.S. GAAP and Non-GAAP gross profit (1) | $ | 89,612 | $ | 3,164 | $ | — | $ | 92,776 | |||||||||||
Three Months Ended March 31, 2018 | |||||||||||||||||||
Company-owned | Franchise | Corporate | Consolidated | ||||||||||||||||
Revenues: | |||||||||||||||||||
Service | $ | 222,022 | $ | — | $ | — | $ | 222,022 | |||||||||||
Product | 49,980 | 14,931 | — | 64,911 | |||||||||||||||
272,002 | 14,931 | — | 286,933 | ||||||||||||||||
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) | $ | 114,784 | $ | 2,929 | $ | — | $ | 117,713 | |||||||||||
Non- GAAP gross profit adjustments: | |||||||||||||||||||
SmartStyle restructuring discounting | 536 | — | — | 536 | |||||||||||||||
Non-GAAP gross profit (1) | $ | 115,320 | $ | 2,929 | $ | — | $ | 118,249 | |||||||||||
____________________________________ |
Notes: |
||
(1) | Gross profit excludes depreciation and amortization. |
For the Nine Months Ended March 31, 2019 | |||||||||||||||
Company-owned | Franchise | Corporate | Consolidated | ||||||||||||
Revenues: | |||||||||||||||
Service | $ | 580,076 | $ | — | $ | — | $ | 580,076 | |||||||
Product | 125,220 | 47,786 | — | 173,006 | |||||||||||
705,296 | 47,786 | — | 753,082 | ||||||||||||
Cost of service | 348,060 | — | — | 348,060 | |||||||||||
Cost of product | 61,661 | 38,037 | — | 99,698 | |||||||||||
409,721 | 38,037 | — | 447,758 | ||||||||||||
U.S. GAAP and Non-GAAP gross profit (1) | $ | 295,575 | $ | 9,749 | $ | — | $ | 305,324 | |||||||
For the Nine Months Ended March 31, 2018 | |||||||||||||||
Company-owned | Franchise | Corporate | Consolidated | ||||||||||||
Revenues: | |||||||||||||||
Service | $ | 680,930 | $ | — | $ | — | $ | 680,930 | |||||||
Product | 159,980 | 37,721 | — | 197,701 | |||||||||||
840,910 | 37,721 | — | 878,631 | ||||||||||||
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 gross profit (1) | $ | 356,515 | $ | 8,184 | $ | — | $ | 364,699 | |||||||
Non- GAAP gross profit adjustments: | |||||||||||||||
SmartStyle restructuring discounting | 1,121 | — | — | 1,121 | |||||||||||
Non-GAAP gross profit (1) | $ | 357,636 | $ | 8,184 | $ | — | $ | 365,820 | |||||||
____________________________________ |
Notes: |
||
(1) | Gross profit excludes depreciation and amortization. |
REGIS CORPORATION |
||||||||||||||||
Reconciliation of reported U.S. GAAP revenue change to company-owned same-store sales |
||||||||||||||||
(unaudited) |
||||||||||||||||
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue decline, as reported (U.S. GAAP) | (15.5 | )% | (4.3 | )% | (12.2 | )% | (3.1 | )% | ||||||||
Effect of salons sold to franchisees | 7.6 | 3.4 | 6.9 | 2.4 | ||||||||||||
Effect of new company-owned stores | — | (0.1 | ) | — | (0.2 | ) | ||||||||||
Effect of closed salons | 5.7 | 5.1 | 5.7 | 3.0 | ||||||||||||
Franchise product and royalty | (0.3 | ) | (0.1 | ) | (0.2 | ) | (0.2 | ) | ||||||||
Franchise same-store sales (1) | — | — | — | — | ||||||||||||
TBG product, royalties and fees | 0.9 | (2.0 | ) | (0.6 | ) | (1.3 | ) | |||||||||
Foreign currency | 0.3 | (0.3 | ) | 0.3 | (0.3 | ) | ||||||||||
Advertising fund | (0.6 | ) | (0.1 | ) | (0.5 | ) | (0.1 | ) | ||||||||
Other | (0.6 | ) | — | 0.2 | 0.2 | |||||||||||
Company-owned same-store sales, non-GAAP | (2.5 | )% | 1.6 | % | (0.4 | )% | 0.4 | % | ||||||||
____________________________________ |
Notes: |
||
(1) | Franchise same-store sales increase (decrease) franchise royalties. As we transition to the asset-light franchise platform, franchise same-store sales will become more significant to consolidated revenues. |