Regis's Q1 2026 Earnings Call: Contradictions Emerge on Store Closure Trends, G&A Expenses, and Digital Transformation

Date of Call: November 12, 2025

Financials Results

• Revenue: $59.0M, up 28% YOY ($12.9M increase vs prior year)

Guidance:

• Expect a meaningful increase in unrestricted cash generated from core operations in FY2026 vs FY2025.
• Plan to deploy accumulated ad-fund cash to support marketing initiatives in FY2026; total reported cash from operations may be lower due to ad-fund usage.
• Annualized G&A expected to be $40M–$43M (includes Align transaction).
• Anticipate fewer franchise closures than recent years but will not provide a specific closure forecast.
• Will continue to monitor refinancing opportunities; not economical in the near term but will reassess as make-whole expiry approaches.

Business Commentary:

* Same-Store Sales and Profitability Improvement: - Regis Corporation reported a consolidated same-store sales increase of 0.9% for Q1 FY2026, driven by pricing actions and improved salon execution. - Adjusted EBITDA for the first fiscal quarter was $8 million, up from $7.6 million a year ago, reflecting greater revenue contribution from company-owned salons, disciplined cost management, and increasing operational efficiencies.

• Company-Owned Salon Performance:
• Regis' company-owned salon segment saw an adjusted EBITDA improvement of $1.9 million year-over-year, reaching $1.6 million for the quarter.

• This was primarily due to an increased number of company-owned salons, reflecting operational discipline and stylist productivity gains.

• Cash Flow and Financial Health:

• The company generated $2.3 million in positive operating cash flow, a $3.6 million improvement versus last year's first quarter.

• This improvement was attributed to a net increase in advertising funds and income generated by company-owned salons, demonstrating financial stability.

• Supercuts Brand Modernization:

• Same-store sales for Supercuts were up 2.5% for Q1 FY2026, with loyalty program participation growing from 36% to 40%.

• The modernization efforts, including brand consistency and digital integration, are driving guest traffic and retention.

• Franchise Closures and Strategic Rationale:

• Regis closed 54 locations in Q1, reflecting a decrease in franchise locations, with a net decrease of 757 locations compared to the prior year.
• The closures were primarily of underperforming stores, which had significantly lower trailing 12-month sales volumes compared to top-performing units, aiming to enhance profitability margins.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized progress: 'off to a solid start to fiscal 2026,' adjusted EBITDA improved to $8M (up $0.4M YOY), and generated $2.3M in positive operating cash flow (a $3.6M improvement YOY). They repeatedly cited momentum in same-store sales, company-owned salon performance, and strengthened cash generation.

Q&A:

• Question from Anthony (Unknown): Can you please provide more details about the pricing actions you have taken and the impact on traffic, if any?
  Response: Regis runs a third-party competitive pricing survey across ~200 DMAs and issues guidance to franchisees (who set local prices); franchisees have started taking actions and corporate salons adjust where needed — no material traffic impact observed so far.

• Question from Jason (Unknown): Can you talk about traffic trends at Supercuts SmartStyle, if any?
  Response: Same-store sales are improving overall; SmartStyle still lags and is a targeted focus with initiatives underway to address traffic and performance.

• Question from Bill Treger (Unknown): You talked about the 54 stores that were sequentially shut, and that annualizes about 200, or down 50% from the previous year. Is that the way we should look at it this year?
  Response: They closed 54 locations in Q1 but will not provide a numeric closure forecast; they expect closures to be materially lower than the large pace of recent years, noting many closures are lease-end driven and unpredictable.

• Question from Bill Treger (Unknown): On the FICA tip credit math — does that roughly translate to a material benefit for franchisees (~$16M aggregate)?
  Response: Management confirmed the math and said the FICA tip credit will materially improve franchisee profitability; Regis is engaged in helping owners implement claiming guidance.

• Question from Bill Treger (Unknown): Can you give any more insight into G&A for this year?
  Response: Annualized G&A is expected to be $40M–$43M, which includes G&A related to the Align acquisition.

• Question from Bill Treger (Unknown): Do company-owned stores now consist entirely of Align stores or are there others?
  Response: The company-owned portfolio is primarily the Align-acquired salons (281) plus a handful of select company-owned locations (e.g., some in Chicago).

• Question from Bill Treger (Unknown): Is the new design a prototype (Supercuts Select) and how will it roll out?
  Response: They've developed a value-engineered Supercuts Select prototype with phased upgrade options for franchisees; construction expected to start in early 2026 and rollout will allow incremental implementation to control cost.

• Question from Unknown Analyst (Unknown): CEO search update — when will the Board decide?
  Response: The Board is evaluating candidates (including the interim CEO); a final decision is expected in the coming months.

• Question from Unknown Analyst (Unknown): When you say no debt repayment in the near term, what does 'near term' mean given the make-whole expires next June?
  Response: Refinancing or repayment is not economically attractive today; they will continue to monitor markets and reassess as the make-whole expiry (next June) approaches and economics improve.

Contradiction Point 1

Store Closure Trends

It involves differing statements about the expected pace and scale of store closures, which could impact investor expectations regarding the company's financial health and strategic direction.

Have store closures been reduced by half to around 200? - Bill Treger (Analyst)

2026Q1: We closed 54 locations in the first quarter. We don't expect closures at the last few years' levels. - Kersten Zupfer(CEO)

Are there any updates on store closings for this year and next year? - William Charters (Sabal Capital Management)

2025Q3: We're seeing it kind of come in at around that pace. And as well as going forward, we anticipate an order of magnitude less. - Matthew Doctor(CEO)

Contradiction Point 2

G&A Expense Expectations

It involves changes in financial forecasts regarding G&A expenses, which are crucial for investor understanding of the company's operational efficiency and cost management.

Can you provide additional details on G&A for this year? - Bill Treger (Analyst)

2026Q1: On an annualized basis, we expect G&A to range from $40 million to $43 million, including G&A associated with the Align transaction. - Kersten Zupfer(CEO)

Can you explain your plans for the incoming cash? Will you be adding more franchisees? - William Charters (Sabal Capital Management)

2025Q3: G&A on a full-year basis should decrease about $8 million compared to 2024, primarily due to lower legal expenses. - Matthew Doctor(CEO)

Contradiction Point 3

Digital Transformation and Loyalty Program Growth

It involves differing statements on the progress and impact of the Supercuts Rewards loyalty program, which is a key component of the company's digital transformation strategy.

Can you discuss any traffic trends at Supercut SmartStyle? - Kersten Zupfer (Interim President, CEO and EVP of Brand Operations for Supercuts & Cost Cutters)

2026Q1: We are seeing improved same-store sales at Supercuts. There is an opportunity to address traffic and performance at SmartStyle, the second-largest brand. We are working to improve SmartStyle's situation. - Jim Lain(CMO)

Can you provide an update on the brand and digital initiatives? - Kersten Zupfer (Regis)

2025Q2: Our Supercuts Rewards loyalty program has shown promise, with memberships reaching 27% of total sales across the system, driving incremental traffic and same-store sales. - Matthew Doctor(CEO)

Contradiction Point 4

New Salon Prototype Financing

It pertains to the financial strategy and commitment of the company in implementing a new salon prototype, which could impact franchisee relations and growth opportunities.

Are you referring to a prototype store, such as Supercut Select? - Bill Treger (Unknown Analyst)

2026Q1: We're working on a Supercut Select prototype, using an outside professional design service. It will connect to the brand transformation and be affordable. Construction will likely start in early 2026. - Jim Lain(CEO)

How will the prototype be financed and implemented? - William Charters (Sable Capital)

2025Q4: The financing for the new salon prototype is still being reviewed, considering multiple options. There is a strong interest from franchisees ready to remodel their salons once the new prototype is launched. The goal is to determine the best approach that supports the necessary changes and growth. - Jim Lain(CEO)

Contradiction Point 5

Store Closures and Lease Ends

It involves the company's expectations and reasons for store closures, which directly impact the company's overall retail presence and strategic growth.

Have store closures been reduced by half to around 200? - Bill Treger (Unknown Analyst)

2026Q1: We closed 54 locations in the first quarter. We don't expect closures at the last few years' levels. Store closures are often due to lease ends, but unexpected situations can arise, such as significant rent increases. - Kersten Zupfer(CEO)

How is cash being used to support the business, pay down debt, or fund potential acquisitions? - William Charters (Sable Capital)

2025Q4: We ultimately closed 91 corporate-owned salons during Q4. This number was well below our year-end target and below prior year closures. - Kersten Zupfer(CFO)