Core Viewpoint - Zacks Investment Research has initiated coverage of Regis Corporation (RGS) with a "Neutral" recommendation, reflecting a mixed outlook for the company amid industry challenges [1] Company Overview - Regis Corporation, based in Minneapolis, MN, operates beauty salons under various trade names including Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters, and Magicuts, offering haircutting, styling, hair coloring services, and professional hair care products [2] Financial Performance - Regis has shown tangible improvement in its earnings profile for the second quarter of fiscal 2026, despite ongoing traffic headwinds. The company has expanded operating income and improved EBITDA through pricing actions, tighter cost controls, and a greater contribution from company-owned salons [3] - The shift towards positive operating cash flow indicates that operational adjustments are leading to stronger internal cash generation, which is crucial for stabilizing RGS' business [3] Growth Drivers - The acquisition of Alline Salon Group in December 2024 has significantly expanded the company-owned salon base and positively impacted operating income, allowing for better control over pricing and labor initiatives [4] - Comparable sales trends have improved, with system-wide results turning positive in the first half of fiscal 2026, and Supercuts showing solid growth [4] - Management's revised stylist compensation models, pricing adjustments, and labor optimization tools are aimed at driving structural margin gains over time [4] Market Positioning - Regis stock has underperformed compared to industry peers and the broader market over the past year, indicating investor skepticism regarding the durability of the turnaround and the company's ability to refinance its debt favorably [6] - The current valuation suggests meaningful upside potential if execution improves and balance sheet risk is reduced [6]

Core Insights - The primary challenge for Regis remains traffic, which is impacting top-line performance despite pricing actions supporting same-store sales [1][6] - The company aims to deliver sustainable traffic improvements through tighter organizational alignment and increased focus on execution [1][3] Financial Performance - Adjusted EBITDA for the quarter was $8 million, an increase of $900,000 year over year, with year-to-date adjusted EBITDA at $16 million, up $1.2 million from the previous year [2] - Total revenue for the second quarter reached $57.1 million, a 22.3% increase from the prior year, largely due to the acquisition of approximately 300 salons from Align [7][13] - Operating income increased to $6.2 million, up from $5.5 million a year ago, attributed to higher contributions from company-owned salons and reduced general and administrative costs [16] Traffic and Sales - Consolidated same-store sales declined by 0.10%, while Supercuts experienced a growth of approximately 2% and company-owned salons rose by 4.3% [6][8] - The franchise base has seen a net decline of 374 locations since December 31, 2024, with management expecting similar closure rates in the second half of fiscal 2026 [5][14] Strategic Initiatives - The company is focusing on modernizing and transforming its brands, particularly Supercuts, with improvements in loyalty participation and digital engagement [9][10] - A new stylist pay plan was introduced to support a productivity-driven model, with early signs indicating better alignment with margin expectations [11][19] Cash and Liquidity - Regis reported $27.4 million in available liquidity, including $18.4 million in unrestricted cash, and has $126 million in outstanding debt [5][20] - The company generated $1.5 million of unrestricted cash from operations in the second quarter, with a year-to-date total of $3.9 million, showing significant improvement from the prior year [18] Future Outlook - Management is exploring refinancing options as the two-year anniversary of the current agreement approaches in June 2026, with initial conversations with potential partners already underway [21] - The board is evaluating options for the next CEO, with the interim CEO continuing to lead the organization in collaboration with the board [23]

Financial Data and Key Metrics Changes - For Q2 fiscal 2026, total revenue was $57.1 million, a 22.3% increase or $10.4 million compared to the prior year, primarily driven by increased revenue from company-owned salons due to the Align acquisition [11] - Adjusted EBITDA for Q2 was $8 million, an increase of $900,000 year-over-year, reflecting improved G&A discipline and contributions from the company-owned salon portfolio [2][14] - Consolidated same-store sales for the quarter declined modestly by 0.10%, while Supercuts delivered same-store sales growth of 2% year to date [2][3] Business Line Data and Key Metrics Changes - The company-owned salon segment reported sales growth of 4.3% for Q2, benefiting from the acquisition of Align salons [4] - Adjusted EBITDA for the franchise segment was $6.2 million, a decrease of $173,000 compared to the prior year, primarily due to lower royalties and non-cash fees [15] - Adjusted EBITDA for the company-owned salon segment improved by $1.1 million year-over-year to $1.8 million for the quarter [15] Market Data and Key Metrics Changes - The company experienced a net decrease of 374 franchise locations compared to the previous year, with closures primarily involving underperforming stores [11] - The gap in sales between the lowest-performing stores and the highest performers was approximately $350,000, indicating potential for profitability enhancement [12] Company Strategy and Development Direction - The company is focused on building a more durable and disciplined organization, emphasizing cash generation, financial performance, and long-term value creation [2] - Key priorities include reducing friction, increasing franchisee adoption and compliance, and demonstrating measurable improvements through targeted pilots [4] - The company is leveraging technology, including AI, to enhance operational efficiency and improve customer engagement [6][7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged traffic as a significant challenge impacting top-line performance, with a focus on sustainable traffic improvements as a central objective [3] - The company is encouraged by progress in profitability, cash generation, and organizational focus, which supports confidence in future growth [8] - Management remains committed to disciplined cost management and operational improvements to enhance cash generation and financial flexibility [17] Other Important Information - The company generated $1.5 million of unrestricted cash from operations in Q2 and $3.9 million year to date, reflecting improved cash management [3] - As of December 31, 2025, the company had $27.4 million of available liquidity and $18.4 million in unrestricted cash [18] Q&A Session Summary Question: What initiatives are in place to improve performance at Align stores? - Management highlighted three components: refinement of the pay plan, pricing adjustments, and labor optimization using AI to better align staffing with sales patterns [24][25][26] Question: Can you confirm the reduction in store closures compared to last fiscal year? - Management confirmed that closures are expected to be about 50% lower than the previous fiscal year, indicating improved performance [28][29] Question: What feedback is being received from potential replacement lenders regarding refinancing? - Management stated that initial conversations are ongoing, but specific rates or terms cannot be disclosed at this time [32] Question: What initiatives are being implemented to drive foot traffic? - Management discussed the importance of loyalty programs, customer acquisition strategies, and data analysis to improve customer retention and engagement [33][34] Question: Are there plans to add Cost Cutters locations, and why is loyalty adoption lagging in SmartStyle and Cost Cutters? - Management indicated that while there is no major push to add Cost Cutters locations, some are being converted from defunct businesses. Loyalty adoption is lagging due to a later start in implementation, but growth is being observed [35][36][37]

Financial Data and Key Metrics Changes - For Q2 Fiscal 2026, total revenue was $57.1 million, an increase of 22.3% or $10.4 million compared to the prior year, primarily driven by increased revenue from company-owned salons due to the Align acquisition [11] - Adjusted EBITDA for Q2 was $8 million, an increase of $900,000 year-over-year, reflecting improved G&A discipline and contributions from the company-owned salon portfolio [2][14] - GAAP operating income increased by 13% to $6.2 million compared to $5.5 million in the year-ago quarter, driven by contributions from company-owned salons and cost management [10][13] Business Line Data and Key Metrics Changes - Supercuts delivered same-store sales growth of 2% year-to-date, while consolidated same-store sales increased by 0.4% [3][4] - The company-owned salon segment reported adjusted EBITDA of $1.8 million for the quarter, an improvement of $1.1 million year-over-year, primarily due to the increase in the number of company-owned salons [15] - SmartStyle continues to face performance challenges, but the company is focused on stabilization and improvement [6] Market Data and Key Metrics Changes - The company experienced a net decrease of 374 franchise locations compared to the previous year, with closures primarily involving underperforming stores [11] - The gap between the lowest-performing stores and top performers was approximately $350,000, indicating potential for profitability enhancement [12] Company Strategy and Development Direction - The company is focused on building a more durable and disciplined Regis, emphasizing cash generation, financial performance, and long-term value creation [2] - Key priorities include reducing friction, increasing franchisee adoption and compliance, and demonstrating measurable improvements through targeted pilots [4][8] - The company is leveraging technology, including AI, to improve operational efficiency and enhance customer experience [7][8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged traffic as a significant challenge impacting top-line performance, with a focus on sustainable traffic improvements as a central objective [3][8] - The company is encouraged by progress in profitability, cash generation, and organizational focus, which supports confidence in future growth [8][21] Other Important Information - The company generated $3.9 million in cash from operations year-to-date, an improvement of $3.1 million compared to the prior year [16] - As of December 31, 2025, the company had $27.4 million in available liquidity and $18.4 million in unrestricted cash [18] Q&A Session Summary Question: What initiatives are in place to improve performance at Align stores? - Management highlighted three components: refinement of the pay plan, pricing adjustments, and labor optimization using AI to better align staffing with sales patterns [24][25][26] Question: Can you confirm the reduction in store closures compared to last fiscal year? - Management confirmed that closures are expected to be about 50% lower than the previous fiscal year [28][29] Question: What feedback is being received from potential replacement lenders regarding refinancing? - Management stated that initial conversations are ongoing, but specific rates cannot be disclosed at this time [32] Question: What initiatives are being implemented to address foot traffic goals? - Management emphasized the importance of loyalty programs, customer acquisition strategies, and data analysis to drive traffic and retention [33][34] Question: Are there plans to add Cost Cutters locations, and why is loyalty adoption lagging in SmartStyle and Cost Cutters? - Management indicated that while there is no major push to add Cost Cutters locations, some are being converted from defunct businesses. Loyalty adoption is lagging due to a later start in implementation [35][36][37]

Financial Data and Key Metrics Changes - For Q2 Fiscal 2026, the company reported total revenue of $57.1 million, a 22.3% increase or $10.4 million compared to the prior year, primarily driven by increased revenue from company-owned salons due to the Alline acquisition [11] - Adjusted EBITDA for the quarter was $8 million, an increase of $900,000 year-over-year, with year-to-date adjusted EBITDA of $16 million, up $1.2 million compared to the prior year [2][10] - GAAP operating income increased by 13% to $6.2 million, up from $5.5 million in the year-ago quarter, driven by contributions from company-owned salons and disciplined cost management [10][13] Business Line Data and Key Metrics Changes - Supercuts achieved same-store sales growth of 2% year-to-date, while consolidated same-store sales increased by 0.4% [3][4] - The company-owned salon segment reported sales growth of 4.3% for Q2, benefiting from the Alline acquisition [4] - Franchise segment adjusted EBITDA was $6.2 million, a decrease of $173,000 compared to the prior year, primarily due to lower royalties and non-cash fees [16] Market Data and Key Metrics Changes - The company experienced a net decrease of 374 franchise locations compared to the previous year, with closures primarily involving underperforming stores [11][12] - The gap in sales between underperforming stores and top-performing units was approximately $350,000, indicating potential for profitability enhancement [12] Company Strategy and Development Direction - The company is focused on building a more durable and disciplined organization, emphasizing cash generation and financial performance [2] - Key priorities include reducing friction, increasing franchisee adoption, and demonstrating measurable improvements through targeted pilots [4][8] - The company is leveraging technology, including AI, to enhance operational efficiency and improve customer engagement [6][7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged traffic as a significant challenge impacting top-line performance, with a focus on sustainable traffic improvements as a central objective [3][8] - The company is encouraged by progress in profitability and cash generation, which supports confidence in future growth [8][22] - Management is actively exploring refinancing options for existing debt, with a focus on reducing debt service as a top priority [22] Other Important Information - The company generated $1.5 million of unrestricted cash from operations in Q2 and $3.9 million year-to-date, reflecting improved cash management [3][17] - As of December 31, 2025, the company had $27.4 million in available liquidity, including $18.4 million in unrestricted cash [19] Q&A Session Summary Question: What initiatives are in place to improve performance at Alline stores? - Management highlighted three components: refinement of the pay plan, pricing adjustments, and labor optimization using AI to better align staffing with sales patterns [25][26][28] Question: Can you confirm the reduction in store closures compared to last fiscal year? - Management confirmed that closures are expected to be about 50% lower than the previous fiscal year, with approximately 100 closures anticipated [29][30][32] Question: What insights are being gained regarding foot traffic goals? - Management discussed the importance of loyalty programs and customer acquisition strategies, emphasizing the need for effective execution in driving traffic [36][37] Question: Are there plans to add Cost Cutters locations? - Management indicated that while there isn't a broad effort to add locations, some conversions are occurring where franchisees are repurposing old businesses [39] Question: Why is loyalty adoption lagging in SmartStyle and Cost Cutters? - Management noted that loyalty programs were implemented later in these brands but are seeing growth similar to initial adoption rates at Supercuts [40] Question: What is the status of the CEO search? - Management confirmed that the Board is actively evaluating options for the next CEO while the current interim CEO continues to lead the organization [41]

Financial Data and Key Metrics Changes - For Q2 fiscal 2026, the company reported total revenue of $57.1 million, a 22.3% increase or $10.4 million compared to the prior year, primarily driven by increased revenue from company-owned salons due to the Alline acquisition [12] - Adjusted EBITDA for Q2 was $8 million, an increase of $900,000 year-over-year, reflecting improved G&A discipline and contributions from the company-owned salon portfolio [2][15] - GAAP operating income increased by 13% to $6.2 million compared to $5.5 million in the year-ago quarter, driven by contributions from company-owned salons and cost management [11][13] Business Line Data and Key Metrics Changes - Supercuts achieved same-store sales growth of 2% year-to-date, while consolidated same-store sales increased by 0.4% [3][4] - The company-owned salon segment reported a sales growth of 4.3% for Q2, benefiting from the Alline acquisition [4] - Franchise segment adjusted EBITDA was $6.2 million, a decrease of $173,000 compared to the prior year, primarily due to lower royalties and non-cash fees [16] Market Data and Key Metrics Changes - The company experienced a net decrease of 374 franchise locations compared to the previous year, with closures primarily involving underperforming stores [12][13] - The gap in sales between underperforming stores and top-performing units was approximately $350,000, indicating potential for profitability enhancement [13] Company Strategy and Development Direction - The company is focused on building a more durable and disciplined organization, emphasizing cash generation, financial performance, and long-term value creation [2] - Key strategic priorities include stabilizing traffic, increasing franchisee adoption and compliance, and enhancing customer digital interaction through technology [4][9] - The company is leveraging AI for labor optimization and improving operational efficiency across its brands [8][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged traffic as a significant challenge impacting top-line performance, with a focus on sustainable improvements [3][9] - The company is encouraged by progress in profitability, cash generation, and organizational focus, which supports confidence in future growth [9][22] - Management is actively exploring refinancing options for existing debt as part of their financial strategy [21] Other Important Information - The company generated $1.5 million of unrestricted cash from operations in Q2, reflecting improved cash management [3] - As of December 31, 2025, the company had $27.4 million in available liquidity, including $18.4 million in unrestricted cash [19][20] Q&A Session Summary Question: What initiatives are in place to improve performance at Alline stores? - Management highlighted three components: refinement of the pay plan, pricing adjustments, and labor optimization using AI to better align staffing with sales patterns [24][25][26] Question: Can you confirm the reduction in store closures compared to last fiscal year? - Management confirmed that closures are expected to be about 50% lower than the previous fiscal year, indicating a positive trend [29][30][32] Question: What insights are being gained from potential replacement lenders regarding refinancing? - Management stated that initial conversations are ongoing, but specific rates or terms cannot be disclosed at this time [35] Question: What strategies are being implemented to drive foot traffic and customer retention? - Management emphasized the importance of loyalty programs, customer acquisition strategies, and data analysis to enhance customer retention and engagement [36][37] Question: Are there plans to add Cost Cutters locations? - Management indicated that while there isn't a broad effort to add locations, some conversions from existing businesses are occurring [39][40] Question: Why is loyalty adoption lagging in SmartStyle and Cost Cutters? - Management noted that loyalty programs were implemented later in these brands, but growth is being observed [41][42]

Financial Data and Key Metrics Changes - For Q2 fiscal 2026, total revenue was $57.1 million, an increase of 22.3% or $10.4 million compared to the prior year, primarily driven by increased revenue from company-owned salons due to the Align acquisition [12] - Adjusted EBITDA was $8 million, an increase of $900,000 year-over-year, with year-to-date Adjusted EBITDA of $16 million up $1.2 million versus the prior year [2][11] - GAAP operating income increased by 13% to $6.2 million compared to $5.5 million in the year-ago quarter, driven by contributions from company-owned salons and cost management [11][13] Business Line Data and Key Metrics Changes - Supercuts delivered same-store sales growth of 2% year-to-date, while consolidated same-store sales increased by 0.4% [3][4] - The company-owned salon segment reported sales growth of 4.3% for Q2, benefiting from the acquisition of Align salons [4] - Adjusted EBITDA for the franchise segment was $6.2 million, a decrease of $173,000 compared to the prior year, primarily due to lower royalties and non-cash fees [15][16] Market Data and Key Metrics Changes - The company experienced a net decrease of 374 franchise locations compared to the previous year, with closures primarily involving underperforming stores [12] - The gap in sales between the lowest and highest performing stores was approximately $350,000, indicating potential for profitability enhancement [12] Company Strategy and Development Direction - The company is focused on building a more durable and disciplined organization, emphasizing cash generation and financial performance [2] - Key priorities include reducing friction, increasing franchisee adoption, and demonstrating measurable improvements through targeted pilots [4][9] - Technology and digital engagement are critical enablers of the strategy, with ongoing efforts to modernize customer interactions and enhance loyalty programs [7][8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged traffic as a significant challenge impacting top-line performance, with a focus on sustainable traffic improvements as a central objective [3][9] - The company is encouraged by progress in profitability and cash generation, with expectations for a meaningful increase in unrestricted cash from core operations in fiscal 2026 [18][21] - Management is actively exploring refinancing options for existing debt as they approach the two-year anniversary of their current agreement [21] Other Important Information - The company generated $1.5 million of unrestricted cash from operations in Q2 and $3.9 million year-to-date, reflecting improved cash management [3][17] - As of December 31, 2025, the company had $27.4 million of available liquidity and $18.4 million in unrestricted cash [19][20] Q&A Session Summary Question: What initiatives are in place to improve performance at Align stores? - Management highlighted three components: refinement of the pay plan, pricing adjustments, and labor optimization using AI to better align staffing with sales patterns [24][25][26] Question: Can you confirm the reduction in store closures compared to last fiscal year? - Management confirmed that closures are expected to be about 50% less than the previous fiscal year, indicating a positive trend [28][29] Question: What feedback is being received from potential lenders regarding refinancing? - Management stated that initial conversations are ongoing, but specific rates or terms cannot be disclosed at this time [32] Question: What measures are being taken to drive foot traffic? - Management discussed the importance of loyalty programs, customer acquisition strategies, and improving customer retention through various initiatives [33][34] Question: Are there plans to add Cost Cutters locations, and why is loyalty adoption lagging in SmartStyle and Cost Cutters? - Management indicated that while there is no major push to add Cost Cutters locations, some are being converted from defunct businesses. Loyalty adoption is lagging due to a later start in implementation, but growth is being observed [35][36]

Core Insights - Regis Corporation reported financial results for the second fiscal quarter ending December 31, 2025, highlighting improved execution and momentum in the haircare industry [1] Financial Performance - Same-store sales increased by 2.0% at Supercuts and 4.3% at company-owned salons, indicating positive growth in customer traffic and service demand [1] - Year-over-year improvements in operating performance were noted, reflecting the company's effective strategies and operational enhancements [1]

Company Operations - As of December 31, 2025, Regis Corporation operated 3,829 locations, including 3,551 franchised salons and 278 company-owned salons[109]. Financial Performance - System-wide revenue for the three months ended December 31, 2025, was $260.8 million, a decrease of 4.8% from $274.1 million in the same period of 2024[114]. - Total system-wide same-store sales decreased by 0.1% for the three months ended December 31, 2025, compared to a decrease of 1.6% in the same period of 2024[114]. - Company-owned salon revenue increased by $15.7 million, or 448.6%, from $3.5 million to $19.2 million for the three months ended December 31, 2025, due to the Alline acquisition[125]. - Franchise revenue decreased by $5.4 million and $11.8 million during the three and six months ended December 31, 2025, primarily due to a decrease in franchise salon count[141]. - Franchise adjusted EBITDA totaled $6.2 million and $12.6 million for the three and six months ended December 31, 2025, reflecting a decrease of $0.2 million and $1.8 million, respectively[142]. - Company-owned salon revenue increased by $15.7 million and $35.2 million during the three and six months ended December 31, 2025, primarily due to the Alline acquisition[145]. - Company-owned salon adjusted EBITDA improved by $1.1 million and $2.9 million for the three and six months ended December 31, 2025, respectively[146]. Expenses and Liabilities - Royalties decreased by $1.2 million, or 8.1%, during the three months ended December 31, 2025, primarily due to a decrease in franchise salon count[121]. - General and administrative expenses decreased by $0.9 million, or 8.0%, during the three months ended December 31, 2025, primarily due to lower broker fees and severance[126]. - Rent expense increased by $1.5 million, or 71.4%, during the three months ended December 31, 2025, due to expenses associated with salons from the Alline acquisition[127]. - Company-owned salon expenses increased by $11.8 million, or 621.1%, from $1.9 million to $13.7 million for the three months ended December 31, 2025, primarily due to the Alline acquisition[130]. - Depreciation and amortization increased by $0.3 million, or 60.0%, during the three months ended December 31, 2025, due to assets acquired in the Alline acquisition[131]. - Interest expense increased by $0.5 million and $0.8 million for the three and six months ended December 31, 2025, respectively, due to higher debt outstanding compared to the prior year[133]. - The company recognized a $1.0 million gain on earn-out liability related to the Alline acquisition during the six months ended December 31, 2025[134]. Cash Flow and Capitalization - As of December 31, 2025, cash and cash equivalents were $18.4 million, with $17.6 million in the United States and $0.8 million in Canada[151]. - Cash provided by operating activities was $3.9 million for the six months ended December 31, 2025, compared to $0.8 million in the prior year[155]. - The company's debt to capitalization ratio was 40.0% as of December 31, 2025, compared to 40.3% as of June 30, 2025[159]. - The company has $54.6 million remaining under the approved stock repurchase program as of December 31, 2025[160]. Market Risks and Strategic Considerations - The company is exposed to market risks from changes in interest rates and foreign currency exchange rates, with no material changes reported since the last annual report[164]. - Forward-looking statements reflect management's best judgment but are subject to numerous risks and uncertainties that could materially affect actual results[162]. - The company emphasizes the importance of maintaining satisfactory relationships with key partners, such as Walmart, to drive business success[162]. - There is a reliance on franchise royalties and the overall success of franchisees' salons, which are critical for revenue generation[162]. - The company faces challenges in attracting, training, and retaining talented stylists and salon leaders, impacting operational efficiency[162]. - Data security and privacy compliance are highlighted as significant concerns, particularly regarding the protection of sensitive information[162]. - The company is focused on implementing cost reduction initiatives to achieve expected cost savings and maintain competitiveness[162]. - The ability to generate sufficient cash flow to meet debt service obligations is a key financial consideration for the company[162]. - The company is currently undergoing a search for a new CEO, which is crucial for future leadership and strategic direction[162]. - Potential liabilities related to the employee retention credit received by Alline may pose financial risks[162].

Core Viewpoint - Regis Corporation, a leader in the haircare industry, will release its financial results for the second fiscal quarter on February 5, 2026, before market opening [1]. Group 1: Financial Results Announcement - The financial results will cover the period ended December 31, 2025 [1]. - A presentation via webcast for investors will follow the release, starting at 7:30 a.m. central time [1]. Group 2: Participation and Replay - Interested parties can register for the live webcast through the company's website [2]. - A replay of the presentation will be available later that day at the same website [2]. - Investors can submit questions in advance to be addressed during the earnings call [2]. Group 3: Company Overview - Regis Corporation operates 3,879 salon locations as of September 30, 2025, through franchising and corporate ownership [3]. - The company operates under various concepts, including Supercuts, SmartStyle, Cost Cutters, Roosters, and First Choice Haircutters [3]. - Additional information can be found in the Investor Relations section of the corporate website [3].