Regis corporation reports fourth quarter and full year 2022 results
Minneapolis--(business wire)--regis corporation (nyse: rgs), a leader in the haircare industry, today reported results for the fourth quarter and full year ended june 30, 2022. highlights from the year include: fourth quarter and full year revenue of $66.1 million and $276.0 million, including royalty growth of 12.1% and 25.6%, respectively. system-wide same-store sales increase of 7.1% in the quarter and 14.8% in fiscal year 2022. positive fourth quarter adjusted ebitda, excluding salon sales, of $1.1 million, a $15.6 million improvement compared to a loss of $14.5 million during the fourth quarter 2021; franchise ebitda of $2.5 million, positive for the 3rd quarter in a row. positive fiscal year adjusted ebitda, excluding salon sales, of $0.5 million compared to a $60.2 million loss in fiscal year 2021. efforts to renegotiate debt culminated in the successful amendment to our credit agreement and extension of the maturity date from march 2023 to august 2025. sold proprietary salon management system, opensalon® pro, for up to $39.0 million in proceeds and partnered with salon technology leader, zenoti, to provide a best-in-class technology solution to franchisees. reduced loss-generating company-owned locations from 276 to 105, resulting in a $38.0 million year-over-year ebitda improvement. well-positioned with strategy in place to deliver strong ebitda growth in fiscal year 2023. earnings webcast scheduled for 9am cst on august 23, 2022 and will be accompanied by a slide presentation. "when i stepped in as interim ceo in december 2021, we identified refinancing our debt, providing the right technology solution to our franchisees, and continuing the wind down of our company-owned salons as our top priorities. i am pleased that in a short period of time, we successfully delivered on all three by renegotiating our credit agreement with our lender group, selling opensalon pro to our new point-of-sale technology partner, zenoti, and winding down our company-owned salons from 276 to 105 locations," said matt doctor, regis chief executive officer. "in addition to these transformative efforts, our performance is continuing to improve with positive adjusted ebitda, excluding salon sales, in q4 and fiscal year 2022. with our fully-franchised business model and strategies in place that focus on stylist retention and recruiting, enhanced digital marketing, and a more robust salon management system, we are poised to deliver stronger results in fiscal 2023." three months ended june 30, twelve months ended june 30, (dollars in thousands) 2022 2021 2022 2021 consolidated revenue $ 66,069 $ 97,614 $ 275,967 $ 411,651 system-wide revenue (1) 316,838 293,981 1,228,464 1,086,024 system-wide same-store sales comps 7.1 % 4.2 % 14.8 % (25.8 ) % two-year system-wide same-store sales comps 7.4 % (21.0 ) % (13.7 ) % (28.3 ) % operating loss $ (1,315 ) $ (22,844 ) $ (28,898 ) $ (94,677 ) loss from continuing operations (8,560 ) (29,755 ) (46,459 ) (103,206 ) diluted loss per share from continuing operations (0.19 ) (0.83 ) (1.07 ) (2.87 ) loss from discontinued operations (34,073 ) (4,584 ) (39,398 ) (10,125 ) net loss (42,633 ) (34,339 ) (85,857 ) (113,331 ) diluted net loss per share (0.93 ) (0.95 ) (1.97 ) (3.15 ) ebitda (2) (34,384 ) (27,140 ) (64,160 ) (70,824 ) as a percent of revenue (52.0 ) % (27.8 ) % (23.2 ) % (17.2 ) % as adjusted (2) loss from continuing operations, as adjusted $ (3,032 ) $ (25,483 ) $ (18,054 ) $ (101,685 ) diluted loss per share from continuing operations, as adjusted (0.07 ) (0.71 ) (0.41 ) (2.83 ) net loss, as adjusted (3,032 ) (25,483 ) (18,054 ) (101,685 ) diluted net loss per share, as adjusted (0.07 ) (0.71 ) (0.41 ) (2.83 ) ebitda, as adjusted 959 (22,728 ) (1,799 ) (76,914 ) as a percent of revenue 1.5 % (23.3 ) % (0.7 ) % (18.7 ) % ebitda, as adjusted excluding loss on sale of salons 1,104 (14,495 ) 535 (60,218 ) as a percent of revenue 1.7 % (14.8 ) % 0.2 % (14.6 ) % _______________________________________________________________________________ (1) represents total sales within the system. (2) see gaap to non-gaap reconciliations, within the attached section titled "non-gaap reconciliations." total revenue in the quarter of $66.1 million decreased $31.5 million, or 32.3% and full year revenue declined $135.7 million year-over-year. both of these declines were driven primarily by exiting company-owned salons that generated significant revenue, but were loss generating. partially offsetting the decline in revenue was an increase in royalty revenue due to higher franchise system sales. fourth quarter adjusted ebitda of $1.0 million improved $23.7 million, versus an adjusted ebitda loss of $22.7 million in the same period last year. on a full year basis, adjusted ebitda loss of $1.8 million improved $75.1 million from fiscal 2021. the improvements were driven by an increase in royalty revenues; lower general and administrative expense; and the wind down of loss-generating company-owned salons during the last twelve months. regis reported a fourth quarter 2022 net loss from continuing operations of $8.6 million, or $0.19 loss per diluted share, compared to a net loss from continuing operations of $29.8 million, or $0.83 loss per diluted share, in the fourth quarter of 2021. excluding discrete items, the company reported fourth quarter 2022 adjusted net loss from continuing operations of $3.0 million, or $0.07 loss per diluted share, compared to adjusted net loss from continuing operations of $25.5 million, or $0.71 per diluted share for the same period last year. on a full year basis, the company reported an adjusted net loss from continuing operations of $18.1 million or $0.41 loss per diluted share compared to an adjusted net loss from continuing operations of $101.7 million or $2.83 loss per share for the same period last year. the year-over-year improvement in adjusted net loss from continuing operations was driven primarily by improved sales leading to an increase in royalty revenues; lower general and administrative expense; and the company winding down loss-generating company-owned salons during the last twelve months. the company reported a fourth quarter 2022 net loss of $42.6 million, or $0.93 loss per diluted share, compared to a net loss of $34.3 million, or $0.95 per diluted share for the same period last year. on a full year basis, the company reported a net loss of $85.9 million, or $1.97 loss per diluted share, compared to a net loss of $113.3 million, or $3.15 loss per share, in fiscal 2021. the net loss in the quarter and in the year was driven by the loss from discontinued operations of $34.1 and $39.4 million in the quarter and full year, respectively, which includes a $38.4 million non-cash goodwill derecognition charge. additionally, the twelve months results include a non-cash goodwill impairment charge of $13.1 million. the net loss improved year-over-year in both periods due to higher royalty revenues and lower general and administrative expense. fourth quarter segment results franchise three months ended june 30, increase (decrease) twelve months ended june 30, increase (decrease) (dollars in millions) (1) 2022 2021 2022 2021 royalties $ 17.2 $ 15.4 $ 1.8 $ 65.8 $ 52.4 $ 13.4 fees 3.0 2.6 0.4 11.6 10.2 1.4 product sales to franchisees 3.3 15.6 (12.3 ) 15.1 56.7 (41.6 ) advertising fund contributions 8.4 7.2 1.2 32.6 22.0 10.6 franchise rental income 30.6 31.5 (0.9 ) 130.8 127.4 3.4 total franchise revenue $ 62.5 $ 72.3 $ (9.8 ) $ 255.8 $ 268.7 $ (12.9 ) franchise same-store sales comps 7.2 % 4.4 % 15.0 % (24.5 ) % franchise two-year same-store sales comps 7.5 % (20.2 ) % (13.4 ) % (27.2 ) % ebitda, as adjusted $ 2.5 $ (9.4 ) $ 11.9 $ 7.7 $ (29.4 ) $ 37.1 as a percent of revenue 4.1 % (13.0 ) % 3.0 % (10.9 ) % as a percent of adjusted revenue (2) 10.8 % (28.1 ) % 8.4 % (24.7 ) % total franchise salons 5,395 5,563 (168 ) as a percent of total franchise and company-owned salons 98.1 % 95.3 % _______________________________________________________________________________ (1) variances calculated on amounts shown in millions may result in rounding differences. (2) adjusted revenue excludes non-margin revenue. see non-gaap reconciliation fourth quarter franchise revenue was $62.5 million, a $9.8 million, or 13.6% decrease, compared to the prior year quarter. royalties were $17.2 million, a $1.8 million, or 11.7% increase, versus the same period last year. the increase in royalties is due to higher franchise system sales. product sales to franchisees of $3.3 million decreased $12.3 million as a result of the transition out of the wholesale product business. franchise adjusted ebitda of $2.5 million improved $11.9 million year-over-year primarily due to an increase in royalty revenues and a decrease in general and administrative expense. full year results followed the same trends. company-owned salons three months ended june 30, (decrease) increase twelve months ended june 30, (decrease) increase (dollars in millions) (1) 2022 2021 2022 2021 total company-owned salon revenue $ 3.6 $ 25.3 $ (21.7 ) $ 20.2 $ 143.0 $ (122.8 ) company-owned same-store sales comps (0.8 ) % (7.0 ) % 3.4 % (33.4 ) % company-owned two-year same-store sales comps (27.1 ) % (30.4 ) % (32.1 ) % (35.2 ) % ebitda, as adjusted $ (1.6 ) $ (13.3 ) $ 11.7 $ (9.5 ) $ (47.5 ) $ 38.0 as a percent of revenue (44.4 ) % (52.6 ) % (47.0 ) % (33.2 ) % total company-owned salons 105 276 (171 ) as a percent of total franchise and company-owned salons 1.9 % 4.7 % _______________________________________________________________________________ (1) variances calculated on amounts shown in millions may result in rounding differences. fourth quarter revenue for the company-owned salon segment decreased $21.7 million versus the prior year to $3.6 million and full year revenue declined $122.8 million. the year-over-year decline in revenue was expected and driven by 110 salons converted to the company's franchise portfolio and the closure of 61 unprofitable salons over the past 12 months. fourth quarter adjusted ebitda loss improved $11.7 million, or 88.0%, and full year adjusted ebitda loss improved $38.0 million, or 79.9%, versus the same period last year, driven primarily by current year closure of unprofitable salons and an inventory reserve charge in the prior year. non-gaap reconciliations for gaap to non-gaap reconciliations, please refer to the attached section titled "non-gaap reconciliations." a complete reconciliation of reported earnings to adjusted earnings is included in this press release and is available on the company’s website at www.regiscorp.com. earnings webcast regis corporation will host a conference call via webcast to discuss fourth quarter and full year results on august 23, 2022 at 9 a.m., central time. interested parties are invited to participate in the live webcast by registering for the event at www.regiscorp.com/investor-relations.html. the webcast will include a slide presentation. a replay of the presentation will be available on our website at www.regiscorp.com/investor-relations. about regis corporation regis corporation (nyse:rgs) is a leader in the beauty salon industry. as of june 30, 2022, the company franchised, owned or held ownership interests in 5,576 worldwide locations. regis’ franchised and corporate locations operate under concepts such as supercuts®, smartstyle®, cost cutters®, roosters® and first choice haircutters®. regis maintains an ownership interest in empire education group in the u.s. for additional information about the company, including a reconciliation of certain non-gaap financial information and certain supplemental financial information, please visit the investor information section of the corporate website at www.regiscorp.com. this press release contains or may contain “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. these forward-looking statements are made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995. the forward-looking statements in this document reflect management’s best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. such forward-looking statements are often identified herein by use of words including, but not limited to, “may,” “believe,” “project,” “forecast,” “expect,” “estimate,” “anticipate,” and “plan.” in addition, the following factors could affect the company's actual results and cause such results to differ materially from those expressed in forward-looking statements. these uncertainties include a potential material adverse impact on our business and results of operations as a result of the covid-19 pandemic, including any adverse impact from variants; consumer shopping trends and changes in manufacturer distribution channels; changes in regulatory and statutory laws including increases in minimum wages; laws and regulations could require us to modify current business practices and incur increased costs; changes in economic conditions; changes in consumer tastes, fashion trends and consumer spending patterns; compliance with new york stock exchange listing requirements; reliance on franchise royalties and overall success of our franchisees’ salons; the return of sales at franchise locations to pre-pandemic levels; new merchandising strategy that utilizes third-party preferred supplier arrangements; our franchisees' ability to attract, train and retain talented stylists and salon leaders; the success of our franchisees, which operate independently; our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, franchisees, employees, vendors or company information; the ability of the company to maintain a satisfactory relationship with walmart; marketing efforts to drive traffic to our franchisees' salons; the successful migration of our franchisees to the zenoti salon technology platform; our ability to maintain and enhance the value of our brands; reliance on information technology systems; reliance on external vendors; the use of social media; failure to standardize operating processes across brands; exposure to uninsured or unidentified risks; the effectiveness of our enterprise risk management program; compliance with covenants in our financing arrangement, access to the existing revolving credit facility, and we may face an accelerated obligation to repay our indebtedness; our capital investments in technology may not achieve appropriate returns; premature termination of agreements with our franchisees; financial performance of empire education group, inc.; the continued ability of the company to implement cost reduction initiatives and achieve expected cost savings; continued ability to compete in our business markets; reliance on our management team and other key personnel; the continued ability to maintain an effective system of internal controls over financial reporting; changes in tax exposure; the ability to use u.s. net operating loss carryforwards; potential litigation and other legal or regulatory proceedings could have an adverse effect on our business; or other factors not listed above. additional information concerning potential factors that could affect future financial results is set forth under item 1a of form 10-k. we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. however, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the sec on forms 10-k, 10-q and 8-k and proxy statements on schedule 14a. regis corporation condensed consolidated balance sheet (dollars in thousands, except per share data) june 30, 2022 2021 assets current assets: cash and cash equivalents $ 17,041 $ 19,191 receivables, net 14,531 26,270 inventories 3,109 20,639 other current assets 13,984 17,017 current assets related to discontinued operations — 3,542 total current assets 48,665 86,659 property and equipment, net 12,835 16,906 goodwill 174,360 188,257 other intangibles, net 3,226 3,761 right of use asset 493,749 610,599 other assets 36,465 41,388 non-current assets related to discontinued operations — 48,813 total assets $ 769,300 $ 996,383 liabilities and shareholders' (deficit) equity current liabilities: accounts payable $ 15,860 $ 27,157 accrued expenses 33,784 51,242 short-term lease liability 103,196 116,348 current liabilities related to discontinued operations — 3,738 total current liabilities 152,840 198,485 long-term debt, net 179,994 186,911 long-term lease liability 408,445 517,626 other non-current liabilities 58,974 75,075 non-current liabilities related to discontinued operations — 1,240 total liabilities 800,253 979,337 commitments and contingencies shareholders' (deficit) equity: common stock, $0.05 par value; issued and outstanding, 45,510,245 and 35,795,844 common shares at june 30, 2022 and 2021, respectively 2,276 1,790 additional paid-in capital 62,562 25,102 accumulated other comprehensive income 9,455 9,543 accumulated deficit (105,246 ) (19,389 ) total shareholders' (deficit) equity (30,953 ) 17,046 total liabilities and shareholders' (deficit) equity $ 769,300 $ 996,383 regis corporation condensed consolidated statement of operations (dollars and shares in thousands, except per share data) three months ended june 30, twelve months ended june 30, 2022 2021 2022 2021 revenues: royalties $ 17,227 $ 15,369 $ 65,753 $ 52,357 fees 2,954 2,561 11,587 10,215 product sales to franchisees 3,343 15,642 15,072 56,699 advertising fund contributions 8,360 7,218 32,573 22,023 franchise rental income 30,577 31,507 130,777 127,392 company-owned salon revenue 3,608 25,317 20,205 142,965 total revenue 66,069 97,614 275,967 411,651 operating expenses: cost of product sales to franchisees 4,172 12,201 17,391 43,756 inventory reserve (1) 1,235 — 7,655 — general and administrative 14,566 23,597 65,274 96,427 rent 3,368 6,758 9,357 40,754 advertising fund expense 8,360 7,218 32,573 22,023 franchise rent expense 30,577 31,507 130,777 127,392 company-owned salon expense (2) 3,648 30,942 21,952 141,204 depreciation and amortization 1,458 5,030 6,224 21,749 long-lived asset impairment — 3,205 542 13,023 goodwill impairment — — 13,120 — total operating expenses 67,384 120,458 304,865 506,328 operating loss (1,315 ) (22,844 ) (28,898 ) (94,677 ) other (expense) income: interest expense (3,292 ) (3,024 ) (12,914 ) (13,163 ) loss from sale of salon assets to franchisees (145 ) (8,233 ) (2,334 ) (16,696 ) interest income and other, net (309 ) 286 (296 ) 15,902 loss from operations before income taxes (5,061 ) (33,815 ) (44,442 ) (108,634 ) income tax (expense) benefit (3,499 ) 4,060 (2,017 ) 5,428 loss from continuing operations (8,560 ) (29,755 ) (46,459 ) (103,206 ) loss from discontinued operations, net of income taxes (34,073 ) (4,584 ) (39,398 ) (10,125 ) net loss $ (42,633 ) $ (34,339 ) $ (85,857 ) $ (113,331 ) net loss per share: basic and diluted: loss from continuing operations $ (0.19 ) $ (0.83 ) $ (1.07 ) $ (2.87 ) income from discontinued operations (0.74 ) (0.13 ) (0.90 ) (0.28 ) net loss per share, basic and diluted (3) $ (0.93 ) $ (0.95 ) $ (1.97 ) $ (3.15 ) weighted average common and common equivalent shares outstanding: basic and diluted 45,969 36,038 43,582 35,956 _______________________________________________________________________________ (1) includes charges in the third and fourth quarter associated with liquidation of distribution center inventory. excludes reserves for inventory at salons. (2) includes cost of service and product sold to guests in our company-owned salons. excludes general and administrative expense, rent and depreciation and amortization related to company-owned salons. (3) total is a recalculation; line items calculated individually may not sum to total due to rounding. regis corporation consolidated statement of cash flows (dollars in thousands) twelve months ended june 30, 2022 2021 cash flows from operating activities: net loss $ (85,857 ) $ (113,331 ) adjustments to reconcile net loss to net cash used in operating activities loss from sale of osp 36,143 — depreciation and amortization 6,504 17,871 long-lived asset impairment 542 13,023 deferred income taxes 391 (3,388 ) inventory reserve 10,478 12,068 gain from disposal of distribution center assets — (14,997 ) loss from sale of salon assets to franchisees, net 2,334 16,696 goodwill impairment 16,000 — stock-based compensation 1,334 3,254 amortization of debt discount and financing costs 1,839 1,839 other non-cash items affecting earnings 709 (351 ) changes in operating assets and liabilities (1): receivables 11,896 (279 ) inventories 7,886 17,879 income tax receivable 1,118 1,295 other current assets 2,118 1,658 other assets 2,703 (2,896 ) accounts payable (10,966 ) (21,669 ) accrued expenses (21,983 ) 5,296 net lease liabilities (5,960 ) (19,248 ) other non-current liabilities (15,867 ) (14,603 ) net cash used in operating activities: (38,638 ) (99,883 ) cash flows from investing activities: capital expenditures (5,316 ) (11,475 ) proceeds from sale of osp 13,000 — proceeds from sale of assets to franchisees — 8,437 costs associated with sale of assets to franchisees — (261 ) proceeds from company-owned life insurance policies — 1,200 net cash provided by (used in) investing activities: 7,684 (2,099 ) cash flows from financing activities: borrowings on revolving credit facility 10,000 10,000 repayments of revolving credit facility (16,916 ) (589 ) proceeds from issuance of common stock, net of offering costs 37,185 — taxes paid for shares withheld (845 ) (348 ) minority interest buyout — (562 ) distribution center lease payments — (724 ) net cash provided by financing activities: 29,424 7,777 effect of exchange rate changes on cash and cash equivalents (158 ) 477 decrease in cash, cash equivalents and restricted cash (1,688 ) (93,728 ) cash, cash equivalents and restricted cash: beginning of year 29,152 122,880 end of year $ 27,464 $ 29,152 _______________________________________________________________________________ (1) changes in operating assets and liabilities exclude assets and liabilities sold or acquired. system-wide same-store sales (1): three months ended june 30, 2022 june 30, 2021 service retail total service retail total smartstyle 1.5 % (17.9 ) % (2.7 ) % 2.4 % (14.0 ) % (1.7 ) % supercuts 14.4 (11.8 ) 13.0 12.4 (10.1 ) 10.9 portfolio brands 6.5 (5.5 ) 5.3 (0.5 ) (14.7 ) (2.2 ) total 9.6 % (13.4 ) % 7.1 % 6.8 % (13.2 ) % 4.2 % twelve months ended june 30, 2022 june 30, 2021 service retail total service retail total smartstyle 10.7 % (10.5 ) % 5.7 % (26.1 ) % (28.5 ) % (26.7 ) % supercuts 23.8 (5.6 ) 22.1 (25.9 ) (23.5 ) (25.8 ) portfolio brands 13.0 (3.4 ) 11.2 (25.3 ) (20.6 ) (24.8 ) total 17.8 % (7.5 ) % 14.8 % (25.8 ) % (25.5 ) % (25.8 ) % _______________________________________________________________________________ (1) system-wide same-store sales in fiscal years 2022 and 2021 are calculated as the total change in sales for system-wide franchise and company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period. quarterly and year-to-date system-wide same-store sales are the sum of the system-wide same-store sales computed on a daily basis. franchise salons that do not report daily sales are excluded from same-store sales. system-wide same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. regis corporation system-wide location counts june 30, 2022 2021 franchise salons: supercuts 2,264 2,386 smartstyle/cost cutters in walmart stores 1,646 1,666 portfolio brands 1,344 1,357 total north american salons 5,254 5,409 total international salons (1) 141 154 total franchise salons 5,395 5,563 as a percent of total franchise and company-owned salons 98.1 % 95.3 % company-owned salons: supercuts 18 35 smartstyle/cost cutters in walmart stores 49 91 portfolio brands 38 150 total company-owned salons 105 276 as a percent of total franchise and company-owned salons 1.9 % 4.7 % ownership interest locations: equity ownership interest locations 76 78 grand total, system-wide 5,576 5,917 _______________________________________________________________________________ (1) canadian and puerto rican salons are included in the north american salon totals. non-gaap reconciliations: we believe our presentation of non-gaap operating income (loss), net loss, net loss per diluted share, and other non-gaap financial measures provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. presentation of the non-gaap measures allows investors to review our core ongoing operating performance from the same perspective as management and the board of directors. these non-gaap financial measures provide investors an enhanced understanding of our operations, facilitate investors' analyses and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. we also believe the non-gaap measures are useful to investors because they provide supplemental information that research analysts frequently use to analyze financial performance. the method we use to produce non-gaap results is not in accordance with u.s. gaap and may differ from methods used by other companies. these non-gaap results should not be regarded as a substitute for corresponding u.s. gaap measures, but instead should be utilized as a supplemental measure of operating performance in evaluating our business. non-gaap measures do have limitations as they do not reflect certain items that may have a material impact upon our reported financial results. as such, these non-gaap measures should be viewed in conjunction with our financial statements prepared in accordance with u.s. gaap. non-gaap reconciling items for the three and twelve months ended june 30, 2022 and 2021: the following information is provided to give qualitative and quantitative information related to items impacting comparability. items impacting comparability are not defined terms within u.s. gaap. therefore, our non-gaap financial information may not be comparable to similarly titled measures reported by other companies. we determine the items to consider as "items impacting comparability" based on how management views our business, makes financial, operating and planning decisions and evaluates the company’s ongoing performance. the following items have been excluded from our non-gaap results: inventory reserve ceo transition distribution center wind down fees ("distribution center fees") professional fees and settlements severance benefit from lease liability decrease in excess of previously impaired roua ("lease liability benefit") lease termination fees real estate fees asset retirement obligation long-lived asset impairment goodwill impairment gain on distribution centers non-recurring, non-operating income deferred tax asset discontinued operations regis corporation reconciliation of selected u.s. gaap to non-gaap financial measures (dollars in thousands, except per share data) reconciliation of u.s. gaap operating loss and u.s. gaap net loss to equivalent non-gaap measures three months ended june 30, twelve months ended june 30, u.s. gaap financial line item 2022 2021 2022 2021 u.s. gaap revenue $ 66,069 $ 97,614 $ 275,967 $ 411,651 u.s. gaap operating loss $ (1,315 ) $ (22,844 ) $ (28,898 ) $ (94,677 ) non-gaap operating expense adjustments (1) inventory reserve inventory reserve 1,235 — 7,655 — ceo transition general and administrative — — (466 ) (694 ) distribution center fees general and administrative — — 285 — professional fees and settlements general and administrative 280 — 2,140 826 severance general and administrative 59 1,606 2,074 4,545 lease liability benefit rent (336 ) (8,727 ) (3,620 ) (20,022 ) lease termination fees rent 32 7,020 1,835 13,544 real estate fees rent — 49 40 583 asset retirement obligation depreciation and amortization 139 1,280 1,041 4,726 long-lived asset impairment long-lived asset impairment — 3,205 542 13,023 goodwill impairment goodwill impairment — — 13,120 — total non-gaap operating expense adjustments 1,409 4,433 24,646 16,531 non-gaap operating income (loss) (1) $ 94 $ (18,411 ) $ (4,252 ) $ (78,146 ) u.s. gaap net loss $ (42,633 ) $ (34,339 ) $ (85,857 ) $ (113,331 ) non-gaap net loss adjustments: non-gaap operating expense adjustments 1,409 4,433 24,646 16,531 gain on distribution centers interest income and other, net — (120 ) — (14,997 ) non-recurring, non-operating income interest income and other, net — — (100 ) — income tax impact on non-gaap adjustments (2) income taxes 4,119 (41 ) 3,859 (13 ) discontinued operations, net of tax loss from discontinued operations, net of tax 34,073 4,584 39,398 10,125 total non-gaap net loss adjustments 39,601 8,856 67,803 11,646 non-gaap net loss $ (3,032 ) $ (25,483 ) $ (18,054 ) $ (101,685 ) _______________________________________________________________________________ (1) adjusted operating margins for the three months ended june 30, 2022 and 2021, were 0.1% and (18.9)%, respectively, and were (1.5)% and (19.0)% for the twelve months ended june 30, 2022 and 2021, respectively, and are calculated as non-gaap operating income (loss) divided by non-gaap revenue for each respective period. (2) based on projected statutory effective tax rate analyses, the non-gaap tax benefit (provision) was calculated to be approximately 0% and 1% for the three months ended june 30, 2022 and 2021, respectively and approximately 1% for the twelve months ended june 30, 2022 and 2021, for all non-gaap operating expense adjustments. regis corporation reconciliation of selected u.s. gaap to non-gaap financial measures (dollars in thousands, except per share data) reconciliation of u.s. gaap net loss per diluted share to non-gaap net loss per diluted share three months ended june 30, twelve months ended june 30, 2022 2021 2022 2021 u.s. gaap net loss per diluted share $ (0.927 ) $ (0.953 ) $ (1.970 ) $ (3.152 ) inventory reserve (1) 0.027 — 0.174 — ceo transition (1) — — (0.011 ) (0.019 ) distribution center fees (1) — — 0.006 — professional fees and settlements (1) 0.006 — 0.049 0.022 severance (1) 0.001 0.044 0.047 0.125 lease liability benefit (1) (0.007 ) (0.240 ) (0.082 ) (0.550 ) lease termination fees (1) 0.001 0.193 0.042 0.373 real estate fees (1) — 0.001 0.001 0.016 asset retirement obligation (1) 0.003 0.035 0.024 0.130 long-lived asset impairment (1) — 0.088 0.012 0.359 goodwill impairment (1) — — 0.297 — gain on distribution centers (1) — (0.003 ) — (0.413 ) non-recurring, non-operating income (1) — — (0.002 ) — discontinued operations, net of tax 0.740 0.127 0.904 0.282 deferred tax asset 0.090 — 0.095 — non-gaap net loss per diluted share (2) $ (0.066 ) $ (0.707 ) $ (0.414 ) $ (2.828 ) u.s. gaap weighted average shares - basic and diluted 45,969 36,038 43,582 35,956 non-gaap weighted average shares - diluted 45,969 36,038 43,582 35,956 _______________________________________________________________________________ (1) based on projected statutory effective tax rate analyses, the non-gaap tax benefit (provision) was calculated to be approximately 0% and 1% for the three months ended june 30, 2022 and 2021, respectively, and approximately 1% for the twelve months ended june 30, 2022 and 2021, for all non-gaap operating expense adjustments. (2) total is a recalculation; line items calculated individually may not sum to total due to rounding. regis corporation reconciliation of reported u.s. gaap net loss to adjusted ebitda, a non-gaap financial measure (dollars in thousands) (unaudited) adjusted ebitda ebitda represents u.s. gaap net loss for the respective period excluding interest expense, income taxes and depreciation and amortization expense. the company defines adjusted ebitda, as ebitda excluding identified items impacting comparability for each respective period. for the three and twelve months ended june 30, 2022 and 2021, the items impacting comparability consisted of the items identified in the non-gaap reconciling items for the respective periods. the impacts of the income tax benefit (provision) adjustments associated with the above items are already included in the u.s. gaap reported net loss to ebitda reconciliation, therefore there is no adjustment needed for the reconciliation from ebitda to adjusted ebitda. three months ended june 30, 2022 franchise company-owned consolidated (1)(2) consolidated reported net loss, as reported (u.s. gaap) $ (39,879 ) $ (1,519 ) $ (42,633 ) interest expense, as reported 3,292 — 3,292 income taxes, as reported 3,499 — 3,499 depreciation and amortization, as reported 1,275 183 1,458 ebitda (as defined above) $ (31,813 ) $ (1,336 ) $ (34,384 ) inventory reserve, as reported (2) — — 1,235 professional fees and settlements 280 — 280 severance 56 3 59 lease liability benefit (130 ) (206 ) (336 ) lease termination fees 72 (40 ) 32 discontinued operations, net of tax 34,073 — 34,073 adjusted ebitda, non-gaap financial measure $ 2,538 $ (1,579 ) $ 959 three months ended june 30, 2021 franchise company-owned consolidated (1) consolidated reported net loss, as reported (u.s. gaap) $ (15,047 ) $ (19,292 ) $ (34,339 ) interest expense, as reported 3,024 — 3,024 income taxes, as reported (4,060 ) — (4,060 ) depreciation and amortization, as reported 1,379 3,651 5,030 long-lived asset impairment, as reported — 3,205 3,205 ebitda (as defined above) $ (14,704 ) $ (12,436 ) $ (27,140 ) severance 1,606 — 1,606 lease liability benefit (716 ) (8,011 ) (8,727 ) lease termination fees (103 ) 7,123 7,020 real estate fees 21 28 49 gain on distribution centers (120 ) — (120 ) discontinued operations, net of tax 4,584 — 4,584 adjusted ebitda, non-gaap financial measure $ (9,432 ) $ (13,296 ) $ (22,728 ) _______________________________________________________________________________ (1) consolidated ebitda margins for the three months ended june 30, 2022, and 2021, were (52.0)% and (27.8)%, respectively, and are calculated as ebitda (as defined above) divided by u.s. gaap revenue for each respective period. consolidated adjusted ebitda margin for the three months ended june 30, 2022, and 2021 were 1.5% and (23.3)%, respectively, and are calculated as consolidated adjusted ebitda (as defined above) divided by consolidated adjusted revenue for each respective period. (2) this charge, primarily related to reserving for personal protective equipment acquired as a result of the covid-19 pandemic, relates to the wind down of our distribution centers and is reviewed separately from the segment results by the chief operating decision maker. consolidated results will not cross foot as the inventory reserve is not part of the company's segments. twelve months ended june 30, 2022 franchise company-owned consolidated (1)(2) consolidated reported net loss, as reported (u.s. gaap) $ (68,735 ) $ (9,467 ) $ (85,857 ) interest expense, as reported 12,914 — 12,914 income taxes, as reported 2,017 — 2,017 depreciation and amortization, as reported 4,913 1,311 6,224 long-lived asset impairment, as reported 450 92 542 ebitda (as defined above) $ (48,441 ) $ (8,064 ) $ (64,160 ) inventory reserve, as reported (2) — — 7,655 ceo transition (466 ) — (466 ) distribution center fees 285 — 285 professional fees and settlements 2,140 — 2,140 severance 2,000 74 2,074 lease liability benefit (378 ) (3,242 ) (3,620 ) lease termination fees 172 1,663 1,835 real estate fees — 40 40 goodwill impairment, as reported 13,120 — 13,120 non-recurring, non-operating income (100 ) — (100 ) discontinued operations, net of tax 39,398 — — 39,398 adjusted ebitda, non-gaap financial measure $ 7,730 $ (9,529 ) $ (1,799 ) twelve months ended june 30, 2021 franchise company-owned consolidated (1) consolidated reported net loss, as reported (u.s. gaap) $ (43,299 ) $ (70,032 ) $ (113,331 ) interest expense, as reported 13,163 — 13,163 income taxes, as reported (5,428 ) — (5,428 ) depreciation and amortization, as reported 7,019 14,730 21,749 long-lived asset impairment, as reported 726 12,297 13,023 ebitda (as defined above) $ (27,819 ) $ (43,005 ) $ (70,824 ) ceo transition (694 ) — (694 ) professional fees and settlements 826 — 826 severance 4,545 — 4,545 lease liability benefit (1,322 ) (18,700 ) (20,022 ) lease termination fees (103 ) 13,647 13,544 real estate fees 22 561 583 gain on distribution centers (14,997 ) — (14,997 ) discontinued operations, net of tax 10,125 — 10,125 adjusted ebitda, non-gaap financial measure $ (29,417 ) $ (47,497 ) $ (76,914 ) _______________________________________________________________________________ (1) consolidated ebitda margins for the twelve months ended june 30, 2022, and 2021, were (23.2)% and (17.2)%, respectively, and are calculated as ebitda (as defined above) divided by u.s. gaap revenue for each respective period. consolidated adjusted ebitda margin for the twelve months ended june 30, 2022, and 2021, were (0.7)% and (18.7)%, respectively, and are calculated as consolidated adjusted ebitda (as defined above) divided by consolidated adjusted revenue for each respective period. (2) this charge, primarily related to reserving for personal protective equipment acquired as a result of the covid-19 pandemic, relates to the wind down of our distribution centers and is reviewed separately from the segment results by the chief operating decision maker. consolidated results will not cross foot as the inventory reserve is not part of the company's segments. regis corporation reconciliation of reported franchise ebitda as a percent of u.s. gaap revenue to ebitda as a percent of adjusted revenue (dollars in thousands) (unaudited) three months ended june 30, 2022 2021 as adjusted ebitda $ 2,538 $ (9,432 ) u.s. gaap revenue 62,461 72,297 as adjusted ebitda as a % of u.s. gaap revenue 4.1 % (13.0 ) % non-margin revenue adjustments: franchise rental income $ (30,577 ) $ (31,507 ) advertising fund contributions (8,360 ) (7,218 ) adjusted revenue $ 23,524 $ 33,572 as adjusted ebitda as a percent of adjusted revenue (1) 10.8 % (28.1 ) % twelve months ended june 30, 2022 2021 as adjusted ebitda $ 7,730 $ (29,417 ) u.s. gaap revenue 255,762 268,686 as adjusted ebitda as a % of u.s. gaap revenue 3.0 % (10.9 ) % non-margin revenue adjustments: franchise rental income $ (130,777 ) $ (127,392 ) advertising fund contributions (32,573 ) (22,023 ) adjusted revenue $ 92,412 $ 119,271 as adjusted ebitda as a percent of adjusted revenue (1) 8.4 % (24.7 ) % _______________________________________________________________________________ (1) total is a recalculation; line items calculated individually may not sum to total due to rounding.
