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RC

REGIS CORP (RGS)·Q3 2025 Earnings Summary

Executive Summary

  • Solid profitability and cash generation despite modest comp decline: revenue +15.9% YoY to $57.0M, operating income +22.9% to $5.0M, adjusted EBITDA +31.9% to $7.1M; cash from operations of $6.2M (second consecutive positive quarter) .
  • Mix shift took hold: franchise non‑margin revenue declined with lower salon count, while Company‑owned revenue jumped on the Alline acquisition; Supercuts comps +1.1% while consolidated comps (1.1)% (Easter timing headwind estimated ~1.1 pts) .
  • Management cited early April acceleration (Supercuts +4.5%, consolidated +2.8%) and Alline integration actions (new compensation and pricing) as near‑term tailwinds, with larger Supercuts brand transformation underway .
  • No formal Street consensus available; result context anchored to prior quarter and prior year. Management reiterated positive cash generation for the rest of FY25 and refined G&A outlook, a potential stock narrative catalyst into FY25 year‑end strategy disclosures .

What Went Well and What Went Wrong

What Went Well

  • Profitability and cash generation inflected: “adjusted EBITDA grew 33%, operating income grew by 23%… generated more than $6 million in cash from operations… historically a weaker quarter” .
  • Alline integration progressing; strategic levers deployed: “brand‑new pay plan for all stylists… updated service menu and pricing… implemented March 30,” with April turning positive comps and improved margins in the portfolio .
  • Supercuts showed stabilization and loyalty traction: Supercuts comps +1.1% in Q3; Supercuts Rewards now >30% of sales with higher traffic in high‑adoption stores; April Supercuts comps +4.5% .

What Went Wrong

  • Traffic softness and Easter shift pressured comps: consolidated same‑store sales (1.1)% with management estimating Easter timing at ~1.1 pts; SmartStyle remained weak (7.4)% comps as footprint rationalization continued .
  • Operating margin down sequentially (seasonality, wage pressures, weather): operating margin 8.8% vs 11.8% in Q2; management cited minimum wage pressure and severe Midwest weather in Feb as headwinds .
  • Franchise royalty base smaller: franchise revenue down YoY on lower salon count and lower non‑margin advertising/rent pass‑throughs; royalties down 14% YoY to $13.5M .

Financial Results

Key P&L (oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$49.181 $46.719 $56.957
Operating Income ($M)$4.084 $5.497 $5.021
Operating Margin (%)8.3% (4.084/49.181) 11.8% (5.497/46.719) 8.8% (5.021/56.957)
Net Income ($M)$(2.332) $7.645 $0.250
Diluted EPS$(1.00) $2.71 $0.08
Adjusted EBITDA ($M)$5.353 $7.140 $7.125
Adjusted EBITDA Margin (%)11.0% (5.353/49.181) 15.3% (7.140/46.719) 12.5% (7.125/56.957)

Segments and mix (oldest → newest)

Segment/KPIQ3 2024Q2 2025Q3 2025
Franchise Royalties ($M)$15.687 $14.840 $13.533
Franchise Rental Income ($M)$23.780 $20.022 $16.866
Advertising Fund Contributions ($M)$5.773 $5.490 $5.203
Franchise Adjusted EBITDA ($M)$6.125 $6.414 $6.282
Company‑Owned Revenue ($M)$1.324 $3.450 $18.953
Company‑Owned Adj. EBITDA ($M)$(0.8) $0.725 $0.843
Total Franchise Salons4,537 3,925 3,776
Total Company‑Owned Salons20 323 311

KPIs and balance (oldest → newest)

KPIQ3 2024Q2 2025Q3 2025
System‑wide Revenue ($M)$286.8 $274.1 $266.9
Same‑Store Sales (Total)+0.5% (1.6)% (1.1)%
Supercuts SSS (Total)+1.6% +0.5% +1.1%
Cash from Operations ($M, qtr)$(0.280) $2.1 $6.198
Available Liquidity ($M)$21.9 (as of 9/30/24) $25.9 (as of 12/31/24) $19.0 (as of 3/31/25)
Debt Outstanding ($M)$110.4 (as of 9/30/24) $126.4 (as of 12/31/24) $127.4 (as of 3/31/25)
Total Salons4,408 (sys‑wide) 4,248 4,087

Notes:

  • Non‑margin lines (franchise rent and ad fund) have equal offsetting expenses and do not contribute to margin; declines reflect salon count and lower pass‑throughs .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted G&A (incl. Alline)FY 2025~$42M (Q2 call) ~$40.5M (Q3 call) Lowered
G&A Run‑Rate (incl. Alline)Forward run‑rate$42.5–$43M (Q2 call) $43–$45M (Q3 call) Slightly higher range
Cash from OperationsFY 2025Expect positive cash generation (Q2) Continue to expect positive cash generation (Q3) Maintained
Salon Closures PaceCalendar 2025 onward2025 last year of “order of magnitude” closures; slowing thereafter (Q2) Similar message; “order of magnitude less” ahead (Q3) Maintained (qualitative)

No revenue/EPS guidance was provided.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY25)Current Period (Q3 FY25)Trend
Alline integration & strategyAcquisition closed Dec 19; pro forma $83M revenue, $11.1M 4‑wall EBITDA; $5.8M corporate EBITDA; $1.5M synergies targeted; testing ground rationale New pay plan and pricing rolled out Mar 30; comps progressed Jan (‑7.5%) to Mar (‑2.7%); April turned positive with margin improvement Improving execution; early post‑initiative traction
Supercuts brand transformationEngaged consultants; define positioning to attract 18–44 demo; launch brand excellence standards visits; loyalty rollout Three strategic pillars: brand strategy, omnichannel growth, operational excellence; plan to share details by Aug/Nov calls Formalizing roadmap; upcoming disclosure
Loyalty & digitalSupercuts Rewards launched; 27% of sales from members in Q2; pilot salons at 50% member sales outperform >30% of sales from members; salons ≥40% member sales show +1.8% traffic vs <20% Adoption building; measurable traffic benefit
Same‑store sales & closuresQ2 comps (1.6)%; closures ~130 bps drag; 2025 last big closure year Q3 comps (1.1)% with Easter timing ~1.1 pts; SmartStyle still soft; April comps uptick Near‑term headwinds easing post‑Easter
Macro/costsWage pressures; seasonality; weather not highlightedWeather hit Midwest/Northeast in Feb; pay plans set to counter minimum wage Cost headwinds addressed via comp plan
Capital allocationPost‑refi flexibility; cash generation expected De‑lever via sweep; build liquidity; invest in highest‑ROI initiatives; no broad franchise buybacks planned Balanced deleveraging and reinvestment

Management Commentary

  • “We delivered a 22.0% increase in operating profit, 33.1% increase in Adjusted EBITDA, and… generated positive cash from operations of more than $6 million.” — CEO Matthew Doctor .
  • “As in April, we did build off the momentum… turning positive in the [Alline] portfolio, along with improved profit margins.” — CEO .
  • “Rewards member sales as a percentage of total sales is up to over 30%… salons at 40% or more member sales demonstrating 1.8% higher traffic.” — CEO .
  • “Our third quarter… delivered a 23% increase in operating income and generated approximately $6.2 million in cash from operations.” — CFO Kersten Zupfer .

Q&A Highlights

  • Alline accounting and EBITDA cadence: royalties shift down while Company‑owned EBITDA rises; Q3 Alline contribution modest due to seasonality, minimum wage pressure, lack of prior pricing, and February weather; margin expected to build post March initiatives .
  • Store closures outlook: on track with prior commentary; anticipating “order of magnitude less” closures ahead; considering future guidance framework at FY25 year‑end .
  • Remodel ROI: SmartStyle remodels yield ~5% lift; two Chicago Supercuts top‑tier remodel pilots sustained 20%+ price increases on strong underlying stores—prototype work ongoing .
  • Capital allocation: prioritize required deleveraging, maintain liquidity, invest behind Supercuts/Alline initiatives with highest ROI; no broad franchise acquisitions planned near term .

Estimates Context

  • Wall Street consensus (S&P Global) for quarterly EPS and revenue was not available; there is no formal sell‑side coverage reflected in S&P Global for Q3 FY25 to compare against reported figures (S&P Global).
  • Implication: With no Street anchors, investors will likely benchmark against sequential trends (Q/Q) and YoY deltas, and focus on operational proof points (April comps inflection, Company‑owned profitability, G&A outlook).

Key Takeaways for Investors

  • Profitability and cash flow are improving even with flat‑to‑down comps; mix shift to Company‑owned plus G&A control is supporting EBITDA and cash generation .
  • Early signs of revenue acceleration post‑Easter and post‑Alline initiatives (April comps up) could be a near‑term narrative catalyst if sustained into Q4 .
  • Supercuts brand transformation (loyalty, standards, re‑positioning) should drive medium‑term traffic/retention; concrete roadmap disclosure targeted by Aug/Nov calls .
  • Guidance posture is cautious but tightening: FY25 adjusted G&A lowered to ~$40.5M and positive CFFO reiterated—de‑risking the model while investors await top‑line reacceleration .
  • Watch KPIs: Supercuts member sales mix, Alline portfolio margins/comp cadence, salon closure pace, and Company‑owned EBITDA scaling; these will shape FY26 setup .
  • Balance sheet/liquidity manageable: $19M availability, $13.3M cash; debt ~$127M, with deleveraging expected via cash sweep; lease liabilities are largely franchisee‑serviced .

Appendix: Additional Details and Cross‑Checks

  • Consolidated revenue +15.9% YoY to $56.957M; operating income +22.9% to $5.021M; adjusted EBITDA +33.1% to $7.125M; diluted EPS $0.08 vs $(1.00) .
  • Company‑owned revenue rose to $18.953M on Alline; segment adj. EBITDA to $0.843M vs $(0.8)M prior year .
  • Franchise revenue down on fewer salons and lower non‑margin pass‑throughs; royalties $13.533M (‑14% YoY) .
  • System‑wide comps by brand (Q3): Supercuts +1.1%; SmartStyle (7.4)%; Portfolio (0.9)% .
  • Cash from operations $6.198M in Q3; excluding ad fund, $3.829M .
  • Liquidity $19.0M (includes $13.3M cash); debt $127.4M; note lease liabilities largely serviced by franchisees .