Good morning, and thank you for joining the Regis First Quarter Fiscal 2024 Earnings Conference Call. I'm your host Biz McShane, Vice President Corporate Controller. All participants are in 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 their prepared remarks, we will have time for questions. [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, www.regiscorp.com/investorrelations, along with 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, and good morning everyone. On today's call, we will go through our Q1 fiscal 2024 results, a quarter in which we continue to make financial progress. In addition to our Q1 results, we announced the process, to evaluate strategic alternatives with the intent of strengthening our balance sheet and position Regis for future growth. We determined now is the proper time to launch this process. As we're doing so proactively, during a time in which we are not in default. Nor projecting to be in default of any of our debt covenants. We have ample liquidity and we can take control of the process. We wanted to take advantage of this window of time, we have to go broad and maximize our optionality. As opposed to waiting until closer to maturity, or a regular way refinancing may prove more challenging. We believe this process is a solid way, to evaluate several potential structures and complement our current work streams, in order to best set Regis up for the future and maximize value. With this announcement, I also feel that it's appropriate to provide some more context as to how we got here, and why now. Whether you've been following Regis for a while, or you're a new follower or investor in the company, I believe it would be beneficial to recap the sequence of events leading up to the current state. Now Regis was in the middle of two major business model shifts when the COVID-19 pandemic disrupted the business. Those business model shifts being one, the transition from a company owned salon business to one that is fully franchised. And two, the in-house development and rollout of a proprietary point-of-sale technology product called OpenSalon Pro. The pandemic was highly disruptive to Regis' business as over 1,800…

Thanks, Matt and good morning. The first quarter saw positive system-wide same-store sales, increased operating income, positive net income, positive earnings per share, and improved adjusted EBITDA. Overall, we are pleased with the health of our business. Reviewing the first quarter in more detail and beginning with the income statement. The first quarter revenues were $53.4 million and declined $8.5 million from the prior year. This revenue decline was expected and relates primarily to a reduction in franchise rental income, which is a gross-up of revenue and expense and has no impact on profitability. Additionally, transitioning out of company-owned salons and product sales reduced revenue with minimal impact on profitability. Royalty and fee revenue of $19.2 million, which represents our core business revenue was down approximately $700,000 versus the prior year's first quarter due to the number of salon closures during fiscal year 2023. System-wide same-store sales grew 1.8% in the quarter. We reported GAAP operating profit of $7.4 million. The increase in GAAP operating profit of $5 million was driven by our focus on controlling G&A and the wind down of last generating company-owned salons. We continue to produce operating profit each quarter and we expect that trend to continue. We reported positive net income of $1.2 million from continuing operations and earnings per share of $0.03 compared to a loss of $1.8 million a year ago during Q1 of 2023, and a loss of $11.3 million for the full fiscal 2023 year. This is the first time we have positive earnings per share since fiscal year 2018. Now let's turn to our adjusted results, which eliminates the noise in the reported results. On an adjusted basis, first quarter consolidated EBITDA was $7.5 million compared to $3.8 million in the prior year's quarter. The $3.6 million improvement was driven…

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

Okay, can you hear me?

Yes, we can.

Great, thank you. So congratulations on making a lot of progress here. When you look at Zenoti now over 1000 stores, what is 1000 salons? What is that enabling you to do in terms of CRM and reaching out to customers that you couldn't do before? And how do you view that as a potential driver going forward?

Yes. Hey, Eric, thanks for the question. It's Matt, Yes. We've spoken about this a lot. And as I mentioned, it's super foundational to that because it unlocks a lot of things that weren't able to be done on prior systems. I talked a lot about personalized marketing. It's very, very easy to understand your audience based, your customer base. The requirements of data collection are much higher and stringent in Zenoti. So just being on it alone, we’re capturing way more customer data just as a foundation. And the ability to then convert that customer data into action is something that is super streamlined through the platform, as easy as going in and actually being proactive on messages to send individuals to setting settings based on hey, this person generally comes in at this time, let's send them a reminder in a few weeks, set it, forget it, let it go. General blanket, permissions across, hey, for all cohorts, send them a text or an email over the course of X amount of time to remind them and enables reminders of their check-in is there. It's just a lot more of an ability to speak one-on-one with a customer that we haven't had before in order to interact with them during the service before and after it to drive frequency, to drive loyalty. So there's a lot of great, you know, just personalized marketing initiatives around that, that we can tap into, even the idea of running a platform based loyalty program, that is enabled on Zenoti as well. Other things beyond just the marketing side of things, which I think is super important, and I alluded to this in my comments is this notion of salon operations and brand standards outside of reviews on Google and Yelp right now, we don't have a lot of insight to this. Now, there's a lot of customer feedback through this Zenoti platform that is very streamlined that we can get right away that our franchisees can operationalize on, on the fly when they get that feedback on things to work on. And we can collate that, we can correlate that to results, we can, when we get positive reviews, we can -- there's prompts to already automatically upload those to Google and Yelp, which helps with digital footprint. So there's a lot of really great things that can happen with this platform. And it'll be way more strengthened once the entire system is on it, versus the 1140 that are on it today.

Okay, sounds great. Can you remind us, you mentioned that you're getting $2 million potentially in progress fees from Zenoti. What's remaining to be done in terms of potential for that? And remember, it's supposed to go for the debt. Is that still correct?

Yes, that's still correct. So yes, there's 2 million, which is part of the original -- is part of the original $20 million upfront purchase price. And then the remaining proceeds, you know, we had mentioned as part of the original transaction, that there was about $19 million of additional potential proceeds. At that time, that was based on a number of factors, the key one being the amount of salons that migrated. Now our salon count has gone down since that time. So you can kind of -- we haven't given what the exact payment is per salon, but you can kind of do some extrapolation of approximately 19 million our salon count at the time, and kind of take a look at where it is now, and that will give you some view of what's left remaining to collect.

Okay.

And that does go to - sorry, that does go towards the debt.

I know that you've been expanded marketing materials, bringing more regularity to some of the in-store marketing. What has been the impact of that? And what also has been now that you are done for almost a year now in store mark - in stores teaching, how is that continue to expand?

Yes. So those are really strong foundational items that we are putting into place. I would say it's a little hard to track the exact impact of that, because as opposed to some sort of trackable customer that came in due to the certain thing, there's no, you know, there's nothing trackable on a poster or signage and collateral. I can say, okay, this is exactly what drove this customer behavior to that. That being said, we do think things like that are complete table stakes. And so our job is to continue to do them, and ensure that they're done well. The other side of that equation is, again, I kind of mentioned and alluded to brand standards, it's not just kind of rolling this out. But at this point, we've kind of more shifted towards that they're used, and they're used properly. So, we've kind of centered around. It's important to have this out there, let's have it out there. Let's get a practice of using it. Now, let's ensure that there's use of it. So there's going to be a lot of focus on ensuring that our franchisees are properly using these tools that we have out there, or else it does us no good to have them out there to have them out there sake. So it's really at this point in time ensuring the uptake of those tracking the uptake, and then we'll be able to have a little bit of a better sense of, okay, we know XYZ franchisees are using this, as its intended, we know XYZ maybe are not. So then we can now start correlating to see which salons that are using it properly versus those that are not, and come up with data that way, which will even help drive further adoption of those programs as well.

Okay. And last question. In terms of inflation, and the ability to raise prices, I know that you mentioned previously that a lot of the gains in comps has been inflation and on price raising. Is that still something that we should be thinking about in terms of a driver here? Or is that going to slow down? How should we be thinking about going forward, I guess, as the overall drivers of the business in terms of that? Thank you.

Yes. No, thanks, Eric. And on that piece, you know, that has been, right? And we know we need to start moving the needle on customer traffic. That's an equation that has been hard to solve for a very long time. And the game has changed. It’s reset a little bit through the pandemic and how often people go, where people are going, what the considerations are to visit. So yes, so we have a -- we are testing a number of things out there to really optimize our customer counts, try to drive as much productivity through increased customer counts, through texts, through traffic driving initiatives such as promotions and other things of that nature, which will help, I mean, those will be incremental. And when we find it centered around those, that seemed to make the most impact, we'll look to do that in a much broader scale. Now beyond that, as I kind of mentioned on the call, I was vague about this, those are all good incremental things, and they should be done, and I think they will have an impact. But I do think there are other means, and it's a good time for us to take some bigger swings of sources of differentiation that run beyond traditional promotional campaigns and et cetera, bigger swings to move the needle. And like I said, versus being very specific, given how important uniqueness and speed is in this industry, rather kind of let you know that we're working on those things than any sort of specifics around those things. However, once we start actually implementing and rolling them out over the next, call it six to eight months, we can definitely start talking about them more as they they're showing up more and market.

Great, Congrats and good luck for the holiday.

Thank you.

With no further questions, we will conclude the call by thanking everyone for joining and have a great day.