Regis Reports Third Quarter 2019 Operating Results And The Continued Growth Of Its Franchise Portfolio During The Period The Company Recorded The Profitable Sale And Conversion Of An Additional Comp

The following excerpt is from the company's SEC filing.

Year-Over-Year Including Gains From The Sale of Salons To Franchisees And A

Million Non-Cash Restructuring Charge; Year-To-Date EBITDA Of

Million Is

Million, Or

236.4%

Favorable Year-Over-Year Including Gains From The Sale Of Salons To Franchisees And A Non-Cash Restructuring Charge

Third Quarter Adjusted EBITDA Of

Year-Over-Year Including Gains From The Sale Of Salons To Franchisees; Year-To-Date Adjusted EBITDA Of

The Company Repurchased

Shares, Or Approximately 5% Of Its Total Common Stock In The Quarter

Three Months Ended Mar ch 31,

Nine Months Ended March 31,

(Dollars in thousands)

2018 (1)

Consolidated Revenue

$258,343

$305,783

$820,849

$935,096

System-wide Revenue

$437,547

$448,089

$1,302,217

$1,308,200

System-wide Same-Store Sales Comps

System-wide Same-Store Sales Comps, excluding TBG mall locations (3)

Company-owned Same-Store Sales Comps

Franchise Same-Store Sales Comps, excluding TBG mall locations (3)

Operating (Loss) Income

$(22,162)

$4,339

$(20,284)

$(18,540)

Net (Loss) Income From Continuing Operations

$(14,811)

$3,585

$(14,857)

$54,122

Diluted (Loss) Earnings per Share From Continuing Operations

$(0.37)

$(0.35)

EBITDA (4)

$(1,401)

$5,024

$25,322

$(18,560)

   as a percent of revenue

As Adjusted (2)

Consolidated Revenue, as Adjusted

$303,722

$933,035

Net Income, as Adjusted

$15,404

$8,695

$34,760

$13,747

Diluted Earnings per Share, as Adjusted

EBITDA, as Adjusted (4)

$37,158

$19,180

$82,907

$58,102

   as a percent of revenue, as Adjusted

____________________________________

(1)    Amounts for fiscal year 2018 have been adjusted to account for the adoption of "ASC 606 - Revenue From Contracts With Customers."

(2)    See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations".

(3)    Same-store sales include salons that have been a franchise location for more than one year, therefore TBG is not included in 2018

same-store sales.

(4)     See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations" for a reconciliation of

EBITDA to Adjusted EBITDA

MINNEAPOLIS,

April 30, 2019

-- Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is franchising, owning and operating hair salons, today reported a

quarter

from continuing operations of

$14.8 million

per diluted share as compared to net

income

$3.6 million

per diluted share in the

quarter of 2018. The Company’s reported results include

$15.9 million

of non-cash goodwill derecognition associated with the sale of

salons to franchisees,

$20.7 million

of TBG mall location non-cash restructuring costs and $2.1 million of other discrete costs, partially offset by

$8.5 million

of related tax benefits. Excluding discrete items, and the income from discontinued operations, the Company reported

as adjusted net

$15.4 million

earnings per diluted share versus adjusted net

$8.7 million

earnings per diluted share, for the same period last year.

Total revenue in the quarter of

$258.3 million

decreased

$47.4 million

, year-over-year driven primarily by the net closure of

salons and the conversion of

company-owned salons to the Company's asset-light franchise portfolio over the past 12 months and a

basis point decline in company-owned same-store sales. The Company estimates that the shift of the lead up to the Easter holiday into the fourth quarter this fiscal year negatively impacted third quarter company-owned same store sales by approximately

basis points. In addition, prior year same-store-sales included 70 basis points of one-time discounted close-out product sales as part of the closure of 597 non-performing SmartStyle salons. Excluding the lead up to the Easter holiday shift and the one-time SmartStyle impact in the prior year, the Company estimates that company-owned same-store sales declined approximately

basis points during the quarter. The negative company-owned same-store sales performance was the result of a

decline in year-over-year transactions, partially offset by a

increase in ticket. These reductions were partially offset by revenue growth in the Company's Franchise segment.

quarter adjusted EBITDA of

$37.2 million

$18.0 million

favorable versus the same period last year. Excluding the

million and

$1.4 million

gain from the sale of company-owned salons during the current and prior year quarter, respectively, adjusted EBITDA of

$9.7 million

$8.0 million

unfavorable

versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the

company-owned salons that were profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.

On a full year basis, adjusted EBITDA of 

$82.9 million

$24.8 million

 favorable versus the same period last year. Excluding the

$43.9 million

$2.0 million

gain from the sale of company-owned salons during the current and prior year, respectively, adjusted EBITDA of

$39.0 million

$17.1 million

company-owned salons that were profitably sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.

Hugh Sawyer, President and Chief Executive Officer, commented, "We remain focused on the ongoing transformation of our business and maximizing shareholder value. Among other items, this includes initiatives underway in technology, marketing and advertising, merchandise, data science, stylist recruiting and training, real estate and new capabilities to establish frictionless relationships with customers and franchisees. As in prior quarters, the gains generated from the sale and conversion of our company-owned salons met our financial objectives for these transactions” Mr. Sawyer added, “Given our success, we expect to consider additional opportunities to franchise company-owned salons in circumstances where we believe it will add to shareholder value and support an evolving strategy for our business."

Third Quarter Segment Results

Company-Owned Salons

Three Months Ended March 31,

(Decrease)

Nine Months Ended March 31,

(Dollars in millions) (1)

2018 (2)

Total Revenue, as Adjusted

(410) bps

(80) bps

 Year-over-Year Ticket change

 Year-over-Year Transaction (3) change

Gross Profit, as Adjusted(4)

   as a percent of revenue, as adjusted

(220) bps

(70) bps

(290) bps

(120) bps

Total Company-owned Salons

as a percent of total Company-owned and Franchise salons

(710) bps

Variances calculated on amounts shown in millions may result in rounding differences.

Amounts for fiscal year 2018 have been recast to account for the adoption of "ASC 606 - Revenue From Contracts With Customers."

Defined as total transactions and is what the Company had historically referred to as Traffic

Gross profit, as Adjusted, excludes depreciation and amortization.

quarter revenue, as adjusted, for the Company-owned salon segment

$48.7 million

, versus the prior year to

$221.2 million

. The year-over-year decline in revenue was driven by the decrease of 635 salons profitably sold and converted to the Company's asset-light franchise portfolio over the past 12 months, the closure of

unprofitable salons over the past 12 months and by a decline in Company-owned same-store sales of

. The year-over-year decline in company-owned same store sales was driven by a

decrease in transactions, partially related to the shift of the lead up to the Easter holiday into the fourth quarter this year, partially offset by a

increase in average ticket.

$17.2 million

$11.6 million

company-owned salons that were profitably sold and converted to the Company's asset-light franchise portfolio over the past 12 months and strategic investments in marketing and advertising, including the support of the Company's Supercuts MLB sponsorship partially offset by management initiatives.

Increase

Increase (Decrease)

    Product

    Product sold to TBG mall locations

    Total product

    Royalties and fees

(550 bps)

(300 bps)

80 bps

(300) b

Total Franchise Salons

710 bps

Same-store sales include salons that have been a franchise location for more than one year, therefore TBG is not included in 2018 same-store sales.

quarter Franchise revenue was

$37.1 million

$3.3 million

compared to the prior year quarter. Royalties and fees were

$22.8 million

$3.9 million

versus the same period last year. Royalties and fees

increased

due to increased franchise salon counts. Product sales to franchisees of

$14.3 million

decreased

$0.6 million

versus the same period last year driven primarily by lower sales to TBG, partially offset by increased franchise salon counts.

Franchise adjusted EBITDA of

$9.8 million

improved

$1.2 million

year-over-year primarily driven by the increase in salon counts, partially offset by planned strategic G&A investments to enhance the Company's franchisor capabilities and support the increased volume and cadence of transactions and conversions into the Franchise portfolio along with a decrease in margins on product sold to franchisees.

Other Company Updates

Adoption of New Accounting Standard

On July 1, 2018, the Company adopted amended revenue recognition guidance. For comparability the Company has adjusted prior reporting periods, including the three and nine months ended March 31, 2018. As a result, future financial statements will be comparable to the prior year results, but they will not be comparable to the financial results issued previously.

Other Key Events

The Company repurchased 2,100,000 common shares, which is approximately

of its total common stock, at an average price of

$18.47

per share for a total of

$37.9 million

The Company profitably sold and transferred

Company-owned salons to its asset-light franchise portfolio. The impact of these transactions is as follows:

Three Months Ended 

 March 31,

Nine Months Ended 

(Decrease) Increase

(Dollars in thousands)

Salons sold to franchisees (1)

Cash proceeds received in quarter

30,569

27,645

54,619

48,999

Gain on sale of venditions, excluding goodwill derecognition

27,421

26,012

43,922

41,953

Non-cash goodwill derecognition

(15,932

(1,172

14,760

(33,528

(1,714

31,814

Gain from sale of salon assets to franchisees, net

11,489

11,252

10,394

10,139

In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing

858 salons, and substantially all of its International segment, representing approximately 250 salons in the UK, to The Beautiful Group (TBG). No cash proceeds were recorded as part of the transaction with TBG.

Transformational Strategy Update

The Company continued to make progress during the quarter implementing elements of its transformational strategy which includes among other initiatives:

The appointment of Mr. James Townsend as Executive Vice President and Chief Marketing Officer

Accelerating the growth of the Company's asset-light franchise portfolio where it believes it will add to shareholder value and support an evolving strategy for the business

The elimination of non-core, non-essential G&A

Investments in technology to establish a frictionless relationship with customers, franchisees and stylists

Additional franchisor capabilities and services

Trend-driven merchandise offerings

Differentiated digital advertising and the Company's MLB relationship

Customer data and analytics

Stylist recruiting and training

Non-GAAP reconciliations:

For GAAP to non-GAAP reconciliations, please refer to 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 discussing

quarter results today,

, at 9 a.m., Central time. Interested parties are invited to participate in the live webcast by logging on to www.regiscorp.com or participate via telephone by dialing (800) 667-5617 and entering access code 6867095. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 6867095.

About Regis Corporation

Regis Corporation (NYSE:RGS) is a leader in beauty salons and cosmetology education. As of

March 31, 2019

, the Company owned, franchised or held ownership interests in

worldwide locations. Regis’ corporate and franchised locations operate under concepts such as Supercuts

, SmartStyle

, MasterCuts

, Regis Salons

, Sassoon

, 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. To join Regis Corporation’s email alert list, click on this link:

http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1

CONTACT:

REGIS CORPORATION

Andrew Lacko

952-918-4175

investorrelations@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 factors include the continued ability of the Company to implement its strategy, priorities and initiatives; our ability to attract, train and retain talented stylists; financial performance of our franchisees; acceleration of sale of certain salons to franchisees; The Beautiful Group's ability to transition and operate its salons successfully, as well as maintain adequate working capital; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic; changes in regulatory and statutory laws including increases in minimum wages; our ability to maintain and enhance the value of our brands; premature termination of agreements with our franchisees; our ability to manage cyber threats and protect the security of sensitive information about our guests, employees, vendors or Company information; reliance on information technology systems; reliance on external vendors; competition within the personal hair care industry; changes in tax exposure; changes in healthcare; changes in interest rates and foreign currency exchange rates; failure to standardize operating processes across brands; consumer shopping trends and changes in manufacturer distribution channels; financial performance of Empire Education Group; the continued ability of the Company to implement cost reduction initiatives; compliance with debt covenants; changes in economic conditions; changes in consumer tastes and fashion trends; exposure to uninsured or unidentified risks; ability to attract and retain key management personnel; reliance on our management team and other key personnel or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018. 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.

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

(Dollars in thousands, except share data)

ASSETS

Current assets:

Cash and cash equivalents

71,146

110,399

Receivables, net

33,737

52,430

Inventories

90,869

79,363

Other current assets

32,386

47,867

Total current assets

228,138

290,059

Property and equipment, net

83,629

99,288

Goodwill

378,560

412,643

Other intangibles, net

10,557

Other assets

32,768

37,616

Non-current assets held for sale

Total assets

738,970

856,735

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

57,021

57,738

Accrued expenses

83,490

100,716

Total current liabilities

140,511

158,454

Long-term debt

90,000

Long-term lease liability

17,505

Other noncurrent liabilities

115,144

121,843

Total liabilities

363,160

370,297

Commitments and contingencies

Shareholders’ equity:

Common stock, $0.05 par value; issued and outstanding 39,433,124 and 45,258,571 common shares at March 31, 2019 and June 30, 2018 respectively

Additional paid-in capital

93,515

194,436

Accumulated other comprehensive income

Retained earnings

271,273

280,083

Total shareholders’ equity

375,810

486,438

Total liabilities and shareholders’ equity

– more –

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Three and

Nine Months Ended March 31, 2019

(Dollars and shares in thousands, except per share data amounts)

Revenues:

Service

181,809

222,022

580,076

680,930

53,766

64,911

173,006

197,701

22,768

18,850

67,767

56,465

Operating expenses:

Cost of service

111,632

132,081

348,060

406,767

Cost of product

31,167

37,139

99,698

107,165

Site operating expenses

34,339

37,548

106,723

116,175

General and administrative

41,694

45,727

135,257

129,485

32,332

39,391

102,952

147,280

Depreciation and amortization

27,732

46,764

TBG mall location restructuring

20,711

Total operating expenses

280,505

301,444

841,133

953,636

Operating (loss) income

Other (expense) income:

Interest expense

(1,354

(5,095

(3,432

(9,402

Interest income and other, net

(Loss) income from continuing operations before income taxes

(11,563

(11,869

(23,753

Income tax (expense) benefit

(3,248

(2,988

77,875

Income (loss) from TBG discontinued operations, net of taxes

(10,605

(50,973

Net (loss) income

(14,633

(7,020

(8,830

Net (loss) income per share:

Basic:

Net (loss) income per share, basic (1)

Diluted:

Net (loss) income per share, diluted (1)

Weighted average common and common equivalent shares outstanding:

40,314

46,612

42,900

46,684

47,153

47,093

_______________________________________________________________________________

Total is a recalculation; line items calculated individually may not sum to total due to rounding.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE

(LOSS) INCOME

For The Three and Nine Months Ended March 31, 2019 and

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments during the period:

(1,372

Reclassification adjustments for losses included in net (loss) income

Net current period foreign currency translation adjustments

Comprehensive (loss) income

(13,728

(8,392

(9,436

10,205

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)

Three Months Ended March 31, 2019

Paid-In

Capital

Balance, December 31, 2018

41,472,468

128,964

285,827

425,010

Net loss

Stock repurchase program

(2,050,430

(37,818

(37,920

Exercise of SARs

Stock-based compensation

Net restricted stock activity

Minority interest

Balance, March 31, 2019

Three Months Ended March 31, 2018

Balance, December 31, 2017

46,688,423

216,301

11,843

283,694

514,173

(585,967

(9,605

(9,635

18,697

Balance, March 31, 2018

46,126,249

208,149

10,471

276,741

497,667

Balance, June 30, 2018

(6,023,523

(105,951

(106,252

15,412

182,664

(1,830

(1,821

Nine Months Ended March 31, 2018

Balance, June 30, 2017

46,400,367

214,109

273,776

493,620

Net income

27,793

Shares issued through franchise stock incentive program

283,534

(2,017

(2,003

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)

Cash flows from operating activities:

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Non-cash impairment and other adjustments related to TBG discontinued operations

37,020

24,727

29,736

Depreciation related to TBG discontinued operations

Deferred income taxes

(6,034

(85,026

Gain on life insurance

(7,986

Non-cash TBG mall location restructuring charge

Gain from sale of salon assets to franchisees, net

(10,394

Salon asset impairments

11,099

Accumulated other comprehensive income reclassification adjustment

Amortization of debt discount and financing costs

Other non-cash items affecting earnings

Changes in operating assets and liabilities, excluding the effects of asset sales

(50,074

(29,483

Net cash (used in) operating activities

(20,273

(21,664

Cash flows from investing activities:

Capital expenditures

(23,160

(20,065

Capital expenditures related to TBG discontinued operations

(1,171

Proceeds from sale of assets to franchisees

Proceeds from company-owned life insurance policies

24,617

18,108

Net cash provided by investing activities

56,076

Cash flows from financing activities:

Borrowings on revolving credit facilities

Repayment of long-term debt and capital lease obligations

(124,230

Repurchase of common stock

(105,364

(9,634

Settlement of equity awards

Taxes paid for shares withheld

(2,447

(2,279

Net proceeds from sale and leaseback transaction

18,068

Net cash used in financing activities

(89,743

(46,693

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash, cash equivalents, and restricted cash

(53,935

(65,895

Cash, cash equivalents and restricted cash:

Beginning of period

148,774

208,634

Cash, cash equivalents and restricted cash included in current assets held for sale

Beginning of period, total cash, cash equivalents and restricted cash

209,986

End of period

94,839

144,091

Same-Store sales

SYSTEM-WIDE SAME-STORE SALES (1):

For the Three Months Ended

March 31, 2018

Retail

Signature Style

Total, excluding TBG mall locations

For the Nine Months Ended

(1) System-wide same-store sales are calculated as the total change in sales for system-wide company-owned and franchise locations for more than one year (including TBG mall locations in 2019) 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. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. System-wide same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

COMPANY-OWNED SAME-STORE SALES (1):

(1) Company-owned same-store sales are calculated as the total change in sales for 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 company-owned same-store sales are the sum of the company-owned same-store sales computed on a daily basis. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. Company-owned same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

FRANCHISE SAME-STORE SALES (2):

Total, excluding TBG mall locations

(2) Franchise same-store sales are calculated as the total change in sales for salons that have been a franchise location for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. TBG is not included in 2018 same-store sales as it was not a franchise location in the previous year.

System-wide location counts

COMPANY-OWNED SALONS:

SmartStyle/Cost Cutters in Walmart Stores

FRANCHISE SALONS:

Total franchise locations, excluding TBG mall locations

Total North America TBG mall locations (1)

Total North American Salons

Total International TBG Salons (1)

OWNERSHIP INTEREST LOCATIONS:

Equity ownership interest locations

Grand Total, System-wide

Canadian and Puerto Rican salons are included in the North American salon totals.

We believe our presentation of non-GAAP operating (loss) income, net income, net income 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 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 in that 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 both our financial statements prepared in accordance with U.S. GAAP and the reconciliation of the selected U.S. GAAP to non-GAAP financial measures, which are located in the Investor Information section of the corporate website at www.regiscorp.com.

Non-GAAP reconciling items for the three and nine ended months ended

and 2018:

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 which 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:

SmartStyle restructuring discounting.

SmartStyle restructuring costs.

Executive transition costs.

Professional fees.

Severance expense.

Legal fees.

Gain on life insurance proceeds.

TBG restructuring.

Debt refinancing.

Goodwill derecognition.

Impact of tax reform.

TBG discontinued operations.

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

(Dollars in thousands, except per share data)

(unaudited)

Reconciliation of U.S. GAAP operating (loss) income and U.S. GAAP net income to equivalent non-GAAP measures

U.S. GAAP financial line item

U.S. GAAP revenue

Non-GAAP revenue adjustments

Product Sales

(2,061

Non-GAAP operating expense adjustments (1)

Cost of Service

SmartStyle restructuring costs, net

23,999

12,922

Total non-GAAP operating expense adjustments

22,805

30,084

38,958

Non-GAAP operating (loss) income (1)

18,357

U.S. GAAP net (loss) income

Non-GAAP net income adjustments:

Income tax impact on Non-GAAP adjustments (2)

Income taxes

(8,522

(1,441

(13,995

(10,072

(71,871

TBG discontinued operations, net of income tax

Loss from discontinued operations, net of tax

(6,027

Total non-GAAP net income adjustments

30,037

15,715

43,590

10,598

Notes:

Adjusted operating margins for the three months ended

, and 2018, were

, and were

for the nine months ended

, and 2018, respectively, and are calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period.

Based on projected statutory effective tax rate analyses, the non-GAAP tax provision was calculated to be approximately 22% for the three and nine months ended

, and 2018, for all non-GAAP operating expense adjustments. Non-GAAP operating expense adjustments recognized during the first quarter of fiscal year 2018 were not tax effected as a result of the valuation allowance.

Reconciliation of U.S. GAAP net (loss) income per diluted share to non-GAAP net income per diluted share

(0.363

(0.149

(0.206

Severance (1)

Professional fees (1)

Gain on life insurance proceeds (1)

(0.170

Executive transition costs (1)

Debt refinancing (1) (2)

Goodwill derecognition (1)

(1.526

(0.003

(0.138

Impact of change in weighted average shares (3)

Non-GAAP net income per diluted share (2)

U.S. GAAP Weighted average shares - basic

U.S. GAAP Weighted average shares - diluted

Non-GAAP Weighted average shares - diluted (3) 

41,337

43,907

47,053

Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which includes the dilutive effect of common stock equivalents. The earnings per share impact of the adjustments for the three and nine months ended

included additional shares for common stock equivalents of 1.0 million. The impact of the adjustments described above result in the effect of the common stock equivalents to be dilutive to the non-GAAP net income per share.

Summary of Pre-Tax, Income Taxes and Net Income Impact for Q3 FY19 Discrete Items

(4,557

16,154

(3,505

12,427

38,737

30,215

38,513

(8,476

Reconciliation of reported U.S. GAAP net income (loss) to adjusted EBITDA, a non-GAAP financial measure

EBITDA represents U.S. GAAP

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 nine months ended

, 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 provision adjustments associated with the above items are already included in the U.S. GAAP reported

to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to adjusted EBITDA.

Corporate

Consolidated (1)

Consolidated reported net income (loss), as reported (U.S. GAAP)

10,730

(11,180

(14,183

Interest expense, as reported

Income taxes, as reported

Depreciation and amortization, as reported

EBITDA (as defined above)

17,249

(10,940

(7,710

Adjusted EBITDA, non-GAAP financial measure

10,138

19,341

(34,881

(2,609

26,617

(30,205

28,835

(18,267

Consolidated EBITDA margins for the three months ended

(0.5)%

, respectively, and are calculated as EBITDA (as defined above) divided by U.S. GAAP revenue for each respective period. Consolidated adjusted EBITDA margins for the three months ended March 31, 2019 and 2018 were 

, respectively, and are calculated as adjusted EBITDA divided by adjusted non-GAAP revenue for each respective period.

For the Nine Months Ended March 31, 2019

44,844

(60,454

21,304

66,148

(48,219

28,104

(11,345

For the Nine Months Ended March 31, 2018

22,650

25,469

(44,970

(77,875

39,224

61,874

25,744

(106,178

26,904

26,941

88,778

(56,420

(1) Consolidated EBITDA margins for the nine months ended

, and 2018 were

(2.0)%

, respectively, and are calculated as EBITDA (as defined above) divided by U.S. GAAP revenue for each respective period. Consolidated adjusted EBITDA margins for the nine months ended March 31, 2019 and 2018, were 

Reconciliation by reportable segment of reported U.S. GAAP total revenue to adjusted total revenue, a non-GAAP financial measure

Non-GAAP total revenue is U.S. GAAP revenue adjusted for items impacting comparability for each respective period.

Consolidated total revenue, U.S. GAAP and non-GAAP

221,236

37,107

Consolidated total revenue, as reported (U.S. GAAP)

272,002

33,781

Adjusted total revenue, non-GAAP financial measure

269,941

705,296

115,553

840,910

94,186

838,849

Reconciliation by reportable segment of reported U.S. GAAP gross profit (excluding depreciation and amortization) to adjusted gross profit (excluding depreciation and amortization), a non-GAAP financial measure

The Company defines gross profit as service and product revenues less cost of service and cost of product, excluding depreciation and amortization. Non-GAAP gross profit is gross profit, as defined by the Company, adjusted for items impacting comparability for each respective period.

39,427

14,339

235,575

19,992

11,175

131,624

142,799

U.S. GAAP and Non-GAAP gross profit (1)

89,612

92,776

49,980

14,931

286,933

25,137

12,002

157,218

169,220

U.S. GAAP gross profit (1)

114,784

117,713

Non- GAAP gross profit adjustments:

115,320

118,249

(1) Gross profit excludes depreciation and amortization.

125,220

47,786

753,082

61,661

38,037

409,721

447,758

295,575

305,324

159,980

37,721

878,631

77,628

29,537

484,395

513,932

356,515

364,699

357,636

365,820

Reconciliation of reported U.S. GAAP revenue change to company-owned same-store sales

Revenue decline, as reported (U.S. GAAP)

Effect of salons sold to franchisees

Effect of new company-owned stores

Effect of closed salons

Franchise product and royalty

Franchise same-store sales (1)

TBG product, royalties and fees

Advertising fund

Company-owned same-store sales, non-GAAP

(1) Franchise same-store sales increase (decrease) franchise royalties. As we transition to the asset-light franchise platform, franchise same-store sales will become more significant to consolidated revenues.

– end –

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER - March 19, 2020

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