Good morning, and thank you for joining the Regis fourth Quarter 2022 earnings release conference call. All participants are in a listen-only mode. The prepared remarks by our President and Chief Executive Officer, Matthew Doctor, and Executive Vice President and Chief Financial Officer, Kersten Zupfer, are accompanied by slides to help participants follow along. After the prepared remarks, we will have time for questions. Please use the Q&A feature or the raise-your-hand feature to ask a question. Also joining Matt and Kersten on this call is Jim Lain, our Chief Operations Officer. I’m your host, Biz McShane, Vice President and Corporate Controller. As a reminder, this conference is being recorded. I would like to remind everyone that the language on forward-looking statements included in our earnings release, and 8-K filing, also apply to our comments made on the call today. These documents, along with our presentation today, can be found on our website, www.Regiscorp.com/investorrelations, along with the reconciliation of any non-GAAP financial measures mentioned on today’s call with our corresponding GAAP measures. Today’s slides are located in the supplemental financial section of the investor site. With that, I will now turn the call over to Matt.

Thanks, Biz, and good morning, everyone. First off, I want to thank you all for listening in and your interest in Regis. This was a call I was very much looking forward to, as there’s been a lot going on in our business, with some major announcements coming out from us over the last few months, announcements that I am very proud of and excited to bring forward. The goal of today’s call is to fill you in on the details of those major items, go through the results for the quarter and the fiscal year, and further discuss the key initiatives we are focused on for fiscal 2023. As I reflect on fiscal ‘22, there are some key themes that come to mind. Those themes are, one, the right team, two, business transformation, three, progress, and four, momentum. In terms of the team, there have been several changes that took place over the last year. I mean, starting with me, I came into my role as CEO in the middle of our fiscal year. Our Chairman, Dave Grissen, while not new to the board, stepped into his role as Chairman in November 2021. And alongside of us is a great mix of tenured members, like our Chief financial Officer, Kersten, our Chief Operations Officer, Jim, and our Head of Education and Merchandising, Jamie, who has been elevated to the leadership team due to his connection with the stylist community, which is so key in this industry, as well as our new hires, including our Chief Technology Officer, John, who has recently been appointed as our Chief Digital Officer, our Chief People Officer, Michael, General Counsel, Andra, and brand new as of a day go, Head of Marketing, Michelle. I say all of this as I want you to know…

Thanks, Matt, and good morning. Yesterday, we reported on a consolidated basis, improved fourth quarter revenues compared to the prior quarter, which was driven by an increase in royalties. Year-over-year total revenue of $66 million, declined $32 million from the prior year, as we expected, due to 98% of our salons now being franchised compared to 95% in the prior year. The revenue decline also reflected the transition away from our product distribution business. These businesses caused revenue to decline $34 million, offset by $2 million of improved royalty and advertising revenue. Same-store sales growth was 7% in the quarter compared to the fourth quarter of 2021. On an adjusted basis, fourth quarter adjusted EBITDA was $1 million, compared to a loss of $23 million in the prior year’s quarter. We delivered positive adjusted EBITDA in the quarter despite incurring $2 million of losses associated with our 105 remaining company-owned salons. The improvement in adjusted EBITDA is a result of higher systemwide sales and our lower G&A structure. On a full year basis, adjusted EBITDA improved $75 million to an annual loss of $2 million, from a loss of$ 77 million in fiscal 2021. Excluding the loss associated with selling our salons to franchisees, we recorded positive adjusted EBITDA in fiscal ‘22 of $1 million, versus a loss of $60 million on a comparable basis. Our core franchise business posted adjusted EBITDA of $3 million in the quarter, a $12 million improvement compared to a loss of $9 million in the prior year quarter. This is the third consecutive quarter that our core business has been profitable. This improvement is driven primarily by higher systemwide sales and the rightsizing of our G&A structure over the past year. The company-owned segment recorded an adjusted EBITDA loss of approximately $2 million in…

Thank you, Kersten. [Operator instructions]. Our first question is from Stephanie Wissink with Jefferies. Please remember to unmute, Steph, and go ahead.

Good morning, everyone. We have a few questions. The first is, and maybe this is for you, Kersten, is just to talk about the 7% comp in the period. Any sense of volume versus value? Just thinking about the price increases that you’ve taken over the last year or so.

Yes. No. Hey, Steph, it’s Matt. I can take that one. Yes, it’s – a number of it is driven by price increases, and that’s actually – we didn’t talk about this on the call, as we kind of outlined, the three much higher level strategic priorities that drive the underlying fundamentals of the business. As I think about kind of some near-term levers and tactics to drive sales as we – in the first half of, call it this year, probably we’ll continue to lean a bit on price, just given what’s going on in the industry and the world around us. So that will continue to take hold. And probably would expect the investments that we’re making in education and the investments we’re – and shift of dollars that we’re talking about from a marketing perspective, that will end up being the traffic-driving catalyst that as I mentioned – actually starting now, it will come into play, probably have a major shift in those dollars, our education efforts will be fully launched towards the end of the year. And kind of think about it, price will kind of hold us as we move through the next couple of months, with traffic starting to come through our initiatives thereafter. So, we’ll probably have a good mix of both price and traffic heading into the back half of this year.

Okay, that’s helpful. And Matt, can we just spend a little bit more time on the different monikers, the different business segments, any delta or performance difference between Smart Style and the other business lines? Just maybe talk a little bit by moniker, by brand.

Yes. No. I mentioned previously and it’s in our release. I mean, Smart Style, from an overall sales perspective and traffic perspective, is lagging behind the other ones a little bit, with the others kind of more close to each other from an overall comp perspective and traffic perspective. And one thing that we didn’t talk about is probably a good piece to touch on here, is actually we’ve kind of made some really good headway regarding the Smart Style brand. We’ve got a number of initiatives going on there regarding a large-scale reimaging program, which will be a big deal kind of from a marketing perspective in and of itself, when you think about the captive nature there. We’re having a large-scale remodel. Bringing that image up to comments and presence, will probably go a really long way. So, that’s a piece. Another one is kind of the captive nature. We’ve been talking a lot to Walmart to get more ingrained in their digital ecosystem, and we’re actually, for the first time, doing just that. We’ve made some really awesome inroads. There are some marketing programs that are going to be launching in-store. Examples of that will be on their TV walls, which basically are huge ad banners of part of the store. We’re going to run video loops that will just raise awareness and show that Smart Style is there. First time in a long time that anything like that has happened. Another is, we’re going to have a campaign where every single kiosk, self-checkout kiosk, will have Smart Style awareness and ads being displayed on them. And also, we’re in talks with getting, as a perk partner on the Walmart Plus platform. So, a lot of really exciting things going on from a Smart Style perspective. But going back to your initial question, yes, there is a little bit of a gap from the Smart Style brand to the rest, but in addition to all the things we spoke about regarding education, shift in marketing dollars, Zenoti, which will help Smart Style as well, we have those extra in-salon traffic-driving ecosystem mechanisms that will hopefully go above and beyond for that brand, in addition to reimaging.

All right, that’s encouraging to hear. I mean, I apologize. This is going to be a little bit nuanced and technical, but I wanted to just, Kersten, kind of true-up the model with respect to the outstanding lease obligations on your balance sheet, what portion of that is related is Regis-owned facilities versus what you’re carrying on behalf of your franchisees. And then on the product revenue, I think you mentioned that you’re largely complete with that transition to Sally Beauty. Should we anticipate any sort of fees and where will those fees be recorded in the P&L? Is it going to be in the fees and royalties line?

Yes. Maybe I’ll hit on the – I’ll hit the first one first. So, I know it’s deep in the 10-K, but there is a pretty good footnote as it relates to the lease obligations. So, of the total that’s on the balance sheet related to leases, there’s only about $7 million left associated with our APCO salons. And then the remainder relates to the $12 million associated with corporate leases, and then the remainder relates to franchise leases.

Okay. That’s it for us. Thank you so much.

There are no other open questions at this time. We thank everyone for your interest in Regis. Have a great day.