Regis (RGS)2023-11-01 18:43Financial Data and Key Metrics - Q1 revenues were 8 5 million from the prior year, primarily due to reduced franchise rental income and transitioning out of company-owned salons [22] - GAAP operating profit increased by 7 4 million, driven by controlled G&A and the wind down of company-owned salons [24] - Positive net income of 0 03, compared to a loss of 7 5 million from 42 4 million, including 9 3 million of cash [28] - Debt outstanding was 9 8 million of letters of credit outstanding [29] Business Line Data and Key Metrics - Core Franchise Business achieved adjusted EBITDA of 3 million improvement compared to the prior year [8] - Company-owned segment lost just under 700,000 from the same quarter last year [8] - Royalty and fee revenue, representing core business revenue, was 700,000 due to salon closures [23] - System-wide same-store sales grew 1 8% in the quarter [23] Market Data and Key Metrics - Franchise salon count decreased by 52 to 4,745, with 24 Supercuts, 15 SmartStyle, and 13 from portfolio brands closing [73] - Average volumes for closed salons were 122,000, reflecting the challenging operating environment [73] - The company announced a Supercuts brand entry into India through a master franchise partnership, aiming for 100 locations over five years [87][89] Company Strategy and Industry Competition - The company is evaluating strategic alternatives to strengthen the balance sheet and position for growth [46][47] - Zenoti platform, now active in 1,140 locations, is foundational for personalized marketing and operational initiatives [76][83] - Focus on high-volume salons to drive returns for both franchisees and the company [86] - Testing promotions and transformational marketing ideas to differentiate brands [84] Management Commentary on Operating Environment and Future Outlook - Management remains committed to cash management and returning to cash generation [9] - The company expects annual G&A run rate to be in the range of 47 million to 50 million [7] - Two-thirds of remaining company-owned salons will come to lease-end by February next year, reducing their impact [27] - The company is focused on increasing profitability and addressing challenges related to labor and customer behavior [58][60] Other Important Information - The company is in compliance with debt covenants and does not expect to violate any during the term of the credit facility [29] - Legacy insurance claims and rental payments on dark salons continue to impact cash flow, though amounts are decreasing [35] - The company is prioritizing the conversion of salons running on SuperSalon to Zenoti, with many franchisees already signed up [79][82] Q&A Session Question: Impact of Zenoti on CRM and customer outreach - Zenoti enables personalized marketing, better customer data collection, and streamlined customer interaction, driving frequency and loyalty [12][13][14] - The platform also provides operational insights and customer feedback, helping franchisees improve salon operations [15][16] Question: Remaining potential for Zenoti progress fees - 2 million remains from the original $20 million upfront purchase price, with additional proceeds based on salon migration [17][18] - Remaining proceeds will go towards debt [20] Question: Impact of in-store marketing and teaching - In-store marketing is foundational but hard to track directly, though it is considered table stakes for the business [21] Question: Inflation and price raising as a driver - Inflation and price raising have driven comps, but the company is testing initiatives to optimize customer counts and traffic [39][94][95]