Good morning, and thank you for joining the Regis Second Quarter 2026 Earnings Conference Call. I am your host, Kersten Zupfer, Executive Vice President and Chief Financial Officer. I am joined today by our Interim Chief Executive Officer, Jim Lain. [Operator Instructions] And 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 applies to our comments made on the call today. These documents can be found on our website, www.regiscorp.com/investor-relations. We will be taking questions at the end of the call. Please use the Q&A feature to submit any questions. With that, I will now turn the call over to Jim Lain.

Good morning, everyone, and thank you for joining us for Regis Corporation's Second Quarter Fiscal 2026 Earnings Call. As I mentioned last quarter, our focus remains on building a more durable, modern and disciplined Regis, one that is positioned to sustain consistent cash generation, improve financial performance and create long-term value for all stakeholders. Q2 represents continued progress on that journey. We are operating with greater precision and sharpening our focus on the execution levers that matter most despite traffic headwinds across the system. For the second quarter, adjusted EBITDA was $8 million, an increase of $900,000 year-over-year, driven by continued G&A discipline and contributions from our company-owned salon portfolio. Year-to-date adjusted EBITDA of $16 million is up $1.2 million versus the prior year. Consolidated same-store sales for the quarter declined modestly by 0.10%. Importantly, Supercuts delivered same-store sales growth of 2% year-to-date, while consolidated same-store sales increased 0.4%. We generated $1.5 million of unrestricted cash from operations in Q2 and $3.9 million year-to-date, reflecting improved operating discipline and cash management. At the same time, traffic remains our most significant challenge and the primary drag on top line performance. While pricing actions have supported same-store sales, particularly year-to-date, sustainable traffic improvements remains the central objective of our strategy. Since Q1, our strategy has not changed. What's different is the focus and rigor with which we are executing it. Over the past 2 quarters, we've zeroed in on the specific enablers that drive effective execution, including tighter organizational alignment, clear leader ownership, disciplined capital deployment and a sharper focus on adoption and compliance across the system. We continue to make good progress in our efforts to modernize and transform our flagship brand, Supercuts. Highlights include continued improvements in loyalty participation, digital engagement and execution of brand standards. In December, we launched…

Thanks, Jim. As a reminder, the company's acquisition of approximately 300 salons from Alline closed on December 19, 2024. Consequently, our results for the fiscal second quarter ending December 31, 2025, include a full period of contribution from those salons, while the prior year quarter included less than 2 weeks of contribution, which affects year-over-year comparability. As Jim discussed, our fiscal 2026 second quarter results reflect ongoing progress in executing our transformation strategy. While this work will take time, our fiscal second quarter results demonstrate continued strengthening of Regis' financial performance, supported by improving brand level performance and advancement of the initiatives that will drive long-term profitable and sustainable growth. For the second quarter, we delivered a 13% increase in GAAP operating income, $8 million in consolidated adjusted EBITDA and generated positive cash from operations for the fifth consecutive quarter. Total second quarter revenue was $57.1 million, an increase of 22.3% or $10.4 million compared to the prior year. This increase was primarily driven by increased revenue from company-owned salons resulting from the acquisition of Alline in December of 2024. This increase was partially offset by lower royalties and fees and non-margin franchise rental income. As of December 31, 2025, we had a net decrease of 374 franchise locations compared to December 31, 2024. Of the 374 franchise locations that closed since last December, 96 were in the 6 months ended December 31, 2025. We believe closures in the second half of fiscal year 2026 will be in the same range as the first half of fiscal 2026. The closures year-over-year primarily involved underperforming stores with much lower trailing 12-month sales than our top-performing units. The gap between those stores and our highest performers was approximately $350,000, highlighting both the strong potential in our system and the opportunity to further…

We do have a question from Bill Charters of Sabal Capital.

Well, that's great news on the proactive refinancing efforts. I know it's almost 5 months away, but that's good that you're looking at that now. My question is actually on the Alline stores. And what is your initiative to improve performance there? Is it pricing? If you could just elaborate on that, that would be great.

Yes. Bill, this is Jim. Thanks for the question. Thanks for joining today. Yes, this has been one that I've been particularly involved with for the last many months. There's really 3 components to what we're doing. First off is a refinement of the pay plan itself. I'm no stranger to pay plans in our business, and this particular pay plan needed a bit of tweaking to put it kind of in simplistic terms. And we've made some, what I think to be pretty solid meaningful adjustments without any kind of a massive impact at all to the stylist. Second component is pricing. I think we were a bit slow early this past year in terms of taking price, and we've caught that up. We took further price adjustments in early December. And then the important part about pricing when you take price with a pay plan is that you adjust the associated tiers, the commensurate tiers so that it's all kind of going up equally together, that ensures that you maintain the appropriate margins in terms of the pay plan itself versus labor. And then lastly, what I will call labor optimization. You heard me talk in my narrative about the early steps we're taking with AI, and we've done some good work here. This is probably one of the first notable steps we've taken where we've levered the machine learning to help us, as an example, dumping in data in terms of sales by hour, so call it dayparts so that we better understand where we're overstaffed on stylist or understaffed on stylist. And one of the first things that really popped for us was where we were overstaffed. And so moving those stylists accordingly with the business is really the kind of the ultimate output of this labor optimization tool. It's early. I like what I see so far with it, but I think it's going to take the rest of the quarter that we're in to get a better understanding and where that might need to be tweaked. So listen, overall, I'm encouraged by what I'm seeing so far, and we're going to continue to stay very, very close to it.

Great. One other thing, just in the stores, I think it was like last fiscal year, it was -- maybe the store closures were 200. So far this year, maybe 100 closures, and you kind of guided for another 100. So if you look at apples-to-apples with the Alline stores going to company-owned from franchise, that is about a 50% reduction. Is that right from the previous fiscal year?

Yes, that's about right. Just -- you mean reduction from half of the amount of closures that we had last year?

Yes.

That's said properly, Bill.

We did get one more question in the Q&A feature, and I'll just read it and respond. Can you share any preliminary high-level feedback you're getting from potential replacement lenders on what rates you might get as a much more stable system with better leverage ratios? I'd love to be able to answer that at this point. But unfortunately, I can't really share anything more on rates or discussions we've been having, but know that we are having initial conversations with potential advisers. And as we can share more information, we definitely will.

Yes. Another question has come in. Can you walk through major new insights or initiatives from awareness to consideration to store visit to retention to address foot traffic goals? And if I'm following the question correctly, yes, there's -- if you listen kind of what I walked through in the narrative, the loyalty component, obviously, in Supercuts is a big driver, and we're continuing to see loyalty membership increase. With that, we stay highly focused on a group of what I would call lead measures with the lag -- the ultimate lag measure being the impact on traffic. And there are several components there. One is top of funnel, middle funnel, bottom funnel paid media, driving customer acquisition and then getting the customer in our door and then maintaining the stickiness of that customer. And that's where the CRM and the loyalty come into play. But data such as online booking, we look at very, very closely, 90-day customer retention, transactions with a valid e-mail. Those are all of the things that I consider to be important lead measures. And again, the primary drivers, the resources, the tools we're using and leaning into is paid media, and we continue to improve and tighten our execution there as well as loyalty, the kind of offers that we have and down the road, what I would call gamification in that particular arena. And then, of course, the whole idea of 90-day customer retention and what we're doing to maintain that stickiness.

We did get a couple more questions that came in through the Q&A. I'll combine these 2 questions from the same individual. Are you planning to add cost-cutter locations? And why is loyalty adoption lagging in SmartStyle and cost cutters?

Yes. So first off, cost-cutter locations, there isn't an all-out effort to add cost-cutter locations. However, there are some cost-cutter locations that are coming online really as we speak right now in an area where a franchisee has found the ability to go over an old hair cutting business and has converted that business is now defunct and the owner of a Supercuts brand for us has gone in and been able to convert those to cost cutters, providing kind of a cool approach where we've got the 2 brands now in a given DMA and able to grow instead of growing the Supercuts brand where it didn't make sense, we can bring in the cost-cutter brand and fill in appropriately and productively. So I'm encouraged by that. And then in terms of loyalty adoption, the loyalty adoption is lagging because we started it later. It came -- we just have recently turned it on in the balance of our brands. The good news is we're seeing it grow. And in fact, in some cases, it's growing at a faster rate than it did initially at Supercuts when we launched it at Supercuts. So as I said in my narrative, ensuring that we are implementing and taking the logical wins that we're seeing on the Supercuts side and deploying those into the balance of our brands is an important part of our strategy. In terms of the CEO search, sorry, I wanted to make sure I'm looking at the questions here live. We continue -- the Board continues to evaluate and continues to consider the appropriate options for the next CEO. And I continue to operate as I am in running the organization and working in close partnership with the Board to ensure that we're moving forward. So more to come.

That is -- that wraps up our Q&A session. That wraps up our second quarter fiscal year 2026 earnings call. Thank you for your interest and continued support of Regis. Have a great day. Thank you.