Regis Corporation Aktie

Good morning, and thank you for joining the Regis Fourth Quarter 2026 Earnings Conference Call. I am your host, Kersten Zupfer, Executive Vice President and Chief Financial Officer. I am joined today by our Chief Executive Officer, Susan Lintonsmith, and this conference is being recorded. [Operator Instructions]

I would like to remind everyone that the language on forward-looking statements included in our earnings release and 8-K filing also applies to our comments made on the call today. These documents can be found on our website, www.regiscorp.com/investor-relations.

With that, I will now turn the call over to our CEO, Susan Lintonsmith.

Good morning, everyone, and thank you for joining us. In fiscal 2026, we strengthened the foundation of our business and demonstrated our ability to deliver profitable growth while consistently delivering cash. We finished the year with $224.5 million of revenue, $32.8 million of adjusted EBITDA and more than $13 million in cash from operations, extending our track record to 7 consecutive quarters of positive cash from operations. We delivered positive comparable sales growth in the fourth quarter with consolidated same-store sales up 0.1% and Supercuts up 2.6%. For the full fiscal year, consolidated same-store sales increased by 0.9%, driven largely by Supercuts, which achieved 3% growth, delivering growth for the 5th consecutive year. This performance demonstrates that the initiatives we have been implementing are building momentum and translating into results.

Over the past 5 months, I've spent significant time with our franchisees, our company teams and in salons, giving me firsthand understanding of the business, what's working and where we have meaningful opportunities to improve. I'm encouraged by what I've seen, but I'm equally focused on the opportunities ahead and the work required to unlock the full potential of our portfolio. As we enter fiscal 2027, our focus is clear: convert the foundation we have built into stronger, more consistent performance and sustainable growth.

Our priorities are to: one, strengthen our brands; two, drive growth through traffic; and three, improve the health of our salon portfolio while mitigating closures. These priorities are grounded in the belief that successful performance in a service business like ours is driven by strong, meaningfully differentiated brands, impactful marketing that drive guests into our salons and great experiences delivered to every guest in every salon every day. I'll dive deeper into specifics later in the call.

Before I turn it over to Kersten, I want to briefly address our opportunity to refinance our existing debt. This is an important priority for both our shareholders and the company, and the Board and I are actively engaged in the process with Kersten. We are exploring many options, and we'll move forward when we believe the terms provide meaningful value for shareholders. Kersten will provide additional details on our efforts shortly. I'll hand the call over to her now to review our financial results.

Thanks, Susan. I'll cover the fourth quarter and full year results and then spend a few minutes on our balance sheet. Our fiscal 2026 results demonstrate meaningful progress in our transformation with stronger profitability and importantly, a significant improvement in cash generation. As Susan mentioned, we generated $32.8 million of adjusted EBITDA, an increase of $1.2 million compared to fiscal year 2025 and $13.5 million of unrestricted cash from operations, up from $5.4 million in the prior year. These results were achieved while continuing to direct resources toward our strategic priorities and navigating an environment where franchise location count declined.

For the fourth quarter, we delivered $6.6 million of operating income, generated $9.2 million in consolidated adjusted EBITDA and produced positive cash from operations for the 7th consecutive quarter. We achieved these results despite lower revenue. Total revenue for the fourth quarter was $56 million, a decrease of $4.4 million or 7.3% compared to the prior year. The decline was primarily driven by lower non-margin franchise rental income, reflecting a reduction in franchise salon count and the transition of certain franchisees to their own leases. Net income was $4.4 million or $1.51 per diluted share compared to $116.5 million or $42.58 per diluted share in the year ago quarter.

The year-over-year comparison is heavily influenced by the $115.5 million discrete tax benefit recognized in the prior year as well as $1.9 million loss from discontinued operations net of tax rather than underlying business performance. On an adjusted basis, net income increased to $3 million from $2 million, providing a more meaningful view of the underlying performance of the business.

Turning to our adjusted results. As a reminder, our adjusted results exclude stock-based compensation expense. We believe this provides a clear view of our underlying business performance. A reconciliation of our GAAP to non-GAAP results is included in our press release. Adjusted G&A was $9.8 million in the fourth quarter, down from $10.4 million in the prior year quarter, reflecting continued cost management discipline.

For the fourth quarter, consolidated adjusted EBITDA was $9.2 million, a decrease of $500,000 compared to $9.7 million in the prior year quarter. The decrease was primarily driven by an unfavorable impact from foreign currency translation adjustments as well as lower franchise revenue. Adjusted EBITDA for our franchise segment was $6.4 million in the quarter, a decrease of $1.3 million compared to $7.7 million in the prior year quarter. This decrease was primarily driven by lower royalties and fees resulting from the decline in salon count. In our company-owned salon segment, the adjusted EBITDA improved by $800,000 year-over-year to $2.8 million. The improvement was primarily driven by decreased rent and salon expenses resulting from the closure of unprofitable salons.

One item to note as we move into fiscal 2027, we are dedicating resources to the company-owned salon business that were previously shared across the organization. This will shift certain costs into the company-owned salon segment's reported results impacting the year-over-year comparison. This is a reallocation of costs rather than an increase in spending. Our total G&A expense declined in fiscal 2026, and we expect to maintain expense discipline in 2027.

Turning to our franchise portfolio. We ended fiscal 2026 with 207 closures, offset by 8 openings for a net decline of 199 salons. The locations that exited the system were predominantly lower volume salons, resulting in a smaller impact on royalty revenue than the unit count alone would suggest. The average unit volume of the closed locations was approximately $136,000, roughly $364,000 below the average unit volume of stores in our highest performing quartile. While the decline in salon count continues to affect franchise revenue, we believe the remaining salon base is becoming stronger and more productive, which should support improved franchisee economics over time.

For budgeting purposes, we identify salons at risk of closure based primarily on lease expiration dates and key operating metrics, including average unit volume and rent as a percentage of revenue. Based on the visibility we have today, we do not expect fiscal year 2027 closures to be materially different from fiscal year 2026.

Now turning to our full year fiscal results. For fiscal 2026, consolidated revenue was $224.5 million, an increase of $14.4 million compared to fiscal year 2025. The increase was primarily driven by higher company-owned salon revenue, partially offset by lower royalties, fees and non-margin franchise rental income. Operating income for the full fiscal year increased to $24.4 million, up from $19.9 million in fiscal 2025. The improvement was primarily driven by increased company-owned salon revenue, partially offset by lower royalties and fees. Net income for our fiscal year 2026 was $6.9 million or $2.41 per diluted share compared to $123.5 million or $46.10 per diluted share in fiscal year 2025.

The year-over-year comparison is also heavily influenced by the $115.5 million discrete tax benefit recognized in the prior year as well as the $6.5 million in income from discontinued operations net of tax in the prior year. On an adjusted basis, net income increased to $7.8 million from $7.6 million, which highlights improvement in the underlying performance of the business. As I mentioned earlier, adjusted EBITDA for fiscal year 2026 increased to $32.8 million, up from $31.6 million in fiscal year 2025. This improvement was primarily driven by a full year of company-owned salon revenue and lower G&A expenses, partially offset by lower franchise revenue. Adjusted net income was $7.8 million, up from $7.6 million in fiscal year 2025, while adjusted diluted earnings per share were $2.70 compared to $2.85 in the prior year.

Turning to full year cash flows. Net cash provided by operating activities was $13.1 million for fiscal year 2026 compared to $13.7 million in the prior year. That reported measure includes restricted ad fund cash, which is designated for marketing purposes and is not available for corporate use. Importantly, unrestricted cash from operations increased to $13.5 million in fiscal year 2026, up from $5.4 million in fiscal year 2025. This represents a significant improvement in cash generation and reflects the benefits of our lower cost structure and improved operating performance. We used a portion of that cash to fund $2 million in capital investments and repaid $2.7 million of term loan principal while still ending the fiscal year with a cash balance that is more than 50% greater than a year ago.

As of June 30, 2026, we had $26 million in unrestricted cash and cash equivalents. In accordance with our credit agreement, we expect to make our annual excess cash flow sweep payment in September, which will reduce our cash and our outstanding debt by approximately $7 million to $8 million.

Turning to our debt. As of June 30, 2026, our funded debt was approximately $128 million, consisting of $116 million of term loan principal, $11 million of paid-in-kind interest and approximately $1 million outstanding under our revolving credit facility. We also had $6 million of standby letters of credit outstanding, which includes the $1 million related to the revolver draw, leaving $19 million of available capacity. Net of cash, funded debt was approximately $102.2 million or approximately 3.1x adjusted EBITDA.

As of June 30, 2026, we had $19 million of unused availability under the revolving credit facility and total liquidity of $35 million. Unrestricted cash generated from operations more than doubled this year, and that improvement is an important part of our refinancing efforts. It demonstrates the significant progress we have made in improving the business' ability to generate cash and provides us with greater flexibility to reinvest in the business and repay debt obligations. We continue to evaluate refinancing alternatives that provide acceptable terms and conditions and will lower our overall cost of debt in a way that creates meaningful value for shareholders. Our Board is actively engaged throughout this process, including our recently appointed director, who is also a significant shareholder.

That shareholder alignment is important as we evaluate the alternatives available to us. We are approaching this effort with urgency while maintaining discipline in our approach, and we will not sacrifice long-term value and we'll continue to pursue the best and appropriate refinancing options for Regis. Overall, our fiscal 2026 results demonstrate continued financial progress. We improved operating income and adjusted EBITDA and more than doubled unrestricted cash from operations to $13.5 million while directing resources to initiatives that advance our long-term strategy.

As we enter fiscal 2027, we are building on that progress with a clear focus on sustaining meaningful cash generation while balancing targeted growth investments that can further strengthen our business with ongoing cost discipline.

With that, I will turn the call back to Susan.

Thank you. Looking ahead, we are focused on 3 areas to drive our growth plan at Regis. First is Supercuts. This includes implementing the strategic blueprint to modernize and unlock the growth potential of this brand, which is about the brand strategy, modernizing the digital experience and driving operational excellence. The second priority is our company-owned salons, building a best-in-class operating model for growth and profitability while using these salons as a testing ground for initiatives that we can then scale across the system. And third, SmartStyle, addressing the fundamentals of this business and taking the immediate actions necessary to drive traffic and improve performance. These priorities continue to guide where we direct our resources and how we plan to drive sustainable, profitable growth at Regis.

I'll quickly update you on the progress we're making across each of these areas. I'll start with Supercuts, which is our greatest brand opportunity with nearly half of our salon base and 60% of our royalties. With its scale, brand recognition and broad customer base, Supercuts is central to our growth strategy. For fiscal 2026, Supercuts delivered same-store sales growth of 3%, including strong performance throughout the year with 5% growth in Q3 and a 2.6% growth in Q4. This performance demonstrates the impact of the initiatives that we are implementing and importantly, reinforces that there is meaningful opportunity to continue strengthening and growing this brand. Against that backdrop, we're making strong progress on our strategic blueprint to modernize Supercuts for long-term growth.

Recall that this plan is built around 3 pillars: brand strategy, digital experience and operational excellence. The first pillar, evolve the brand strategy, is well underway. We fully launched the new Supercuts marketing campaign in July, including the Supercuts, Supercuts video, which brings the refreshed brand positioning and the Confidence Without Compromise tagline to life in a more modern and engaging way. We're also finding ways to connect Supercuts with consumers through culture and entertainment. Our partnership with Jackson Olson from the Savannah Bananas is a great example of this approach. Jackson's strong following and the Savannah Bananas highly engaged young fan base give us an opportunity to put Supercuts in front of new audiences in an authentic and entertaining way.

It helps that Jackson loves Supercuts and has amazing hair. We've had fun with social media initiatives and offering the Jack's hair style at Supercuts across the country.

In addition, Jackson is a contestant in Season 5 of Dancing with the Stars, further demonstrating his popularity and appeal. These efforts are helping make Supercuts more relevant to today's consumer while reinforcing the brand's personality and our differentiation, not only through our skilled stylists, but also through differentiated hair services like color. The second pillar, modernizing the digital experience, is also underway. We're focused on improving the guest journey, including strengthening our loyalty program and testing online scheduling to make the experience more convenient and seamless for guests.

We're strengthening our loyalty program to drive incremental visits, increase retention and maximize lifetime value while continuing to build a more robust CRM database that enables us to engage guests more effectively. With new marketing leadership and deep loyalty expertise now in place, we are well positioned to make loyalty a more powerful engine of profitable and sustainable growth. We're also differentiating the business by offering guests choice scheduling. This is the ability to schedule via app or web or simply walk in and get on the schedule. Early results from our online scheduling pilot are promising, and we look forward to sharing more results next quarter. The third pillar is operational excellence. This includes providing stronger support for franchisees, including communication, training and education, and coaching to improve execution and ultimately strengthen salon performance.

During the last quarterly earnings call, I mentioned dedicating resources via a new leader for training and education. We have now hired a leader for this department who has hair salons in her blood. Her mother is a stylist and who brings significant expertise in high-quality training effectiveness. She and her team of seasoned trainers are building the curriculum for stylists and managers from onboarding through continued education. Our skilled stylists set us apart, and we will focus even more on development to increase retention and expand that differentiation. The important takeaway is that Supercuts' strategy has moved from planning to execution. The new brand work is in market, the digital initiatives are underway and our operating model is being implemented. And importantly, we are already extending this blueprint beyond Supercuts to other core brands, leveraging what we are learning across the portfolio.

The second major area of focus is our company-owned salons. As mentioned on our last call, we now have dedicated leadership and support resources focused specifically on running the company's salon business. Our objective is to make our company salons a best-in-class operating model for growth and profitability while continuing to test important initiatives that can benefit the broader system. An example of this is our second visit marketing initiative, which is designed to convert more first-time guests into repeat guests. Another example is our new remodel and refresh design for Supercuts, which we will test in 3 company locations this fall. We will validate the costs and share the results with franchisees by November.

In terms of results, we ended fiscal 2026 with 4% same-store sales growth for company-owned salons, driven primarily by pricing. Traffic remains an opportunity, and we're taking action to improve trends by strengthening the guest experience, increasing marketing efforts and enhancing our value proposition. We've also made meaningful progress on labor productivity in our company salons in Q4. Through adjustments to our pay plans in March and greater discipline around scheduling, we reduced labor margins significantly from first fiscal quarter to fourth, and we're on track to achieve our labor margin targets for fiscal '27. Overall, we will strengthen the company-owned salon portfolio by elevating the guest experience, driving profitable traffic and improving labor productivity and store level profitability. We know where the opportunities are, and we're moving with urgency to address them.

The third major area of focus is SmartStyle, our second largest brand with about 25% of our total salons. I see a lot of potential in this brand, and our focus in fiscal 2027 is on addressing the fundamentals of the business and strengthening the value proposition for guests, particularly the Walmart shoppers and associates. We will quickly move into action with our franchisees, piloting several targeted initiatives, including optimizing hours of operations, improving staffing and training and attractive offers that appeal to Walmart shoppers, employees and their families.

We are also evaluating opportunities to introduce more convenient express service options that meet the needs of the SmartStyle customers. The objective is straightforward: strengthen the value proposition, make SmartStyle more relevant and convenient to its core customers and ultimately drive profitable traffic. Across all core Regis brands, strengthening the health and performance of our franchise system remains a top priority. We have invested in additional resources to better support our franchisees to improve performance across the system. Our goal is to strengthen the entire system by elevating our brands, driving traffic and enhancing operational support through improved communication, and training and education. We are also leveraging AI-powered dashboards to help our operations team identify opportunities earlier and then direct resources where they can have the greatest impact. To help mitigate closures, we are focusing on key areas of opportunity while accelerating resale activity by connecting franchisees looking to exit with qualified franchisees seeking growth opportunities. By strengthening the health of our franchise system and supporting sustainable growth, our objective is to reduce closures and ultimately return the system to net unit growth.

In summary, fiscal 2026 was about strengthening the foundation of Regis with meaningful progress in profitability and cash generation with 7 consecutive quarters of positive cash from operations. The Supercuts transformation is underway, and we already have tangible evidence that our actions are translating into results. Fiscal '27 is about moving from stabilization to sustainable, profitable growth. Our strategy remains clear: one, strengthen and differentiate our brands; two, drive profitable guest traffic; and three, improve the health of our salon portfolio while minimizing closures. These priorities will continue to guide how we operate and how we allocate resources. We have a lot of work to do, and I'm personally focused on making sure we execute against this strategy with discipline and urgency.

This concludes our prepared remarks.

We'll now open the call for questions.

[Operator Instructions] Our first question is from Ryan Meyers of Lake Street Capital Markets.

Congrats on the solid progress here. Just thinking about the positive same-store sales at Supercuts during the quarter, can you just talk about how much of that came from pricing versus better traffic? And then maybe the system as a whole, just how you have seen traffic trends, if there's been any improvement, no change and how we should maybe think about that?

Yes. Thank you, Ryan. This is Susan. So primarily, the growth in Supercuts did come from average ticket versus traffic. However, traffic was improved. It was down, but only by like 1 point or so. So it's improved for Supercuts and the trend is moving in the right direction. For the entire portfolio, as I mentioned, traffic absolutely is an opportunity for us to continue to make sure that we get the growth from traffic more so than pricing going forward. So that is something that we are very much focused on from our marketing efforts to improving operations.

Okay. Got it. That's helpful. And then lastly, I think you guys called out that closures in 2027 should be pretty similar to what they were in 2026. I just want to confirm and make sure I'm understanding this correctly. Is that both on the corporate-owned portfolio as well as the franchise salons?

'27 should not be materially different than what we had in 2026. We are expecting fewer closures in our company locations in fiscal 2027.

The next question comes from Nathan...

I was wondering -- and this is my kind of a specific question, but I was wondering if you guys could spell out or kind of lay out the main median and potentially how many stores fall under that $150,000 threshold laid out in the master lease for the Walmart stores in terms of revenue, that would be possible?

Yes. That is pretty specific in terms of like how we quartile. So maybe we can take that offline. We do look at our salons by quartile. As I mentioned, the majority of our closures relate to lower volume locations in the tune of $130,000, $135,000 of AUV. Is that helpful? And then we can get into more specifics.

Yes, just because like I was looking at the FDD document or financial disclosure documentation, and that's something that's missing compared to the other -- like that's available for [ Super-Styles ] and Cost Cutters, for example. I was just trying to sort of dive into that, but that's fine, too. Yes, that's kind of my main question. But yes.

Okay. We'll touch base. Thank you. I don't see any other questions coming in. Actually, one just came in. [ Greg Bennett ]?

Yes. In your thoughts about the financing -- refinancing the balance sheet, are you considering or is the possibility to do a rights offering with your shareholders, but continue to preserve the NOL going -- how much of the NOL going forward is there?

Yes. We have a significant over $450 million of NOL. As it relates to the refinancing, we are looking at all options. I don't want to get into any specifics, but know that we are moving swiftly and reviewing all options related to the potential refinancing.

So is it possible to do a rights offering with TCW and the rest of your shareholders and still have a backstop capacity to complete the rights offering if you were to do that?

Yes. I don't -- at this point, I don't want to get into any specifics. So I'll stick with -- we're continuing to look at all opportunities related to refinancing.

Second question, the lease liability has been going down. What do you anticipate. You've mentioned the possibility of having 200 -- I think, similar to this past year, 200 store closures. Are those ones that would mainly be involved with you reducing your lease liability also? And you mentioned also that, I guess, the leases that are coming up, the owner of the store or the franchise has now taking the obligation. What do you anticipate your lease liability to be at the end of next year?

Yes. So the 200 -- in terms of closures, we expect closures to be about the same that they were in fiscal year '26. Some of those leases -- so the lease liability will come down for those closures. But you're right. The other reason that, that liability is coming down is franchisees are moving on to their own leases. So it's a combination of both closures as well as franchisees taking on the lease.

With the real estate market like it is, commercial real estate, are you finding that it's lease -- the liability for leases, the rents are actually going down that the owner of the real estate wants to keep you -- keep a store in place?

I mean we continue to see inflationary increases as we renew leases.

The cost is going up, not down.

Thank you.

All right. I don't see any more questions. I just wanted to again thank everybody for joining us today. And just to summarize, we had a solid fiscal 2026, and we're very positive and optimistic as we enter fiscal 2027 and just know that we're going to pursue it with the momentum and urgency to build on the foundation that we've built. So thank you so much for your continued support of Regis Corporation and for joining the call today.

Good morning, and thank you for joining the Regis Third Quarter 2026 Earnings Conference Call. I am your host, Kersten Zupfer, Executive Vice President and Chief Financial Officer. I am joined today by our Chief Executive Officer, Susan Lintonsmith; and our Chief Operating Officer, Jim Lain.[Operator Instructions] and this conference is being recorded. We will open this call up for questions at the end of our prepared remarks. I would like to remind everyone that the language on forward-looking statements included in our earnings release and 8-K filing also applies to our comments made on the call today. These documents can be found on our website, www.regiscorp.com/investor-relations. With that, I will now turn the call over to our CEO, Susan Lintonsmith.

Hi. Good morning, everyone, and thank you for joining us on today's earnings call. Let me start by recognizing our wonderful support team and our franchise partners. I also want to thank our thousands of dedicated stylists who take care of our guests every day. Since this is my first Regis earnings call as CEO, I'll take a few minutes to introduce myself. While new to the CEO role, I am not new to Regis, having been on the Board since January 2025, serving most recently as Board Chair. I have over 35 years of leadership experience with strong consumer brands, primarily in the health and beauty services and restaurant industries. I've led high growth and turnaround businesses. My expertise is in strategic planning, marketing and brand building, leading operations and running franchise systems. My career has mainly focused on multiunit retail franchise businesses, leading company-focused franchisor and then also most recently operating a beauty services franchise. My experience has reinforced a simple view, successful performance in a service business like ours is ultimately driven by strong differentiated brands, staying focused on priorities that can drive sustainable growth and delivering a great experience in every salon to every guest every day. My approach is franchisee-centric, and our strategic initiatives will be guided by a focus on supporting franchisee success and the guest experience. I am excited to lead Regis and work with an amazing group of people in a great industry. I see the potential of this business. We have a portfolio of category-leading brands and a compelling opportunity to define the future of hair care. I'm fortunate to have joined the company at a time when the business has a solid foundation to build upon and much progress has already been made. This is a great time to move the business from stability to growth, and we can achieve this by strengthening our brand differentiation, attracting new guests and improving share of visits, powered by a robust CRM and loyalty platform, digital innovation and operational excellence. We have 3 key priorities to help drive our growth plan. The first priority is to grow the Supercuts brand. At a high level, there are 3 pillars in the transformation plan to grow Supercuts. The first is evolving the brand strategy. The second is modernizing the digital experience. And the third is driving operational excellence. The second priority is our company-owned salons. We will invest more resources in our company-owned salons to make them the best-in-class model of growth and profitability. And the third priority is SmartStyle. This is an underperforming brand that continues to weigh on our overall growth, but one we are committed to improving. In addition to these 3 growth priorities, we are also taking actions to strengthen our financial foundation. We are actively pursuing refinancing opportunities to reduce our cost of capital and enhance our financial flexibility. This is a high-level overview of our priorities, and we'll go through in more detail later in the call, each one of these. Let's move now into fiscal third quarter highlights. Our third quarter results reflect another quarter of strong execution, demonstrated by same-store sales growth, increasing profitability and solid cash flow generation. The growth in same-store sales reflects benefits from favorable seasonal conditions and the impact of our initiatives. For Q3, we had solid same-store sales growth. Consolidated same-store sales growth increased 2.6%. Supercuts delivered same-store sales growth of 5% and company-owned salons had same-store sales growth of 9.6%. Pricing actions, specifically in our company-owned salons supported these sales increases. Our focus across all our salons is on driving traffic, and I'll speak later in the call about our plans to achieve this. As Kersten will cover, we continue to expand profitability and generate meaningful cash flow through disciplined cost management and operational improvements, reinforcing the underlying earnings power of this business and durability of our cash flow. Adjusted EBITDA in the third quarter was $7.7 million, an increase of $600,000, driven year-over-year by continued G&A discipline and contributions from our company salon portfolio. Year-to-date adjusted EBITDA of $23.6 million is up $1.7 million versus the prior year. We generated $5.3 million of unrestricted cash from operations in Q3, bringing the total to $9.3 million year-to-date. Our balance sheet remains solid, and we continue to operate comfortably within our credit agreement covenants. And with that summary, I'll hand it back to Kersten to discuss the financial results in more detail.

Thanks, Susan. As Susan begins her tenure as CEO, it is worth taking a moment to reflect on the financial foundation that has been built over the past several years. Through disciplined cost management, we have made meaningful progress reducing G&A, improving profitability and returning the business to positive cash flow generation. As a result, Regis is operating from a stronger and more flexible financial position as we move into the next phase of growth Susan outlined. For the third quarter, we delivered a 14% increase in GAAP operating income, generated $7.7 million in consolidated adjusted EBITDA and produced positive cash from operations for the sixth consecutive quarter. This improvement in profitability and cash flow occurred alongside a decline in total revenue. Total third quarter revenue was $52.4 million, a decrease of 8.1% or $4.6 million compared to the prior year. This decline was primarily driven by lower noncash franchise fee recognition in the quarter. Franchise closures have moderated meaningfully in fiscal year 2026 as we continue to strengthen the overall quality of the system. During the first 9 months of fiscal year 2026, our franchise location count declined by 150 locations, net of openings or approximately 50 locations per quarter, and we expect fourth quarter net decline to be generally consistent with that recent run rate. On an annualized basis, that represents a significant improvement compared to net franchise location declines of 414 in fiscal 2024 and 430 in fiscal year 2025. Many of the prior year closures involved underperforming locations that reached the end of their lease life and their exit has contributed to a stronger, more productive remaining salon base. As of March 31, 2026, our franchise location count was down 279 salons compared to March 31, 2025. The locations that closed were primarily underperforming stores with significantly lower trailing 12-month sales than our top-performing units. The average unit volume of the closed locations was approximately $130,000, roughly $350,000 below the average unit volume of stores in our highest performing quartile. As lower performing locations exit the system, our remaining salon base becomes stronger, more productive and better positioned to support our improved profitability and cash flow over time. We reported GAAP operating income of $5.7 million, a $700,000 increase compared to $5 million in the year ago quarter. This increase was primarily driven by reductions in G&A expenses and benefits from portfolio optimization initiatives in our company-owned salon segment, which contributed to an improved operating margin. Income from continuing operations was $735,000 compared to $250,000 in the year ago quarter. The year-over-year improvement was primarily driven by reductions in G&A expenses and an increase in company-owned salon contribution, which was partially offset by lower contribution from higher-margin royalty revenues. The increase in both operating income and income from continuing operations reflects positive same-store sales performance in our franchise and company-owned salons as well as disciplined cost management. Turning to our adjusted results. As a reminder, our adjusted results exclude stock-based compensation expense. We believe this provides a clearer view of our underlying business performance. A reconciliation of our GAAP to non-GAAP results is included in our press release. For the third quarter, our consolidated adjusted EBITDA was $7.7 million, an increase of 8.5% compared to $7.1 million in the prior year quarter. The improvement was primarily driven by lower G&A expenses and contributions from company-owned salons, which were partially offset by lower franchise royalties and noncash fee recognition. Our adjusted G&A was $9.5 million in the third quarter of fiscal year 2026, down from $10.2 million in the year ago quarter, reflecting continued cost management discipline. Adjusted EBITDA for our franchise segment was $6.2 million in the quarter, a $100,000 decrease compared to $6.3 million in the prior year quarter. This decrease was primarily due to lower royalties and noncash franchise fees in the current period, which were partially offset by lower G&A expenses. Franchise EBITDA as a percentage of franchise revenue was 18.7%, up from 16.5% in the year ago quarter. Adjusted EBITDA for our company-owned salon segment improved by $600,000 year-over-year to $1.4 million for the quarter, primarily as a result of increased pricing and portfolio optimization initiatives. Turning to cash flows. For the 9 months ending March 31, 2026, we generated $8.9 million in cash from operations, which is an improvement of $1.9 million compared to $7 million in the prior year period. Of the $8.9 million, $5.3 million was generated in the third quarter. This represents our sixth consecutive quarter of positive cash from operations. This increase in cash generation was driven by higher operating income as a percentage of revenue. As a reminder, when we're evaluating our reported cash flows, we believe it is important to understand that cash flows are derived from 2 sources: unrestricted cash from operations, which is available for general corporate use and restricted cash related to our ad fund, which is sourced from contributions made by our salons, both franchise and company-owned. Ad fund cash is designated specifically for marketing purposes and is not available for corporate use. For the first 9 months of fiscal year 2026, our total reported cash from operations of $8.9 million includes $400,000 of cash used for the ad funds, which is restricted and $9.3 million in cash generated from our core operations, which is unrestricted. The business continues to generate positive cash from operations, providing a strong foundation for growth and financial flexibility. In addition, because of our significant net operating loss carryforwards, we do not expect to pay meaningful cash taxes in the near term, allowing more of our earnings improvement to translate into cash. For fiscal year 2026, we continue to anticipate a meaningful increase in unrestricted cash generated from our core operations compared to fiscal year 2025. This expected improvement is supported by continued operational strength, a full year of acquired company-owned salon results and the absence of onetime expenses we experienced last fiscal year. We also expect working capital improvements to provide additional support to cash generation. While we expect full year unrestricted cash generation to increase meaningfully year-over-year, quarterly cash generation may vary based on the timing of working capital movements and scheduled payments. Ad fund cash, which is designated specifically for marketing purposes and not available for corporate use, totals approximately $20 million annually. Since fiscal year 2025, we deliberately accumulated a surplus by moderating spend in order to focus on our business transformation strategy. In the first quarter of fiscal year 2027, we will have new marketing creative ready, and we'll deploy the accumulated ad fund dollars to increase our marketing efforts to help drive awareness and traffic. Turning to our balance sheet. Our balance sheet continues to improve through significant quarterly free cash generation. As of March 31, 2026, we had $31.9 million of available liquidity, including capacity under our revolving credit agreement and $22.9 million in unrestricted cash and cash equivalents. This provides flexibility to support ongoing operations while continuing to invest in the initiatives we are executing to drive higher salon traffic and long-term value creation. As of the end of the third fiscal quarter, we had outstanding debt of $127.1 million, excluding deferred financing costs and the value of warrants plus accrued paid-in-kind interest. As a reminder, in accordance with GAAP, our balance sheet includes approximately $175 million of operating lease liabilities related to our franchise salon leases. These leases have a weighted average remaining term of less than 5 years and the associated obligations are serviced directly by our franchisees. Provided that the franchisees continue to meet their lease payments as they historically have, we believe these amounts should not be considered part of our debt position when evaluating our financial leverage. We expect these liabilities will continue to decrease over time as the leases mature and as we further reduce our use of franchise leases. From a capital allocation perspective, reducing debt and improving financial flexibility remain key priorities. We are continuing to build cash and strengthen our financial profile, which we believe better positions the company to evaluate refinancing opportunities aimed at reducing our cost of capital over time. With that, I'll turn it back to Susan to discuss our business priorities.

Thank you. Over the past several years, we have completed a structural transformation of our business model, transitioning to a more asset-light franchise-focused system with a portfolio of category-leading brands. A lot of work has been done to stabilize the business since the impact of COVID. Today, we are focused on the next phase, moving from stability to sustainable growth. At a high level, our strategy is centered on leaning into our core growth drivers with a clear priority on driving traffic and continuing to take disciplined actions to strengthen performance across the broader system. We're being intentional with how we prioritize investments and allocate resources, scaling what is working across our brand portfolio. As I mentioned earlier, we have 3 priorities to drive growth, which I'm going to go into more detail on now. The first is Supercuts. Supercuts remains our flagship brand at nearly 50% of salons and over 60% of our royalties. This brand is a central driver of performance across the system. While same-store sales are up 3.2% year-to-date, and we're encouraged by our Q3 performance, it's important to recognize that our results may continue to fluctuate as we move through the transformation. As a reminder, our adjusted EBITDA is not highly sensitive to modest changes in same-store sales and sustained performance improvement requires durable traffic gains over time. We still have meaningful work ahead before delivering consistent sustained growth. We are continuing to advance our Supercuts North Star transformation strategy, which is designed to reposition the brand for sustainable long-term growth. This plan is a 3-pronged approach, including evolving the brand strategy, modernizing the digital experience and driving operational excellence. On evolving the brand strategy pillar, the positioning work has been completed, including a new tagline of confidence without compromise and some of the new creative can be seen in our digital and social efforts. The insights from the research and positioning work will be threaded through all aspects of our go-to-market strategy, including our stylist recruitment program and our future salon remodel plan. We've made progress on the second pillar, which is modernizing the digital experience. We are strengthening our loyalty program, which was launched in Supercuts in September 2024 to drive more consumer and franchise engagement and to build a robust CRM platform. From my experience, I know the power of the loyalty program, and I believe we can enhance this program to drive meaningful growth across our system. The work continues to evolve Supercuts from a largely transactional relationship with guests towards a more personalized, loyalty-driven and digitally enabled experience. From a technology perspective, we're evaluating enhancements to our existing technology stack to support a more modern operating environment. This includes ongoing work related to our POS ecosystem, web and mobile platform modernization and the continued evolution of our loyalty structure. These capabilities are increasingly important to improving guest engagement, operational visibility, franchisee support and long-term scalability across the system. We're also evaluating AI-enabled tools to improve operational efficiency and decision-making across the system. This includes AI-driven scheduling and salon hour optimization, more effective stylist shift planning and the rollout of a KPI dashboard that provides real-time visibility into performance at the salon level. These tools are designed to simplify decision-making, reduce friction in daily operations and help salon teams better align staffing to guest demand. We will pilot AI initiatives first in our company salons as proof of concept prior to scaling to the broader system. Last, we are advancing our third pillar, which is driving operational excellence. This includes several initiatives designed to achieve brand consistency and an exceptional guest experience across all locations. Our stylists are the face of the brand to the guest. At the salon level, they are accountable for delivering on the brand promise. So we're investing more in our training program to ensure that every stylist receives the training and development needed to deliver on our differentiation. Part of this investment in training includes improving our support for franchisees, providing KPI insights and coaching to help them strengthen their 4-wall profitability. We believe long-term brand health is directly connected to both quality of the in-salon experience and the strength of the support systems surrounding our franchisees and stylists. That said, Jim Lain and team will build a blueprint to modernize our education platform across both technical stylist training and franchise business development. Our objective is to create a scalable education ecosystem that strengthens technical excellence inside the salon while also improving operational capability and business acumen across our franchise system. The intent of these 3 pillars is to strengthen and grow our business while curbing store closures. The goal is to provide more support to franchisees to help improve salon performance while strengthening the franchise system through consolidation efforts, matching those who want to exit the system with those who want to grow by taking on additional salons. While these initiatives I just covered first focus on Supercuts, the intention is to implement best practices quickly across the remaining portfolio of brands. Okay. Let's move into the second priority, company salons. As a reminder, we acquired roughly 300 salons from a large franchisee late December 2024. Roughly 1/3 of these salons are Supercuts, 1/3 are cup cutters and 1/3 are holiday hair. Company-owned salons play a strategic role within the organization, serving as a test-and-learn platform that supports innovation, operational improvements and best practices that can be shared across our network. Given the importance of company salons, the leader, James Larez, is now 100% dedicated to this business as EVP of Company Operations, and the trading department is now under Jim Lain's leadership. Company salons had strong same-store sales growth of 9.6% in Q3, driven primarily by pricing actions and solid execution. As discussed on prior calls, after acquiring the salons, we implemented many changes to help improve the business, including a new stylist pay plan to address the previously high turnover. While the pay plan changes improved stylist retention, the impact of the new pay plan, combined with minimum wage increases led to a more rapid rise in labor costs than expected. In response, we implemented pricing increases and recently updated the pay plan to offset these margin pressures. These pricing actions moved the company's salons from below the brand average to slightly above the brand average. It's important to remember that traffic trends were already negative prior to the acquisition. While trends improved during our first year of ownership, traffic remained negative. We'll continue to closely analyze performance to better understand the impact of our pricing actions, consumer response and broader market dynamics while evaluating additional initiatives to support guest retention and sustainable traffic improvement. Going forward, improving traffic and expanding margins, particularly through enhanced labor efficiency will remain key areas of focus. Our goal is to make company salons best-in-class and a pilot to refine operating practices and leverage loyalty and technology tools with the plan to scale successes across the broader system. Let's turn to our third priority, SmartStyle. As our second largest brand and royalty stream, SmartStyle has underperformed relative to the broader portfolio, making its turnaround a key focus for the organization. The team is working closely with franchisees to evaluate initiatives aimed at improving traffic trends, guest retention and salon level economics while strengthening the customer proposition within its unique retail environment through a renewed focus on fast, convenient and affordable services. We believe the plan we are developing is aligned with Walmart's value-driven ethos and position SmartStyle for improved performance. We look forward to providing additional details on plans on future earnings calls. In addition to focusing on these 3 priorities, we continue to evaluate opportunities to enhance our financial flexibility, including optimizing our capital structure and reducing interest expense through a potential refinancing of our existing debt. As we approach the 2-year anniversary of our credit agreement in late June, we have the ability to refinance, which could lower our overall cost of capital. We recently added a new Board member, Bill Charters, who is also a significant shareholder and brings deep expertise in credit markets, which will be helpful as we evaluate refinancing opportunities. We're making great progress, and we'll provide an update soon. In summary, Reach's third quarter results reflect continued improvements in financial performance, driven by disciplined cost management and investment in areas of the business that support long-term growth. We're investing resources in a disciplined way to support our priorities. Supercuts remains a key focus with our transformational North Star plan, which is designed to differentiate the brand and achieve sustainable growth. We've made progress against the 3 pillars of this plan and we'll continue to strengthen the brand's differentiation going forward. We're dedicating more resources to company salons to improve traffic and margins and position it as the best-in-class operational model for the broader system. The second largest brand, SmartStyle, has been declining. We're focusing on addressing the issues and implementing initiatives to improve performance. We're putting more focus on the training program and modernizing our education platform to create a more scalable system. This initiative includes both stylist training and improved franchise business support. Reducing salon closures is a priority and the growth initiatives I've outlined, combined with the franchise support and consolidation efforts are designed to help mitigate closures. Last, we're evaluating and advancing our technology platform to enable many of the initiatives we've outlined and to support a more modern operating environment, including improved business insights and guest engagement. While significant work remains, we're focused on the right priorities. Collectively, these initiatives are designed to strengthen execution at every level of the organization, improve consistency across the system and create a more modern, data-driven operating model that supports long-term growth across the Regis portfolio. In closing, I'm excited to be leading this business. Regis has great brands and amazing people, and I'm energized about our plans to move the company into its next phase of growth.

This concludes our prepared remarks. Thank you for your continued support of Regis Corporation. We will now open the call to questions.[Operator Instructions]

Good morning Nathan, Please unmute your mic and ask question.

Susan, congrats on the new position. I just have a question regarding the unit level economics. Could you provide any information regarding level -- 4-wall breakeven or shutdown dynamics? How this has informed your pricing strategy and discuss how maybe that relates to average ticket pricing, for example?

Yes. First off, thank you very much. I appreciate that. I won't speak to the breakeven on this call. We can -- but I do want to say that we are focused on core KPIs to just improve overall level profitability. It does vary by location, definitely based on a lot of what's rent, what they're paying in labor, everything else. So there's no standardized response to that. But our goal is to provide more franchisee support and more support and visibility into our own company salons just to make sure that we are doing the right things not only to drive the top line through traffic, but also to improve margins for us and for our franchise partners.

Just a quick follow-up. Can you discuss a little bit about -- I know you guys mentioned quartiles. Can you kind of compare the Align system compared to the broad system and talk about -- because I know you guys -- from a mix perspective, Align does not have any SmartStyles in it. So I was wondering if you could add some sort of color to that situation.

Yes. If you just compare -- like I mentioned, the company salon business has the 3 different brands. And if you just -- and with Holiday hair, it's just companies. So if you look at the super cuts and the cost cutters and you look at the quartiles for our company-owned salons compared to the quartiles for our franchisees with those same brands, it's pretty comparable.

Right. But I'm just kind of trying to get at because -- I mean, 9.6% versus the system, is that -- would you say would you mainly the operational changes or sort of the broad mix?

Yes, the 9.6% for the company operations, that was primarily driven by the pricing actions that I mentioned. We did have a couple of pricing actions in calendar year 2025 that took us from really below the brand average. So we were priced below to above the brand average. So that in itself and a couple of operational improvements did drive that growth in Q3.

Got you. And can you add any detail to ticket pricing and sort of what -- how much room you guys think you guys have and stuff like that?

How much room we have? Yes. All I can say is it's -- the ticket average is really it depends how many services we have and everything else. So I don't know exactly what our pricing elasticity is or how high that ticket can go. That's something that definitely we'll be looking at. But I do believe that we do have a little bit more pricing power. We're still below -- we're still within the range, but we're going to be watching that because we're also looking at everything that's going on around us, competitive pricing, competitive value offers, et cetera. So all of that stuff impacts what we're able to price at and really what our power is.

Got you. Sorry, one final question. Do you have any sort of operational learnings from your background because I know you ran European wax centers in Colorado. Do you have any sort of direct learnings from that, that you think are transferable or...

Yes. sorry. A lot of my experience with running franchise locations are very directly applicable to this, working with licensed professionals and the importance of training and the importance of everything that happens within the 4 walls, that experience, that is one of my big things coming into this opportunity is really focusing on the front line, focusing on the stylists and that experience and making sure that the stylist has the training and the development needed to really provide that on that brand promise.

Got you. Yes. I know you guys probably can't discuss it, but do you have any sort of color you can add to the refinancing situation? Or is that an ongoing thing?

It's ongoing, and we're making good progress. And once we have information that we can share with everybody, we certainly will do so.

At this time, we do not have any further questions. Please feel free to reach out to me at [email protected] if you have any questions that we can address offline. And thank you again for your support of Regis Corporation. Have a great day.

Good morning, and thank you for joining the Regis Second Quarter 2026 Earnings Conference Call. I am your host, Kirsten Zupfer, Executive Vice President and Chief Financial Officer. I am joined today by our Interim Chief Executive Officer, Jim Lane. -- this conference is being recorded. I would like to remind everyone that the language on forward-looking statements included in our earnings release and 8-K filing also applies to our comments made on the call today. These documents can be found on our website, www.regiscorp.com/investor-relations. We will be taking questions at the end of the call. Please use the Q&A feature to submit any questions. With that, I will now turn the call over to Jim Lane.

Good morning, everyone, and thank you for joining us for Regis Corporation's Second Quarter Fiscal 2026 Earnings Call. As I mentioned last quarter, our focus remains on building a more durable, modern and disciplined Regis, one that is positioned to sustain consistent cash generation, improve financial performance and create long-term value for all stakeholders. Q2 represents continued progress on that journey. We are operating with greater precision and sharpening our focus on the execution levers that matter most despite traffic headwinds across the system. For the second quarter, adjusted EBITDA was $8 million, an increase of $900,000 year-over-year, driven by continued G&A discipline and contributions from our company-owned salon portfolio. Year-to-date adjusted EBITDA of $16 million is up $1.2 million versus the prior year. Consolidated same-store sales for the quarter declined modestly by 0.10%. Importantly, Supercuts delivered same-store sales growth of 2% year-to-date, where consolidated same-store sales increased 0.4%. We generated $1.5 million of unrestricted cash from operations in Q2 and $3.9 million year-to-date, reflecting improved operating discipline and cash management. At the same time, traffic remains our most significant challenge and the primary drag on top line performance. While pricing actions have supported same-store sales, particularly year-to-date, sustainable traffic improvements remains the central objective of our strategy. Since Q1, our strategy has not changed. What's different is the focus and rigor with which we are executing it. Over the past 2 quarters, we've zeroed in on the specific enablers that drive effective execution, including tighter organizational alignment, clear leader ownership, disciplined capital deployment and a sharper focus on adoption and compliance across the system. We continue to make good progress in our efforts to modernize and transform our flagship brand, Supercuts. Highlights include continued improvements in loyalty participation, digital engagement and execution of brand standards. In December, we launched pilots that will help us evaluate improvements designed to enhance customer digital interaction. As loyalty membership continues to grow, we are further refining our CRM strategy to improve customer retention. As I mentioned earlier, Supercuts delivered same-store sales growth of 2% in the quarter. However, traffic does not yet fully reflect the work underway. Our priorities for the coming quarters are clear: reducing friction, increasing franchisee adoption and compliance and demonstrating measurable lift through targeted pilots that can be scaled with confidence. Our company-owned salon group continues to be an important strategic asset. For Q2, these salons delivered sales growth of 4.3% -- as we noted in Q1, we introduced a new stylist pay plan designed to support a more productivity-driven operating model. As with any significant change, early implementation insights highlighted areas for refinement and the timing of pricing actions created some near-term margin pressure. During the second quarter, we moved quickly to implement targeted actions, including service pricing adjustments and the rollout of a labor optimization tool. While still early, we are beginning to see improved alignment with our margin expectations. The trajectory of performance is improving. And importantly, this group of salons is increasingly positioned to serve as a center of excellence, testing, learning and refining operating practices that can inform the broader franchise system. Across our portfolio of brands, we are taking deliberate steps to strengthen performance and drive long-term value. While SmartStyle continues to face more pronounced performance challenges relative to other brands, we are approaching this with a disciplined and proactive mindset focused on stabilization and improvement. Stepping back, our objective across our entire portfolio is not to make every brand the same, but to ensure they operate on a common operational and digital backbone. This allows each brand to retain its unique customer proposition while benefiting from shared capabilities that reduce complexity and cost. Our multi-brand portfolio is a meaningful asset for Regis, enabling us to reach different geographies and consumer segments effectively while operating with greater discipline and efficiency underneath. Technology remains a critical enabler of our strategy, and we are making steady progress across key initiatives. In the near term, we are focused on more effectively leveraging and integrating our POS platform to help drive traffic and improve the overall guest experience. This includes targeted enhancements to guest-facing digital capabilities ahead of the service, most notably booking and loyal connectivity. In parallel, we are defining a longer-term modernization road map designed to support scale, personalization and a unified guest identity across our brands. Loyalty and CRM continue to show promise, particularly in driving repeat visits and increasing engagement. While gains are incremental today, these platforms are foundational capabilities to unlocking greater frequency and utilization over time. We are also taking a disciplined forward-looking approach to AI. An AI task force has been established with a clearly defined charter, ensuring the responsible and productive use of AI across the organization. Our focus is practical, leveraging AI to improve process efficiency, enhance data analysis and support better decision-making across our portfolio of brands. We are taking actions required to position Regis for its next phase, simplifying the organization, tightening leadership scope and reallocating resources toward the highest impact priorities. This is not change for change's sake. It's about ensuring Regis is structurally prepared to execute with greater speed, clarity and accountability. As we move through the back half of fiscal 2026, -- our priorities are clear: stabilizing traffic through increased adoption of our initiatives, maintaining disciplined cost and cash management, strengthening the operational and digital foundation across our brands and building credibility through execution, not just ambition. While there is still work ahead, we are encouraged by the progress we're making in profitability, cash generation and organizational focus, which gives us confidence in the path forward. I want to thank our franchisees, our stylists and team members for their resilience and commitment. Together, we are building a more focused, more disciplined and more modern Regis. With that, I'll turn the call over to Kirsten to walk through the financial results in more detail.

Thanks, Jim. As a reminder, the company's acquisition of approximately 300 salons from Align closed on December 19, 2024. Consequently, our results for the fiscal second quarter ending December 31, 2025, include a full period of contribution from those salons, while the prior year quarter included less than 2 weeks of contribution, which affects year-over-year comparability. As Jim discussed, our fiscal 2026 second quarter results reflect ongoing progress in executing our transformation strategy. While this work will take time, our fiscal second quarter results demonstrate continued strengthening of Regis' financial performance, supported by improving brand level performance and advancement of the initiatives that will drive long-term profitable and sustainable growth. For the second quarter, we delivered a 13% increase in GAAP operating income, $8 million in consolidated adjusted EBITDA and generated positive cash from operations for the fifth consecutive quarter. Total second quarter revenue was $57.1 million, an increase of 22.3% or $10.4 million compared to the prior year. This increase was primarily driven by increased revenue from company-owned salons resulting from the acquisition of Align in December of 2024. This increase was partially offset by lower royalties and fees and non-margin franchise rental income. As of December 31, 2025, we had a net decrease of 374 franchise locations compared to December 31, 2024. Of the 374 franchise locations that closed since last December, 96 were in the 6 months ended December 31, 2025. We believe closures in the second half of fiscal year 2026 will be in the same range as the first half of fiscal 2026. The closures year-over-year primarily involved underperforming stores with much lower trailing 12-month sales than our top-performing units. The gap between those stores and our highest performers was approximately $350,000, highlighting both the strong potential in our system and the opportunity to further enhance profitability and cash flow as we continue executing our transformation strategy. We reported GAAP operating income of $6.2 million, an increase of $0.7 million compared to $5.5 million in the year ago quarter. This increase was primarily driven by operating income contribution from the company-owned segment, which includes the salons from the Align acquisition and continued cost management discipline, which was partially offset by onetime professional fee expenses associated with the Align acquisition in the prior year and salon closures. Income from continuing operations was around $456,000 compared to $206,000 in the year ago quarter. The year-over-year improvement was primarily driven by an increase in company-owned salon contribution and reductions in G&A expenses, which was partially offset by lower contribution from higher-margin royalty revenues. The increase in both operating income and income from continuing operation reflects positive same-store sales performance at Supercuts and our company-owned salons as well as disciplined cost management. Turning to our adjusted results. As a reminder, our adjusted results exclude stock-based compensation expense. We believe this provides a clearer view of our underlying business performance. A reconciliation of our GAAP to non-GAAP results is included in our press release. For the second quarter, our consolidated adjusted EBITDA was $8 million, an increase of 11.9% compared to $7.1 million in the prior year quarter. The improvement was primarily driven by the EBITDA contribution from the acquired company-owned salons and lower G&A expenses, which was partially offset by lower franchise royalties and noncash fee recognition. Our adjusted G&A was $9.8 million in the second quarter of fiscal year 2026, up from $9.6 million in the year ago quarter. The slight increase resulted from G&A associated with our additional company-owned salons, partially offset by lower corporate G&A expenses resulting from our continued focus on disciplined cost management. Adjusted EBITDA for our franchise segment was $6.2 million in the quarter, a $173,000 decrease compared to $6.4 million in the prior year quarter. This decrease was primarily due to lower royalties and noncash fees in the current period, which were partially offset by lower G&A expenses. Franchise adjusted EBITDA as a percentage of franchise revenue was 16.5%, up from 14.8% in the year ago quarter. Adjusted EBITDA for our company-owned salon segment improved by $1.1 million year-over-year to $1.8 million for the quarter, primarily as a result of increased number of company-owned salons, which were acquired in December of 2024. Turning to cash flows. For the 6 months ended December 31, 2025, we generated $3.9 million in cash from operations, which is an improvement of $3.1 million compared to the $787,000 in the prior year period. The increase in cash generation was driven by impacts from the Align acquisition. As a reminder, when evaluating our reported cash flows, we believe it's important to understand that cash flows are derived from 2 sources: unrestricted cash from operations, which is available for general corporate use and restricted cash related to our ad fund, which is sourced from the contributions made by our salons, both franchise and company-owned. Ad fund cash is designated specifically for marketing purposes and is not available for corporate use. For the first 6 months of fiscal year 2026, our total reported cash from operations of $3.9 million includes $200,000 of cash used for the ad funds, which is restricted, and $4.2 million in cash generated from our core operations, which is unrestricted. The business continues to generate positive cash from operations, providing a strong foundation for growth and financial flexibility. For fiscal year 2026, we continue to anticipate a meaningful increase in unrestricted cash generated from our core operations compared to fiscal year 2025. This expected improvement is supported by continued operational strength, a full year of acquired company-owned salon results and the absence of onetime expenses we experienced last fiscal year. Additionally, working capital improvements are expected to further enhance cash generation from our core business. Ad fund cash, which is designated specifically for marketing purposes and not available for corporate use, built up over fiscal year 2025 as we moderated spending to focus on executing our business transformation strategy. Our marketing plans for fiscal year 2026 anticipate deploying a portion of this accumulated ad fund cash to support initiatives aimed at driving growth. In allocating capital, our priorities remain the same: reinvesting in the business to support growth, maintaining disciplined debt management and evaluating potential strategic opportunities. Turning to our balance sheet. In terms of liquidity, as of December 31, 2025, we had $27.4 million of available liquidity, including capacity under our revolving credit agreement and $18.4 million in unrestricted cash and cash equivalents. As of the end of the second fiscal quarter, we had outstanding debt of $126 million, excluding deferred financing costs and the value of warrants plus accrued paid-in-kind interest. As a reminder, in accordance with GAAP, our balance sheet contains approximately $208 million of operating lease liabilities related to our franchise salon leases. These leases have a weighted average remaining term of less than 5 years and the associated obligations are serviced by our franchisees. Provided the franchisees continue to meet their lease payments as they historically have, we believe these amounts should not be considered part of our debt position when evaluating our financial leverage. We expect these liabilities will continue to decrease over time as the leases mature and as we further reduce our use of franchise leases. And lastly, we continue to receive questions from shareholders regarding the potential to refinance our existing debt. While our current interest rate is higher than recent market levels, the economics of refinancing also depend on other terms of the agreement, including prepayment penalties and fees. Taken together, these factors may make refinancing after the 2-year anniversary of the agreement in June of 2026, economically viable and in the best interest of our shareholders. In the meantime, I want to assure investors that reducing our debt service remains a top priority. We are speaking with potential partners to explore refinancing options as we near the 2-year anniversary of the agreement in June of 2026, and we will keep shareholders informed as things progress. In summary, our fiscal year 2026 second quarter results reflect meaningful progress in strengthening Regis' financial profile. Our adjusted EBITDA and positive operating cash flows demonstrate the benefits of operating leverage and the contributions from the Align acquisition, while our balance sheet and liquidity position provide flexibility to support our strategic initiatives. This concludes our prepared remarks. We will now open the call to any questions.

We do have a question from Bill Charters of S Capital.

Well, that's great news on the proactive refinancing efforts. I know it's almost 5 months away, but that's good that you're looking at that now. My question is actually on the Align stores. And what is your initiative to improve performance there? Is it pricing? If you could just elaborate on that, that would be great.

Yes. Bill, this is Jim. Thanks for the question. Thanks for joining today. Yes, this has been one that I've been particularly involved with for the last many months. There's really 3 components to what we're doing. First off is a refinement of the pay plan itself. I'm no stranger to pay plans in our business, and this particular pay plan needed a bit of tweaking to put it kind of in simplistic terms. And we've made some, what I think to be pretty solid meaningful adjustments without any kind of a massive impact at all to the stylist. Second component is pricing. I think we were a bit slow early this past year in terms of taking price, and we've caught that up. We took further price adjustments in early December. And then the important part about pricing when you take price with a pay plan is that you adjust the associated tiers, the commensurate tiers so that it's all kind of going up equally together. that ensures that you maintain the appropriate margins in terms of the pay plan itself versus labor. And then lastly, what I will call labor optimization. You heard me talk in my narrative about the early steps we're taking with AI, and we've done some good work here. This is probably one of the first notable steps we've taken where we've levered the machine learning to help us, as an example, dumping in data in terms of sales by hour, so call it dayparts so that we better understand where we're overstaffed on stylist or understaffed on stylist. And one of the first things that really popped for us was where we were overstaffed. And so moving those stylists accordingly with the business is really the kind of the ultimate output of this labor optimization tool. It's early. I like what I see so far with it, but I think it's going to take the rest of the quarter that we're in to get a better understanding and where that might need to be tweaked. So listen, overall, I'm encouraged by what I'm seeing so far, and we're going to continue to stay very, very close to it.

Great. One other thing, just in the stores, I think it was like last fiscal year, it was -- maybe the store closures were 200. So far this year, maybe 100 closures, and you kind of guided for another 100. So if you look at apples-to-apples with the aligned stores going to company-owned from franchise, that is about a 50% reduction. Is that right from the previous fiscal year?

Yes, that's about right. Just -- you mean reduction from half of the amount of closures that we had last year.

Yes.

That's said properly, Bill.

We did get one more question in the Q&A feature, and I'll just read it and respond. Can you share any preliminary high-level feedback you're getting from potential replacement lenders on what rates you might get as a much more stable system with better leverage ratios? I'd love to be able to answer that at this point. But unfortunately, I can't really share anything more on rates or discussions we've been having, but know that we are having initial conversations with potential advisers. And as we can share more information, we definitely will.

Yes. Another question has come in. Can you walk through major new insights or initiatives from awareness to consideration to store visit to retention to address foot traffic goals? And if I'm following the question correctly, yes, there's -- if you listen kind of what I walked through in the narrative, the loyalty component, obviously, in Supercuts is a big driver, and we're continuing to see loyalty membership increase. With that, we stay highly focused on a group of what I would call lead measures with the lag -- the ultimate lag measure being the impact on traffic. And there are several components there. One is top of funnel, middle funnel, bottom funnel paid media, driving customer acquisition and then getting the customer in our door and then maintaining the stickiness of that customer. And that's where the CRM and the loyalty come into play. But data such as online booking, we look at very, very closely, 90-day customer retention, transactions with a valid e-mail. Those are all of the things that I consider to be important lead measures. And again, the primary drivers, the resources, the tools we're using and leaning into is paid media, and we continue to improve and tighten our execution there as well as loyalty, the kind of offers that we have and down the road, what I would call gamification in that particular arena. And then, of course, the whole idea of 90-day customer retention and what we're doing to maintain that stickiness.

We did get a couple more questions that came in through the Q&A. I'll combine these 2 questions from the same individual. Are you planning to add cost-cutter locations? And why is loyalty adoption lagging in SmartStyle and cost cutters?

Yes. So first off, cost-cutter locations, there isn't an all-out effort to add cost-cutter locations. However, there are some cost-cutting locations that are coming online really as we speak right now in an area where a franchisee has found the ability to go over an old hair cutting business and has converted that business is now defunk and the owner of a Supercuts brand for us has gone in and been able to convert those to cost cutters, providing kind of a cool approach where we've got the 2 brands now in a given DMA and able to grow instead of growing the Supercuts brand where it didn't make sense, we can bring in the cost-cutter brand and fill in appropriately and productively. So I'm encouraged by that. And then in terms of loyalty adoption, the loyalty adoption is lagging because we started it later. It came -- we just have recently turned it on in the balance of our brands. The good news is we're seeing it grow. And in fact, in some cases, it's growing at a faster rate than it did initially at Supercuts when we launched it at Supercuts. So as I said in my narrative, ensuring that we are implementing and taking the logical wins that we're seeing on the Supercut side and deploying those into the balance of our brands is an important part of our strategy. In terms of the CEO search, sorry, I wanted to make sure I'm looking at the questions here live. We continue -- the Board continues to evaluate and continues to consider the appropriate options for the next CEO. And I continue to operate as I am in running the organization and working in close partnership with the Board to ensure that we're moving forward. So more to come.

That is -- that wraps up our Q&A session. That wraps up our second quarter fiscal year 2026 earnings call. Thank you for your interest and continued support of Regis. Have a great day. Thank you.

Good morning, and thank you for joining the Regis First Quarter 2026 Earnings Conference Call. I am your host, Kersten Zupfer, Executive Vice President and Chief Financial Officer.

I am joined today by our Interim Chief Executive Officer, Jim Lain.

[Operator Instructions]

This conference is being recorded.

[Operator Instructions]

I would like to remind everyone that the language on forward-looking statements included in our earnings release and 8-K filing also applies to our comments made on the call today.

These documents can be found on our website, www.regiscorp.com/investor-relations. With that, I will now turn the call over to Jim Lain.

Good morning, everyone, and thank you for joining us for Regis Corporation's First Quarter Fiscal 2026 Earnings Call.

I'm pleased to share our progress as we continue advancing our transformation and strengthening the foundation for sustainable, profitable growth.

As we begin a new fiscal year, our priorities remain clear. We are focused on the holistic transformation of our Supercuts brand and optimizing and growing sales and profitability in our company-owned salon portfolio.

I continue to be inspired by the level of engagement across our franchise and corporate networks. Our franchisees, field leaders, and corporate teams are energized and aligned around both the path we have created and the actions we are taking.

Unity is a powerful driver of our progress.

For the first quarter of fiscal 2026, consolidated same-store sales increased 0.9%, marking another period of growth that was driven by both pricing actions and improved execution at the salon level.

Adjusted EBITDA for the first fiscal quarter was $8 million, up from $7.6 million a year ago, a $400,000 improvement. This improvement reflects the benefits of greater revenue contribution from company-owned salons, disciplined cost management, and increasing operational efficiencies.

We also generated $2.3 million in positive operating cash flow, a $3.6 million improvement versus last year's first quarter and the fourth consecutive quarter of positive cash from operations.

These results reflect continued progress on the fundamentals of growth, improving profitability, and cash generation. Our modernization of Supercuts continues to gain traction.

Same-store sales were up 2.5% for the first fiscal quarter, and participation in our loyalty program grew from 36% in the prior quarter to 40% in fiscal Q1.

We're reinforcing brand relevance and consistency across every touch point in salon, online, and through marketing, all designed to drive guest traffic and retention.

Compliance with brand standards is steady, and franchisees are increasingly embracing the new model. Transparency and pricing, service consistency, digital integration, and salon presentation.

Adoption is progressing, though full system alignment will take time. We've also completed a comprehensive customer research study that's now informing an evolved brand story and creative direction, sharpening how Supercuts will differentiate within the industry.

Next month, we'll begin pilots that improve digital interaction on our website and app, removing friction and enhancing the guest experience. Execution discipline remains high, and our teams are committed to delivering transformation with precision and focus.

Turning to our company-owned salon group. This remains a central focus and long-term value driver. We are now 3 quarters into owning and operating over 300 salons acquired earlier this year.

For Q1, we delivered month-over-month gains in traffic and same-store sales, and adjusted EBITDA of $1.6 million, which is trending in the right direction as operational discipline strengthens.

We've implemented a new stylist pay plan and embedded a productivity-driven operating model. Most importantly, stylist productivity is improving, which has a positive impact on their earnings and contributes to improved stylist retention.

As performance stabilizes, we expect our company-owned salons will increasingly serve as a center of excellence, testing, learning, and sharing best practices that can benefit our broader franchise network.

In support of these 2 priorities, we are advancing several key secondary initiatives aimed at positioning Regis for durable system-wide growth, strengthening our people and culture, and driving technology and digital acceleration across the business.

Together, these efforts are designed to enhance our operational performance, reinforce our brand leadership, and create sustainable long-term value for all stakeholders.

In our portfolio of brands, we are extending key elements of the Supercuts transformation, including online booking, transparent pricing, and loyalty integration.

Rather than waiting for later quarters, we've accelerated this work because the benefits are clear and immediate. We're also piloting brand-specific initiatives designed to strengthen performance across the portfolio.

Technology continues to be a critical enabler of transformation as well. We're stabilizing and optimizing our POS and booking platforms while assessing broader modernization opportunities across the enterprise.

Our partnership with Forum 3 and the expansion of our digital and AI initiatives will help us harness data more effectively to drive marketing efficiency, guest engagement, and operational simplicity.

And lastly, our people and our culture are critical to the overall success of our company. At the heart of this is the stylist, the face of our brands and the core of our guest experience.

A thriving stylist community drives guest loyalty and business growth. Insights from our recent qualitative research are helping us better understand what fuels stylist engagement and retention in today's styling industry.

We're also focused on deepening connection and communication across the organization, ensuring every employee, field leader, and franchise owner understands how their efforts ladder up to our broader goals.

When our franchisees thrive, Regis thrives, and that alignment remains fundamental to our success. In summary, we are off to a solid start to fiscal 2026.

Our results reflect continued progress on the fundamentals of improving profitability and generating positive cash flow. We are steadily advancing the transformation of Supercuts and our company-owned salons.

We are executing with discipline, driving stronger alignment across our teams and franchise partners, and building real momentum behind the strategic priorities we have outlined.

While there's more work to do, we are encouraged by the progress and the clear signals that our actions are taking hold. I want to thank our teams, our franchisees, and our stylists for their commitment and resilience.

Together, we are building a stronger, more modern, and more unified Regis, positioned for long-term growth and success.

With that, I'll turn the call over to Kersten for a deeper look at the financial results.

Thanks, Jim. Our fiscal 2026 first quarter results include the results of the 281 company-owned salons that we acquired from Align in December 2024.

As a reminder, our results for this quarter reflect contributions from the acquired company-owned salons, but prior year results do not. As Jim shared, our first quarter results reflect meaningful progress in enhancing Regis' financial performance and advancing key initiatives to position Regis for sustainable growth.

For the first quarter, we delivered same-store sales growth, a 177% increase in operating income, and our fourth consecutive quarter of positive cash from operations.

Total first quarter revenue was $59 million, an increase of 28% or $12.9 million compared to the prior year. This increase was primarily driven by increased revenue from company-owned salons resulting from the acquisition of Align in December of 2024, as well as an increase in same-store sales of 0.9%.

This increase was partially offset by lower non-margin franchise rental income and royalties due to fewer franchise locations. As of September 30, 2025, we had a net decrease of 757 franchise locations compared to September 30, 2024.

Approximately 300 of these locations are related to the Align salons that converted from franchise to company-owned. Sequentially, we had 54 fewer franchise locations compared to the prior fourth quarter of 2025.

The 443 net franchise closures year-over-year, excluding the Align salons that converted to company-owned, primarily involved underperforming stores that had significantly lower trailing 12-month sales volumes than our top-performing locations. 

The performance gap between these closed stores and our highest performing units was approximately $350,000, underscoring the strong potential within our system and highlighting the opportunity we have to further enhance profitability margins and cash flow generation as we continue executing our transformation strategy.

We continue to believe fiscal year 2025 was the last year of closures in this order of magnitude. 

In terms of profitability, we reported GAAP operating income of $5.9 million, an increase of $3.8 million compared to $2.1 million in the year-ago quarter.

This increase was primarily driven by operating income contribution from the acquired company-owned salons, which was partially offset by lower royalty revenues.

In addition, our continued focus on disciplined cost management led to lower G&A expenses that further supported the improvement in operating income.

Income from continuing operations was $1.4 million compared to a loss from continuing operations of $1.8 million in the year-ago quarter. The year-over-year improvement was driven by an increase in company-owned salon revenue, which was partially offset by lower royalties and an increase in net interest expense.

The increase in both operating income and income from continuing operations reflects growth in same-store sales, disciplined cost management, and momentum in our core business. 

Turning to our adjusted results. As a reminder, our adjusted results exclude stock-based compensation expense. We believe this provides a clearer view of our underlying business performance.

A reconciliation of our GAAP to non-GAAP results is included in our press release. For the first quarter, our consolidated adjusted EBITDA was $8 million, an increase of 4.3% compared to $7.6 million in the prior year quarter.

The $400,000 improvement was primarily driven by the EBITDA contribution from the acquired company-owned salons. Our adjusted G&A was $10.4 million in the first quarter of fiscal year 2026, up from $10 million in the year-ago quarter.

The slight increase resulted from G&A associated with our additional company-owned salons, partly offset by lower G&A expenses resulting from our continued focus on disciplined cost management. 

Adjusted EBITDA for our franchise segment was $6.4 million in the quarter, a $1.6 million decrease compared to $8 million in the prior year quarter.

This decrease was primarily due to lower royalties and fees in the current period, which were partially offset by lower G&A expenses. As a result, franchise adjusted EBITDA as a percentage of franchise revenue was 16.5%, down from 17.6% in the year-ago quarter.

Adjusted EBITDA for our company-owned salon segment improved by $1.9 million year-over-year to $1.6 million for the quarter, primarily as a result of an increased number of company-owned salons. 

Turning to cash flows. For the 3 months ended September 30, 2025, we generated $2.3 million in cash from operations, which is an improvement of $3.6 million compared to a use of cash by operations of $1.3 million in the prior year period.

The increase in cash generation was driven by a net increase in advertising funds and income generated by company-owned salons.

As a reminder, when evaluating our reported cash flows, we believe it is important to understand that cash flows are derived from 2 sources: unrestricted cash from operations, which is available for general corporate use, and restricted cash related to our ad fund, which is sourced from the contributions made by our salons, both franchise and company-owned.

Ad fund cash is designated specifically for marketing purposes and is not available for corporate use. 

For the first 3 months of fiscal year 2026, our total reported cash from operations of $2.3 million is comprised of $1.1 million in cash generated for the ad funds, which is restricted, and $1.2 million in cash generated from our core operations, which is unrestricted.

Importantly, the business continues to generate positive cash from operations, providing a strong foundation for growth and financial flexibility. For fiscal year 2026, we anticipate a meaningful increase in unrestricted cash generated from our core operations compared to fiscal year 2025.

This expected improvement is supported by continued operational strength, a full year of acquired company-owned salon results, and the absence of one-time expenses we experienced last fiscal year.

Additionally, working capital improvements are expected to further enhance cash generation from our core business. Ad fund cash, which is designated specifically for marketing purposes and not available for corporate use, built up over fiscal year 2025 as we moderated spending to focus on executing our business transformation strategy. 

Our marketing plans for fiscal year 2026 anticipate deploying this accumulated ad fund cash to support initiatives aimed at driving growth. As a result, we expect unrestricted cash generated from operations to be higher in fiscal year 2026 compared to 2025.

Total reported cash from operations may be lower than the prior year due to the planned usage of ad fund cash. In allocating capital, our priorities remain the same: reinvesting in the business to support growth, maintaining disciplined debt management, and evaluating potential strategic opportunities. 

Turning to our balance sheet. In terms of liquidity, as of September 30, 2025, we had $25.5 million of available liquidity, including capacity under our revolving credit agreement and $16.6 million in unrestricted cash and cash equivalents.

As of the end of the first fiscal quarter, we had outstanding debt of $124.8 million, excluding deferred financing costs and the value of warrants plus accrued paid-in-kind interest.

As a reminder, in accordance with GAAP, our balance sheet includes approximately $211 million of operating lease liabilities related to our franchise salon leases.

These leases have a weighted average remaining term of less than 5 years, and the associated obligations are serviced directly by our franchisees.

Provided that the franchisees continue to meet their lease payments as they historically have, we believe these amounts should not be considered part of our debt position when evaluating our financial leverage.

We expect these liabilities will continue to decrease over time as the leases mature and as we further reduce our use of franchise leases. 

Finally, we have received questions from shareholders about the potential to refinance our existing debt. Given the terms of our agreement, the economics of refinancing do not support such a move in the near term. It would not be in the best interest of our shareholders.

Although our current interest rate is higher than the recent market levels, the impact of certain terms outweighs any interest savings from refinancing.

We will continue to assess refinancing opportunities as our debt agreements mature and market conditions evolve. In summary, our fiscal year 2026 first quarter results reflect meaningful progress in strengthening Regis' financial profile.

Our adjusted EBITDA and positive operating cash flows demonstrate the benefits of operating leverage and the contributions from the Align acquisition, while our balance sheet and liquidity position provide flexibility to support our strategic initiatives.

This concludes our prepared remarks. We will now open the call to any questions.

Good morning. We did have a few questions come through the chat. I will read the question for you, Jim. Can you please provide more details about the pricing actions you have taken and the impact on traffic, if any?

Yes. Thanks, Anthony, for that question. This is Jim. So in terms of pricing, what we do on an annual basis we provide our franchise system.

We actually contract with a third party, and we go out into 200 DMAs in North America and do a competitive pricing survey. We distill that information, summarize it, and send it to our franchisees.

Franchisees own pricing within their salons. We do not dictate that as a franchisor, and they'll take action on that. That was submitted to the franchisees in early October and late September, early October, and they have been working on that since in terms of Q1.

We did see franchisees begin to take further pricing actions even prior to the survey coming out. The survey just tends to have franchisees act that maybe haven't acted or don't have as good a feel based on the breadth of the area that they own. 

In our corporate salons, we can handle those price changes as we see fit. Oftentimes, minimum wage increases, which we are experiencing in some of the states where our corporate salons are positioned, will be a driver of taking price and anywhere else that we feel that there is an opportunity based on the local competition and what they're doing. 

In terms of the same-store traffic sales trends, Anthony, you asked that question as well. Any notable differences in the operating area. We're not seeing anything significant when you look across the country or even within our corporate salons.

We're not seeing anything significant there that would cause any change in direction or focus. It's typical to see the seasonality in our business, for back-to-school as an example, in July and August, and the expected seasonality that we're going to see in our business as we head towards Thanksgiving and Christmas.

Thanks, Jim. We did have a couple of additional questions come in, specifically, can you talk about traffic trends at Supercut SmartStyle, if any?

Yes. Jason, that came in. I appreciate the question. In terms of traffic trends at Supercuts, we are seeing, as you saw, you can see that the improvements we're seeing from a same-store sales standpoint and the focus that we have there, we do see good continued improvements in that arena.

SmartStyle, we have an opportunity. And as you heard me say during the narrative, there are some things that we're working on right now to address traffic and performance in that SmartStyle brand, which is our second largest brand, obviously.

So there is a focus there to work in that arena.

And then next, Bill Treger submitted a number of questions. I think to make this a little bit easier, we'll just go live and have Bill ask the questions live, if that's okay. Bill, the operator will allow you to ask questions. Just take your phone off mute, please.

Great quarter. I guess the question I have is, 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? Store closures are reduced by half, and it's about 200?

Yes, you're right. We closed 54 locations in the first quarter. I'm not going to provide guidance, per se, on the number of salons we expect to close.

However, we do not expect it to be at the levels of the last few years. I mean, generally, our salons close at the end of their leases. And in the last few years, we've had a large number of leases that came to the end of their lease life. 

So we do our best to predict store closures. We use key metrics such as unit volume and rent percent, but there are often situations that we can't predict, such as the landlord requiring a significant rent increase that would no longer make it profitable.

So I don't want to give guidance for those reasons, but I think you're headed down the right path, Bill. So hopefully, that's enough to answer your question.

And then the big, beautiful Bill had a 45B FICA tax tip credit. And if I just took some numbers like your average store for the franchisees, I'm just trying to get to the health of the franchisees of like $300,000 per store and 20% of that revenue was actually for tips and you multiply that by 7.65%, which is the FICA tax, to like $4,600 a store and roughly with about 3,600 stores, it's $16 million to all of the franchisees. Is that right?

Is that the correct math, generally speaking? And I know it wouldn't help your company-owned stores because you already have a very large NOL.

Yes, Bill, this is Jim. Thank you, and glad to have you on. Your math is correct. That is a significant positive impact.

It's actually been something that the beauty industry has been working on for the better part of 30 years. It's something the restaurant industry has enjoyed since 1993, and unfortunately, no parity with our industry.

But with the big, beautiful bill, as you suggest and stated, that is now something that our franchise owners are going to enjoy. 

And as per your math, there is a significant material impact on their profitability. In fact, right now, just this week, Monday, as you know, I'm a member of the Board of Directors with the ISBN, and I sit on a subcommittee of the ISBN Board, myself and senior leaders from both Great Clips and Sport Clips.

And we are working on providing important guidance to owners because the next step of this is ensuring that owners understand how do I do this in terms of when tax time comes here in the spring.

So we're ensuring that they have good guidance on that so that they do enjoy the full benefit. So much more to come on that, but it's something that we're heavily engaged with and are going to drive to ensure that everyone enjoys the benefit.

And then with G&A, previously, you've given like annual guidance on G&A and where it's going. Kersten, can you give us any more insight into G&A for this year?

Yes. No, you're right, Bill, we have in the past and didn't in the script, but on an annualized basis, we expect G&A to be in the range of $40 million to $43 million, which includes G&A associated with the Align transaction.

And then in the company-owned stores, do those all consist of Align stores now? Do you have any other straggler company-owned stores that really are just leases that are waiting to roll over?

Or have all those been charged off? I mean, when I look at the company-owned revenue and expenses, am I looking basically at Align at this point?

We do have a handful of company-owned salons. There are selected salons in Chicago and maybe a couple more. So it's primarily the salons acquired by line and then a handful of others that are generally good salons for us.

And then you spoke in the prepared remarks about launching some new designs and stuff like that. Is it actually like a prototype store? Is it kind of like a Supercut select that we're going to see, and maybe we could even visit?

Or how is this going to be rolled out?

Yes, Bill, good question. Actually, your connection to Supercut Select, we have leaned into Supercut Select.

It has been successful for us in terms of the work that we've done, gosh, now for a good amount of time over the course of this past quarter or 2 in terms of developing the prototype, we're actually working with an outside professional design service that's helped us with this and to also ensure that it connects to all the transformative brand work that we're doing that I spoke to in my narrative today.

We want to make sure that the look and the feel of the salon connect to where we're going in terms of the stylists and the customer, and how the brand is identified. 

That work is very close to wrapping up. Right now, actually, a step that we've taken is ensuring that materials are sourced appropriately. We want this salon to be value-engineered.

We want it to be affordable. In fact, we're looking at ways that you can enhance the current salon by adding the key elements, if you will, of what the new prototype will look like.

So you don't necessarily have to do it all at one time. You can add key elements over the course of time and eventually get to the final prototype. 

I anticipate that construction will start in early 2026, and we'll most certainly advise more specifically as we get closer. I want to make sure that we've got materials at the right cost, but that costs us a little extra time; that's okay.

Affordability for our franchisees is a really important component here. But I'm really pleased and excited. I've been in this industry a long time. I really like what we've created, and I think it's going to truly embody what the future of Supercuts will be.

And then the last thing, just the CEO search update. When does the Board expect to have a decision on that?

Yes. It's a fair question, and I'm asked often. I'm continuing in the interim role, obviously. And as the Board continues to evaluate prospects, and certainly, those prospects include me heavily engaged and focused and working very, very closely with the Board.

And I anticipate that they'll make a final decision in the coming months. And I'm pleased with the approach that they're taking to ensure that we have the right leader in place for the organization.

We have one other question that came through on the chat. It relates to the refinancing. When you say no debt repayment in the near term, what does the near term mean? The make-whole requirement expires next June. 

So as I mentioned, yes, we're looking very closely at this, and the economics right now don't make sense. But as it continues to mature, like beyond June, as you mentioned, the economics do get better.

So believe me, we continue to evaluate this and monitor the capital markets closely, and we'll address this as soon as it makes sense to do so. 

With that, I think that ends the end of our Q&A session. Thank you for your interest in Regis Corporation. And if you have any further questions, feel free to reach out to me or to the mailbox [email protected], and happy to answer those. Have a great morning. Thank you.

Good morning, and thank you for joining the Regis Fourth Quarter 2025 Earnings Conference Call. I am your host, Kersten Zupfer, Executive Vice President and Chief Financial Officer. I am joined today by our Interim Chief Executive Officer, Jim Lain; and our Chairman of the Board, Mike Merriman. All participants are in a listen-only mode, and this conference is being recorded.

I would like to remind everyone that the language on forward-looking statements included in our earnings release and 8-K filing also applies to our comments made on the call today. These documents can be found on our website www.regiscorp.com/investor-relations, along with a reconciliation of any non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures.

With that, I will now turn the call over to Jim Lain.

Thank you, Kersten, and good morning, everyone, and thank you for being with us for our fourth quarter and full year fiscal 2025 earnings call. It's a privilege to address you today as Interim Chief Executive Officer, a role I've had the opportunity to serve in since July 1. As some of you know, I've been with Regis since 2013, most recently serving as Executive Vice President of Brand Operations.

Before this role, I spent nearly a decade as Chief Operating Officer for both our corporate and franchise salon systems, working closely with our corporate employees, franchisees and business partners to drive operational excellence and strengthen our iconic brands. Prior to joining Regis, I held senior leadership roles at Gap Inc. where I was responsible for a $2.5 billion business across 750 stores in the U.S. and Canada and earlier in my career at Dick's Sporting Goods and Target.

In my 30 years of experience, I've never been as energized and optimistic about an opportunity as I am about the role I was recently asked to take on. I have leaned into the opportunity to emphasize continuity and stability. Yet at the same time, the leadership team and myself are not standing still. We have been advancing on a forward-thinking transformational plan designed to drive deeper customer connections with all our brands and a more effective and modern approach to driving growth. These efforts are directed toward enriching our business model and elevating our new brands to turn the tide on declining traffic and pave the way for sustainable long-term growth, enduring profitability and a continued cash flow generation.

As we undergo this transformation, I want to assure you that the priorities and initiatives that have been previously outlined are still firmly in place and supported by a collaborative effort across the leadership team, management and the Board of Directors. Namely, we have 2 primary priorities that we are focused on. The holistic Supercuts brand transformation and optimizing and growing sales and profitability in our company-owned salons. In addition to these priorities, we will increase our focus on the other brands within our portfolio. Collectively, these brands represent a meaningful share of our business.

The key learnings and new processes developed through our focus on Supercuts in our company-owned salons are expected to carry over and create value across the rest of the portfolio, further fueling a flywheel-like effect on our total business. When I assumed the role of interim CEO, I wanted to ensure that our organization understood these priorities and is committed to the transformational vision and strategy of Regis. I spent many of my first days in this new role, connecting with employees, franchisees and investors to help ensure a smooth transition and steady the organization. The senior leadership team convened for a week to reinforce unity across the organization and advance the process of finalizing our financial and operating plans for fiscal year 2026.

We were joined by our strategic partner, Forum3, led by Adam Brotman, Adam is one of the world's leading customer loyalty and engagement experts with over 25 years of experience leading major tech and consumer brands, including in his role as Starbucks inaugural Chief Digital Officer and EVP of Global Retail Operations. Forum3 has been an invaluable partner since the start of this calendar year, and I am pleased they will continue as part of our team. Their deep expertise in digital and AI transformation and brand strategy is helping us accelerate key initiatives that are critical to modernizing our customer experience and unlocking new growth opportunities. While we expect our transformational journey will take time, we are making good progress and are encouraged by the early results.

Our business is consistently profitable. For fiscal year 2025, we delivered $19.9 million in operating income and $31.6 million in Adjusted EBITDA, a year-over-year increase of 14.9%. For the fourth quarter, consolidated same-store sales increased 1.3% year-over-year. And at Supercuts, our largest brand, we experienced an increase of 2.9%. Importantly, the fourth quarter of fiscal 2025 marked our third consecutive quarter of positive cash from operations. While these results are solid, we are encouraged by the opportunities ahead to build on this momentum. We are laying groundwork to change the trajectory of declining traffic, reinforce our core operations and equip both Regis and our franchisees to succeed in a fast-changing industry.

The professional hair salon industry remains a resilient and essential segment within the broader beauty and personal care market, driven by recurring consumer demand, evolving trends and increasing focus on self-care and wellness, the industry continues to show steady growth particularly in the value-focused segment where we operate. Industry demand is supported by a mix of core services and add-ons. And importantly, the industry operates on a high-frequency repeat service model that lends itself well to brand loyalty and membership programs. Digital channels such as online booking create efficiency for the customer as well as the stylist. We have seen a strong business correlation in salons that have higher online booking percent. This bodes well given our omnichannel focus.

Turning to an update on our first near-term priority, the holistic transformation of our Supercuts brand. The road map for Supercuts encompasses 3 pillars. The first is to modernize and evolve the brand by strengthening its relevance with today's consumers and better reflect the quality and value we deliver. This refresh is a holistic update that spans the spectrum to create a more contemporary, consistent and engaging brand experience across every customer touch point. In support of this first pillar of refreshing the Supercuts brand, we recently completed a comprehensive brand research study that provides valuable insights into our customer and our brand. These findings are guiding decisions related to enhancing our brand and establishing meaningful differentiation within the market.

The second pillar of our Supercuts transformation is our digital strategy and omnichannel engagement. In the fourth quarter, we advanced several key initiatives designed to strengthen customer connections and drive top line growth. A highlight was the continued success of Supercuts loyalty program. Launched in the second quarter of this fiscal year, the program has already grown to represent 36% of transactions, an increase of 600 basis points since Q3. Supercuts rewards not only fosters customer loyalty, but also delivers valuable personalization insights that enhance the effectiveness of current and future marketing efforts.

The strong momentum we are seeing reinforces its potential to be a powerful driver of long-term growth and customer retention with loyalty members proving to be our most frequent visitors and highest lifetime value customers. And our third pillar of focus for Supercuts, operational excellence we successfully completed a second round of salon assessments, which were conducted by an objective third party. These evaluations focus on salon level cleanliness, maintenance and other key operational areas like service menu adherence, marketing collateral execution and retail product inventory levels. The headline here is salons that consistently meet brand standards for cleanliness and operational excellence perform at a notably higher level on our primary salon KPIs, including sales and customer retention.

Another work stream within this pillar is the development of our new salon concept. We are nearing the pilot launch of this initiative, which features a clean, modern aesthetic and is aimed at improving efficiency while elevating the experience for both customers and stylists.

Turning to our second priority, optimizing and growing sales and profitability in our company-owned salon portfolio. In 2024, we completed the acquisition of more than 300 salons from our largest franchisee. Since January, these salons have been operating as company-owned salons. As we shared previously, this transaction delivers both meaningful financial benefits and important strategic advantages. Since taking ownership of these salons, we have focused on executing a comprehensive operation strategy. This includes a fully redesigned stylist pay model that is structured to improve productivity and reward performance. In the near term, we will also launch several pilots tied to our omnichannel initiatives and the newly designed salon prototype.

I want to emphasize the advantage of our newly acquired company-owned salons provide, both in accelerating innovation and in their potential to drive meaningful EBITDA. Just as importantly, they enhance our position as a franchisor by keeping us closely connected to day-to-day salon operations. Encouragingly, same-store sales improved in Q4. While we still have work ahead, this is a multiyear strategy and our progress in the fourth quarter and the year reinforces our confidence in our strategy and our ability to execute. I want to thank our teams across North America for their hard work and dedication this past year. Their commitment to our customers to one another and to excellence execution has been instrumental in our progress.

As we enter 2026, we do so as a focused and energized organization with a clear long-term strategy and a commitment to delivering sustainable, profitable growth across our portfolio. Our top 2 near-term priorities remain clear: advancing the holistic transformation of the Supercuts brand, while optimizing and growing sales and profitability in our company-owned salon portfolio. We are excited about the future, and we look forward to sharing more updates with you in the months ahead.

I will now turn the call over to Kersten for a more detailed review of our fourth quarter financials. Kersten?

Thanks, Jim. Our fiscal 2025 fourth quarter and full year results include the results of the approximately 300 salons that we acquired from Alline in December of 2024 during our second quarter of fiscal year 2025. As a reminder, our results for the quarter and the year reflect contributions from Alline, but prior year results do not. As Jim discussed, our fourth quarter results reflect the progress we are making towards improving the financial profile of Regis and implementing initiatives to reignite growth.

For the fourth quarter, we delivered a 58.7% increase in operating income, same-store sales growth and our third consecutive quarter of positive cash from operations. We are encouraged by the progress we are making. Let's start with a review of the results for the fourth quarter. Total fourth quarter revenue was $60.4 million, an increase of 22.3% or $11 million compared to the prior year. This increase was primarily driven by increased revenue from company-owned salons resulting from the acquisition of Alline in December of 2024 as well as an increase in same-store sales of 1.3%.

This increase was partially offset by lower royalties due to fewer franchise locations and non-margin franchise rental income. As of June 30, 2025, we had a net decrease of 744 franchise locations compared to June 30, 2024, approximately 300 of these locations relate to the Alline salons that converted from franchise to company-owned.

The 448 net closures during the year primarily involved underperforming stores, each was significantly lower trailing 12-month sales volumes than our top-performing locations. The performance gap between these closed stores and our highest performing units was approximately $350,000, underscoring the strong potential within our system and highlighting the opportunity we have to further enhance profitability margins and cash flow generation as we continue executing our transformation strategy. We continue to expect fiscal year 2025 to be the last year of closures in this order of magnitude.

In terms of profitability, we reported GAAP operating income of $7.3 million, an increase of $2.7 million compared to $4.6 million in the year ago quarter. This increase was primarily driven by operating income contribution from the Alliance lines, which was partially offset by lower royalties. Below the operating line, income from continuing operations was $118.4 million compared to $91.3 million in the year ago quarter. This year-over-year increase in income was due to improved operating income in the current period and to the release of a majority of our U.S. income tax valuation allowance and a partial release of the Canadian income tax valuation allowance, both of which occurred in the fourth quarter of 2025.

These releases reflect improved financial performance and expectation of generating sufficient taxable income to utilize a significant portion of our deferred tax assets going forward. It is also worth noting that income from continuing operations for the fourth quarter of 2024, included a noncash gain on the extinguishment of long-term debt of $94.6 million. As a reminder, in the fourth quarter of fiscal year 2024, we refinanced our credit facility, which reduced our debt by more than $80 million and significantly strengthened our balance sheet. The gain in the fourth quarter of fiscal year 2024 was directly related to this refinancing. While there is considerable noise below the operating income line from noncash items, the real story is the substantial improvement in our operational performance. The increase in operating income reflects solid execution and ongoing momentum in our core business.

Turning to our adjusted results. As a reminder, in the first quarter of fiscal year 2025, we made a change to our methodology to exclude stock-based compensation expense when presenting our adjusted results. All adjusted results in the current year and prior years have been adjusted to reflect this presentation. We believe our adjusted results are more representative view of the business. Reconciliations of our GAAP results to our adjusted non-GAAP results can be found in our press release.

For the fourth quarter, our consolidated Adjusted EBITDA was $9.7 million, an increase of 24.8% compared to $7.8 million in the prior year quarter. The $1.9 million improvement was primarily due to favorable Alline salon EBITDA and lower general and administrative expenses, which were partially offset by lower franchise revenue. Our adjusted G&A was $10.4 million in the fourth quarter of fiscal year 2025, down from $11.3 million in the year ago quarter. Adjusted EBITDA for our franchise segment was $7.7 million in the quarter, a $1.2 million increase compared to $6.5 million in the prior year quarter. This increase was primarily due to lower G&A expenses, which was partially offset by decreases in royalties as a result of a lower salon count.

Importantly, franchise adjusted EBITDA as a percentage of franchise revenue increased from 13.7% in the year-ago quarter to 19.3% in the current period. A positive indication of the progress we are making in enhancing operational efficiency across our franchise network. Adjusted EBITDA for our company-owned salon segment improved by $700,000 year-over-year to $2 million for the quarter, primarily as a result of an increased number of company-owned salons and closure of unprofitable salons. Additionally, company-owned salon revenue for the prior year period included $1.3 million of non-cash revenue resulting from a change in estimate to gift card breakage. Turning to our results for the full year.

Total revenue for fiscal year 2025 was $210 million, an increase of 3.5% or $7.2 million, compared to the prior year. This increase was primarily driven by increased revenue from company-owned salons, resulting from the acquisition of the line in December of 2024. We reported GAAP operating income of $19.9 million, a slight decrease from $20.9 million in fiscal year 2024. As with the results for the fourth quarter, this decrease was primarily driven by lower royalties and fees partially offset by operating income contribution from the Alline salons.

Income from continuing operations was $117 million for fiscal year 2025 compared to $89.1 million in fiscal year 2024, consistent with the fourth quarter comparison, the year-over-year increase was due in large part to the partial release of the company's prior year income tax valuation allowance in the fourth quarter of 2025. Income for the prior year period included a gain on extinguishment of long-term debt of $94.6 million.

Turning to our adjusted results for fiscal 2025. Our consolidated Adjusted EBITDA was $31.6 million, an increase of 14.9% compared to $27.5 million in the prior year. The $4.1 million improvement was primarily due to higher net company-owned salon revenue as a result of the Alline Acquisition and lower G&A expenses, which were partially offset by lower franchise revenue. Our adjusted G&A was $40.2 million in fiscal year 2025, which was in line with our expectations and down from $43.5 million in the prior year. We remain committed to diligent management of our corporate G&A expenses and continue to expect our run rate for G&A to be in the range of $40.5 million to $42.5 million annually.

Turning to cash flows. For the 3 months ended June 30, 2025, we generated $6.8 million in cash from operations, which is an improvement of $1.7 million compared to the fourth quarter of fiscal 2024. This brings our year-to-date total for cash from operations to $13.7 million, an improvement of $15.8 million compared to fiscal year 2024. The increase in cash generation was driven by Alline, operating profitability and an accumulation of cash from our ad fund contributions. In evaluating our reported cash flows, we believe it is important to understand that cash flows are derived from two sources. On restricted cash from -- generated from operations, which is available for general corporate use and restricted cash related to our ad fund, which is sourced from contributions made by our salons, both franchise and company-owned. Ad fund cash is designated specifically for marketing purposes and not available for corporate use.

In fiscal year 2025, our total reported cash from operations of $13.7 million is comprised of $8.4 million in cash generated for the ad funds, which is restricted and $5.3 million in cash generated from our core operations, which is unrestricted. Notably, the $2.5 million of the restricted ad fund cash was generated in the fourth quarter. Included in the $5.3 million of unrestricted cash from core operations, there were several nonrecurring items that were a drag on cash flow, namely severance-related cash costs and onetime deal-related expenses for the Alline Acquisition, of $3.2 million in aggregate. We do not expect these items to reoccur in fiscal year 2026.

Importantly, the business continues to generate positive cash flows from operations, providing a strong foundation for growth and financial flexibility. As we look ahead to fiscal year 2026, our operating plan anticipates a meaningful increase in the generation of unrestricted cash from our core operations compared to fiscal year 2025. We expect this improvement will be driven by continued operational strength, a full year of Alline results in the absence of nonrecurring expenses in fiscal year 2025 that I just discussed.

We also expect improvements in working capital usage to contribute to stronger generation of unrestricted cash from our core operations. Ad fund cash, which is, again, is designated specifically for marketing purposes and not available for corporate use was building over fiscal year 2025 as we slowed spending to focus on executing our business transformation strategy. Our marketing plans for fiscal year 2026 assume we will spend the ad fund cash that accumulated during 2025 as we implement initiatives aimed at returning growth.

So while we expect unrestricted cash generated from operations to be higher in fiscal year 2026, that it was in 2025, total reported cash from operations for fiscal year 2026 may be lower when compared to the prior year due to our plans to strategically deploy cash accumulated in the ad fund. As we consider the allocation of capital, our priorities include reinvesting in the business to drive growth, maintaining a disciplined approach to managing debt and consideration of potential strategic transactions.

In terms of liquidity, as of June 30, 2025, we had a $25.9 million of available liquidity, including capacity under our revolving credit agreement and $17 million in unrestricted cash and cash equivalents. As of the end of the fiscal year, we had $125.3 million in outstanding debt excluding deferred financing costs and the value of warrants plus accrued paid-in-kind interest. As a reminder, in accordance with GAAP, our balance sheet includes approximately $216.6 million of operating lease liabilities related to our franchisees' salon leases.

These leases have a weighted average remaining term of less than 5 years, and the obligations are serviced by our franchisees. So long as the franchisees continue to meet their lease payments as they historically have, it is our view that these amounts should not be considered part of our debt position. We expect these liabilities will continue to decrease as the leases mature and as we continue to move away from franchise leases. In summary, our fourth quarter and our full year 2025 results reflect a profitable cash-generating business with clear momentum and a meaningful opportunity ahead. This concludes our prepared remarks, and we will now take questions.

Good morning. Our first question is from Bill Charters from Sable Capital. Bill, please unmute your line.

Can you hear me?

Yes, we can.

Great quarter. That was great all around. I just had a few questions. I guess, can you talk more about the Forum3 initiatives in context of what they have done and what plans you have in the future to improve operating results? I mean, I know it's been a lot of SEO, but I would love to give more context on what does it look like going forward?

Yes, Bill, this is Jim. And just thank you again for joining the call today. It's good to have you. I'll take that one. Forum3, obviously has been, as you heard in my remarks, and I think you know pretty significant background in this arena that they're focused on in terms of the transformation of the Supercuts brand. There's several things that they've been highly engaged with. One is just the modernization and evolution of the brand. As you heard in my remarks -- we have just completed a comprehensive qualitative study on the Supercuts brand. We've learned a ton, and we're actually just now kind of getting through all of those results.

And Forum3 is helping us distill those findings and obviously bring those things to life in terms of who is shopping Supercuts, what generation? What are they looking for? This is a particular area of expertise for Forum3 and certainly much more to come there. Omnichannel growth is the other piece that I spoke to in the remarks. The whole loyalty rewards area, another area of, I would say, even more particular expertise for Forum3. They are -- we're seeing good growth here, for sure, as I noted, and we're continuing to focus on that. And this is where Adam is particularly capable in helping us drive the continued growth there -- and then the whole concept and notion of online booking. There is a strong correlation to business performance here. We see it very, very clearly. We want to ensure that customers can easily get into our salons for a service, whether it's a quick haircut or a more lengthy service or color, whatever it might be.

And Adam and his team are doing some really, really good work to help us in that arena. And then kind of to round it all out, the whole kind of notion of operations excellence, the strong correlation, as I said in my remarks, to salons who adhere to the brand standards. It's interesting. We share these results, obviously, with our franchisees. And I think the even better news is that there is a strong desire to make improvements when assessment results reflect the need for improvement. We're really seeing our franchisees grasp and embrace that, and we're actually seeing improvements there.

So that's a good guy for sure. Sharing best practices from the company-owned salons. The company-owned salons are going to be an area where we can bring pilots to life and learn very, very quickly. And then from that, we can share best practices and dare I say, gold standards of operating the business with the rest of our system. And then, last but not least, we're continuing to work on the new salon prototype -- that is coming along nicely right now. And Adam and his team, again, here, continue to lean in with their background and help us in those arenas. So just some pretty incredible things that I think they're bringing to the table.

Absolutely. And regarding the prototype, how would that be financed and implemented? I mean is that the cost of the franchisees -- does that ad fund marketing spend? Do you take some of that to promote these new things? I guess what I'm really trying to get at is what cost is that to the corporation?

Yes, it's a good question. And I'll be honest. We're looking at all appropriate paths to support all of those things. We haven't landed on anything specific. That was work that we're currently engaged with. And I think it could be multiple areas and paths that we could take. But for now, I can say that we're reviewing it very closely to determine what is the best mix, if you will, of an approach to take to bring those salons to light. What I will say is that right out of the chute, we have numerous franchisees that are poised and ready to remodel salons, just holding for the new prototype to come to light. And that's slated to happen in early 2026.

And then the Alline results seem great. Do you think there's more upside to those? And when do you think they would -- Alline would reach its optimal potential?

Yes. Good question. Here's what I'll say is we're optimistic about the company-owned salon portfolio. It's also important to note that we're in the very early stages of what I characterize as operational improvements. As I referenced in my remarks, the new stylist pay model, which is a really, really critical point for salons, that has all been launched. And we're also very near launching several other pilots that are in support of the things I spoke to in your first question regarding Forum3 and the work we're doing there from an omnichannel standpoint. So I think that we're -- it's early, we're optimistic. I like where we're going, I like the leadership that we have in place there, very, very strong tenured senior leader that's driving that area. Myself having many years of running salons and the experience there, we're staying very engaged with that, and I feel good about where we're going.

And then Kersten did talk about uses of cash. And I just wanted to delve in that a little bit more. So I guess the first is to support the business because there are these new initiatives and investing in the business has a certain return on investment. And then there's other initiatives like paying down debt, or I think she alluded to maybe other acquisitions. And I just wanted to know a little more about those -- would those be buying franchise ease back from your current base? Or would those be adjacent new concepts, I just would like to understand the uses of cash, the best you can elaborate on that?

Yes, Jim, I can jump in and take that. Yes, I mean, we currently have $17 million of cash on the balance sheet. One of our priorities is -- continues to be a disciplined approach to managing our debt -- we do have scheduled debt payments and a cash flow sweep coming up. So that will obviously be a portion of the use of that cash. But as I mentioned in my script, we do expect that we will generate cash in this year and really focused on reinvesting back into the business to drive growth and support all the initiatives that Jim spoke about. I'll say as it relates to potential strategic transactions, new concepts, acquisitions. We continue to keep that door open. We don't have anything specific that we're moving forward with at this time, but it's something that we always have in the back of our heads as we look at the best allocation of our capital.

And then I know you have a long runway on the present debt. I think it matures in 2029, June of 2029, and the make-whole ends in, I think this -- a year from now, June of '26. What are your plans on refinancing that debt? Because I think right now it's -- is it SOFR plus 9%. And I mean, with the improvement in cash flow, you're looking closer to 3x on a perspective or forward-looking basis. What are your plans on refinancing?

Yes. No, you have all of that right. Our debt matures in June of 2029. We have a make whole that goes through 2026, and we're paying SOFR plus 9% right now. So we're having early discussions. TCW has been a great lender for us and a great business partner. Our goal would ultimately be to refinance this dept at some point and reduce our interest rate. This year, we're going to continue to focus on strengthening our financial position. So we're in a good spot to be able to have those conversations when the make-whole runs out. So we'll be focusing on everything that Jim talked about, driving comps, improving EBITDA and building that case for better terms when we get to a point where we can refinance.

Well, I mean, looking at the company now a year after the refinancing last year. I mean you guys have all done a great job. I mean, operationally, I think the business turned around a lot faster than I thought it would. I mean, it's great to be talking about what are you going to use the cash flow like you actually have opportunities.

Thanks, Bill. This concludes our fiscal year 2025 earnings call. Thank you for your continued support and interest in Regis. We look forward to updating you on progress next quarter. Please feel free to reach out to investor relations @regiscorp.com to discuss any questions related to the business or quarterly results. Have a nice day. Thank you.