Regis Reports Fourth Quarter 2017 and Full-Year Results

MINNEAPOLIS - August 23, 2017 - (BUSINESS WIRE) - Regis Corporation (NYSE: RGS):

           
      Three Months Ended     Twelve Months Ended
      June 30,     June 30,
(Dollars in thousands)     2017     2016     2017     2016
Consolidated Revenue     $424,200       $447,707       $1,691,888       $1,790,869  
Consolidated Same-Store Sales Comps     0.4 %     (1.4 )%     (1.8 )%     0.2 %
                         
Net Income/(Loss)     $1,253       $5,562       $(16,140 )     $(11,316 )
Earnings/(Loss) per Share     $0.03       $0.12       $(0.35 )     $(0.23 )
EBITDA     $22,691       $27,454       $68,114       $74,520  
                         
As Adjusted(1)                        
Net Income/(Loss), as Adjusted     $9,183       $5,541       $2,659       $3,089  
Earnings/(Loss) per Share, as adjusted     $0.20       $0.12       $0.06       $0.06  
EBITDA, as adjusted     $30,652       $27,433       $86,994       $90,590  
                         

(1) 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 fourth quarter 2017 net income of $1.3 million, or $0.03 per share as compared to net income of $5.6 million, or $0.12 per share in the fiscal fourth quarter of 2016. On an adjusted basis, the Company reported net income of $9.2 million, or $0.20 earnings per share versus net income of $5.5 million, or $0.12 earnings per share, for the same period last year.

Total revenue in the quarter of $424.2 million decreased $23.5 million, or 5.3%, while same-store sales were up 0.4%, compared to the prior year quarter. Fourth quarter adjusted EBITDA of $30.7 million, was $3.2 million, or 11.7% favorable year-over-year.

On a full year basis, the Company reported a net loss of $16.1 million, or $(0.35) per share as compared to a net loss of $11.3 million, or $(0.23) per share in the prior year. On an adjusted basis, net income was $2.7 million, or $0.06 earnings per share versus net income of $3.1 million, or $0.06 earnings per share, for the same period last year.

Total revenue for the year of $1,691.9 million decreased $99.0 million, or 5.5%, and same-store sales were down 1.8%, compared to the prior year. Adjusted EBITDA for the year of $87.0 million was down $3.6 million, or 4.0% on a year-over-year basis.

Hugh Sawyer, President and Chief Executive Officer, commented, “I am grateful for the efforts of our employees and franchise partners in 2017 and the loyalty of our guests and shareholders. Management is increasing the cadence of decision making required to restructure our portfolio, execute the operational turnaround of our company-owned salons and accelerate the growth of our franchise business. We expect the elements of our strategy to be transformational for our guests and employees and value-enhancing for our shareholders.”

New Segment Reporting Provides Improved Transparency

Beginning in the fourth quarter of fiscal year 2017, and in conjunction with the Company’s previously announced plans to focus on a performing portfolio of company-owned and franchised locations, the Company redefined its reportable segments. The new reportable segment structure, which provides increased transparency to the Company’s franchise business, is the basis on which the fourth quarter and full year 2017 results included within are presented. Comparable prior period results also reflect this change. The new reporting segments are: North American Value, North American Franchise, North American Premium and International salons.

 

Fourth Quarter Segment Results

 

North American Value

             
      Three Months Ended June 30,    

Increase
(Decrease)

(Dollars in millions)     2017     2016    
                   
Total Revenue     $ 320.3       $ 328.9       (2.6 )%
Same-Store Sales Comps       1.6 %       (0.4 )%     200 bps
Year-over-Year Ticket change       4.4 %            
Year-over-Year Traffic change       (2.8 )%            
                   
Gross Profit, as Adjusted(1)       134.2         136.6       (1.8 )%
as a percent of revenue       41.9 %       41.5 %     40 bps
                   
EBITDA, as Adjusted       41.0         37.7       8.6 %
as a percent of revenue       12.8 %       11.5 %     130 bps
                   
Salon counts       5,439         5,770       (331 )
                   

(1) Gross profit, as Adjusted, excludes depreciation and amortization.

 

Fourth quarter revenue for the North American Value segment, which is comprised of SmartStyle, Supercuts, MasterCuts, and Signature Style concepts, decreased 2.6% versus the prior year to $320.3 million. The year-over-year decline in revenue was driven primarily by our mall based value brand, by the closure of unprofitable salons and the unfavorable impact of foreign currency partly offset by positive same-store sales increases of 1.6%.

Fourth quarter adjusted gross profit of $134.2 million decreased $2.4 million, or 1.8%, versus the same period last year. The primary drivers of the year-over-year decline were the decrease in salon counts and minimum wage increases, partly offset by same-store sales growth and favorable inventory shrink and usage rates.

Fourth quarter North American Value adjusted EBITDA totaled $41.0 million which was a $3.3 million, or 8.6%, increase versus the same period last year. The year-over-year increase was driven primarily by the closing of unprofitable salons and cost savings, partly offset by the gross profit decline.

 

North American Franchise

             
      Three Months Ended June 30,    

Increase
(Decrease)

(Dollars in millions)     2017     2016    
                   
Total Revenue     $ 21.2       $ 20.2       4.7 %
                   
EBITDA, as Adjusted       9.3         9.2       2.1 %
as a percent of revenue       44.1 %       45.2 %     (110 bps)
                   
Salon counts       2,633         2,496       137  
                             

Fourth quarter North American Franchise revenue was $21.2 million, a $1.0 million, or 4.7%, increase compared to the prior year quarter. Royalties and fees were $13.1 million, a $1.0 million, or 8.6%, increase versus the same period last year. Royalties increased 5.9% driven primarily by positive same-store revenue in the quarter and increased franchise salon counts. Initial franchise fees were up $0.5 million, or 46.0%, as the Company opened, or converted, a net 111 franchised locations in the quarter as compared to 57 in the prior year quarter.

Fourth quarter North American Franchise adjusted EBITDA of $9.3 million improved $0.1 million year-over-year, driven primarily by the increase in royalties and fees, partly offset by lower margins on product sales to franchisees and higher incentive costs.

 

North American Premium

             
      Three Months Ended June 30,    

Increase
(Decrease)

(Dollars in millions)     2017     2016    
                   
Total Revenue     $ 56.8       $ 67.8       (16.3 )%
Same-Store Sales Comps       (4.1 )%       (5.3 )%     120 bps
Year-over-Year Ticket change       3.8 %            
Year-over-Year Traffic change       (7.9 )%            
                   
Gross Profit, as Adjusted(1)       19.0         23.3       (18.4 )%
as a percent of revenue       33.5 %       34.3 %     (80 bps)
                   
EBITDA, as Adjusted       (1.7 )       (0.7 )     nm
as a percent of revenue       (2.9 )%       (1.0 )%     (190 bps)
                   
Salon counts       559         694       (135 )
                             

(1) Gross profit, as Adjusted, excludes depreciation and amortization.

 

The North American Premium segment, which is comprised of the Company's predominantly mall-based Regis Salon brands and Vidal Sassoon North America salons, had fourth quarter revenue of $56.8 million, an $11.1 million, or 16.3%, decrease versus the same period last year. The year-over-year decline was driven primarily by the closing of unprofitable salons and negative same-store sales of 4.1%.

Fourth quarter adjusted gross profit for the segment decreased $4.3 million, or 18.4%, versus the prior year quarter driven by salon closures, negative same-store sales, and minimum wage increases, partly offset by favorable inventory shrink and usage rates.

North American Premium fourth quarter adjusted EBITDA loss of $1.7 million increased $1.0 million as compared to the prior year quarter, driven primarily by the gross profit decline, partly offset by cost savings from closing of unprofitable salons.

 

International

             
      Three Months Ended June 30,    

Increase
(Decrease)

(Dollars in millions)     2017     2016    
                   
Total Revenue     $ 25.9       $ 30.8       (15.8 )%
Same-Store Sales Comps       (5.1 )%       (3.8 )%     (130 bps)
Year-over-Year Ticket change       2.1 %            
Year-over-Year Traffic change       (7.2 )%            
                   
Gross Profit, as Adjusted(1)       11.2         13.8       (18.7 )%
as a percent of service and product revenue       43.5 %       44.9 %     (140 bps)
                   
EBITDA, as Adjusted       0.4         0.1       nm
as a percent of revenue       1.7 %       0.3 %     140 bps
                   
Salon counts       288         328       (40 )
                   

(1) Gross profit, as Adjusted, excludes depreciation and amortization.

 

International segment fourth quarter revenue of $25.9 million declined $4.9 million, or 15.8% versus the same period last year. The revenue decline was driven primarily by the closing of unprofitable salons and the unfavorable impact of foreign currency along with negative same-store sales of 5.1%.

Adjusted gross profit for the quarter decreased $2.6 million, or 18.7%, year-over-year to $11.2 million driven primarily by volume decreases from closed salons, unfavorable currency impact, negative same-store sales, stylist productivity, and inventory shrink and usage rates.

International fourth quarter adjusted EBITDA of $0.4 million was $0.3 million favorable to the same period last year. Operating expense reductions from the closing of unprofitable salons and purposeful cost savings, were partly offset by the gross profit decrease.

Other Corporate Updates

Strategic Alternatives
In May of this year, the Company announced it had retained Huron Transaction Advisory for financial advisory and investment banking services to assist in its review of strategic alternatives for its mall-based salons comprised of the Company's Regis Salons brands and its MasterCuts brand. The Company continues to make progress in its assessment of options for its mall-based salons.

120-Day Plan Update
The Company executed a number of initiatives during the fourth quarter, including a 120-day plan which consisted of several work streams that helped stabilize performance and establishes a platform for longer-term revenue and earnings growth in company-owned salons. The core components of the 120-day plan are focused on strategic pricing and improving the Company's performance by better aligning stylist scheduling and other company resources to forecasted demand while continuing to provide an exceptional guest experience. In addition, we are simplifying our business and disinvesting in certain programs that do not create value while focusing on our brands to drive traffic and grow revenues.

Deferred Tax Valuation Allowance Update
As a result of the Company's valuation allowance against most of its deferred tax assets, associated reported and as adjusted after-tax results are not comparable to prior periods.

  • Net income for the quarter of $1.3 million benefited by $0.8 million due to the deferred tax valuation allowance on income tax expense.
  • Fourth quarter earnings per share of $0.03 benefited by $0.02 per share due to the deferred tax valuation allowance on income tax expense.

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 fourth quarter results today, August 23, 2017, 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 by phone by dialing (888) 490-2771 and entering access code 8255882. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 8255882.

About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in beauty salons and cosmetology education. As of June 30, 2017, the Company owned, franchised or held ownership interests in 9,008 worldwide locations. Regis’ corporate and franchised locations operate under concepts such as Supercuts, SmartStyle, MasterCuts, Regis Salons, Sassoon Salon, 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; 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; consumer shopping trends and changes in manufacturer distribution channels; 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; 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; 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 under Item 1A of our annual report or Form 10-K. 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-Q and 8-K and Proxy Statements on Schedule 14A.

 
REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
                   
      (Unaudited)      
      Three Months Ended June 30,     Twelve Months Ended June 30,
      2017     2016     2017     2016
Revenues:                        
Service     $ 329,510       $ 348,912       $ 1,307,732       $ 1,383,663  
Product       81,470         86,706         335,865         359,683  
Royalties and fees       13,220         12,089         48,291         47,523  
        424,200         447,707         1,691,888         1,790,869  
Operating expenses:                        
Cost of service       211,502         216,702         838,192         868,188  
Cost of product       38,442         42,921         166,344         179,341  
Site operating expenses       41,458         44,807         168,439         182,952  
General and administrative       43,722         43,479         174,502         178,033  
Rent       67,010         73,605         279,288         297,271  
Depreciation and amortization       17,354         15,593         66,327         67,470  
Total operating expenses       419,488         437,107         1,693,092         1,773,255  
                         
Operating income (loss)       4,712         10,600         (1,204 )       17,614  
                         
Other (expense) income:                        
Interest expense       (2,177 )       (2,176 )       (8,703 )       (9,317 )
Interest income and other, net       656         1,261         3,072         4,219  
                         
Income (loss) before income taxes and equity in loss of affiliated companies       3,191         9,685         (6,835 )       12,516  
                         
Income taxes       (1,907 )       (4,123 )       (9,224 )       (9,049 )
Equity in loss of affiliated companies, net of income taxes       (31 )               (81 )       (14,783 )
                         
Net income (loss)     $ 1,253       $ 5,562       $ (16,140 )     $ (11,316 )
                         
Net income (loss) per share:                        
Basic and diluted     $ 0.03       $ 0.12       $ (0.35 )     $ (0.23 )
                         
Weighted average common and common equivalent shares outstanding:                        
Basic       46,527         46,289         46,359         48,542  
Diluted       46,762         46,706         46,359         48,542  
                                         
 
REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
             
      June 30, 2017     June 30, 2016
ASSETS            
Current assets:            
Cash and cash equivalents     $ 172,396     $ 147,346
Receivables, net       23,475       24,691
Inventories       122,104       134,212
Other current assets       52,172       51,765
Total current assets       370,147       358,014
             
Property and equipment, net       146,994       183,321
Goodwill       416,987       417,393
Other intangibles, net       13,634       15,185
Other assets       63,726       62,019
Total assets     $ 1,011,488     $ 1,035,932
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable     $ 56,049     $ 59,884
Accrued expenses       122,013       135,431
Total current liabilities       178,062       195,315
             
Long-term debt       120,599       119,606
Other noncurrent liabilities       204,606       201,610
Total liabilities       503,267       516,531
             
Shareholders’ equity:            
Common stock, $0.05 par value; issued and outstanding, 46,400,367 and 46,154,410 common shares at June 30, 2017 and 2016, respectively       2,320       2,308
Additional paid-in capital       214,109       207,475
Accumulated other comprehensive income       3,336       5,068
Retained earnings       288,456       304,550
Total shareholders’ equity       508,221       519,401
Total liabilities and shareholders’ equity     $ 1,011,488     $ 1,035,932
                 
 
REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
 
      (Unaudited)      
      Three Months Ended June 30,     Twelve Months Ended June 30,
      2017     2016     2017     2016
Net income (loss)     $ 1,253     $ 5,562       $ (16,140 )     $ (11,316 )
Other comprehensive income (loss):                        
Foreign currency translation adjustments during the period       2,701       525         (1,889 )       (4,276 )
Recognition of deferred compensation       179       (162 )       157         (162 )
Other comprehensive income (loss)       2,880       363         (1,732 )       (4,438 )
Comprehensive income (loss)     $ 4,133     $ 5,925       $ (17,872 )     $ (15,754 )
                                       
 
REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF CASH FLOW
(Dollars in thousands)
 
      Twelve Months Ended June 30,
      2017     2016
Cash flows from operating activities:            
Net loss     $ (16,140 )     $ (11,316 )
Adjustments to reconcile net loss to net cash provided by operating activities:            
Depreciation and amortization       54,961         56,992  
Equity in loss of affiliated companies       81         14,783  
Deferred income taxes       7,962         7,023  
Gain from sale of salon assets, net       (492 )       (1,000 )
Loss on write down of inventories       5,905          
Salon asset impairments       11,366         10,478  
Stock-based compensation       13,142         9,797  
Amortization of debt discount and financing costs       1,403         1,514  
Other non-cash items affecting earnings       935         310  
Changes in operating assets and liabilities(1):            
Receivables       724         (577 )
Inventories       4,010         (7,109 )
Income tax receivable       (535 )       501  
Other current assets       820         (460 )
Other assets       (2,586 )       (1,133 )
Accounts payable       (684 )       (4,624 )
Accrued expenses       (13,667 )       (14,280 )
Other noncurrent liabilities       (7,150 )       (5,113 )
Net cash provided by operating activities       60,055         55,786  
             
Cash flows from investing activities:            
Capital expenditures       (33,843 )       (31,117 )
Proceeds from sale of salon assets       2,253         1,740  
Change in restricted cash       1,123         9,042  
Proceeds from company-owned life insurance policies       876         2,948  
Proceeds from sale of investment       500          
Net cash used in investing activities       (29,091 )       (17,387 )
             
Cash flows from financing activities:            
Repayments of long-term debt and capital lease obligations               (2 )
Repurchase of common stock               (101,035 )
Purchase of noncontrolling interest               (760 )
Employee taxes paid for shares withheld       (3,698 )       (754 )
Settlement of equity awards       (3,151 )        
Net cash used in financing activities       (6,849 )       (102,551 )
             
Effect of exchange rate changes on cash and cash equivalents       935         (781 )
             
Increase (decrease) in cash and cash equivalents       25,050         (64,933 )
             
Cash and cash equivalents:            
Beginning of period       147,346         212,279  
End of period     $ 172,396       $ 147,346  
                     

(1) Changes in operating assets and liabilities exclude assets and liabilities sold or acquired.

 
 

SAME-STORE SALES (1):

       
      For the Three Months Ended
      June 30, 2017     June 30, 2016
      Service     Retail     Total     Service     Retail     Total
SmartStyle     2.8 %     0.7 %     2.1 %     0.8 %     3.8 %     1.7 %
Supercuts     3.2       (2.3 )     2.7       0.0       (0.9 )     (0.1 )
MasterCuts     (0.3 )     (2.5 )     (0.7 )     (5.6 )     (8.9 )     (6.2 )
Other Value     0.7       1.0       0.7       (1.6 )     (3.5 )     (1.8 )
North American Value     2.0 %     0.2 %     1.6 %     (0.7 )%     1.0 %     (0.4 )%
                                     
North American Premium     (3.7 )%     (6.1 )%     (4.1 )%     (4.9 )%     (7.5 )%     (5.3 )%
                                     
International     (3.6 )%     (9.9 )%     (5.1 )%     (3.3 )%     (5.4 )%     (3.8 )%
                                     
Consolidated     0.8 %     (1.3 )%     0.4 %     (1.6 )%     (0.8 )%     (1.4 )%
       
      For the Twelve Months Ended
      June 30, 2017     June 30, 2016
      Service     Retail     Total     Service     Retail     Total
SmartStyle     (0.1 )%     (1.2 )%     (0.4 )%     3.0 %     4.4 %     3.4 %
Supercuts     0.9       (4.3 )     0.4       1.6       5.7       2.0  
MasterCuts     (3.4 )     (4.5 )     (3.6 )     (4.5 )     (3.7 )     (4.4 )
Other Value     (1.4 )     (1.1 )     (1.4 )     (0.4 )     1.8       (0.2 )
North American Value     (0.5 )%     (1.7 )%     (0.8 )%     0.8 %     3.4 %     1.3 %
                                     
North American Premium     (5.2 )%     (9.3 )%     (5.9 )%     (3.5 )%     (5.4 )%     (3.8 )%
                                     
International     (3.8 )%     (10.7 )%     (5.7 )%     (1.3 )%     (4.7 )%     (2.3 )%
                                     
Consolidated     (1.4 )%     (3.4 )%     (1.8 )%     %     1.3 %     0.2 %
                                     

(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 fiscal year 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. International same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

 
 
REGIS CORPORATION (NYSE: RGS)
System-wide location counts
             
      June 30, 2017     June 30, 2016
COMPANY-OWNED SALONS:            
             
SmartStyle in Walmart Stores     2,652     2,683
Supercuts     980     1,053
MasterCuts     339     430
Other Value     1,468     1,604
Regis salons     559     694
Total North American Salons (1)     5,998     6,464
Total International Salons (2)     275     328
Total Company-owned Salons     6,273     6,792
             
FRANCHISE SALONS:            
             
SmartStyle in Walmart Stores (3)     62     11
Cost Cutters in Walmart Stores     114     114
Supercuts     1,687     1,579
Other Value     770     792
Total North American Salons     2,633     2,496
Total International Salons (2)     13    
Total Franchise Salons     2,646     2,496
             
OWNERSHIP INTEREST LOCATIONS:            
             
Equity ownership interest locations     89     195
             
Grand Total, System-wide     9,008     9,483
             

(1) The North American Value operating segment is comprised primarily of the SmartStyle, Supercuts, MasterCuts and Other Value salon brands. The North American Premium operating segment is comprised primarily of the Regis salon brands.

(2) Canadian and Puerto Rican salons are included in the North American salon totals.

(3) Franchised SmartStyle salons in Walmart stores includes salons originally opened as Magicuts locations in Canadian Walmart stores that were rebranded to SmartStyle.

 

Non-GAAP Reconciliations

We believe our presentation of non-GAAP operating income (loss), 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 twelve months ended June 30, 2017 and 2016:

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:

  • Salon tools write-off.
  • Professional fees.
  • Severance expense.
  • CEO transition costs.
  • Expense associated with legal settlements.
  • Gain on life insurance proceeds.
  • Expense associated with legal cases.
  • Expenses associated with financing arrangements.
  • Other than temporary impairment associated with our investment in Empire Education Group (EEG).
 
REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures (Unaudited)
(Dollars in thousands, except per share data)
 
Reconciliation of U.S. GAAP operating income (loss) and net income (loss) to equivalent non-GAAP measures
        Three Months Ended   Twelve Months Ended
        June 30,   June 30,
    U.S. GAAP financial line item   2017   2016   2017   2016
U.S. GAAP revenue       $ 424,200   $ 447,707     $ 1,691,888     $ 1,790,869  
                     
U.S. GAAP operating income (loss)       $ 4,712   $ 10,600     $ (1,204 )   $ 17,614  
                     
Non-GAAP operating expense adjustments (1):                    
Salon tools write-off   Cost of service     5,527           5,527        
Salon tools write-off   Site operating expenses     378           378        
Professional fees   General and administrative     1,121           2,831       145  
Severance   General and administrative     583           8,437        
CEO transition costs   General and administrative     321           321        
Legal settlements   General and administrative               1,405        
Gain on life insurance proceeds   General and administrative               (100 )     (1,220 )
Legal fees   General and administrative         (21 )           1,561  
Financing arrangements expense   General and administrative                     801  
Non-GAAP operating adjustments         7,930     (21 )     18,799       1,287  
Non-GAAP operating income (2)       $ 12,642   $ 10,579     $ 17,595     $ 18,901  
                     
U.S. GAAP net income (loss)       $ 1,253   $ 5,562     $ (16,140 )   $ (11,316 )
                     
Non-GAAP net income (loss) adjustments:                    
Non-GAAP operating expense adjustments         7,930     (21 )     18,799       1,287  
Financing arrangements expense   Interest expense                     164  
EEG impairment   Equity in loss of affiliated companies, net of income taxes                     12,954  
Total non-GAAP net income (loss) adjustments         7,930     (21 )     18,799       14,405  
Non-GAAP net income (2)       $ 9,183   $ 5,541     $ 2,659     $ 3,089  
                     

Notes:

(1) As a result of the valuation allowance, non-GAAP adjustments are not tax effected.

(2) Adjusted operating margins for the three months ended June 30, 2017, and 2016, were 3.0% and 2.4%, respectively, and were 1.0% and 1.1% for the twelve months ended June 30, 2017 and 2016, respectively, and are calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period.

 
 
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 income (loss) per diluted share to non-GAAP net income per diluted share
      Three Months Ended     Twelve Months Ended
      June 30,     June 30,
     

2017

   

2016

    2017     2016
U.S. GAAP net income (loss) per diluted share (1)    

$

0.027

   

$

0.119

    $ (0.348 )     $ (0.233 )
Salon tools write-off       0.126             0.125          
Professional fees       0.024             0.060         0.003  
Severance       0.012             0.179          
CEO transition costs       0.007             0.007          
Legal settlements                   0.030          
Gain on life insurance proceeds                   (0.002 )       (0.025 )
Legal fees                           0.032  
Financing arrangements expense                           0.020  
EEG impairment and deferred tax asset valuation allowance                           0.264  
Impact of change in weighted average shares                   0.005         0.002  
Non-GAAP net income per diluted share (2)     $

0.196

   

$

0.119     $ 0.056       $ 0.063  
                         
U.S. GAAP Weighted average shares - basic       46,527       46,289       46,359         48,542  
U.S. GAAP Weighted average shares - diluted       46,762       46,706       46,359         48,542  
Non-GAAP Weighted average shares - diluted (3)       46,762       46,706       47,088         48,989  
                                 

Notes:

           

(1) For the three months ended June 30, 2017, the $1.9 million income tax expense includes $1.3 million of non-cash tax benefits on certain indefinite-lived assets that the Company cannot recognize for reporting purposes. For the twelve months ended June 30, 2017, the $9.2 million of income tax expense includes $7.7 million of non-cash tax benefits on certain indefinite-lived assets. The presence of a valuation allowance, including the non-cash tax expense on certain indefinite-lived assets, affects comparability of income tax expense, as adjusted and will cause our effective tax rate to fluctuate from quarter to quarter. For the three months ended June 30, 2017, the Company evaluated GAAP diluted EPS with and without the presence of the valuation allowance and calculated an impact of $(0.02) per share. Diluted EPS, as adjusted, without the presence of the valuation allowance, was $0.12 and $0.18 for the three months ended June 30, 2017 and 2016, respectively, representing a decrease of $0.06 per diluted share. As a result of the valuation allowance, non-GAAP adjustments are not tax effected.

(2) Total is a recalculation; line items calculated individually may not sum to total due to rounding.

(3) Non-GAAP net income (loss) per share reflects the weighted average shares associated with non-GAAP net income (loss), which may include the dilutive effect of common stock and convertible share equivalents.

 

REGIS CORPORATION
Reconciliation by reportable segment 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 equity in loss of affiliated companies, and identified items impacting comparability for each respective period. For the three and twelve months ended June 30, 2017 and 2016, the items impacting comparability consisted of the items identified in the non-GAAP reconciling items for the respective periods. The impact of the income tax provision adjustments associated with the above items is 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. The impact of the impairment on the Company's investment in EEG is already included by excluding the impact of the Company’s equity in loss of affiliated companies, net of taxes, as reported.

     
    Three Months Ended
    June 30, 2017
    North   North   North            
    American   American   American            
    Value   Franchise   Premium   International   Corporate   Consolidated
Consolidated reported net income (loss), as reported (U.S. GAAP)   $ 23,418   $ 9,252   $ (4,168 )   $ (272 )   $ (26,977 )   $ 1,253  
Interest expense, as reported                         2,177       2,177  
Income taxes, as reported                         1,907       1,907  
Depreciation and amortization, as reported     12,012     89     2,153       712       2,388       17,354  
EBITDA (as defined above)   $ 35,430   $ 9,341   $ (2,015 )   $ 440     $ (20,505 )   $ 22,691  
                         
Equity in loss of affiliated companies, net of income taxes, as reported                         31       31  
Salon tools write-off     5,563         342                   5,905  
Professional fees                         1,121       1,121  
Severance                         583       583  
CEO transition costs                         321       321  
Adjusted EBITDA, non-GAAP financial measure   $ 40,993   $ 9,341   $ (1,673 )   $ 440     $ (18,449 )   $ 30,652  
                         
    Three Months Ended
    June 30, 2016
    North   North   North            
    American   American   American            
    Value   Franchise   Premium   International   Corporate   Consolidated
Consolidated reported net income (loss), as reported (U.S. GAAP)   $ 26,641   $ 9,059   $ (1,893 )   $ (752 )   $ (27,493 )   $ 5,562  
Interest expense, as reported                         2,176       2,176  
Income taxes, as reported                         4,123       4,123  
Depreciation and amortization, as reported     11,098     92     1,198       830       2,375       15,593  
EBITDA (as defined above)   $ 37,739   $ 9,151   $ (695 )   $ 78     $ (18,819 )   $ 27,454  
                         
Equity in loss of affiliated companies, net of income taxes, as reported                                
Legal fees                         (21 )     (21 )
Adjusted EBITDA, non-GAAP financial measure   $ 37,739   $ 9,151   $ (695 )   $ 78     $ (18,840 )   $ 27,433  
                         
 
REGIS CORPORATION
Reconciliation by reportable segment of reported U.S. GAAP net income (loss) to adjusted EBITDA,
a non-GAAP financial measure
(Dollars in thousands)
(Unaudited)
       
      Twelve Months Ended
      June 30, 2017
      North     North     North                  
      American     American     American                  
      Value     Franchise     Premium     International     Corporate     Consolidated
Consolidated reported net income (loss), as reported (U.S. GAAP)     $ 83,557     $ 34,159     $ (18,341 )     $ (1,922 )     $ (113,593 )     $ (16,140 )
Interest expense, as reported                                   8,703         8,703  
Income taxes, as reported                                   9,224         9,224  
Depreciation and amortization, as reported       45,737       357       8,260         2,515         9,458         66,327  
EBITDA (as defined above)     $ 129,294     $ 34,516     $ (10,081 )     $ 593       $ (86,208 )     $ 68,114  
                                     
Equity in loss of affiliated companies, net of income taxes, as reported                                   81         81  
Salon tools write-off       5,563             342                         5,905  
Professional fees                                   2,831         2,831  
Severance                                   8,437         8,437  
CEO transition costs                                   321         321  
Legal settlements                                   1,405         1,405  
Gain on life insurance proceeds                                   (100 )       (100 )
Adjusted EBITDA, non-GAAP financial measure     $ 134,857     $ 34,516     $ (9,739 )     $ 593       $ (73,233 )     $ 86,994  
                                     
      Twelve Months Ended
      June 30, 2016
      North     North     North                  
      American     American     American                  
      Value     Franchise     Premium     International     Corporate     Consolidated
Consolidated reported net income (loss), as reported (U.S. GAAP)     $ 96,170     $ 33,846     $ (12,796 )     $ (1,882 )     $ (126,654 )     $ (11,316 )
Interest expense, as reported                                   9,317         9,317  
Income taxes, as reported                                   9,049         9,049  
Depreciation and amortization, as reported       46,313       363       7,892         2,843         10,059         67,470  
EBITDA (as defined above)     $ 142,483     $ 34,209     $ (4,904 )     $ 961       $ (98,229 )     $ 74,520  
                                     
Equity in loss of affiliated companies, net of income taxes, as reported                                   14,783         14,783  
Professional fees                                   145         145  
Gain on life insurance proceeds                                   (1,220 )       (1,220 )
Legal fees                   31                 1,530         1,561  
Financing arrangements expense                                   801         801  
Adjusted EBITDA, non-GAAP financial measure     $ 142,483     $ 34,209     $ (4,873 )     $ 961       $ (82,190 )     $ 90,590  
                                     

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
      June 30, 2017
      North     North     North                  
      American     American     American                  
      Value     Franchise     Premium     International     Corporate     Consolidated
Revenues:                                    
Service     $ 261,228     $     $ 47,638     $ 20,644     $     $ 329,510
Product       59,107       8,069       9,122       5,172             81,470
        320,335       8,069       56,760       25,816             410,980
                                     
Cost of service       165,635             33,946       11,921             211,502
Cost of product       25,729       5,909       4,135       2,669             38,442
        191,364       5,909       38,081       14,590             249,944
                                     
U.S. GAAP gross profit(1)     $ 128,971     $ 2,160     $ 18,679     $ 11,226     $     $ 161,036
                                     
Non-GAAP gross profit adjustments:                                    
Salon tools write-off       5,207             320                   5,527
Non-GAAP gross profit(1)     $ 134,178     $ 2,160     $ 18,999     $ 11,226     $     $ 166,563
       

(1) Gross profit excludes depreciation and amortization.

       
      Three Months Ended
      June 30, 2016
      North     North     North                  
      American     American     American                  
      Value     Franchise     Premium     International     Corporate     Consolidated
Revenues:                                    
Service     $ 267,888     $     $ 56,713     $ 24,311     $     $ 348,912
Product       61,012       8,152       11,097       6,445             86,706
        328,900       8,152       67,810       30,756             435,618
                                     
Cost of service       164,227             39,110       13,365             216,702
Cost of product       28,049       5,865       5,423       3,584             42,921
        192,276       5,865       44,533       16,949             259,623
                                     
U.S. GAAP and Non-GAAP gross profit(1)     $ 136,624     $ 2,287     $ 23,277     $ 13,807     $     $ 175,995
                                     

(1) Gross profit excludes depreciation and amortization.

 
 

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)
 
      Twelve Months Ended
      June 30, 2017
      North     North     North                  
      American     American     American                  
      Value     Franchise     Premium     International     Corporate     Consolidated
Revenues:                                    
Service     $ 1,035,900     $     $ 200,732     $ 71,100     $     $ 1,307,732
Product       244,500       30,548       40,769       20,048             335,865
        1,280,400       30,548       241,501       91,148             1,643,597
                                     
Cost of service       657,013             140,743       40,436             838,192
Cost of product       112,156       22,640       20,571       10,977             166,344
        769,169       22,640       161,314       51,413             1,004,536
                                     
U.S. GAAP gross profit     $ 511,231     $ 7,908     $ 80,187     $ 39,735     $     $ 639,061
                                     
Non-GAAP gross profit adjustments:                                    
Salon tools write-off       5,207             320                   5,527
Non-GAAP gross profit     $ 516,438     $ 7,908     $ 80,507     $ 39,735     $     $ 644,588
       
      Twelve Months Ended
      June 30, 2016
      North     North     North                  
      American     American     American                  
      Value     Franchise     Premium     International     Corporate     Consolidated
Revenues:                                    
Service     $ 1,064,109     $     $ 233,520     $ 86,034     $     $ 1,383,663
Product       252,301       31,406       49,918       26,058             359,683
        1,316,410       31,406       283,438       112,092             1,743,346
                                     
Cost of service       659,140             161,466       47,582             868,188
Cost of product       117,464       23,086       24,573       14,218             179,341
        776,604       23,086       186,039       61,800             1,047,529
                                     
U.S. GAAP and Non-GAAP gross profit     $ 539,806     $ 8,320     $ 97,399     $ 50,292     $     $ 695,817
                                                 
?
 
REGIS CORPORATION
Reconciliation of reported U.S. GAAP revenue change to same-store sales (Unaudited)
             
     

  Three Months Ended  

   

  Twelve Months Ended  

      June 30,     June 30,
      2017     2016     2017     2016
Revenue decline, as reported (U.S. GAAP)     (5.3 )%     (3.3 )%     (5.5 )%     (2.5 )%
Effect of new stores and conversions     (0.4 )     (0.5 )     (0.4 )     (0.5 )
Effect of closed salons     4.8       2.6       3.5       2.7  
Foreign currency     1.0       0.7       0.8       1.2  
Other     0.3       (0.9 )     (0.2 )     (0.7 )
Same-store sales, non-GAAP     0.4 %     (1.4 )%     (1.8 )%     0.2 %
                       

Contacts:

Paul Dunn
Regis Corporation
VP, Finance and Investor Relations
952-947-791

SOURCE Regis Corporation

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Featured Opportunities

Discovery Point Child Development Centers®
Leading education-based childcare franchise founded in 1988 with corporate headquarters in Atlanta, GA. with a turnkey business model, real estate...
Speaking Roses
Speaking Roses gives you the opportunity to produce, sell, and distribute our patented product in your area using our very own flower printer....
Perkins Restaurant & Bakery
In today's market, the opportunity to buy a PerkinsĀ® couldn't be better for experienced restaurateurs interested in aligning with a concept that has...
Massage Envy
Massage Envy clinics are designed to provide a compelling image, an inviting and functional environment and the highest degree of operational...
Fitness Together
Join one of the largest personal training brands focused on results and accountability!

Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)