Good morning and thank you for joining the Regis Third Quarter Fiscal 2023 Earnings Conference Call. I am your host, Biz McShane, Vice President, Corporate Controller. 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. [Operator Instructions]. 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 at www.regiscorp.com/investorrelations, along with a reconciliation of any non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures. Today's slides are located in the Investor Presentations and Supplemental Financial Statements section of the Investor site. With that, I will now turn the call over to Matt.

Thank you, Biz. Good morning, everyone, and thank you for your interest in Regis. For today's call, I will highlight our third quarter fiscal 2023 results, and discuss our areas of focus for the remainder of our fiscal year and into fiscal 2024. Our results this quarter continued to demonstrate the progress of our turnaround efforts as we work to get Regis back on the path towards growth. We have now delivered positive EBITDA and operating income in all 3 of our quarters thus far during fiscal 2023, representing additional data points that highlight the hard work, dedication, and execution of the entire Regis system, including our employees, franchisees and salon level staff. We continue to build upon our positive first half of the fiscal year by delivering further sales and EBITDA growth. With Q3 2023 adjusted EBITDA of $4.2 million, which beat the guidance I provided on our last call when I stated we were expecting Q3 and Q4 EBITDA to fall below our Q1 2023 EBITDA of $3.8 million. The outperformance versus that guidance was due to tighter management of controllables just as the team has been doing for a while now, combined with the right balance of continuing to invest in our key initiatives. And while I've stated this on previous calls, I cannot stress enough that I continue to be proud of the progress we have made in a relatively short period of time. When I stepped in as CEO a little under a year and a half ago, Regis was coming off of a quarter where we reported an adjusted EBITDA loss of $5.6 million in Q1 of fiscal 2022, with the last 12-month adjusted EBITDA loss at that time of $66.2 million. Now nine months into our fiscal 2023, we have reported positive adjusted…

Thanks, Matt, and good morning. We are pleased to speak with you to share continued progress on our strategy that delivered improved operational and financial metrics with our third quarter results. For this morning's call, I will review our financials and share perspective as we enter the final quarter of the year. The third quarter saw positive systemwide revenue growth, increased systemwide same-store sales, and increased operating income while we made further investments in support of our strategy. Overall, we are pleased with the health of our business, and we believe we remain on pace to deliver operating profit for the fiscal year for the first time since 2017. Reviewing the third quarter in more detail and beginning with the income statement, total third quarter revenues were $56 million and declined $8 million from the prior year. This revenue decline was expected and relates primarily to a reduction in franchise rental income and the wind down of our company-owned salons. Franchise rental income flows both through revenue and expense, and therefore, has no impact on profitability. We believe a better reflection of our revenue performance is systemwide same-store sales, which grew 6% in the quarter. Looking into Q4 revenue, we expect these revenue trends to continue. We posted GAAP operating profit of $2 million. The increase in GAAP operating profit of $24 million was driven by a lapping $20 million in impairment charges incurred in the prior year quarter, our focus on controlling G&A, and the winddown of loss-generating company-owned salons. We have produced operating profit each quarter of this fiscal year and are currently projecting that trend to continue. Now let's turn to our adjusted results, which eliminates the noise in the reported numbers. On an adjusted basis, third quarter consolidated EBITDA was $4 million compared to near breakeven…

Thank you, Kersten. Our first question is from Eric Beder from Small Cap Consumer Research. Please remember to unmute, Eric.

Good morning. Congratulations. Could you give us kind of a general overview of what you're seeing economically? I know that you guys, your franchisees raised prices a little bit after COVID. What are they seeing in terms of throughput of clients now that people I guess are going back to work and more events?

Yes. Eric, it's Matt. I appreciate it. Yes, as you mentioned, there's been pretty significant price increases since COVID, about 20%, 25% since then. But that's pretty in line with what a lot of other retail has done and kept up with competitors. In terms of like throughput of what that's done to customer traffic and profile of customers, it's actually interesting. I think we discussed a little bit in the past that there hasn't been much elasticity from an increase of price perspective. Whether it's a minimal price increase or a large price increase, traffic between those who have taken a little price and a lot of price, have actually been pretty steady between those 2 datapoints. So that's why we think there's actually a pretty decent opportunity for pricing as we continue on. And in terms of profile of customer, we haven't seen much different as a lot of our brands are actually tailored to a wide range of customers even though we sit in the value segment. I think I've mentioned in the past that can range for anyone from -- someone who really cares about what their hair looks like, because our salons do provide really strong quality convenient haircuts to someone who's just looking for a quick convenient in and out and everything in between. So the profile of customer is similar, but I think where this is going is, are we set up to be successful in an ever-changing macroeconomic environment? And absolutely, because as I mentioned, it's a place for someone who's looking for that value price point and to the extent someone is looking for that in the future given what happens economically will be a great landing spot for those folks as well.

Great. In terms of the stylists, I know that we're going back to normal stylist [indiscernible] times have to go for schools, get their trainings, do all the pieces, so there's probably some lag here. What are you seeing in terms of your ability to kind of squeeze that gap between what you want to do with the stylists and kind of what the capacity is needed, especially now that you are -- it seems like you're going to be adding brand campaigns and rolling out other pieces that should drive more people into the stores.

Yes. No, that's a great question. It's an ever-ongoing initiative, right? Even before COVID, stylist recruiting retention is always a key topic. Got even more amplified as we went through it. I would say as we sit here today, it's kind of crept back up to a place where it's been largely stable, I will recall the past couple of quarters. So we're actually doing a pretty decent job, our franchisees are, of recruiting. We're seeing actually the ability and needing to retain almost as much as importance as that. We have a little bit of our efforts to making sure that we're retaining the stylists that we're recruiting at just as good of a clip. But as I can kind of mentioned, a lot of the work that we've done here, to your point, it's a little bit of investment to make sure we're in the best position as possible to recruit successfully now and going forward. It's going to be an ongoing effort. We think we've come a lot further in this muscle given that we're stronger in our stories, we're stronger in where we're recruiting, we're stronger in how to recruit. So yes, I think this is ever going to be an ongoing thing that we're going to want to see over time. I think that's why I kind of mentioned in the meantime, given that stabilization and given that where we are. I think there is capacity in the system by and large to increase the amount of production of the stylists that we do have and anything that we look to add will just be incremental on top of that. So there is a capacity to increase productivity with the base. Wouldn't be forcing that upon folks if we didn't think there was. And just to demonstrate what that can mean if we think in terms of haircuts, one additional haircut a day, or if you want, two additional on the weekends, maybe less, maybe one on the weekend, any way you cut it, that's an additional call it $9,000 to $10,000 per salon at current pricing, which is another $2.5 million of royalties at our current rate. That's going to be quite meaningful. And is there an ability to do one extra or even 2 extra, whether it's from all of those customers who are coming in one and done, driving net new, we think this actually is a very key thing that will help. Going back to the original question of stylist retention recruiting, one of the best tools to recruit stylists is having them be busy. And so busier salons, busier stylists will be not only a retention play, but I think would also dovetail nicely into a recruitment play when they know they're going to get stronger books of business or inflows of business rather than set books from day one.

That makes a lot of sense. When Zenoti and kind of the rollout of these new systems in terms of affinity programs and brand pieces, how does Zenoti change the game for a franchisee when you layer on the marketing and other pieces you're doing? Are those linked? And if they are, how do they link together?

Yes. Thank you. That's a great question because I refer a lot to the driver of lifecycle marketing efforts, the key to performance marketing. And yes, there is an underlying reason why. And it's the way that OpenSalon Pro and SuperSalon and others that we have are currently working. Zenoti has kind of a built-in loyalty structure and permissioning and built-in ability to actually provide a link and send SMS and e-mail and rules based right in the POS system itself. So actually, having all the customer profiles within Zenoti allows it to automatically based on franchisee rules or are even our national rules to be that kind of bridge between customer and message. So that is why enabling and getting folks onto this is so key to that because it is a driver of bridging that link between us and customer, which is something that is a little bit a functionality gap for the current point-of-sale systems that are currently out there today. When I mentioned why this is such a link and why it's important to enable these initiatives, it's because it actually makes it happen.

Great. Last question. In terms of you talked a lot about in-store styling, in-store training. I think on the last conference call you mentioned how there was like a central point in the stores for the training pieces. What is kind of the further refinements there and/or expansions going forward? Thank you.

Yes. No, it's the same concept, same thing holds. I think this all gets back to salons that are performing really well, have super engaged staff, franchisees and all the above. And when you have field-based trainers and in-salon trainers and dedicated in-salon design team members, you're going to have that natural inherent engagement given that they are going to drive hands-on training, be a resource. So as I've mentioned in the past, this has been a program that we see sales of those salons that have dedicated resources, sometimes upwards of 10% better than sales of those that don't. This is a program that is relatively new in a lot of our other brands that we've rolled out just a couple of quarters ago. So as we think about the future toolkit and where we want to invest and stories for why someone should come join some of our brands, this is a nice career path for new hires they wouldn't get elsewhere. But it's also a great engagement tool for those salons. It's a program that's here to stay. It's one that we're going to continue to invest in. It's one that's free to our franchisees. They've raised their hand and say, we want design team members, they get no problem. We'll train them here on-premise through digital means, get into their salons. This is something that's really available to everybody, and we hope that the entire system ultimately continues to take advantage of this program as we continue to prove out its value.

Great. Good luck for the rest of the year. Thank you.

Thanks, Eric. Our next question came through the chat. Could you please advise the status of your continued listing with the NYSE?

Yes. We did have a couple of days in March that we closed under $1, which caused us to fall under the $50 million market cap requirement. And we are back up to $50 million market cap. So at this point, we do remain in the care period as it relates to the market cap requirement in NYSE.

Thank you, Kersten. Looking at the chat again. All right, we have no further questions at this time. Thank you, everyone, for joining the Regis call. We appreciate your support. Have a great day.