Ladies and gentlemen, thank you for standing by. Welcome to the Regis Corporation Fiscal 2018 First Quarter Earnings Call. My name is Tiffany, and I will be your conference facilitator for today. At this time, all participants are in a listen-only mode. Following the management's presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by approximately 12 PM Eastern Time today. I'll now turn the conference over to Paul Dunn, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Tiffany. Good morning, everyone, and thank you, all, for joining us. On the call with me today are Hugh Sawyer, our Chief Executive Officer; Andrew Lacko, our new Chief Financial Officer; and Eric Bakken, President of our Franchise Segment. Before turning the call over to Hugh, there are 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 today's release and our recent SEC filings for more information on these risks and uncertainties. The Company takes no obligation to update or revise any of these forward-looking statements to reflect events or circumstances that may arise after the date of the call. Second, this morning's conference call must be considered in conjunction with both the 10-Q filing and earnings release we issued this morning. In today's call, we will be discussing non-GAAP financial results that exclude the impact of certain business events. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons but should not be considered superior to, or as a substitute for, and should be ready 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 earnings release, which is available on our website at www.regiscorp.com/investor. With that, I will now turn the call over to Hugh.

Thank you, Paul, and good morning, everyone. Thank you for joining us and thanks as well for your interest in Regis. My comments today will focus on the operational and strategic aspects of the quarter and then my partner, Andrew, will provide a recap of our financial results for the quarter. Let's begin with a high-level overview of our actions. A few days ago, I reached six months in my tenure as Chief Executive Officer at Regis and during this time, we have increased the pace of decision-making and as a result, the cadence of management actions at the company -- actions that are intended to enhance shareholder value. I thought it might be helpful to our shareholders if I were to take a moment at the beginning of today's call to catalog some of the programing already completed or under way at the company, including the following items. As you know, we published our strategic plan in the August 2017 10-K, only four months into my role as CEO. The sale and subsequent refinancing of substantially all of our mall and UK salon operations was completed in October. A major reorganization of our field salon operations aligning our business according to brands was completed since I began my role here at Regis. We've upgraded approximately 1,900 POS terminals in our salons to enhance the guest and stylist experience. We've improved our analytics and the control of variable labor cost in our salons. We executed preliminary steps necessary to reduce non-essential non-strategic G&A as part of our 120-day plan. We deployed tablets into our SmartStyle salons to open lines of communications with our stylist and to support our new digital training programs. Along the way, there have been numerous upgrades and executive in field management including a new Chief Human…

Thanks, Hugh, and good morning, everyone. This morning I would like to provide an overview of our results for the first quarter including updates on several key financial items in liquidity. I'd like to remind you that our first quarter 10-Q and press release along with our website all contain more detailed explanations of our financial results and that our comments today should be considered within the context of these and other publicly disclosed documents. Additionally, Paul will be available to answer any questions after this call. Before getting into the details, I'd like to highlight a few issues that occurred during the quarter that impact year-over-year comparability. The first involves our strategic restructuring activity. Due to the previously announced sale and subsequent franchising of the mall-based salons in UK business, these units are now shown as discontinued operations on the P&L. The financial statements provided in our press release in 10-Q for both current and prior year periods have been recast to reflect the impact of this transaction. However, earlier releases of financial results for prior years would not reflect this change and my comments both today and going forward will focus on the continuing operations of our remaining company-owned salon and franchise segments. Additionally, as a result of these transactions, we have redefined the report of the segments to the company-owned salons and franchised. With the company-owned salon segment comprised of our SmartStyle, Supercuts and Signature Style concepts. The second item involves the field reorganization change we announced in August which align the field leadership team by brand. An outcome of this reorganization is that senior district leaders will no longer be in the salons. As a result, the cost will be moved out of cost to goods sold, incite operating expense where they have historically been recorded…

Thank you. [Operator Instructions] We'll go first to Steph Wissink with Jefferies.

Thanks. Good morning, everyone, and gentlemen, thank you for all the detail. Just two questions to get started. First on the comp, nice to see a positive comp. I'm wondering if you can talk a little bit about the range across your different salon types. So you're seeing coalesces towards a consistent range as you closed some of the under-performing or is there still a widespread? And then maybe you can give us some insight into how this field reorganization by brand, how that incentive model will now lead to each brand performing independently and hopefully positively?

Yes, Steph. I'll take the first part of that question. As we disclosed in this morning's press release, you can see the service comp are banner brands. Supercuts was a service comp of up to 2.6% versus a 1.3% comp last year. SmartStyle was up 70 basis points versus 40 basis points last year and Signature Style was a comp decline of 30 basis points versus a comp decline of 20 basis points last year. That's how we get to a 90 basis point service comp result for the quarter this year and you can see that that's the dispersion of comp performance overseen in the portfolio. Obviously as we look to continue to restructure the portfolio, we would be reducing the lower performing salons in the portfolio and as a result, we would hope to see an overall improvement in the comp performance and hopefully, we will get to a point where that dispersion will tighten up and we will be able to come positively across all the brands.

Steph, it's Hugh. As to the strategic alignment of field personnel with brands, that was intentional and they are intended to grow revenues and EBITDA in their individual salon locations as you may know. Supercuts and SmartStyle and our Signature Style brands do offer different services and the advertising programs that are under way throughout the company today are intended to differentiate the nature of the brands. I'm actually very comfortable with the reorganization that we executed earlier this year to align field management around their individual brands and I think as with all human beings, it takes a little time for people to coalesce and to become comfortable with their new assignments. But I really don't see any barrier to our field personnel executing around their individual brands and differentiated services.

Just a follow-up, Hugh, on the investment in SmartStyle digital advertising. Can you talk a little bit about that process? When that went into effect and if you've seen any more recent uptrend in the sales line that would justify or support some of the early indications on that advertising investment?

Sure, Steph. The advertising and the changes that we've made around our service menu in pricing are all designed to capture the customers we have inside of a Walmart box rather than the hypothetical customer we would love to go obtain. The reality is that we are in fact inside a Walmart location. Our service menu and our pricing should reflect the nature of the Walmart customer. In my tenure here since April, we have worked pretty aggressively to reorient the advertising to target the Walmart customer to simplify the service menu and to offer pricing that addresses their value of customer and also Walmart's national advertising campaign where speed is the new currency. So the express haircut was actually created in collaboration with Walmart management team. It just seems common sense of all to me that you would target the customers you have inside that Walmart box. Historically, Steph, some of the services and pricing and approach, it was designed towards the customer that really wasn't inside that Walmart box. It all went in place in the April-May period. The digital advertising is new to Regis, social media is new to Regis and I'm an apostle for both. I think digital advertising gets a lot of bang for the investment dollars and we will not step away from digital advertising programming here at Regis at least during my tenure.

A final question; Andrew, if I could touch one in on the shifting -- this is on a reporting basis -- the shifting from the senior district leaders out of cogs and inside expense into G&A. I think you mentioned a sheet on your website, but can you just give us that for reference for the next three quarters, what the comparison will be dollars, to $5.5 million this quarter? Do you have the three quarterly comparisons coming up?

Yes. I don't have the exact amounts by quarter in front of me, Steph, so I would just encourage you to reach out to Paul and he can walk you through the exact details of what's been posted on the website.

Okay, thank you.

Steph, it's Hugh again. Just to re-underscore Andrew's earlier comment on the comps. Obviously, I'm not done weeding the garden, but I will be in 2018.

Okay, thank you. Appreciate that.

You're welcome.

[Operator Instructions] We'll go next to Dustin Henderson with Eagle Asset.

Good morning. Thanks for taking the call. Is the franchise business hit a 46.4% EBITDA margin which is good year-over-year. Is this what we should use to estimate going forward?

I think that's a reasonable estimate going forward.

Okay, thanks. CapEx was fairly normal during the quarter, given that you sold all those stores the first day of the next quarter. Is this CapEx what we should be using going forward, too?

I would expect CapEx to be slightly above our historical run rates as we continue to make strategic investments throughout the portfolio.

And that's the point of sale terminals? The tablets [indiscernible] training?

Yes. Store technology, stylist training, etcetera.

Substantially designed -- it's Hugh -- to enhance the guest and stylist experience at the salon level.

Okay. And you've completed the divestiture of the mall business now. So what's the earnings power of the franchise business going forward?

We don't give guidance. It's Hugh. But as I've said on prior calls, Dustin, it's like asking me which of my two children got loved the most. I love them both, I love the company-owned salons because they throw off a lot of cash when they run well, but I love franchise. It's hard not to love it, it's capital-light and I really just don't see any barrier to growing the franchise business.

Okay. Thought I'd ask, just thought of throwing in there. Maybe just make it past you. Thanks very much for the time.

No worries, pal. Thanks.

We have no further questions. I would like to turn the call back to Hugh Sawyer for any additional or closing remarks.

Thanks to all for your continued support of Regis and we will continue to do our best to earn your loyalty and support. Thank you, everyone.