Regis Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Regis Corporation first quarter fiscal 2020 earnings call. My name is Cassidy and I will be your conference facilitator today. At this time, all participants are in a listen only mode. Following management's presentation, we will conduct a question and answer session. If you would like to ask a question during this time, please press star one on your push button telephone. If you wish to withdraw your question, please press star two. As a reminder, this call is being recorded for playback and will be available by approximately 12 p.m. Central Time today. I'll now turn the conference call over to Kirsten Zupfer, Senior Vice President of Finance. Please go ahead.

Thank you, Cassidy. Good morning, everyone, and thank you all for joining us. On the call with me today, we have Hugh Sawyer, our Chief Executive Officer, Andrew Lacko, our Executive Vice President and Chief Financial Officer, Eric Bakken, President of our Franchise Segment, and Amanda Russin, our General Counsel. Before turning the call over to Hugh, there are a few housekeeping items to address. First, today's earnings release and conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance and by their nature are subject to inherent risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current earnings release and recent SEC filings, including our most recent Form 10-Q and June 30, 2019 Form 10-K, for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. Second, this morning's conference call must be considered in conjunction with the earnings release we issued this morning and our previous SEC filings, including our most recent 10Q and 10K. On today's call, we will be discussing non-GAAP as-adjusted financial results that exclude the impact of certain business events and other discrete items. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons but should not be considered superior to as a substitute for and should be read in conjunction with GAAP financial measures for the period. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in this morning's release, which is available on our website at www.regiscorp.com slash investors dash relations. With that, I will now turn the call over to Hugh.

Thank you, Kirsten, and good day, everyone. As we discussed last quarter, When I joined Regus, my aspiration was to develop a transformational, enduring strategy to reinvigorate our company. My guiding principle has been to generate long-term value for the company's core constituents, our shareholders, our franchise owners, customers, and employees. We are pleased to report this quarter meaningful progress in our ongoing strategic transformation to a capital-like high-growth, technology-enabled franchise company. As we continue our transformation, we expect to utilize the cash proceeds we are generating from the sale of company-owned salons in various ways to maximize shareholder value. This may include but not be limited to investments in the core capabilities we need to facilitate sustainable revenue and earnings growth in the future state as a fully franchised company. Those investments may include frictionless customer-facing technology, disruptive marketing and advertising, trend-driven merchandise, stylist recruiting and education, franchisor capabilities, and new real estate locations to support future organic salon openings by our franchisees. We may also utilize our cash in the next 18 months to complete any remaining elements of our multiyear restructuring, including closing non-performing company-owned salons, eliminating or reducing any ongoing lease risk associated with TPG, supporting our ongoing G&A reductions through severance programs, management of our capital structure as we continue to evolve to a franchise platform, and if needed, capital investments and some salon refurbishments and remodels as we consolidate our various brands throughout the portfolio. And as you know, in the past, we've utilized cash to repurchase our shares in circumstances where we believed it was in the best interest of our shareholders. So how do we expect to utilize the cash proceeds we generate from the sale of company-owned salons? Consistent with our past practice, investments in the core capabilities needed to facilitate revenue and earnings growth as a franchise company, completing the elements of our multi-year restructuring and where we believe it's in the best interest of our shareholders, we'll certainly consider share repurchase programs. When I arrived in 2017, approximately 28% of the company's salons were franchised. At the close of this quarter, Approximately 64% of our salon portfolio is franchised. Moreover, at this time, approximately 900 company-owned salons or roughly 42% of the remaining company-owned salons are in various stages of negotiation to be purchased by new or existing franchisees. We expect these transactions to close, but as you know, given the uncertainty in the external environment and Other factors, things could still change. Nevertheless, I believe our robust condition pipeline is an encouraging data point that indicates we have a significant opportunity to complete our transformation within the 18-month period we estimated at the close of 2019. As we have previously disclosed, although the transition to a capital-like franchise model will initially have a dilutive impact on the company's reported adjusted EBITDA, we remain convinced that a fully franchised business has the potential to generate a higher return on its capital and will ultimately prove to be in the best long-term interest of our shareholders and franchise constituents. We do have more work to do before we finish the transformational phase of our strategy, but we have confidence in our plan. the abilities of our Regus team and our franchise partners to successfully execute the transformation, and that our shared vision for the company will be fully realized. Andrew, why don't you take us through the numbers?