10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2021
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from             to

Commission file number 1-12725

Regis Corporation

(Exact name of registrant as specified in its charter)

Minnesota			41-0749934
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
3701 Wayzata Boulevard,	Minneapolis	Minnesota	55416
(Address of principal executive offices)			(Zip Code)

 (952) 947-7777

(Registrant's telephone number, including area code) 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to be submit and post such files). Yes ☒ No ☐

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐ No ☒  

Title of each class	Trading symbol	Name of exchange
Common Stock, $0.05 par value	RGS	NYSE

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 29, 2021: 45,370,007

REGIS CORPORATION

INDEX

 

Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited):
		Condensed Consolidated Balance Sheet as of September 30, 2021 and June 30, 2021	2
		Condensed Consolidated Statement of Operations for the three months ended September 30, 2021 and 2020	3
		Condensed Consolidated Statement of Comprehensive Loss for the three months ended September 30, 2021 and 2020	4
		Condensed Consolidated Statement of Shareholders' Equity for the three months ended September 30, 2021 and 2020	5
		Condensed Consolidated Statement of Cash Flows for the three months ended September 30, 2021 and 2020	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
	Item 4.	Controls and Procedures	33
Part II.	Other Information		34
	Item 1.	Legal Proceedings	34
	Item 1A.	Risk Factors	34
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
	Item 5.	Other Information	35
	Item 6.	Exhibits	36
	Signatures		37

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

REGIS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

(Dollars in thousands, except share data)

	September 30, 2021		June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	45,508	$	19,191
Receivables, net	21,833		27,372
Inventories	16,774		22,993
Other current assets	16,049		17,103
Total current assets	100,164		86,659
Property and equipment, net	22,588		23,113
Goodwill	229,007		229,582
Other intangibles, net	3,604		3,761
Right of use asset (Note 7)	573,475		611,880
Other assets	40,013		41,388
Total assets	$	968,851	$	996,383
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	20,784	$	27,157
Accrued expenses	48,099		54,857
Short-term lease liability (Note 7)	113,585		116,471
Total current liabilities	182,468		198,485
Long-term debt, net (Note 8)	195,805		186,911
Long-term lease liability (Note 7)	480,769		518,866
Other non-current liabilities	69,999		75,075
Total liabilities	929,041		979,337
Commitments and contingencies (Note 5)
Shareholders' equity:
Common stock, $0.05 par value; issued and outstanding 43,964,489 and 35,795,844 common shares at September 30, 2021 and June 30, 2021, respectively	2,198		1,790
Additional paid-in capital	58,310		25,102
Accumulated other comprehensive income	9,069		9,543
Accumulated deficit	(29,767)		(19,389)
Total shareholders' equity	39,810		17,046
Total liabilities and shareholders' equity	$	968,851	$	996,383

_______________________________________________________________________________ 

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

2

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Three Months Ended September 30, 2021 And 2020

(Dollars and shares in thousands, except per share data amounts)

	Three Months Ended September 30,
	2021		2020
Revenues:
Royalties	$	16,602	$	11,405
Fees	3,265		2,042
Product sales to franchisees	8,008		13,742
Advertising fund contributions	8,114		4,509
Franchise rental income (Note 7)	33,762		32,283
Company-owned salon revenue	8,005		47,415
Total revenue	77,756		111,396
Operating expenses:
Cost of product sales to franchisees	8,112		10,678
General and administrative	21,789		26,148
Rent (Note 7)	1,803		13,225
Advertising fund expense	8,114		4,510
Franchise rent expense	33,762		32,283
Company-owned salon expense (1)	7,945		42,943
Depreciation and amortization	1,869		7,376
Long-lived asset impairment	163		5,824
Total operating expenses	83,557		142,987
Operating loss	(5,801)		(31,591)
Other (expense) income:
Interest expense	(3,306)		(3,762)
Loss from sale of salon assets to franchisees, net	(1,080)		(662)
Interest income and other, net	(239)		114
Loss from continuing operations before income taxes	(10,426)		(35,901)
Income tax benefit	48		635
Net loss	$	(10,378)	$	(35,266)
Net loss per share:
Basic and diluted:
Net loss per share, basic and diluted (2)	$	(0.28)	$	(0.98)
Weighted average common and common equivalent shares outstanding:
Basic and diluted	36,850		35,908

_______________________________________________________________________________

(1)Includes cost of service and product sold to guests in our Company-owned salons. Excludes general and administrative expense, rent and depreciation and amortization related to Company-owned salons.

(2)Total is a recalculation; line items calculated individually may not sum to total due to rounding.

 The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

3

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited)

For The Three Months Ended September 30, 2021 And 2020

(Dollars in thousands)

	Three Months Ended September 30,
	2021		2020
Net loss	$	(10,378)	$	(35,266)
Foreign currency translation adjustments	(474)		502
Comprehensive loss	$	(10,852)	$	(34,764)

_______________________________________________________________________________ 

 The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

4

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)

For The Three Months Ended September 30, 2021 And 2020

(Dollars in thousands)

	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
	Shares	Amount
Balance, June 30, 2021	35,795,844	$	1,790	$	25,102	$	9,543	$	(19,389)	$	17,046
Net loss	—	—		—		—		(10,378)		(10,378)
Foreign currency translation	—	—		—		(474)		—		(474)
Issuance of common stock, net of offering costs	8,072,304	404		31,789		—		—		32,193
Stock-based compensation	—	—		1,678		—		—		1,678
Net restricted stock activity	96,341	4		(259)		—		—		(255)
Balance, September 30, 2021	43,964,489	$	2,198	$	58,310	$	9,069	$	(29,767)	$	39,810

	Three Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Total
	Shares	Amount
Balance, June 30, 2020	35,625,716	$	1,781	$	22,011	$	7,449	$	94,462	$	125,703
Net loss	—	—		—		—		(35,266)		(35,266)
Foreign currency translation	—	—		—		502		—		502
Stock-based compensation	—	—		(1,225)		—		—		(1,225)
Net restricted stock activity	40,067	2		(190)		—		—		(188)
Minority interest	—	—		—		—		15		15
Balance, September 30, 2020	35,665,783	$	1,783	$	20,596	$	7,951	$	59,211	$	89,541

_______________________________________________________________________________ 

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

5

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

For The Three Months Ended September 30, 2021 And 2020

(Dollars in thousands)

	Three Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(10,378)	$	(35,266)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	1,574		6,087
Long-lived asset impairment	163		5,824
Deferred income taxes	(258)		(384)
Loss from sale of salon assets to franchisees, net	1,080		662
Stock-based compensation	1,678		(1,225)
Amortization of debt discount and financing costs	460		438
Other non-cash items affecting earnings	232		4
Changes in operating assets and liabilities, excluding the effects of asset sales (1)	(6,805)		(5,006)
Net cash used in operating activities	(12,254)		(28,866)
Cash flows from investing activities:
Capital expenditures	(1,524)		(3,811)
Proceeds from sale of assets to franchisees	—		3,735
Costs associated with sale of salon assets to franchisees	—		(125)
Net cash used in investing activities	(1,524)		(201)
Cash flows from financing activities:
Borrowings on revolving credit facility	10,000		—
Repayments of revolving credit facility	(1,106)		—
Proceeds from issuance of common stock, net of offering costs	32,193		—
Taxes paid for shares withheld	(255)		(187)
Distribution center lease payments	—		(238)
Net cash provided by (used in) financing activities	40,832		(425)
Effect of exchange rate changes on cash and cash equivalents	(148)		88
Increase (decrease) in cash, cash equivalents, and restricted cash	26,906		(29,404)
Cash, cash equivalents and restricted cash:
Beginning of period	29,152		122,880
End of period	$	56,058	$	93,476

_______________________________________________________________________________        

(1)Changes in operating assets and liabilities exclude assets and liabilities sold.

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

6

REGIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of September 30, 2021 and for the three months ended September 30, 2021 and 2020, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2021 and its consolidated results of operations, comprehensive loss, shareholders' equity and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2021 and other documents filed or furnished with the SEC during the current fiscal year.

COVID-19 Impact:

During the period ended September 30, 2021, the global coronavirus pandemic (COVID-19) had an adverse impact on operations. The COVID-19 pandemic continues to impact salon guest visits and franchisee staffing, resulting in a significant reduction in revenue. As a result, COVID-19 has, and may continue to have, a negative affect on revenue and profitability. The ultimate impact of the COVID-19 pandemic in both the short and long term is not currently estimable due to the uncertainty surrounding the duration of the pandemic, the availability and acceptance of preventative vaccines, the emergence and impact of new COVID-19 variants and changing government restrictions. Additional impacts to the business may arise that we are not aware of currently.

Inventories:

The Company has inventory valuation reserves for excess and obsolete inventories or other factors that may render inventories unmarketable at their historical costs. In fiscal year 2021, the Company announced it would transition away from its wholesale product distribution model in favor of a third-party distribution model. As a result, the Company exited one distribution center in the quarter and plans to exit its other distribution center in fiscal year 2022. To facilitate the exit, the Company is selling inventory at discounts and disposing of hard-to-sell products. Additionally, the reduction in company-owned salons decreases the Company's ability to re-distribute inventory from closed locations to other salons to be sold or used. The inventory valuation reserve as of September 30, 2021 and June 30, 2021 was $8.8 and $11.8 million, respectively.

7

Salon Long-Lived Asset and Right of Use Asset Impairment Assessments:

The Company assesses impairment of long-lived salon assets and right of use (ROU) assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in the use of the assets. The first step is to assess recoverability, and in doing that, the undiscounted salon cash flows are compared to the carrying value of the salon assets. If the undiscounted estimated cash flows are less than the carrying value of the assets, the Company calculates an impairment charge based on the difference between the carrying value of the asset group and its fair value. The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available. See Note 7 of the unaudited Condensed Consolidated Financial Statements for further discussion related to the ROU asset impairment.

Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as changes in economic conditions and changes in operating performance. As the ongoing expected cash flows and carrying amounts of long-lived assets are assessed, these factors could cause the Company to realize material impairment charges.

Goodwill:

As of September 30, 2021 and June 30, 2021, the Franchise reporting unit had $229.0 and $229.6 million, respectively, of goodwill. The change in goodwill for the three months ended September 30, 2021 is due to foreign currency translation. The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. An interim impairment analysis was not required in the three months ended September 30, 2021.

The Company performs its annual impairment assessment as of April 30. For the fiscal year 2021 annual impairment assessment, the Company performed a Step 1 impairment test for the Franchise reporting unit. The Company compared the carrying value of the Franchise reporting unit, including goodwill, to the estimated fair value. The results of this assessment indicated that the estimated fair value of the Company's Franchise reporting unit significantly exceeded the carrying value.

8

Classification of Revenue and Expenses:

Beginning in the first quarter of fiscal year 2022, the Company adjusted its Statement of Operations for both periods presented to align the presentation of results to its franchise-focused business. Below is a summary of the changes to the financial statement captions. The change does not have a financial impact on the Company's reported revenue, operating loss, reported net loss or cash flows from operations.

Royalties - sales-based royalty received from franchisees. In prior years, these fees were included in Royalties and Fees and disclosed in the footnotes.

Fees - fees received from franchisees and third parties, including franchise fees, software and hardware fees related to Opensalon® Pro and fees received from the third-party distributors.

Product sales to franchisees - wholesale product sales to franchisees. This caption equates to Product sales in the Franchise segment in prior years. The Company is changing its franchise product sales business in fiscal year 2022 from a wholesale distribution model to a third-party distribution model. This revenue is expected to decrease significantly during fiscal year 2022.

Advertising fund contributions - sales-based advertising fund contributions received from franchisees. In prior years, these fees were included in Royalties and Fees and disclosed in the footnotes.

Company-owned salon revenue - service revenue and revenue derived from sales of product in Company-owned salons. This caption equates to revenue reported in the Company-owned segment in prior periods.

Cost of product sales to franchisees - direct cost of inventory and freight and other costs of sales. In prior years, these sales were included in the Franchise segment cost of product and site operating expenses.

Company-owned salon expense - cost of service and product sold to guests in our Company-owned salons and other salon-related costs. In prior years, these costs were classified as Company-owned segment cost of service, cost of product and site operating expenses. Excluded from this caption are general and administrative expense, rent and depreciation and amortization related to company-owned salons.

Depreciation:

Depreciation expense in the three months ended September 30, 2021 and 2020 include $0.3 and $1.3 million of asset retirement obligations, which are cash expenses.

9

2.    REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized at point of sale

Product sales to franchisees are recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery. Company-owned salon revenues are recognized at the time when the services are provided or the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the guest. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns.

Revenue recognized over time

Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenues are billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statement of Operations. The treatment increases both the gross amount of reported revenue and expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, which is typically ten years. Software fees are recognized over the term of the SaaS agreement. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees. The Company recognizes franchise rental income and expense when it is due to the landlord.

Information about receivables, broker fees and deferred revenue subject to the current revenue recognition guidance is as follows:

	September 30, 2021		June 30, 2021		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	14,612	$	19,112	Receivables, net
Broker fees	18,272		19,254		Other assets
Deferred revenue:
Current
Gift card liability	$	2,150	$	2,240	Accrued expenses
Deferred franchise fees unopened salons	31		40		Accrued expenses
Deferred franchise fees open salons	5,901		5,884		Accrued expenses
Total current deferred revenue:	$	8,082	$	8,164
Non-current
Deferred franchise fees unopened salons	$	5,824	$	6,571	Other non-current liabilities
Deferred franchise fees open salons	31,101		32,365		Other non-current liabilities
Total non-current deferred revenue	$	36,925	$	38,936

10

Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, rent, franchise product sales and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. The following table is a rollforward of the allowance for doubtful accounts for the period (in thousands):

Balance as of June 30, 2021	$	7,774
Provision for doubtful accounts (1)	237
Provision for franchisee rent (2)	364
Reclass of accrued rent (3)	396
Write-offs	(102)
Balance as of September 30, 2021	$	8,669

_______________________________________________________________________________

(1)The provision for doubtful accounts is recognized as General and administrative expense in the unaudited Condensed Consolidated Statement of Operations.

(2)The provision for franchisee rent is recognized as Rent in the unaudited Condensed Consolidated Statement of Operations.

(3)The reclass of accrued rent represents franchisee rent obligations guaranteed by the Company that were unbilled and deemed unrecoverable as of June 30, 2021. The amounts were billed in fiscal year 2022 and the related accrual was reclassified to the allowance for doubtful accounts.

Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as general and administrative expense over the term of the franchise agreement. The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):

Balance as of June 30, 2021	$	19,254
Additions	25
Amortization	(862)
Write-offs	(145)
Balance as of September 30, 2021	$	18,272

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended September 30, 2021 and 2020 was $1.6 and $1.6 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2021 is as follows (in thousands):

Remainder of 2022	$	4,391
2023	5,866
2024	5,631
2025	5,246
2026	4,776
Thereafter	11,092
Total	$	37,002

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3.    SHAREHOLDERS' EQUITY:

Stock-Based Employee Compensation:

During the three months ended September 30, 2021, the Company granted one equity award as follows:

	Three Months Ended September 30, 2021
Restricted stock units	2,987

The RSUs granted during the three months ended September 30, 2021 vest on October 27, 2021 and were granted to a Board member who joined the Company during the quarter.

Total compensation cost for stock-based payment arrangements totaling $1.7 and $(1.2) million for the three months ended September 30, 2021 and 2020, respectively, was recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations. In the three months ended September 30, 2020, stock compensation includes a $2.4 million benefit from the forfeiture of awards related to the departure of the Company's former CEO.

Share Issuance Program:

In fiscal year 2021, the Company filed a $150.0 million shelf registration statement and $50.0 million prospectus supplement with the Securities and Exchange Commission (SEC) under which it may offer and sell, from time to time, up to $50.0 million worth of its Class A common stock in "at-the-market" offerings. During the three months ended September 30, 2021, the Company raised gross proceeds of $33.2 million related to the "at-the-market" offering and paid fees to sales agents and other fees of $1.0 million. On September 29, 2021, the Company sold 1.2 million shares for net proceeds of $5.0 million, which settled on October 1, 2021. The settlement occurred in the second quarter so it is excluded from interim unaudited Condensed Consolidated Statement of Shareholders' Equity and Cash Flows. Net proceeds from sales of shares under the "at-the-market" program, if any, may be used to, among other things, fund working capital requirements, repay debt and support growth strategies.

12

4.     INCOME TAXES:

 A summary of income tax benefits and corresponding effective tax rates is as follows:

	Three Months Ended September 30,
	2021			2020
	(Dollars in thousands)
Income tax benefit	$	48		$	635
Effective tax rate	0.5		%	1.8		%

The recorded tax provisions and effective tax rates for the three months ended September 30, 2021 and 2020 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance.

The Company is no longer subject to IRS examinations for years before 2014. Furthermore, with limited exceptions, the Company is no longer subject to state and international income tax examinations by tax authorities for years before 2012.

5.     COMMITMENTS AND CONTINGENCIES:

The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. Litigation is inherently unpredictable, and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period. In addition, our existing point-of-sale system supplier had challenged the development of certain parts of our technology systems in litigation brought in the Northern District of California, case No. 20-cv-02181-MMC. The Company and the supplier entered into an agreement, effective June 25, 2021, that provided for the dismissal of the lawsuit and set forth a commercial services agreement pursuant to which the supplier will assist in the transfer of franchise salons from its point-of-sale system to the Company's salon management system, Opensalon® Pro. The Company's accrual related to the agreement was $3.0 million as of September 30, 2021 and June 30, 2021.

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6.    CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded within other current assets on the unaudited Condensed Consolidated Balance Sheet to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statement of Cash flows:

	September 30, 2021		June 30, 2021
	(Dollars in thousands)
Cash and cash equivalents	$	45,508	$	19,191
Restricted cash, included in other current assets (1)	10,550		9,961
Total cash, cash equivalents and restricted cash	$	56,058	$	29,152

_______________________________________________________________________________

(1)Restricted cash within other current assets primarily relates to consolidated advertising cooperatives funds, which can only be used to settle obligations of the respective cooperatives and contractual obligations to collateralize the Company's self-insurance programs.

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7.    LEASES:

At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and some of its corporate facilities under operating leases. The original terms of the salon leases range from 1 to 20 years with many leases renewable for an additional 5 to 10-year term at the option of the Company. In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels. For most leases, the Company is required to pay real estate taxes and other occupancy expenses. Total rent includes the following:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Office and warehouse rent	$	1,669	$	1,203
Lease termination expense (1)	1,340		5,554
Lease liability benefit (2)	(2,431)		(6,061)
Franchise salon rent	329		718
Company-owned salon rent	896		11,811
Total	$	1,803	$	13,225

_______________________________________________________________________________

(1)During the three months ended September 30, 2021, the Company paid $0.9 million to exit its distribution centers before the lease end dates and incurred costs of $0.4 million to exit salons before the lease end date in order to relieve the Company of future lease obligations. For the three months ended September 30, 2020, lease termination fees includes $2.5 million of early termination payments to close salons before the lease end date to relieve the Company of future lease obligations and $3.1 million to accrue future lease payments for salons that are no longer operating.

(2)Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities which results in a net gain. In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statement of Operations. For the three months ended September 30, 2021 and 2020, franchise rental income and franchise rent expense were $33.8 and $32.3 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew SmartStyle and some franchise leases upon expiration. Other leases are expected to be renewed by the franchisee upon expiration. All lease-related costs are passed through to the franchisees.

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For salon operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed. The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any. The Company's consolidated ROU asset balance was $573.5 and $611.9 million as of September 30, 2021 and June 30, 2021, respectively. For leases classified as operating leases, expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed. Generally, the non-lease components, such as real estate taxes and other occupancy expenses, are separate from rent expense within the lease and are not included in the measurement of the lease liability because these charges are variable.

The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined. The Company uses the portfolio approach in applying the discount rate based on the original lease term. The weighted average remaining lease term was 6.38 and 6.44 years and the weighted average discount rate was 4.14% and 4.11% for all salon operating leases as of September 30, 2021 and June 30, 2021, respectively.

A lessee's ROU asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, applied to other elements of property, plant, and equipment. The Company has identified its asset groups at the individual salon level as this represents the lowest level that identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Poor salon performance, primarily due to the COVID-19 pandemic, resulted in an ASC 360-10-35-21 triggering event. As a result, management assessed underperforming salon asset groups, which included the related ROU assets, for impairment in accordance with ASC 360.

The first step in the impairment test under ASC 360 is to determine whether the long-lived assets are recoverable, which is determined by comparing the net carrying value of the salon asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. Estimating cash flows for purposes of the recoverability test is subjective and requires significant judgment. Estimated future cash flows used for the purposes of the recoverability test were based upon historical cash flows for the salons, adjusted for expected changes in future market conditions related to the COVID-19 pandemic, and other factors. The period of time used to determine the estimates of the future cash flows for the recoverability test was based on the remaining useful life of the primary asset of the group, which was the ROU asset in all cases.

The second step of the long-lived asset impairment test requires that the fair value of the asset group be estimated when determining the amount of any impairment loss. For the salon asset groups that failed the recoverability test, an impairment loss was measured as the amount by which the carrying amount of the asset group exceeds its fair value. The Company applied the fair value guidance within ASC 820-10 to determine the fair value of the asset group from the perspective of a market-participant considering, among other things, appropriate discount rates, multiple valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group. To determine the fair value of the salon asset groups, the Company utilized market-participant assumptions rather than the Company's own assumptions about how it intends to use the asset group. The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include: the market rent of comparable properties based on recently negotiated leases as applicable, the asset group's projected sales for properties with no recently negotiated leases, and a discount rate.

In the three months ended September 30, 2021 and 2020, the Company recognized a long-lived impairment charge of $0.2 and $5.8 million, respectively, which included $0.1 and $4.6 million, respectively, related to the ROU assets, in the unaudited Condensed Consolidated Statement of Operations. The impairments recorded for the three months ended September 30, 2021 were primarily the result of triggering events identified on certain underperforming salons, salons that were identified to close in the year, and certain salons where franchisees were unable to fulfill their rent obligations. Assessing the long-lived assets for impairment requires management to make assumptions and to apply judgment, which can be affected by economic conditions and other factors that can be difficult to predict. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it uses to calculate impairment losses for its long-lived assets, including its ROU assets. Our projections of future operating performance do not anticipate future salon closures due to the COVID-19 pandemic. However, the ultimate severity and longevity of the COVID-19 pandemic is unknown, therefore; if actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

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As of September 30, 2021, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (in thousands):

Fiscal Year	Leases for Franchise Salons		Leases for Company-owned Salons		Corporate Leases		Total Operating Lease Payments		Sublease Income To Be Received From Franchisees		Net Rent Commitments
Remainder of 2022	$	96,767	$	4,460	$	2,071	$	103,298	$	(96,767)	$	6,531
2023	115,343		4,944		2,365		122,652		(115,343)		7,309
2024	100,818		3,005		1,486		105,309		(100,818)		4,491
2025	84,740		1,013		1,525		87,278		(84,740)		2,538
2026	71,674		566		1,563		73,803		(71,674)		2,129
Thereafter	177,274		904		6,498		184,676		(177,274)		7,402
Total future obligations	$	646,616	$	14,892	$	15,508	$	677,016	$	(646,616)	$	30,400
Less amounts representing interest	79,466		925		2,271		82,662
Present value of lease liabilities	$	567,150	$	13,967	$	13,237	$	594,354
Less current lease liabilities	106,010		5,407		2,168		113,585
Long-term lease liabilities	$	461,140	$	8,560	$	11,069	$	480,769

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8.    FINANCING ARRANGEMENTS:

The Company's long-term debt consists of the following:

Revolving Credit Facility

	Maturity Date	September 30, 2021	September 30, 2021		June 30, 2021
	(Fiscal Year)	(Interest rate %)	(Dollars in thousands)
Revolving credit facility	2023	5.00%	$	195,805	$	186,911

At September 30, 2021, cash and cash equivalents totaled $45.5 million. As of September 30, 2021, the Company has $195.8 million of outstanding borrowings under a $293.3 million revolving credit facility. The credit facility decreased $1.1 million from $294.4 million as of June 30, 2021 in accordance with the bulk sale provisions in the revolving credit facility agreement, due to the sale of secured inventory related to our transition to third-party distribution partners. At September 30, 2021, the Company had outstanding standby letters of credit under the revolving credit facility of $15.7 million, primarily related to the Company's self-insurance program. The unused available credit under the revolving credit facility was $81.8 million as of September 30, 2021. The Company's liquidity per the agreement includes the unused available balance under the credit facility, unrestricted cash and cash equivalents and the shortfall in the gap in expected proceeds from the sale of salon assets of $20.9 million as of September 30, 2021. Total liquidity per the agreement was $148.2 million as of September 30, 2021. The revolving credit facility has a minimum liquidity covenant of $75.0 million. As of September 30, 2021, the Company had cash, cash equivalents and restricted cash of $56.1 million and current liabilities of $182.5 million.

The Company was in compliance with all covenants and other requirements of the financing arrangements as of September 30, 2021 and believes it will continue to be in compliance for at least one year from the filing date.

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9.    FAIR VALUE MEASUREMENTS:

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2021 and June 30, 2021, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets and accounts payable approximated their carrying values. The estimated fair values of the Company's debt is based on Level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets, including the Company's equity method investments, tangible fixed and other assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.

The following impairments were based on fair values using Level 3 inputs:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Long-lived asset impairment (1)	$	163	$	5,824

_______________________________________________________________________________

(1)See Note 1 to the unaudited Condensed Consolidated Financial Statements.

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10.    SEGMENT INFORMATION:

Segment information is prepared on the same basis that the chief operating decision maker reviews financial information for operational decision-making purposes. Beginning in fiscal year 2022, corporate costs are included within the Franchise segment to reflect how the chief operating decision maker reviews the business.

The Company's reportable operating segments consisted of the following salons:

	September 30, 2021		June 30, 2021
FRANCHISE SALONS:
SmartStyle/Cost Cutters in Walmart Stores	1,676		1,666
Supercuts	2,369		2,386
Portfolio Brands	1,391		1,357
Total North American salons	5,436		5,409
Total International salons (1)	151		154
Total Franchise salons	5,587		5,563
as a percent of total Franchise and Company-owned salons	96.9	%	95.3	%
COMPANY-OWNED SALONS:
SmartStyle/Cost Cutters in Walmart Stores	67		91
Supercuts	24		35
Portfolio Brands	88		150
Total Company-owned salons	179		276
as a percent of total Franchise and Company-owned salons	3.1	%	4.7	%
OWNERSHIP INTEREST LOCATIONS:
Equity ownership interest locations	77		78
Grand Total, System-wide	5,843		5,917

_______________________________________________________________________________

(1)Canadian and Puerto Rican salons are included in the North American salon totals.

As of September 30, 2021, the Franchise operating segment is comprised primarily of Supercuts®, SmartStyle®, Cost Cutters®, First Choice Haircutters®, Magicuts®, and Roosters® concepts and the Company-owned operating segment is comprised primarily of SmartStyle®, Supercuts®, Cost Cutters®, and other regional trade names.

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Financial information concerning the Company's reportable operating segments is shown in the following tables:

	Three Months Ended September 30, 2021
	Franchise		Company-owned		Consolidated
	(Dollars in thousands)
Revenues:
Royalties	$	16,602	$	—	$	16,602
Fees	3,265		—		3,265
Product sales to franchisees	8,008		—		8,008
Advertising fund contributions	8,114		—		8,114
Franchise rental income	33,762		—		33,762
Company-owned salon revenue	—		8,005		8,005
Total revenue	69,751		8,005		77,756
Operating expenses:
Cost of product sales to franchisees	8,112		—		8,112
General and administrative	21,243		546		21,789
Rent	1,677		126		1,803
Advertising fund expense	8,114		—		8,114
Franchise rent expense	33,762		—		33,762
Company-owned salon expense	—		7,945		7,945
Depreciation and amortization	1,623		246		1,869
Long-lived asset impairment	—		163		163
Total operating expenses	74,531		9,026		83,557
Operating loss	$	(4,780)	$	(1,021)	$	(5,801)

	Three Months Ended September 30, 2020
	Franchise		Company-owned		Consolidated
	(Dollars in thousands)
Revenues:
Royalties	$	11,405	$	—	$	11,405
Fees	2,042		—		2,042
Product sales to franchisees	13,742		—		13,742
Advertising fund contributions	4,509		—		4,509
Franchise rental income	32,283		—		32,283
Company-owned salon revenue	—		47,415		47,415
Total revenue	63,981		47,415		111,396
Operating expenses:
Cost of product sales to franchisees	10,678		—		10,678
General and administrative	23,171		2,977		26,148
Rent	1,279		11,946		13,225
Advertising fund expense	4,510		—		4,510
Franchise rent expense	32,283		—		32,283
Company-owned salon expense	—		42,943		42,943
Depreciation and amortization	2,294		5,082		7,376
Long-lived asset impairment	610		5,214		5,824
Total operating expenses	74,825		68,162		142,987
Operating loss	$	(10,844)	$	(20,747)	$	(31,591)

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. This MD&A should be read in conjunction with the MD&A included in our June 30, 2021 Annual Report on Form 10-K and other documents filed or furnished with the SEC during the current fiscal year.

MANAGEMENT'S OVERVIEW

Regis Corporation (RGS) franchises technology-enabled hairstyling and hair care salons throughout the United States, Puerto Rico and the United Kingdom. As of September 30, 2021, the Company franchised, owned or held ownership interests in 5,843 worldwide locations. Our locations consisted of 5,766 system-wide North American and international salons, and in 77 locations we maintained a non-controlling ownership interest less than 100 percent. Each of the Company's salon concepts generally offer similar salon products and services and serve the mass market. As of September 30, 2021, the Company had 1,172 employees worldwide.

Impact of COVID-19 on Business Operations

During the period ended September 30, 2021, the COVID-19 pandemic had an adverse impact on operations. The COVID-19 pandemic continues to impact salon guest visits and franchisee staffing, resulting in a significant reduction in revenue. As a result, COVID-19 has, and may continue to have, a negative affect on revenue and profitability. The ultimate impact of the COVID-19 pandemic in both the short and long term is not currently estimable due to the uncertainty surrounding the duration of the pandemic, the availability and acceptance of preventative vaccines, the emergence and impact of new COVID-19 variants, and changing government restrictions. Additional impacts to the business may arise that we are not aware of currently.

Merchandising Strategy

As part of the Company's transformation to focus on managing and nurturing brands, and in line with its capital-light business, a new merchandise strategy to outsource product distribution was adopted in the third quarter of fiscal year 2021. The Company is shifting its product business from a wholesale model to a third-party distribution model. Management expects the change will positively impact franchisees by providing them access to industry-leading pricing, loyalty programs, promotional benefits, educational assets, and ongoing support. The Company will receive a fee from the third-party distributors which is included in Fees on the interim unaudited Condensed Consolidated Statement of Operations. The change is expected to result in product sales to franchisees providing significantly less revenue by the end of fiscal year 2022. Cost of product sales to franchisees and general and administrative expense are expected to decrease once the transition is complete which is expected to be by the end of fiscal year 2022.

CRITICAL ACCOUNTING POLICIES

The interim unaudited Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the interim unaudited Condensed Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could have a significant impact on the results reported in the interim unaudited Condensed Consolidated Financial Statements. We base these estimates on historical experience and other assumptions believed to be reasonable under the circumstances. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Changes in these estimates could have a material effect on our interim unaudited Condensed Consolidated Financial Statements.

Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Part II, Item 8 of the June 30, 2021 Annual Report on Form 10-K, as well as Notes 1 and 2 to the unaudited Condensed Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q. We believe the accounting policies related to the valuation of goodwill, the valuation and estimated useful lives of long-lived assets, estimates used in relation to tax liabilities and deferred taxes are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations. Discussion of each of these policies is contained under "Critical Accounting Policies" in Part II, Item 7 of our June 30, 2021 Annual Report on Form 10-K. Our policies related to revenue recognition guidance can be found in Note 2 to the unaudited Condensed Consolidated Financial Statements.

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RESULTS OF OPERATIONS

System-wide results

As an asset-light franchise platform, our results are impacted by our system-wide sales, which include sales by all points of distribution, whether owned by our franchisees or the Company. While we do not record sales by franchisees as revenue, and such sales are not included in our unaudited Condensed Consolidated Financial Statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe system-wide sales information aids in understanding how we derive royalty revenue and in evaluating performance.

System-wide same-store sales (1) by concept are detailed in the table below:

	Three Months Ended September 30,
	2021		2020
SmartStyle	17.0	%	(33.9)	%
Supercuts	30.5		(33.4)
Portfolio Brands	18.5		(30.2)
Consolidated system-wide same-store sales	23.2	%	(32.6)	%

_______________________________________________________________________________

(1)Fiscal year 2022 system-wide same-store sales are calculated as the total change in sales for system-wide franchise and company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period. Fiscal year 2021 system-wide same-store sales are calculated as the total change in sales for system-wide franchise and company-owned locations for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date system-wide same-store sales are the sum of the system-wide same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. System-wide same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

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Condensed Consolidated Results of Operations (Unaudited)

The following table sets forth, for the periods indicated, certain information derived from our unaudited Condensed Consolidated Statement of Operations. The percentages are computed as a percent of total consolidated revenues, except as otherwise indicated, and the increase (decrease) is measured in basis points.

	Three Months Ended September 30,
	2021		2020		2021		2020		2021
	($ in millions)				% of Total Revenues (1)				Increase (Decrease)
Royalties	$	16.6	$	11.4	21.4	%	10.3	%	1,110
Fees	3.3		2.0		4.2		1.8		240
Product sales to franchisees	8.0		13.7		10.3		12.3		(200)
Advertising fund contributions	8.1		4.5		10.4		4.0		640
Franchise rental income	33.8		32.3		43.4		29.0		1,440
Company-owned salon revenue	8.0		47.4		10.3		42.6		(3,230)
Cost of product sales to franchisees (2)	8.1		10.7		101.3		78.1		2,320
General and administrative	21.8		26.1		28.0		23.4		460
Rent	1.8		13.2		2.3		11.8		(950)
Advertising fund expense	8.1		4.5		10.4		4.0		640
Franchise rent expense	33.8		32.3		43.4		29.0		1,440
Company-owned salon expense	7.9		42.9		10.2		38.5		(2,830)
Depreciation and amortization	1.9		7.4		2.4		6.6		(420)
Long-lived asset impairment	0.2		5.8		0.3		5.2		(490)
Operating loss (3)	(5.8)		(31.6)		(7.5)		(28.4)		2,090
Interest expense	(3.3)		(3.8)		(4.2)		(3.4)		(80)
Loss from sale of salon assets to franchisees, net	(1.1)		(0.7)		(1.4)		(0.6)		(80)
Interest income and other, net	(0.2)		0.1		(0.3)		0.1		(40)
Income tax benefit (4)	—		0.6		0.5		1.8		N/A
Net loss (3)	(10.4)		(35.3)		(13.4)		(31.7)		1,830

_______________________________________________________________________________

(1)Cost of product sales to franchisees is computed as a percent of product sales to franchisees.

(2)Excludes depreciation and amortization expense.

(3)Total is a recalculation; line items calculated individually may not sum to total due to rounding.

(4)Computed as a percent of loss from continuing operations before income taxes. The income taxes basis point change is noted as not applicable (N/A) as the discussion within MD&A is related to the effective income tax rate.

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Consolidated Revenues

Consolidated revenues primarily include franchise royalties, fees, product sales to franchisees, advertising contributions, rental income, and service and product sales in company-owned salons. The following tables summarize revenues and same-store sales by concept, as well as the reasons for the percentage change:

	Three Months Ended September 30,
	2021			2020
	(Dollars in thousands)
Franchise:
Royalties	$	16,602		$	11,405
Fees	3,265			2,042
Product sales to franchisees	8,008			13,742
Advertising fund contributions	8,114			4,509
Franchise rental income	33,762			32,283
Total, Franchise	$	69,751		$	63,981
Franchise same-store sales (1)	23.7		%	(31.9)		%
Total, Company-owned salons	$	8,005		$	47,415
Consolidated revenues	$	77,756		$	111,396
Percent change from prior year (2)	(30.2)		%	(54.9)		%

_______________________________________________________________________________

(1)Franchise same-store sales in fiscal year 2022 are calculated as the total change in sales for franchise locations that were open on a specific day of the week during the current period and the corresponding prior period. Franchise same-store sales in fiscal year 2021 are calculated as the total change in sales for franchise locations for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

(2)Decrease due to the Company's strategic shift from a company-owned salon business to an asset-light franchise model.

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Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020

Consolidated Revenues

Consolidated revenues are primarily comprised of royalties, fees, advertising fund contributions, franchise product sales, rental income and company-owned salon revenue.

Consolidated revenue decreased $33.6 million, or 30.2%, for the three months ended September 30, 2021. Royalty revenue increased $5.2 million in the three months ended September 30, 2021 due to higher franchise system-wide sales and higher franchise salon counts. During the twelve months ended September 30, 2021, 692 salons were sold to franchisees and 799 and 31 system-wide salons were closed and constructed, respectively (2022 Net Salon Count Changes). During the three months ended September 30, 2021, company-owned salon revenue decreased $39.4 million due primarily to the sale of salons to franchisees and salon closures. For the three months ended September 30, 2021, the impact to consolidated revenue due to the sale of salons to franchisees and closure of salons was $35.3 million.

Royalties

During the three months ended September 30, 2021, royalties increased $5.2 million, or 45.6%, primarily due to the increase in franchise salons and higher franchise system-wide sales. Total franchised locations open at September 30, 2021 were 5,587 as compared to 5,226 at September 30, 2020.

Fees

During the three months ended September 30, 2021, fees increased $1.3 million, primarily due to the increase in franchise salons and an increase in salons running Opensalon® Pro.

Product Sales to Franchisees

Product sales to franchisees decreased $5.7 million, or 41.6%, during the three months ended September 30, 2021, primarily due to the Company's shift to third-party distribution partners. The Company expects revenue from product sales to decrease significantly during fiscal year 2022.

Advertising Fund Contributions

Advertising fund contributions increased $3.6 million, or 80.0%, during the three months ended September 30, 2021, primarily due to the increase in franchise salon count and system-wide sales.

Franchise Rental Income

During the three months ended September 30, 2021, franchise rental income increased $1.5 million, or 4.6%, primarily due to the increase in franchise salon count.

Company-owned Salon Revenue

Company-owned salon revenue decreased $39.4 million due to the decrease in Company-owned salons as a result of the sale of salons to franchisees and salon closures, a decline in product sales, and exiting our third-party logistic revenue.

Cost of Product Sales to Franchisees

The 2,320 basis point increase in cost of product as a percent of product revenues during the three months ended September 30, 2021 was primarily due to the Company reducing prices to liquidate inventory at its distribution centers to facilitate exiting the distribution centers.

General and Administrative

The decrease of $4.3 million, or 16.5%, in general and administrative expense during the three months ended September 30, 2021 was primarily due to lower administrative and field management salaries due to reductions in headcount as we align our cost structure with our transition to an asset-light franchise model. Additionally, bad debt expense decreased $2.1 million year-over-year. These decreases were offset by an increase in stock compensation expense of $2.9 million, due primarily to a $2.4 million benefit from the forfeiture of awards related to the departure of the Company's former CEO in fiscal year 2021.

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Rent

The decrease of $11.4 million, or 86.4%, in rent expense during the three months ended September 30, 2021 was primarily due to the net reduction in the number of company-owned salons. Partially offsetting the decrease is a $1.3 million broker fee incurred this fiscal year related to exiting the Company's distribution centers.

Advertising Fund Expense

Advertising fund expense increased $3.6 million, or 80.0%, during the three months ended September 30, 2021, primarily due to the increase in franchise salon count and system-wide sales.

Franchise Rent Expense

During the three months ended September 30, 2021, franchise rent expense increased $1.5 million, or 4.6%, primarily due to the increase in franchise salon count.

Company-owned Salon Expense

Company-owned salon expense for the three months ended September 30, 2021 decreased $35.0 million, or 81.6%, primarily due to the reduction in company-owned salons.

Depreciation and Amortization

The decrease of $5.5 million, or 74.3%, in depreciation and amortization during the three months ended September 30, 2021 was primarily due to the net reduction in company-owned salon counts and no depreciation expense in the current year related to the distribution center assets that were derecognized in the third quarter of fiscal year 2021.

Long-Lived Asset Impairment

In the three months ended September 30, 2021 and 2020, the Company recorded a long-lived asset impairment charge of $0.2 and $5.8 million, respectively, which included a ROU asset impairment charge of $0.1 and $4.6 million, respectively, and salon asset impairment of $0.1 and $1.2 million, respectively. The decrease in long-lived asset impairment is primarily due to more salons being impaired in prior periods.

Interest Expense

The $0.5 million decrease in interest expense for the three months ended September 30, 2021 was primarily due to a lower interest rate in fiscal year 2022.

Loss from Sale of Salon Assets to Franchisees, net

The $0.4 million increase in the loss from the sale of salon assets to franchisees, net in the three months ended September 30, 2021 was primarily due to no proceeds being received for the salons sold in fiscal year 2022 compared to $3.7 million of proceeds in fiscal year 2021.

Interest Income and Other, net

The decrease of $0.3 million in interest income and other, net during the three months ended September 30, 2021 was primarily due to the foreign exchange loss of $0.3 million in fiscal year 2022 compared to no loss in fiscal year 2021.

Income Tax Benefit

During the three months ended September 30, 2021, the Company recognized a tax benefit of $0.05 million, with a corresponding effective tax rate of 0.5% as compared to recognizing a tax benefit of $0.6 million, with a corresponding effective tax rate of 1.8% during the three months ended September 30, 2020.

See Note 4 to the unaudited Condensed Consolidated Financial Statements.

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Results of Operations by Segment

Based on our internal management structure, we report two segments: Franchise and Company-owned salons. See Note 10 to the unaudited Condensed Consolidated Financial Statements. Significant results of operations are discussed below with respect to each of these segments.

Franchise

	Three Months Ended September 30,
	2021			2020			Increase (Decrease) (1)
	(Dollars in millions)
Royalties	$	16.6		$	11.4		$	5.2
Fees	3.3			2.0			1.3
Product sales to franchisees	8.0			13.7			(5.7)
Advertising fund contributions	8.1			4.5			3.6
Franchise rental income	33.8			32.3			1.5
Total franchise revenue (1)	$	69.8		$	64.0		$	5.8
Franchise same-store sales (2)	23.7		%	(31.9)		%
Operating loss	$	(4.8)		$	(10.8)		$	6.0

_______________________________________________________________________________

(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.

(2)Franchise same-store sales in fiscal year 2022 are calculated as the total change in sales for franchise locations that were open on a specific day of the week during the current period and the corresponding prior period. Franchise same-store sales in fiscal year 2021 are calculated as the total change in sales for franchise locations for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.

Franchise Revenues

Franchise salon revenues increased $5.8 million during the three months ended September 30, 2021. The increase in franchise salon revenue during the three months ended September 30, 2021 was primarily due to higher royalties and advertising contributions due to an increase in salon count and system-wide sales. During the twelve months ended September 30, 2021, franchisees constructed (net of relocations) and closed 27 and 358 Franchise-owned salons, respectively, and purchased 692 salons from the Company during the same period. The increase in royalties and advertising contributions was partially offset by a decline in franchise product sales, which the Company expects revenue to significantly decrease throughout fiscal year 2022 due to the Company exiting its whole-sale product business.

Franchise Operating Loss

During the three months ended September 30, 2021, franchise salon operations generated an operating loss of $4.8 million, a $6.0 million improvement from the prior comparable period. The improvement in the three months ended September 30, 2021 was primarily due to an increase in royalties and reduced general and administrative expense related primarily to salaries and bad debt expense.

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Company-owned Salons

	Three Months Ended September 30,
	2021		2020		(Decrease) Increase (1)
	(Dollars in millions)
Total revenue	$	8.0	$	47.4	$	(39.4)
Operating loss	(1.0)		(20.7)		19.7
Total company-owned salons	179		1,308		(1,129)

_______________________________________________________________________________

(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.

Company-owned Salon Revenues

Company-owned salon revenues decreased $39.4 million during the three months ended September 30, 2021, primarily due to the 2022 Net Salon Count Changes.

Company-owned Salon Operating Loss

During the three months ended September 30, 2021, company-owned salon operating loss improved $19.7 million compared to the prior comparable period. The improvement in the loss during the three months ended September 30, 2021 was primarily due to reduced general and administrative expense primarily related to salaries and a decrease in marketing expense.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

Funds generated by operating activities, available cash and cash equivalents, proceeds from sale of salons sold to franchisees, and our borrowing agreements are our most significant sources of liquidity.

As of September 30, 2021, cash and cash equivalents were $45.5 million, with $42.3 and $3.2 million within the United States and Canada, respectively.

The Company's borrowing arrangements include a $293.3 million five-year revolving credit facility that expires in March 2023, of which $81.8 million was available as of September 30, 2021. The revolving credit facility has a minimum liquidity covenant of $75.0 million (see Note 8 to the unaudited Condensed Consolidated Financial Statements).

Additionally, on February 3, 2021, the Company filed a $150.0 million shelf registration statement and $50.0 million prospectus supplement with the SEC under which it may offer and sell, from time to time, up to $50.0 million worth of its of its Class A common stock in "at-the-market offerings." Net proceeds from sales of shares under the "at-the-market" program, if any, may be used to, among other things, fund working capital requirements, repay debt and support growth strategies. Such strategies may include positioning the Company for potential expansion through targeted industry acquisitions and alternatives to fund additional capital investment requirements related to potential partnership opportunities to facilitate continued growth of our proprietary technology, Opensalon® Pro. During the three months ended September 30, 2021, the Company issued 8.1 million shares and received net proceeds of $32.2 million. On September 29, 2021, the Company sold 1.2 million shares for net proceeds of $5.0 million, which settled on October 1, 2021.

Uses of Cash

The Company closely manages its liquidity and capital resources. The Company's liquidity requirements depend on key variables, including the level of investment needed to support its business strategies, the performance of the business, capital expenditures, credit facilities and borrowing arrangements, and working capital management. Capital expenditures are a component of the Company's cash flow and capital management strategy, which can be adjusted in response to economic and other changes to the Company's business environment. The Company has a disciplined approach to capital allocation, which focuses on investing in key priorities as discussed within Part I, Item 1 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

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Cash Flows

Cash Flows from Operating Activities

During the three months ended September 30, 2021, cash used in operating activities was $12.3 million. Cash used in operations decreased due to higher royalties and lower general and administrative expense. These cash inflows were partially offset by the Company's bonus payment of $2.1 million to non-executives paid during the first quarter. In the prior year, bonuses were paid in the second quarter.

Cash Flows from Investing Activities

During the three months ended September 30, 2021, cash used in investing activities of $1.5 million was due to capital expenditures primarily related to internally-developed capitalized software.

Cash Flows from Financing Activities

During the three months ended September 30, 2021, cash provided by financing activities was $40.8 million, primarily as a result of net proceeds of $32.2 million related to the issuance of common stock and a net $8.9 million draw on the Company's revolving credit facility.

Financing Arrangements

See Note 8 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 and Note 8 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, for additional information regarding our financing arrangements.

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Debt to Capitalization Ratio

Our debt to capitalization ratio, calculated as the principal amount of debt as a percentage of the principal amount of debt and shareholders' equity at fiscal quarter end, was as follows:

	Debt to Capitalization (1)
September 30, 2021	83.1	%
June 30, 2021	91.6	%

_______________________________________________________________________________

(1)Debt includes long-term debt. It excludes the long-term lease liability as that liability is offset by the ROU asset.

The decrease in the debt to capitalization ratio as of September 30, 2021 as compared to June 30, 2021, was primarily due to the increase in shareholders' equity as a result of the common stock issued in the quarter

Share Issuance Program

On February 3, 2021, the Company filed a $150.0 million shelf registration statement and $50.0 million prospectus supplement with the SEC under which it may offer and sell, from time to time, up to $50.0 million worth of its Class A common stock in "at-the-market" offerings. During the three months ended September 30, 2021, the Company issued 8.1 million shares for net proceeds of $32.2 million.

Share Repurchase Program

In May 2000, the Board approved a stock repurchase program with no stated expiration date. Since that time and through September 30, 2021, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program. All repurchased shares become authorized, but unissued shares of the Company. The timing and amounts of any repurchases depend on many factors, including the market price of the common stock and overall market conditions. During the three months ended September 30, 2021, the Company did not repurchase any shares. As of September 30, 2021, 30.0 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remains outstanding under the approved stock repurchase program.

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SAFE HARBOR PROVISIONS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company contains or may contain "forward-looking statements" within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management's best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect," "estimate," "anticipate," and "plan." These uncertainties include a potential material adverse impact on our business and results of operations as a result of the uncertain duration and severity of the COVID-19 pandemic, including any adverse impact from the Delta variant; the impact of the COVID-19 pandemic on our key suppliers; consumer shopping trends and changes in manufacturer distribution channels; changes in regulatory and statutory laws including increases in minimum wages; laws and regulations could require us to modify current business practices and incur increased costs; changes in economic conditions; changes in consumer tastes and fashion trends; the continued ability of the Company to implement its strategy, priorities and initiatives including the re-engineering of our corporate and field infrastructure; new merchandising strategy; our franchisees' ability to attract, train and retain talented stylists; financial performance of our franchisees; the ability to operate or sell the salons transferred back from TBG; our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, employees, vendors or Company information; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic to our franchisees' salons; our ability to maintain and enhance the value of our brands; reliance on information technology systems; reliance on external vendors; the use of social media; failure to standardize operating processes across brands; exposure to uninsured or unidentified risks; Opensalon® Pro may not yield the intended results; compliance with credit facility covenants and access to the existing revolving credit facility; ability to re-finance our existing credit facility or the ability to re-finance at a similar rate; our capital investments in technology may not achieve appropriate returns; premature termination of agreements with our franchisees; financial performance of Empire Education Group; the continued ability of the Company to implement cost reduction initiatives; continued ability to compete in our business markets; reliance on our management team and other key personnel; the continued ability to maintain an effective system of internal controls over financial reporting; changes in tax exposure; potential litigation and other legal or regulatory proceedings could have an adverse effect on our business or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates and changes in foreign currency exchange rates. There has been no material change to the factors discussed within Part II, Item 7A in the Company's June 30, 2021 Annual Report on Form 10-K.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Securities Exchange Act of 1934, as amended (the Exchange Act) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of the CEO and CFO, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period. Based on their evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2021.

Changes in Internal Controls over Financial Reporting

There were no material changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is a defendant in various lawsuits and claims arising out of the normal course of business and similar to certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations (See Note 5 to the unaudited Condensed Consolidated Financial Statements). Litigation is inherently unpredictable, and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.

Item 1A.  Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Share Issuance Program

On February 3, 2021, the Company filed a $150.0 million shelf registration statement and $50.0 million prospectus supplement with the SEC under which it may offer and sell, from time to time, up to $50.0 million worth of its Class A common stock in "at-the-market" offerings. During the three months ended September 30, 2021, the Company issued 8.1 million shares for proceeds of $33.2 million offset by fees of $1.0 million.

The following table shows the stock issuance activity for the three months ended September 30, 2021:

Period	Total Number of Shares Issued	Average Price per Share		Total Number of Shares Issued As Part of Publicly Announced Plans	Gross Proceeds Received in Q1
7/1/21 - 7/31/21	—	$	—	—	$	—
8/1/21 - 8/31/21	46,212	5.99		46,212	276,593
9/1/21 - 9/28/21	8,026,092	4.11		8,072,304	32,960,804
Total	8,072,304	$	4.12	8,072,304	$	33,237,397

On September 29, 2021, the Company sold 1.2 million shares for net proceeds of $5.0 million, which settled on October 1, 2021. The settlement occurred in the second quarter, so it is excluded from the table above. Including the shares settled in the second quarter, $11.6 million remains under the prospectus supplement, which equates to 3.3 million shares based on the share price as of September 30, 2021.

Share Repurchase Program

In May 2000, the Board approved a stock repurchase program with no stated expiration date. Since that time and through September 30, 2021, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program. All repurchased shares become authorized but unissued shares of the Company. The Company last purchased shares in fiscal year 2020. As of September 30, 2021, a total accumulated 30.0 million shares have been repurchased for $595.4 million. At September 30, 2021, $54.6 million remains outstanding under the approved stock repurchase program. The Company does not expect to repurchase shares in fiscal year 2022.

Item 5. Other Information

As previously disclosed in the Company’s definitive proxy statement for its 2021 annual meeting of shareholders filed September 13, 2021, the Compensation Committee of the Board approved certain fiscal 2022 long term incentive awards to the Company’s continuing executive officers, which will be granted in the form of stock options and cash-settled stock appreciation rights (SARs) on November 5, 2021. The forms of awards agreements for the stock options and SARs are filed as Exhibits 10.1 and 10.2, respectively.

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Item 6.  Exhibits

 

Exhibit 10.1	Form of Stock Option Award Agreement (Annual Executive Grants).
Exhibit 10.2	Form of Cash-Settled SAR Agreement (Annual Executive Grants).
Exhibit 31.1	President and Chief Executive Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Executive Vice President and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32	Chief Executive Officer and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101	The following financial information from Regis Corporation's Quarterly Report on Form 10-Q for the quarterly and year-to-date periods ended September 30, 2021, formatted in Inline Xtensible Business Reporting Language (iXBRL) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Loss; (iv) the Condensed Consolidated Statements of Shareholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements.
Exhibit 104	The cover page from Regis Corporation's Quarterly Report on Form 10-Q for the quarterly and year-to-date periods ended September 30, 2021, formatted in iXBRL (included as Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 4, 2021	By:	/s/ Kersten D. Zupfer
		Kersten D. Zupfer
		Executive Vice President and Chief Financial Officer
		(Principal Accounting Officer)

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EX-10.1

REGIS CORPORATION

STOCK OPTION AWARD AGREEMENT

This STOCK OPTION AWARD AGREEMENT (this “Agreement”), dated as of [•] (the “Grant Date”), is between Regis Corporation, a Minnesota corporation (the “Company”), and [•] (the “Participant”).

WHEREAS, the Participant is a valued and trusted employee of the Company and the Company desires to grant the Participant an award of Stock Options which afford the Participant an opportunity to purchase shares of the Company’s Common Stock under the Regis Corporation 2018 Long Term Incentive Plan (as may be amended from time to time, the “Plan”); and

WHEREAS, the Committee has duly made all determinations necessary or appropriate for the grant of the Stock Options hereunder (the “Award”).

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:

1.Definitions.

For purposes of this Agreement, the definitions of terms contained in the Plan are hereby incorporated by reference, except to the extent that any such term is specifically defined in this Agreement.

(a)    “Good Reason” (i) shall have the meaning ascribed to such term in Participant's employment agreement with the Company; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, Participant must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period, or (ii) if there is no such employment agreement with the Company, “Good Reason” shall mean the occurrence, without the express written consent of the Participant, of any of the following:

(A)    any material diminution in the nature of the Participant's authority, duties or responsibilities;

(B)    any reduction by the Company in the Participant's base salary then in effect or target bonus percentage (other than any reduction mutually agreed upon by the Company and the Participant), other than an across the board reduction of not more than 10% that applies to all other executives who report to the Chief Executive Officer of the Company; or

(C)    following a Change in Control, failure by the Company to continue in effect (without substitution of a substantially equivalent plan or a plan of substantially equivalent value) any compensation plan, bonus or incentive plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability

plan or other benefit plan or arrangement in which the Participant is then participating;

provided that the Participant notifies the Company of such condition set forth in clause (A), (B) or (C) within ninety (90) days of its initial existence and the Company fails to remedy such condition within thirty (30) days of receiving such notice (the “Cure Period”) and the Participant delivers written notice of termination of employment to the Company's General Counsel within thirty (30) days following the end of the Cure Period, designating an employment termination date no later than one hundred and twenty (120) days following the end of the Cure Period.

(b)    “Qualifying Termination” means a Termination of Employment:

(i)     due to death or Disability;

(ii)    by reason of Participant’s Retirement;

(iii)    by the Company without Cause; or

(iv)    by the Company without Cause or by Participant for Good Reason, in either case, within 12 months following a Change in Control.

(c)    “Retirement” means any Termination of Employment (other than by the Company for Cause or due to death or Disability) at or after age sixty-two (62) or at or after age fifty-five (55) with fifteen (15) or more years of continuous service to the Company and its Affiliates.

2.Grant of Stock Options. The Company has granted to the Participant, effective as of the Grant Date, the right and option to purchase, on the terms and conditions set forth in the Plan and this Agreement, all or any part of an aggregate of [•] shares of Common Stock, subject to adjustment as set forth in the Plan (the “Stock Options”). The Stock Options are intended to be Nonqualified Stock Options.

3.Exercise Price. The exercise price of each Stock Option is $[•] per share of Common Stock, subject to adjustment as set forth in the Plan (the “Exercise Price”).

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4.Vesting of Stock Options. Subject to the terms and conditions set forth in the Plan and this Agreement, the Stock Options must satisfy a time-vesting condition to become vested and exercisable, as follows:

(a)Time-Vesting Condition. Except as otherwise provided in Section 4(b), 20% of the Stock Options will vest on the first anniversary of the Grant Date, 20% of the Stock Options will vest on the second anniversary of the Grant Date and the remaining 60% of the Stock Options will vest on the third anniversary of the Grant Date (each, a “Scheduled Vesting Date”), subject to Participant’s continued employment with the applicable Scheduled Vesting Date and the other terms and conditions set forth in this Agreement.

(b)Forfeiture; Termination of Employment.

(i)Except as provided in this Section 4(b), any unvested Stock Options will be forfeited immediately, automatically and without consideration upon the Participant’s Termination of Employment for any reason. In the event the Participant experiences a Termination of Employment by the Company for Cause, all vested Stock Options will also be forfeited immediately, automatically and without consideration upon such termination.

(ii)If the Participant experiences a Qualifying Termination prior to the final Scheduled Vesting Date, then Participant shall immediately vest, as of the date of such Qualifying Termination, in a pro rata portion of the Stock Options that were scheduled to vest on the first Scheduled Vesting Date that follows such Qualifying Termination. For purposes of the immediately preceding sentence, the pro rata portion shall be determined as follows: (i) if such Qualifying Termination occurs prior to the first anniversary of the Grant Date, the pro rata portion shall be based on (A) the number of days the participant was employed from the Grant Date through the Termination of Employment as a percentage of (B) 365 days, and (ii) if such Qualifying Termination occurs after the first Scheduled Vesting Date, the pro rata portion shall be based on (A) the number of days the participant was employed from the Scheduled Vesting Date immediately preceding the Qualifying Termination through the Termination of Employment as a percentage of (B) 365 days. For the avoidance of doubt, in no event will the pro rata portion of Stock Options that vest as a result of the Participant’s Qualifying Termination exceed 100% of the Stock Options that were scheduled to vest on the first Scheduled Vesting Date that follows such Qualifying Termination, and any Stock Options that do not vest as a result of the Participant’s Qualifying Termination shall immediately be forfeited as of such Qualifying Termination.

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5.Expiration. Any unexercised Stock Options will expire on the tenth (10th) anniversary of the Grant Date (the “Expiration Date”), or earlier as provided in Section 6 of this Agreement or in the Plan.

6.Period of Exercise. Subject to the provisions of the Plan and this Agreement, the Participant (or the Participant’s Representative, as applicable) may exercise all or any part of the vested Stock Options at any time prior to the earliest to occur of:

(a)the Expiration Date;

(b)the date that is ninety (90) days following the Participant’s Termination of Employment (i) by the Company without Cause or (ii) by Participant for Good Reason within 12 months following a Change in Control;

(c)if the Participant’s Termination of Employment is due to death or Disability, the date that is twelve (12) months following such termination;

(d)the date of Participant’s Termination of Employment by the Company for Cause; or

(e)the date that is thirty (30) days following any Termination of Employment not described in Sections 6(b)-(d).

7.Exercise of Stock Options.

(a)Notice of Exercise. Subject to Sections 4, 5 and 6, the Participant or, in the case of the Participant’s death or Disability, the Participant’s Representative, may exercise all or any part of the vested Stock Options by giving written or electronic notice of exercise to the Company or such agent or representative as may be designated by the Company in a form provided by the Committee (such notice, a “Notice of Exercise”). The Notice of Exercise will be signed by the person exercising the Stock Options. In the event that the Stock Options are being exercised by the Participant’s Representative, the Notice of Exercise will be accompanied by proof (satisfactory to the Committee) of the Representative’s right to exercise the Stock Options. The Participant or the Participant’s Representative will deliver to the Committee, at the time of giving the Notice of Exercise, payment in a form permissible under Section 8 for the full amount of the Purchase Price (as defined below) and applicable withholding taxes as provided below.

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(b)Tax Consequences and Payment of Withholding Taxes. Neither the Company nor any Affiliate shall be liable or responsible in any way for the tax consequences relating to the award or exercise of the Stock Options. The Participant agrees to determine and be responsible for any and all tax consequences to the Participant relating to the award and exercise of the Stock Options and the issuance of Common Stock hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the issuance of shares of Common Stock upon exercise of all or a portion of the Stock Options (“Withholding Taxes”), the provisions of Section 13.4 of the Plan regarding the satisfaction of tax withholding obligations shall apply (including any required payments by the Participant).

8.Payment for Shares of Common Stock. The “Purchase Price” will be the Exercise Price multiplied by the number of shares of Common Stock with respect to which Stock Options are being exercised. All or part of the Purchase Price and any Withholding Taxes may be paid as follows:

(a)Cash or Check. In cash or by bank certified check.

(b)Brokered Cashless Exercise. To the extent permitted by applicable law, from the proceeds of a sale through a broker on the date of exercise of some or all of the shares of Common Stock to which the exercise relates. In that case, the Participant will execute a Notice of Exercise and provide the Plan administrator with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale proceeds to pay the aggregate purchase price and/or Withholding Taxes, as applicable. To facilitate the foregoing, the Company may, to the extent permitted by applicable law, enter into agreements or coordinate procedures with one or more brokerage firms.

(c)Net Exercise. By reducing the number of shares of Common Stock otherwise deliverable upon the exercise of the Stock Options by the number of shares of Common Stock having a Fair Market Value equal to the amount of the Purchase Price and/or Withholding Taxes, as applicable.

(d)Surrender of Stock. By surrendering, or attesting to the ownership of, shares of Common Stock that are already owned by the Participant free and clear of any restriction or limitation, unless the Committee specifically agrees in writing to accept such shares of Common Stock subject to such restriction or limitation. Such shares of Common Stock will be surrendered to the Company in good form for transfer and will be valued by the Company at their Fair Market Value on the date of the applicable exercise of the Stock Options, or to the extent applicable, on the date the Withholding Taxes are to be determined.

9.Adjustment to Stock Options. In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.7 of the Plan, the Stock Options may be adjusted in accordance with Section 4.7 of the Plan.

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10.Nontransferable; Requirements of Law. Except as otherwise approved by the Committee, the Stock Options may not be sold, transferred, conveyed, gifted, assigned, pledged, encumbered, hypothecated, alienated or otherwise disposed of, other than by will or the laws of descent and distribution, and any attempt to do so shall be void. The Company shall not be required to issue any shares of Common Stock in satisfaction of the exercise of all or a portion of the Stock Options if the issuance of such shares shall constitute a violation of any provision of any applicable law or regulation of any governmental authority. The Participant acknowledges that any certificate representing shares of Common Stock to be issued upon the exercise of the Stock Options may be required to bear any legend that counsel to the Company believes is necessary or desirable to facilitate compliance with applicable securities laws. The Company shall have no duty or obligation beyond those imposed by applicable securities laws generally to affirmatively disclose to the Participant or a Representative, and the Participant or Representative shall have no right to be advised of, any material non-public information regarding the Company or an Affiliate at any time prior to, upon or in connection with the issuance of the shares of Common Stock upon the exercise of Stock Options.

11.Administration. The Plan and this Stock Option award are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.

12.Plan and Agreement; Recoupment Policy. The Participant hereby acknowledges receipt of a copy of the Plan. The grant of Stock Options is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended or restated from time to time, and of this Agreement. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Participant. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Participant or any other person or entity then entitled to receive the shares of Common Stock to be issued in connection with the exercise of the Stock Options.

The Company may recover any equity awarded to the Participant under this Agreement, or proceeds from the sale of such equity, to the extent required by any rule of the Securities and Exchange Commission or any listing standard of the New York Stock Exchange, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.

13.No Shareholder Rights until Exercise. The grant of the Stock Options does not entitle the Participant to any of the rights of a holder of the Company’s Company Stock, including

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voting and dividend rights. The Participant shall have no rights as a shareholder of the Company with respect to the shares of Common Stock to be issued upon exercise of the Stock Options until a stock certificate therefor has been actually or constructively issued to the Participant in accordance with this Agreement.

14.No Employment Rights. Neither this Agreement nor the Award evidenced hereby shall give the Participant any right to continue in the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Participant, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Participant (with or without Cause), or give the Participant any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.

15.Governing Law. This Agreement, the awards of Stock Options hereunder and the issuance of Common Stock in connection with the exercise of Stock Options shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).

16.Entire Agreement. This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction, including, without limitation, the Letter Agreement.

17.Amendment. Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.

18.Waiver; Cumulative Rights. The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

19.Counterparts. This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

20.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

21.Severability. If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.

22.Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company, and upon the heirs, legal representatives and successors of the Participant.

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[Signature page follows.]

8

IN WITNESS WHEREOF, the Company and the Participant have executed this Stock Option Award Agreement as of the dates set forth below.

REGIS CORPORATION

By:

Name:

Title:

PARTICIPANT:

EX-10.2

REGIS CORPORATION

STOCK APPRECIATION RIGHTS AWARD AGREEMENT

This STOCK APPRECIATION RIGHTS AWARD AGREEMENT (this “Agreement”), dated as of [•] (the “Grant Date”), is between Regis Corporation, a Minnesota corporation (the “Company”), and [•] (the “Participant”).

WHEREAS, the Participant is a valued and trusted employee of the Company and the Company desires to grant the Participant an award of Stock Appreciation Rights under the Regis Corporation 2018 Long Term Incentive Plan (as may be amended from time to time, the “Plan”); and

WHEREAS, the Committee has duly made all determinations necessary or appropriate for the grant of the Stock Appreciation Rights hereunder (the “Award”).

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:

1.Definitions.

For purposes of this Agreement, the definitions of terms contained in the Plan are hereby incorporated by reference, except to the extent that any such term is specifically defined in this Agreement.

(a)    “Good Reason” (i) shall have the meaning ascribed to such term in Participant's employment agreement with the Company; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, Participant must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period, or (ii) if there is no such employment agreement with the Company, “Good Reason” shall mean the occurrence, without the express written consent of the Participant, of any of the following:

(A)    any material diminution in the nature of the Participant's authority, duties or responsibilities;

(B)    any reduction by the Company in the Participant's base salary then in effect or target bonus percentage (other than any reduction mutually agreed upon by the Company and the Participant), other than an across the board reduction of not more than 10% that applies to all other executives who report to the Chief Executive Officer of the Company; or

(C)    following a Change in Control, failure by the Company to continue in effect (without substitution of a substantially equivalent plan or a plan of substantially equivalent value) any compensation plan, bonus or incentive plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or other benefit plan or arrangement in which the Participant is then participating;

provided that the Participant notifies the Company of such condition set forth in clause (A), (B) or (C) within ninety (90) days of its initial existence and the Company fails to remedy such condition within thirty (30) days of receiving such notice (the “Cure Period”) and the Participant delivers written notice of termination of employment to the Company's General Counsel within thirty (30) days following the end of the Cure Period, designating an employment termination date no later than one hundred and twenty (120) days following the end of the Cure Period.

(b)    “Qualifying Termination” means a Termination of Employment:

(i)     due to death or Disability;

(ii)    by reason of Participant’s Retirement;

(iii)    by the Company without Cause; or

(iv)    by the Company without Cause or by Participant for Good Reason, in either case, within 12 months following a Change in Control.

(c)    “Retirement” means any Termination of Employment (other than by the Company for Cause or due to death or Disability) at or after age sixty-two (62) or at or after age fifty-five (55) with fifteen (15) or more years of continuous service to the Company and its Affiliates.

2.Grant of Stock Appreciation Rights. The Company has granted to the Participant, effective as of the Grant Date, Stock Appreciation Rights with respect to an aggregate of [•] shares of Common Stock, subject to adjustment as set forth in the Plan (the “Stock Appreciation Rights”). The Stock Appreciation Rights will entitle Participant to receive a cash payment upon the due exercise of vested Stock Appreciation Rights in the amount determined pursuant to Section 7(c) of this Agreement, subject in all cases to the terms and conditions set forth in the Plan and this Agreement. For the avoidance of doubt, in no event will Participant be entitled to receive any shares of Common Stock in connection with the grant, vesting or exercise of the Stock Appreciation Rights.

3.Exercise Price. The exercise price of each Stock Appreciation Right is $[•] per share of Common Stock, subject to adjustment as set forth in the Plan (the “Exercise Price”).

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4.Vesting of Stock Appreciation Rights. Subject to the terms and conditions set forth in the Plan and this Agreement, the Stock Appreciation Rights must satisfy a time-vesting condition to become vested and exercisable, as follows:

(a)Time-Vesting Condition. Except as otherwise provided in Section 4(b), 20% of the Stock Appreciation Rights will vest on the first anniversary of the Grant Date, 20% of the Stock Appreciation Rights will vest on the second anniversary of the Grant Date and the remaining 60% of the Stock Appreciation Rights will vest on the third anniversary of the Grant Date (each, a “Scheduled Vesting Date”), subject to Participant’s continued employment with the applicable Scheduled Vesting Date and the other terms and conditions set forth in this Agreement.

(b)Forfeiture; Termination of Employment.

(i)Except as provided in this Section 4(b), any unvested Stock Appreciation Rights will be forfeited immediately, automatically and without consideration upon the Participant’s Termination of Employment for any reason. In the event the Participant experiences a Termination of Employment by the Company for Cause, all vested Stock Appreciation Rights will also be forfeited immediately, automatically and without consideration upon such termination.

(ii)If the Participant experiences a Qualifying Termination prior to the final Scheduled Vesting Date, then Participant shall immediately vest, as of the date of such Qualifying Termination, in a pro rata portion of the Stock Appreciation Rights that were scheduled to vest on the first Scheduled Vesting Date that follows such Qualifying Termination. For purposes of the immediately preceding sentence, the pro rata portion shall be determined as follows: (i) if such Qualifying Termination occurs prior to the first anniversary of the Grant Date, the pro rata portion shall be based on (A) the number of days the participant was employed from the Grant Date through the Termination of Employment as a percentage of (B) 365 days, and (ii) if such Qualifying Termination occurs after the first Scheduled Vesting Date, the pro rata portion shall be based on (A) the number of days the participant was employed from the Scheduled Vesting Date immediately preceding the Qualifying Termination through the Termination of Employment as a percentage of (B) 365 days. For the avoidance of doubt, in no event will the pro rata portion of Stock Appreciation Rights that vest as a result of the Participant’s Qualifying Termination exceed 100% of the Stock Appreciation Rights that were scheduled to vest on the first Scheduled Vesting Date that follows such Qualifying Termination, and any Stock Appreciation Rights that do not vest as a result of the Participant’s Qualifying Termination shall immediately be forfeited as of such Qualifying Termination.

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5.Expiration. Any unexercised Stock Appreciation Rights will expire on the tenth (10th) anniversary of the Grant Date (the “Expiration Date”), or earlier as provided in Section 6 of this Agreement or in the Plan.

6.Period of Exercise. Subject to the provisions of the Plan and this Agreement, the Participant (or the Participant’s Representative, as applicable) may exercise all or any part of the vested Stock Appreciation Rights at any time prior to the earliest to occur of:

(a)the Expiration Date;

(b)the date that is ninety (90) days following the Participant’s Termination of Employment (i) by the Company without Cause or (ii) by Participant for Good Reason within 12 months following a Change in Control;

(c)if the Participant’s Termination of Employment is due to death or Disability, the date that is twelve (12) months following such termination;

(d)the date of Participant’s Termination of Employment by the Company for Cause; or

(e)the date that is thirty (30) days following any Termination of Employment not described in Sections 6(b)-(d).

7.Exercise and Payment of Stock Appreciation Rights.

(a)Notice of Exercise. Subject to Sections 4, 5 and 6, the Participant or, in the case of the Participant’s death or Disability, the Participant’s Representative, may exercise all or any part of the vested Stock Appreciation Rights by giving written or electronic notice of exercise to the Company or such agent or representative as may be designated by the Company in a form provided by the Committee (such notice, a “Notice of Exercise”). The Notice of Exercise will be signed by the person exercising the Stock Appreciation Rights. In the event that the Stock Appreciation Rights are being exercised by the Participant’s Representative, the Notice of Exercise will be accompanied by proof (satisfactory to the Committee) of the Representative’s right to exercise the Stock Appreciation Rights.

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(b)Tax Consequences and Payment of Withholding Taxes. Neither the Company nor any Affiliate shall be liable or responsible in any way for the tax consequences relating to the award or exercise of the Stock Appreciation Rights. The Participant agrees to determine and be responsible for any and all tax consequences to the Participant relating to the award and exercise of the Stock Appreciation Rights hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the exercise of all or a portion of the Stock Appreciation Rights (“Withholding Taxes”), the provisions of Section 13.4 of the Plan regarding the satisfaction of tax withholding obligations shall apply (including any required payments by the Participant). For the avoidance of doubt, by accepting the grant of Stock Appreciation Rights, the Participant shall be deemed to have agreed that the Company is authorized to subtract from the SAR Amount (as defined below) any and all Withholding Taxes due in connection with the exercise of all or a portion of the Stock Appreciation Rights.

(c)Payment on Exercise of the Stock Appreciation Rights. Upon exercise of any vested Stock Appreciation Rights, Participant will receive a cash payment equal to the SAR Amount, less applicable Withholding Taxes. The “SAR Amount” shall be determined by multiplying: (i) the difference obtained by subtracting the Exercise Price from the Fair Market Value of a share of Common Stock on the date of exercise of such Stock Appreciation Rights, by (ii) the number of shares of Common Stock as to which such Stock Appreciation Rights will have been exercised.

8.Adjustment to Stock Appreciation Rights. In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.7 of the Plan, the Stock Appreciation Rights may be adjusted in accordance with Section 4.7 of the Plan.

9.Nontransferable; Requirements of Law. Except as otherwise approved by the Committee, the Stock Appreciation Rights may not be sold, transferred, conveyed, gifted, assigned, pledged, encumbered, hypothecated, alienated or otherwise disposed of, other than by will or the laws of descent and distribution, and any attempt to do so shall be void. In no event will the Company be required to issue any shares of Common Stock in satisfaction of the exercise of all or a portion of the Stock Appreciation Rights. In addition, in no event will the Company be required to honor the exercise of any Stock Appreciation Rights granted hereunder if such exercise would constitute a violation of any provision of any applicable law or regulation of any governmental authority. The Company shall have no duty or obligation beyond those imposed by applicable securities laws generally to affirmatively disclose to the Participant or a Representative, and the Participant or Representative shall have no right to be advised of, any material non-public information regarding the Company or an Affiliate at any time prior to or upon the exercise of any Stock Appreciation Rights.

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10.Administration. The Plan and this Stock Appreciation Rights award are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.

11.Plan and Agreement; Recoupment Policy. The Participant hereby acknowledges receipt of a copy of the Plan. The grant of Stock Appreciation Rights is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended or restated from time to time, and of this Agreement. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Participant. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Participant or any other person or entity then entitled to exercise the Stock Appreciation Rights.

The Company may recover the Stock Appreciation Rights or any payments made to the Participant in connection with the Stock Appreciation Rights under this Agreement to the extent required by any rule of the Securities and Exchange Commission or any listing standard of the New York Stock Exchange, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.

12.No Shareholder Rights. None of the grant, vesting or exercise of the Stock Appreciation Rights will entitle the Participant to any of the rights of a holder of the Company’s Company Stock, including voting and dividend rights.

13.No Employment Rights. Neither this Agreement nor the Award evidenced hereby shall give the Participant any right to continue in the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Participant, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Participant (with or without Cause), or give the Participant any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.

14.Governing Law. This Agreement, the award of Stock Appreciation Rights hereunder and the issuance of any cash payment in connection with the exercise of the Stock Appreciation Rights shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).

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15.Entire Agreement. This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction, including, without limitation, the Letter Agreement.

16.Amendment. Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.

17.Waiver; Cumulative Rights. The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.

18.Counterparts. This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.

19.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

20.Severability. If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.

21.Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company, and upon the heirs, legal representatives and successors of the Participant.

[Signature page follows.]

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IN WITNESS WHEREOF, the Company and the Participant have executed this Stock Appreciation Rights Award Agreement as of the dates set forth below.

REGIS CORPORATION

By:

Name:

Title:

PARTICIPANT:

EX-31.1

Exhibit No. 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Felipe A. Athayde, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Regis Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions:

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

November 4, 2021

/s/ Felipe A. Athayde

Felipe A. Athayde, President and Chief Executive Officer

EX-31.2

Exhibit No. 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kersten D. Zupfer, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Regis Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions:

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

November 4, 2021

/s/ Kersten D. Zupfer

Kersten D. Zupfer, Executive Vice President and Chief Financial Officer

EX-32

Exhibit No. 32

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Regis Corporation (the Registrant) on Form 10-Q for the fiscal quarter ending September 30, 2021 filed with the Securities and Exchange Commission on the date hereof, Felipe A. Athayde, President and Chief Executive Officer of the Registrant, and Kersten D. Zupfer, Executive Vice President and Chief Financial Officer of the Registrant, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Quarterly Report on Form 10-Q complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

November 4, 2021

/s/ Felipe A. Athayde

Felipe A. Athayde, President and Chief Executive Officer

November 4, 2021

/s/ Kersten D. Zupfer

Kersten D. Zupfer, Executive Vice President and Chief Financial Officer

XML

Cover Page - shares	3 Months Ended
	Sep. 30, 2021	Oct. 29, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	1-12725
Entity Registrant Name	Regis Corp
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-0749934
Entity Address, Address Line One	3701 Wayzata Boulevard,
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55416
City Area Code	952
Local Phone Number	947-7777
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock, $0.05 par value
Trading Symbol	RGS
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		45,370,007
Entity Central Index Key	0000716643
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Current assets:
Cash and cash equivalents	$ 45,508	$ 19,191
Receivables, net	21,833	27,372
Inventories	16,774	22,993
Other current assets	16,049	17,103
Total current assets	100,164	86,659
Property and equipment, net	22,588	23,113
Goodwill	229,007	229,582
Other intangibles, net	3,604	3,761
Right of use asset (Note 7)	573,475	611,880
Other assets	40,013	41,388
Total assets	968,851	996,383
Current liabilities:
Accounts payable	20,784	27,157
Accrued expenses	48,099	54,857
Short-term lease liability (Note 7)	113,585	116,471
Total current liabilities	182,468	198,485
Long-term debt, net (Note 8)	195,805	186,911
Long-term lease liability (Note 7)	480,769	518,866
Other non-current liabilities	69,999	75,075
Total liabilities	929,041	979,337
Commitments and contingencies (Note 5)
Shareholders' equity:
Common stock, $0.05 par value; issued and outstanding 43,964,489 and 35,795,844 common shares at September 30, 2021 and June 30, 2021, respectively	2,198	1,790
Additional paid-in capital	58,310	25,102
Accumulated other comprehensive income	9,069	9,543
Accumulated deficit	(29,767)	(19,389)
Total shareholders' equity	39,810	17,046
Total liabilities and shareholders' equity	$ 968,851	$ 996,383

XML

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2021	Jun. 30, 2021
Statement of Financial Position [Abstract]
Common stock par value (in dollars per share)	$ 0.05	$ 0.05
Common stock issued (in shares)	43,964,489	35,795,844
Common stock outstanding (in shares)	43,964,489	35,795,844

XML

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Sep. 30, 2021	Sep. 30, 2020
Revenues:
Franchise rental income		$ 33,762	$ 32,283
Total revenues		77,756	111,396
Operating expenses:
General and administrative		21,789	26,148
Rent		33,800	32,300
Advertising fund expense		8,114	4,510
Company-owned salon expense		7,945	42,943
Depreciation and amortization		1,869	7,376
Long-lived asset impairment		163	5,824
Total operating expenses		83,557	142,987
Operating loss		(5,801)	(31,591)
Other (expense) income:
Interest expense		(3,306)	(3,762)
Loss from sale of salon assets to franchisees, net		(1,080)	(662)
Interest income and other, net		(239)	114
Loss from continuing operations before income taxes		(10,426)	(35,901)
Income tax benefit		48	635
Net loss		$ (10,378)	$ (35,266)
Basic and diluted:
Net loss per share, basic (in dollars per share)	[1]	$ (0.28)	$ (0.98)
Net loss per share, diluted (in dollars per share)	[1]	$ (0.28)	$ (0.98)
Weighted average common and common equivalent shares outstanding:
Basic (in shares)		36,850	35,908
Diluted (in shares)		36,850	35,908
Non-Franchise Lease
Operating expenses:
Rent		$ 1,803	$ 13,225
Franchisor
Operating expenses:
Rent		33,762	32,283
Royalties
Revenues:
Revenues		16,602	11,405
Fees
Revenues:
Revenues		3,265	2,042
Advertising fund contributions
Revenues:
Revenues		8,114	4,509
Franchisees products
Revenues:
Revenues		8,008	13,742
Operating expenses:
Cost of product sales to franchisees		8,112	10,678
Company owned salon products and services
Revenues:
Revenues		8,005	47,415
Operating expenses:
Company-owned salon expense	[2]	$ 7,945	$ 42,943

[1] Total is a recalculation; line items calculated individually may not sum to total due to rounding.

[2] Includes cost of service and product sold to guests in our Company-owned salons. Excludes general and administrative expense, rent and depreciation and amortization related to Company-owned salons

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Net loss	$ (10,378)	$ (35,266)
Foreign currency translation adjustments	(474)	502
Comprehensive loss	$ (10,852)	$ (34,764)

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Retained Earnings (Accumulated Deficit)
Balance (in shares) at Jun. 30, 2020		35,625,716
Balance at Jun. 30, 2020	$ 125,703	$ 1,781	$ 22,011	$ 7,449	$ 94,462
Net loss	(35,266)				(35,266)
Foreign currency translation	502			502
Stock-based compensation	(1,225)		(1,225)
Net restricted stock activity (in shares)		40,067
Net restricted stock activity	(188)	$ 2	(190)
Minority interest	15				15
Balance (in shares) at Sep. 30, 2020		35,665,783
Balance at Sep. 30, 2020	$ 89,541	$ 1,783	20,596	7,951	59,211
Balance (in shares) at Jun. 30, 2021	35,795,844	35,795,844
Balance at Jun. 30, 2021	$ 17,046	$ 1,790	25,102	9,543	(19,389)
Net loss	(10,378)				(10,378)
Foreign currency translation	(474)			(474)
Issuance of common stock, net of offering costs (in shares)		8,072,304
Issuance of common stock, net of offering costs	32,193	$ 404	31,789
Stock-based compensation	1,678		1,678
Net restricted stock activity (in shares)		96,341
Net restricted stock activity	$ (255)	$ 4	(259)
Balance (in shares) at Sep. 30, 2021	43,964,489	43,964,489
Balance at Sep. 30, 2021	$ 39,810	$ 2,198	$ 58,310	$ 9,069	$ (29,767)

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net loss		$ (10,378)	$ (35,266)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		1,574	6,087
Long-lived asset impairment		163	5,824
Deferred income taxes		(258)	(384)
Loss from sale of salon assets to franchisees, net		1,080	662
Stock-based compensation		1,678	(1,225)
Amortization of debt discount and financing costs		460	438
Other non-cash items affecting earnings		232	4
Changes in operating assets and liabilities, excluding the effects of asset sales	[1]	(6,805)	(5,006)
Net cash used in operating activities		(12,254)	(28,866)
Cash flows from investing activities:
Capital expenditures		(1,524)	(3,811)
Proceeds from sale of assets to franchisees		0	3,735
Costs associated with sale of salon assets to franchisees		0	(125)
Net cash used in investing activities		(1,524)	(201)
Cash flows from financing activities:
Borrowings on revolving credit facility		10,000	0
Repayments of revolving credit facility		(1,106)	0
Proceeds from issuance of common stock, net of offering costs		32,193	0
Taxes paid for shares withheld		(255)	(187)
Distribution center lease payments		0	(238)
Net cash provided by (used in) financing activities		40,832	(425)
Effect of exchange rate changes on cash and cash equivalents		(148)	88
Increase (decrease) in cash, cash equivalents, and restricted cash		26,906	(29,404)
Cash, cash equivalents and restricted cash:
Beginning of period		29,152	122,880
End of period		$ 56,058	$ 93,476

[1] Changes in operating assets and liabilities exclude assets and liabilities sold.

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of September 30, 2021 and for the three months ended September 30, 2021 and 2020, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2021 and its consolidated results of operations, comprehensive loss, shareholders' equity and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2021 and other documents filed or furnished with the SEC during the current fiscal year.

COVID-19 Impact:

During the period ended September 30, 2021, the global coronavirus pandemic (COVID-19) had an adverse impact on operations. The COVID-19 pandemic continues to impact salon guest visits and franchisee staffing, resulting in a significant reduction in revenue. As a result, COVID-19 has, and may continue to have, a negative affect on revenue and profitability. The ultimate impact of the COVID-19 pandemic in both the short and long term is not currently estimable due to the uncertainty surrounding the duration of the pandemic, the availability and acceptance of preventative vaccines, the emergence and impact of new COVID-19 variants and changing government restrictions. Additional impacts to the business may arise that we are not aware of currently.

Inventories:

The Company has inventory valuation reserves for excess and obsolete inventories or other factors that may render inventories unmarketable at their historical costs. In fiscal year 2021, the Company announced it would transition away from its wholesale product distribution model in favor of a third-party distribution model. As a result, the Company exited one distribution center in the quarter and plans to exit its other distribution center in fiscal year 2022. To facilitate the exit, the Company is selling inventory at discounts and disposing of hard-to-sell products. Additionally, the reduction in company-owned salons decreases the Company's ability to re-distribute inventory from closed locations to other salons to be sold or used. The inventory valuation reserve as of September 30, 2021 and June 30, 2021 was $8.8 and $11.8 million, respectively.

Salon Long-Lived Asset and Right of Use Asset Impairment Assessments:

The Company assesses impairment of long-lived salon assets and right of use (ROU) assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in the use of the assets. The first step is to assess recoverability, and in doing that, the undiscounted salon cash flows are compared to the carrying value of the salon assets. If the undiscounted estimated cash flows are less than the carrying value of the assets, the Company calculates an impairment charge based on the difference between the carrying value of the asset group and its fair value. The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available. See Note 7 of the unaudited Condensed Consolidated Financial Statements for further discussion related to the ROU asset impairment.

Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as changes in economic conditions and changes in operating performance. As the ongoing expected cash flows and carrying amounts of long-lived assets are assessed, these factors could cause the Company to realize material impairment charges.

Goodwill:

As of September 30, 2021 and June 30, 2021, the Franchise reporting unit had $229.0 and $229.6 million, respectively, of goodwill. The change in goodwill for the three months ended September 30, 2021 is due to foreign currency translation. The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. An interim impairment analysis was not required in the three months ended September 30, 2021.

The Company performs its annual impairment assessment as of April 30. For the fiscal year 2021 annual impairment assessment, the Company performed a Step 1 impairment test for the Franchise reporting unit. The Company compared the carrying value of the Franchise reporting unit, including goodwill, to the estimated fair value. The results of this assessment indicated that the estimated fair value of the Company's Franchise reporting unit significantly exceeded the carrying value.

Classification of Revenue and Expenses:

Beginning in the first quarter of fiscal year 2022, the Company adjusted its Statement of Operations for both periods presented to align the presentation of results to its franchise-focused business. Below is a summary of the changes to the financial statement captions. The change does not have a financial impact on the Company's reported revenue, operating loss, reported net loss or cash flows from operations.

Royalties - sales-based royalty received from franchisees. In prior years, these fees were included in Royalties and Fees and disclosed in the footnotes.

Fees - fees received from franchisees and third parties, including franchise fees, software and hardware fees related to Opensalon® Pro and fees received from the third-party distributors.

Product sales to franchisees - wholesale product sales to franchisees. This caption equates to Product sales in the Franchise segment in prior years. The Company is changing its franchise product sales business in fiscal year 2022 from a wholesale distribution model to a third-party distribution model. This revenue is expected to decrease significantly during fiscal year 2022.

Advertising fund contributions - sales-based advertising fund contributions received from franchisees. In prior years, these fees were included in Royalties and Fees and disclosed in the footnotes.

Company-owned salon revenue - service revenue and revenue derived from sales of product in Company-owned salons. This caption equates to revenue reported in the Company-owned segment in prior periods.

Cost of product sales to franchisees - direct cost of inventory and freight and other costs of sales. In prior years, these sales were included in the Franchise segment cost of product and site operating expenses.

Company-owned salon expense - cost of service and product sold to guests in our Company-owned salons and other salon-related costs. In prior years, these costs were classified as Company-owned segment cost of service, cost of product and site operating expenses. Excluded from this caption are general and administrative expense, rent and depreciation and amortization related to company-owned salons.

Depreciation:

Depreciation expense in the three months ended September 30, 2021 and 2020 include $0.3 and $1.3 million of asset retirement obligations, which are cash expenses.

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REVENUE RECOGNITION

3 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized at point of sale

Product sales to franchisees are recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery. Company-owned salon revenues are recognized at the time when the services are provided or the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the guest. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns.

Revenue recognized over time

Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenues are billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statement of Operations. The treatment increases both the gross amount of reported revenue and expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, which is typically ten years. Software fees are recognized over the term of the SaaS agreement. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees. The Company recognizes franchise rental income and expense when it is due to the landlord.

Information about receivables, broker fees and deferred revenue subject to the current revenue recognition guidance is as follows:

	September 30, 2021		June 30, 2021		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	14,612	$	19,112	Receivables, net
Broker fees	18,272		19,254		Other assets
Deferred revenue:
Current
Gift card liability	$	2,150	$	2,240	Accrued expenses
Deferred franchise fees unopened salons	31		40		Accrued expenses
Deferred franchise fees open salons	5,901		5,884		Accrued expenses
Total current deferred revenue:	$	8,082	$	8,164
Non-current
Deferred franchise fees unopened salons	$	5,824	$	6,571	Other non-current liabilities
Deferred franchise fees open salons	31,101		32,365		Other non-current liabilities
Total non-current deferred revenue	$	36,925	$	38,936

Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, rent, franchise product sales and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. The following table is a rollforward of the allowance for doubtful accounts for the period (in thousands):

Balance as of June 30, 2021	$	7,774
Provision for doubtful accounts (1)	237
Provision for franchisee rent (2)	364
Reclass of accrued rent (3)	396
Write-offs	(102)
Balance as of September 30, 2021	$	8,669

_______________________________________________________________________________

(1)The provision for doubtful accounts is recognized as General and administrative expense in the unaudited Condensed Consolidated Statement of Operations.

(2)The provision for franchisee rent is recognized as Rent in the unaudited Condensed Consolidated Statement of Operations.

(3)The reclass of accrued rent represents franchisee rent obligations guaranteed by the Company that were unbilled and deemed unrecoverable as of June 30, 2021. The amounts were billed in fiscal year 2022 and the related accrual was reclassified to the allowance for doubtful accounts.

Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as general and administrative expense over the term of the franchise agreement. The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):

Balance as of June 30, 2021	$	19,254
Additions	25
Amortization	(862)
Write-offs	(145)
Balance as of September 30, 2021	$	18,272

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended September 30, 2021 and 2020 was $1.6 and $1.6 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2021 is as follows (in thousands):

Remainder of 2022	$	4,391
2023	5,866
2024	5,631
2025	5,246
2026	4,776
Thereafter	11,092
Total	$	37,002

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SHAREHOLDERS' EQUITY

3 Months Ended

Sep. 30, 2021

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY:

Stock-Based Employee Compensation:

During the three months ended September 30, 2021, the Company granted one equity award as follows:

	Three Months Ended September 30, 2021
Restricted stock units	2,987

The RSUs granted during the three months ended September 30, 2021 vest on October 27, 2021 and were granted to a Board member who joined the Company during the quarter.

Total compensation cost for stock-based payment arrangements totaling $1.7 and $(1.2) million for the three months ended September 30, 2021 and 2020, respectively, was recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations. In the three months ended September 30, 2020, stock compensation includes a $2.4 million benefit from the forfeiture of awards related to the departure of the Company's former CEO.

Share Issuance Program:

In fiscal year 2021, the Company filed a $150.0 million shelf registration statement and $50.0 million prospectus supplement with the Securities and Exchange Commission (SEC) under which it may offer and sell, from time to time, up to $50.0 million worth of its Class A common stock in "at-the-market" offerings. During the three months ended September 30, 2021, the Company raised gross proceeds of $33.2 million related to the "at-the-market" offering and paid fees to sales agents and other fees of $1.0 million. On September 29, 2021, the Company sold 1.2 million shares for net proceeds of $5.0 million, which settled on October 1, 2021. The settlement occurred in the second quarter so it is excluded from interim unaudited Condensed Consolidated Statement of Shareholders' Equity and Cash Flows. Net proceeds from sales of shares under the "at-the-market" program, if any, may be used to, among other things, fund working capital requirements, repay debt and support growth strategies.

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INCOME TAXES

3 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES:

 A summary of income tax benefits and corresponding effective tax rates is as follows:

	Three Months Ended September 30,
	2021			2020
	(Dollars in thousands)
Income tax benefit	$	48		$	635
Effective tax rate	0.5		%	1.8		%

The recorded tax provisions and effective tax rates for the three months ended September 30, 2021 and 2020 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance.

The Company is no longer subject to IRS examinations for years before 2014. Furthermore, with limited exceptions, the Company is no longer subject to state and international income tax examinations by tax authorities for years before 2012.

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COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES:The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. Litigation is inherently unpredictable, and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period. In addition, our existing point-of-sale system supplier had challenged the development of certain parts of our technology systems in litigation brought in the Northern District of California, case No. 20-cv-02181-MMC. The Company and the supplier entered into an agreement, effective June 25, 2021, that provided for the dismissal of the lawsuit and set forth a commercial services agreement pursuant to which the supplier will assist in the transfer of franchise salons from its point-of-sale system to the Company's salon management system, Opensalon® Pro. The Company's accrual related to the agreement was $3.0 million as of September 30, 2021 and June 30, 2021.

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH

3 Months Ended

Sep. 30, 2021

Cash and Cash Equivalents [Abstract]

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded within other current assets on the unaudited Condensed Consolidated Balance Sheet to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statement of Cash flows:

	September 30, 2021		June 30, 2021
	(Dollars in thousands)
Cash and cash equivalents	$	45,508	$	19,191
Restricted cash, included in other current assets (1)	10,550		9,961
Total cash, cash equivalents and restricted cash	$	56,058	$	29,152

_______________________________________________________________________________

(1)Restricted cash within other current assets primarily relates to consolidated advertising cooperatives funds, which can only be used to settle obligations of the respective cooperatives and contractual obligations to collateralize the Company's self-insurance programs.

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LEASES

3 Months Ended

Sep. 30, 2021

Leases [Abstract]

LEASES

LEASES:

At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and some of its corporate facilities under operating leases. The original terms of the salon leases range from 1 to 20 years with many leases renewable for an additional 5 to 10-year term at the option of the Company. In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels. For most leases, the Company is required to pay real estate taxes and other occupancy expenses. Total rent includes the following:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Office and warehouse rent	$	1,669	$	1,203
Lease termination expense (1)	1,340		5,554
Lease liability benefit (2)	(2,431)		(6,061)
Franchise salon rent	329		718
Company-owned salon rent	896		11,811
Total	$	1,803	$	13,225

_______________________________________________________________________________

(1)During the three months ended September 30, 2021, the Company paid $0.9 million to exit its distribution centers before the lease end dates and incurred costs of $0.4 million to exit salons before the lease end date in order to relieve the Company of future lease obligations. For the three months ended September 30, 2020, lease termination fees includes $2.5 million of early termination payments to close salons before the lease end date to relieve the Company of future lease obligations and $3.1 million to accrue future lease payments for salons that are no longer operating.

(2)Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities which results in a net gain. In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statement of Operations. For the three months ended September 30, 2021 and 2020, franchise rental income and franchise rent expense were $33.8 and $32.3 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew SmartStyle and some franchise leases upon expiration. Other leases are expected to be renewed by the franchisee upon expiration. All lease-related costs are passed through to the franchisees.

For salon operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed. The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any. The Company's consolidated ROU asset balance was $573.5 and $611.9 million as of September 30, 2021 and June 30, 2021, respectively. For leases classified as operating leases, expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed. Generally, the non-lease components, such as real estate taxes and other occupancy expenses, are separate from rent expense within the lease and are not included in the measurement of the lease liability because these charges are variable.

The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined. The Company uses the portfolio approach in applying the discount rate based on the original lease term. The weighted average remaining lease term was 6.38 and 6.44 years and the weighted average discount rate was 4.14% and 4.11% for all salon operating leases as of September 30, 2021 and June 30, 2021, respectively.

A lessee's ROU asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, applied to other elements of property, plant, and equipment. The Company has identified its asset groups at the individual salon level as this represents the lowest level that identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Poor salon performance, primarily due to the COVID-19 pandemic, resulted in an ASC 360-10-35-21 triggering event. As a result, management assessed underperforming salon asset groups, which included the related ROU assets, for impairment in accordance with ASC 360.

The first step in the impairment test under ASC 360 is to determine whether the long-lived assets are recoverable, which is determined by comparing the net carrying value of the salon asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. Estimating cash flows for purposes of the recoverability test is subjective and requires significant judgment. Estimated future cash flows used for the purposes of the recoverability test were based upon historical cash flows for the salons, adjusted for expected changes in future market conditions related to the COVID-19 pandemic, and other factors. The period of time used to determine the estimates of the future cash flows for the recoverability test was based on the remaining useful life of the primary asset of the group, which was the ROU asset in all cases.

The second step of the long-lived asset impairment test requires that the fair value of the asset group be estimated when determining the amount of any impairment loss. For the salon asset groups that failed the recoverability test, an impairment loss was measured as the amount by which the carrying amount of the asset group exceeds its fair value. The Company applied the fair value guidance within ASC 820-10 to determine the fair value of the asset group from the perspective of a market-participant considering, among other things, appropriate discount rates, multiple valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group. To determine the fair value of the salon asset groups, the Company utilized market-participant assumptions rather than the Company's own assumptions about how it intends to use the asset group. The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include: the market rent of comparable properties based on recently negotiated leases as applicable, the asset group's projected sales for properties with no recently negotiated leases, and a discount rate.

In the three months ended September 30, 2021 and 2020, the Company recognized a long-lived impairment charge of $0.2 and $5.8 million, respectively, which included $0.1 and $4.6 million, respectively, related to the ROU assets, in the unaudited Condensed Consolidated Statement of Operations. The impairments recorded for the three months ended September 30, 2021 were primarily the result of triggering events identified on certain underperforming salons, salons that were identified to close in the year, and certain salons where franchisees were unable to fulfill their rent obligations. Assessing the long-lived assets for impairment requires management to make assumptions and to apply judgment, which can be affected by economic conditions and other factors that can be difficult to predict. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it uses to calculate impairment losses for its long-lived assets, including its ROU assets. Our projections of future operating performance do not anticipate future salon closures due to the COVID-19 pandemic. However, the ultimate severity and longevity of the COVID-19 pandemic is unknown, therefore; if actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

As of September 30, 2021, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (in thousands):

Fiscal Year	Leases for Franchise Salons		Leases for Company-owned Salons		Corporate Leases		Total Operating Lease Payments		Sublease Income To Be Received From Franchisees		Net Rent Commitments
Remainder of 2022	$	96,767	$	4,460	$	2,071	$	103,298	$	(96,767)	$	6,531
2023	115,343		4,944		2,365		122,652		(115,343)		7,309
2024	100,818		3,005		1,486		105,309		(100,818)		4,491
2025	84,740		1,013		1,525		87,278		(84,740)		2,538
2026	71,674		566		1,563		73,803		(71,674)		2,129
Thereafter	177,274		904		6,498		184,676		(177,274)		7,402
Total future obligations	$	646,616	$	14,892	$	15,508	$	677,016	$	(646,616)	$	30,400
Less amounts representing interest	79,466		925		2,271		82,662
Present value of lease liabilities	$	567,150	$	13,967	$	13,237	$	594,354
Less current lease liabilities	106,010		5,407		2,168		113,585
Long-term lease liabilities	$	461,140	$	8,560	$	11,069	$	480,769

LEASES

LEASES:

At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and some of its corporate facilities under operating leases. The original terms of the salon leases range from 1 to 20 years with many leases renewable for an additional 5 to 10-year term at the option of the Company. In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels. For most leases, the Company is required to pay real estate taxes and other occupancy expenses. Total rent includes the following:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Office and warehouse rent	$	1,669	$	1,203
Lease termination expense (1)	1,340		5,554
Lease liability benefit (2)	(2,431)		(6,061)
Franchise salon rent	329		718
Company-owned salon rent	896		11,811
Total	$	1,803	$	13,225

_______________________________________________________________________________

(1)During the three months ended September 30, 2021, the Company paid $0.9 million to exit its distribution centers before the lease end dates and incurred costs of $0.4 million to exit salons before the lease end date in order to relieve the Company of future lease obligations. For the three months ended September 30, 2020, lease termination fees includes $2.5 million of early termination payments to close salons before the lease end date to relieve the Company of future lease obligations and $3.1 million to accrue future lease payments for salons that are no longer operating.

(2)Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities which results in a net gain. In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statement of Operations. For the three months ended September 30, 2021 and 2020, franchise rental income and franchise rent expense were $33.8 and $32.3 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew SmartStyle and some franchise leases upon expiration. Other leases are expected to be renewed by the franchisee upon expiration. All lease-related costs are passed through to the franchisees.

For salon operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed. The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any. The Company's consolidated ROU asset balance was $573.5 and $611.9 million as of September 30, 2021 and June 30, 2021, respectively. For leases classified as operating leases, expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed. Generally, the non-lease components, such as real estate taxes and other occupancy expenses, are separate from rent expense within the lease and are not included in the measurement of the lease liability because these charges are variable.

The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined. The Company uses the portfolio approach in applying the discount rate based on the original lease term. The weighted average remaining lease term was 6.38 and 6.44 years and the weighted average discount rate was 4.14% and 4.11% for all salon operating leases as of September 30, 2021 and June 30, 2021, respectively.

A lessee's ROU asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, applied to other elements of property, plant, and equipment. The Company has identified its asset groups at the individual salon level as this represents the lowest level that identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Poor salon performance, primarily due to the COVID-19 pandemic, resulted in an ASC 360-10-35-21 triggering event. As a result, management assessed underperforming salon asset groups, which included the related ROU assets, for impairment in accordance with ASC 360.

The first step in the impairment test under ASC 360 is to determine whether the long-lived assets are recoverable, which is determined by comparing the net carrying value of the salon asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. Estimating cash flows for purposes of the recoverability test is subjective and requires significant judgment. Estimated future cash flows used for the purposes of the recoverability test were based upon historical cash flows for the salons, adjusted for expected changes in future market conditions related to the COVID-19 pandemic, and other factors. The period of time used to determine the estimates of the future cash flows for the recoverability test was based on the remaining useful life of the primary asset of the group, which was the ROU asset in all cases.

The second step of the long-lived asset impairment test requires that the fair value of the asset group be estimated when determining the amount of any impairment loss. For the salon asset groups that failed the recoverability test, an impairment loss was measured as the amount by which the carrying amount of the asset group exceeds its fair value. The Company applied the fair value guidance within ASC 820-10 to determine the fair value of the asset group from the perspective of a market-participant considering, among other things, appropriate discount rates, multiple valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group. To determine the fair value of the salon asset groups, the Company utilized market-participant assumptions rather than the Company's own assumptions about how it intends to use the asset group. The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include: the market rent of comparable properties based on recently negotiated leases as applicable, the asset group's projected sales for properties with no recently negotiated leases, and a discount rate.

In the three months ended September 30, 2021 and 2020, the Company recognized a long-lived impairment charge of $0.2 and $5.8 million, respectively, which included $0.1 and $4.6 million, respectively, related to the ROU assets, in the unaudited Condensed Consolidated Statement of Operations. The impairments recorded for the three months ended September 30, 2021 were primarily the result of triggering events identified on certain underperforming salons, salons that were identified to close in the year, and certain salons where franchisees were unable to fulfill their rent obligations. Assessing the long-lived assets for impairment requires management to make assumptions and to apply judgment, which can be affected by economic conditions and other factors that can be difficult to predict. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it uses to calculate impairment losses for its long-lived assets, including its ROU assets. Our projections of future operating performance do not anticipate future salon closures due to the COVID-19 pandemic. However, the ultimate severity and longevity of the COVID-19 pandemic is unknown, therefore; if actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

As of September 30, 2021, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (in thousands):

Fiscal Year	Leases for Franchise Salons		Leases for Company-owned Salons		Corporate Leases		Total Operating Lease Payments		Sublease Income To Be Received From Franchisees		Net Rent Commitments
Remainder of 2022	$	96,767	$	4,460	$	2,071	$	103,298	$	(96,767)	$	6,531
2023	115,343		4,944		2,365		122,652		(115,343)		7,309
2024	100,818		3,005		1,486		105,309		(100,818)		4,491
2025	84,740		1,013		1,525		87,278		(84,740)		2,538
2026	71,674		566		1,563		73,803		(71,674)		2,129
Thereafter	177,274		904		6,498		184,676		(177,274)		7,402
Total future obligations	$	646,616	$	14,892	$	15,508	$	677,016	$	(646,616)	$	30,400
Less amounts representing interest	79,466		925		2,271		82,662
Present value of lease liabilities	$	567,150	$	13,967	$	13,237	$	594,354
Less current lease liabilities	106,010		5,407		2,168		113,585
Long-term lease liabilities	$	461,140	$	8,560	$	11,069	$	480,769

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FINANCING ARRANGEMENTS

3 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING ARRANGEMENTS:

The Company's long-term debt consists of the following:

Revolving Credit Facility

	Maturity Date	September 30, 2021	September 30, 2021		June 30, 2021
	(Fiscal Year)	(Interest rate %)	(Dollars in thousands)
Revolving credit facility	2023	5.00%	$	195,805	$	186,911

At September 30, 2021, cash and cash equivalents totaled $45.5 million. As of September 30, 2021, the Company has $195.8 million of outstanding borrowings under a $293.3 million revolving credit facility. The credit facility decreased $1.1 million from $294.4 million as of June 30, 2021 in accordance with the bulk sale provisions in the revolving credit facility agreement, due to the sale of secured inventory related to our transition to third-party distribution partners. At September 30, 2021, the Company had outstanding standby letters of credit under the revolving credit facility of $15.7 million, primarily related to the Company's self-insurance program. The unused available credit under the revolving credit facility was $81.8 million as of September 30, 2021. The Company's liquidity per the agreement includes the unused available balance under the credit facility, unrestricted cash and cash equivalents and the shortfall in the gap in expected proceeds from the sale of salon assets of $20.9 million as of September 30, 2021. Total liquidity per the agreement was $148.2 million as of September 30, 2021. The revolving credit facility has a minimum liquidity covenant of $75.0 million. As of September 30, 2021, the Company had cash, cash equivalents and restricted cash of $56.1 million and current liabilities of $182.5 million.

The Company was in compliance with all covenants and other requirements of the financing arrangements as of September 30, 2021 and believes it will continue to be in compliance for at least one year from the filing date.

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FAIR VALUE MEASUREMENTS

3 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS:

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2021 and June 30, 2021, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets and accounts payable approximated their carrying values. The estimated fair values of the Company's debt is based on Level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets, including the Company's equity method investments, tangible fixed and other assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.

The following impairments were based on fair values using Level 3 inputs:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Long-lived asset impairment (1)	$	163	$	5,824

_______________________________________________________________________________

(1)See Note 1 to the unaudited Condensed Consolidated Financial Statements.

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SEGMENT INFORMATION

3 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION:

Segment information is prepared on the same basis that the chief operating decision maker reviews financial information for operational decision-making purposes. Beginning in fiscal year 2022, corporate costs are included within the Franchise segment to reflect how the chief operating decision maker reviews the business.

The Company's reportable operating segments consisted of the following salons:

	September 30, 2021		June 30, 2021
FRANCHISE SALONS:
SmartStyle/Cost Cutters in Walmart Stores	1,676		1,666
Supercuts	2,369		2,386
Portfolio Brands	1,391		1,357
Total North American salons	5,436		5,409
Total International salons (1)	151		154
Total Franchise salons	5,587		5,563
as a percent of total Franchise and Company-owned salons	96.9	%	95.3	%
COMPANY-OWNED SALONS:
SmartStyle/Cost Cutters in Walmart Stores	67		91
Supercuts	24		35
Portfolio Brands	88		150
Total Company-owned salons	179		276
as a percent of total Franchise and Company-owned salons	3.1	%	4.7	%
OWNERSHIP INTEREST LOCATIONS:
Equity ownership interest locations	77		78
Grand Total, System-wide	5,843		5,917

_______________________________________________________________________________

(1)Canadian and Puerto Rican salons are included in the North American salon totals.

As of September 30, 2021, the Franchise operating segment is comprised primarily of Supercuts®, SmartStyle®, Cost Cutters®, First Choice Haircutters®, Magicuts®, and Roosters® concepts and the Company-owned operating segment is comprised primarily of SmartStyle®, Supercuts®, Cost Cutters®, and other regional trade names.

Financial information concerning the Company's reportable operating segments is shown in the following tables:

	Three Months Ended September 30, 2021
	Franchise		Company-owned		Consolidated
	(Dollars in thousands)
Revenues:
Royalties	$	16,602	$	—	$	16,602
Fees	3,265		—		3,265
Product sales to franchisees	8,008		—		8,008
Advertising fund contributions	8,114		—		8,114
Franchise rental income	33,762		—		33,762
Company-owned salon revenue	—		8,005		8,005
Total revenue	69,751		8,005		77,756
Operating expenses:
Cost of product sales to franchisees	8,112		—		8,112
General and administrative	21,243		546		21,789
Rent	1,677		126		1,803
Advertising fund expense	8,114		—		8,114
Franchise rent expense	33,762		—		33,762
Company-owned salon expense	—		7,945		7,945
Depreciation and amortization	1,623		246		1,869
Long-lived asset impairment	—		163		163
Total operating expenses	74,531		9,026		83,557
Operating loss	$	(4,780)	$	(1,021)	$	(5,801)

	Three Months Ended September 30, 2020
	Franchise		Company-owned		Consolidated
	(Dollars in thousands)
Revenues:
Royalties	$	11,405	$	—	$	11,405
Fees	2,042		—		2,042
Product sales to franchisees	13,742		—		13,742
Advertising fund contributions	4,509		—		4,509
Franchise rental income	32,283		—		32,283
Company-owned salon revenue	—		47,415		47,415
Total revenue	63,981		47,415		111,396
Operating expenses:
Cost of product sales to franchisees	10,678		—		10,678
General and administrative	23,171		2,977		26,148
Rent	1,279		11,946		13,225
Advertising fund expense	4,510		—		4,510
Franchise rent expense	32,283		—		32,283
Company-owned salon expense	—		42,943		42,943
Depreciation and amortization	2,294		5,082		7,376
Long-lived asset impairment	610		5,214		5,824
Total operating expenses	74,825		68,162		142,987
Operating loss	$	(10,844)	$	(20,747)	$	(31,591)

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Inventories

Inventories:The Company has inventory valuation reserves for excess and obsolete inventories or other factors that may render inventories unmarketable at their historical costs. In fiscal year 2021, the Company announced it would transition away from its wholesale product distribution model in favor of a third-party distribution model. As a result, the Company exited one distribution center in the quarter and plans to exit its other distribution center in fiscal year 2022. To facilitate the exit, the Company is selling inventory at discounts and disposing of hard-to-sell products. Additionally, the reduction in company-owned salons decreases the Company's ability to re-distribute inventory from closed locations to other salons to be sold or used.

Salon Long-Lived Asset and Right of Use Asset Impairment Assessments

Salon Long-Lived Asset and Right of Use Asset Impairment Assessments:

The Company assesses impairment of long-lived salon assets and right of use (ROU) assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in the use of the assets. The first step is to assess recoverability, and in doing that, the undiscounted salon cash flows are compared to the carrying value of the salon assets. If the undiscounted estimated cash flows are less than the carrying value of the assets, the Company calculates an impairment charge based on the difference between the carrying value of the asset group and its fair value. The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available. See Note 7 of the unaudited Condensed Consolidated Financial Statements for further discussion related to the ROU asset impairment.

Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as changes in economic conditions and changes in operating performance. As the ongoing expected cash flows and carrying amounts of long-lived assets are assessed, these factors could cause the Company to realize material impairment charges.

Goodwill

The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. An interim impairment analysis was not required in the three months ended September 30, 2021.The Company performs its annual impairment assessment as of April 30. For the fiscal year 2021 annual impairment assessment, the Company performed a Step 1 impairment test for the Franchise reporting unit. The Company compared the carrying value of the Franchise reporting unit, including goodwill, to the estimated fair value. The results of this assessment indicated that the estimated fair value of the Company's Franchise reporting unit significantly exceeded the carrying value.

Classification of Revenue and Expenses

Classification of Revenue and Expenses:

Beginning in the first quarter of fiscal year 2022, the Company adjusted its Statement of Operations for both periods presented to align the presentation of results to its franchise-focused business. Below is a summary of the changes to the financial statement captions. The change does not have a financial impact on the Company's reported revenue, operating loss, reported net loss or cash flows from operations.

Royalties - sales-based royalty received from franchisees. In prior years, these fees were included in Royalties and Fees and disclosed in the footnotes.

Fees - fees received from franchisees and third parties, including franchise fees, software and hardware fees related to Opensalon® Pro and fees received from the third-party distributors.

Product sales to franchisees - wholesale product sales to franchisees. This caption equates to Product sales in the Franchise segment in prior years. The Company is changing its franchise product sales business in fiscal year 2022 from a wholesale distribution model to a third-party distribution model. This revenue is expected to decrease significantly during fiscal year 2022.

Advertising fund contributions - sales-based advertising fund contributions received from franchisees. In prior years, these fees were included in Royalties and Fees and disclosed in the footnotes.

Company-owned salon revenue - service revenue and revenue derived from sales of product in Company-owned salons. This caption equates to revenue reported in the Company-owned segment in prior periods.

Cost of product sales to franchisees - direct cost of inventory and freight and other costs of sales. In prior years, these sales were included in the Franchise segment cost of product and site operating expenses.

Company-owned salon expense - cost of service and product sold to guests in our Company-owned salons and other salon-related costs. In prior years, these costs were classified as Company-owned segment cost of service, cost of product and site operating expenses. Excluded from this caption are general and administrative expense, rent and depreciation and amortization related to company-owned salons.

Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue:

Revenue recognized at point of sale

Product sales to franchisees are recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery. Company-owned salon revenues are recognized at the time when the services are provided or the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the guest. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns.

Revenue recognized over time

Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenues are billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statement of Operations. The treatment increases both the gross amount of reported revenue and expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, which is typically ten years. Software fees are recognized over the term of the SaaS agreement. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees. The Company recognizes franchise rental income and expense when it is due to the landlord.

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2021 and June 30, 2021, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets and accounts payable approximated their carrying values. The estimated fair values of the Company's debt is based on Level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets, including the Company's equity method investments, tangible fixed and other assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.

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REVENUE RECOGNITION (Tables)

3 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Schedule of receivables, broker fees and deferred revenue

Information about receivables, broker fees and deferred revenue subject to the current revenue recognition guidance is as follows:

	September 30, 2021		June 30, 2021		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	14,612	$	19,112	Receivables, net
Broker fees	18,272		19,254		Other assets
Deferred revenue:
Current
Gift card liability	$	2,150	$	2,240	Accrued expenses
Deferred franchise fees unopened salons	31		40		Accrued expenses
Deferred franchise fees open salons	5,901		5,884		Accrued expenses
Total current deferred revenue:	$	8,082	$	8,164
Non-current
Deferred franchise fees unopened salons	$	5,824	$	6,571	Other non-current liabilities
Deferred franchise fees open salons	31,101		32,365		Other non-current liabilities
Total non-current deferred revenue	$	36,925	$	38,936

Rollforward of allowance for doubtful accounts

The following table is a rollforward of the allowance for doubtful accounts for the period (in thousands):

Balance as of June 30, 2021	$	7,774
Provision for doubtful accounts (1)	237
Provision for franchisee rent (2)	364
Reclass of accrued rent (3)	396
Write-offs	(102)
Balance as of September 30, 2021	$	8,669

_______________________________________________________________________________

(1)The provision for doubtful accounts is recognized as General and administrative expense in the unaudited Condensed Consolidated Statement of Operations.

(2)The provision for franchisee rent is recognized as Rent in the unaudited Condensed Consolidated Statement of Operations.

(3)The reclass of accrued rent represents franchisee rent obligations guaranteed by the Company that were unbilled and deemed unrecoverable as of June 30, 2021. The amounts were billed in fiscal year 2022 and the related accrual was reclassified to the allowance for doubtful accounts.

Broker fees

The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):

Balance as of June 30, 2021	$	19,254
Additions	25
Amortization	(862)
Write-offs	(145)
Balance as of September 30, 2021	$	18,272

Estimated revenue expected to be recognized

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2021 is as follows (in thousands):

Remainder of 2022	$	4,391
2023	5,866
2024	5,631
2025	5,246
2026	4,776
Thereafter	11,092
Total	$	37,002

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SHAREHOLDERS' EQUITY (Tables)

3 Months Ended

Sep. 30, 2021

Stockholders' Equity Note [Abstract]

Share-based Equity Awards Granted

During the three months ended September 30, 2021, the Company granted one equity award as follows:

	Three Months Ended September 30, 2021
Restricted stock units	2,987

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INCOME TAXES (Tables)

3 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Summary of income tax benefits and corresponding effective tax rates

A summary of income tax benefits and corresponding effective tax rates is as follows:

	Three Months Ended September 30,
	2021			2020
	(Dollars in thousands)
Income tax benefit	$	48		$	635
Effective tax rate	0.5		%	1.8		%

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH (Tables)

3 Months Ended

Sep. 30, 2021

Cash and Cash Equivalents [Abstract]

Schedule of cash and cash equivalents

The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded within other current assets on the unaudited Condensed Consolidated Balance Sheet to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statement of Cash flows:

	September 30, 2021		June 30, 2021
	(Dollars in thousands)
Cash and cash equivalents	$	45,508	$	19,191
Restricted cash, included in other current assets (1)	10,550		9,961
Total cash, cash equivalents and restricted cash	$	56,058	$	29,152

_______________________________________________________________________________

(1)Restricted cash within other current assets primarily relates to consolidated advertising cooperatives funds, which can only be used to settle obligations of the respective cooperatives and contractual obligations to collateralize the Company's self-insurance programs.

Schedule of restricted cash and cash equivalents

The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded within other current assets on the unaudited Condensed Consolidated Balance Sheet to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statement of Cash flows:

	September 30, 2021		June 30, 2021
	(Dollars in thousands)
Cash and cash equivalents	$	45,508	$	19,191
Restricted cash, included in other current assets (1)	10,550		9,961
Total cash, cash equivalents and restricted cash	$	56,058	$	29,152

_______________________________________________________________________________

(1)Restricted cash within other current assets primarily relates to consolidated advertising cooperatives funds, which can only be used to settle obligations of the respective cooperatives and contractual obligations to collateralize the Company's self-insurance programs.

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LEASES (Tables)

3 Months Ended

Sep. 30, 2021

Leases [Abstract]

Schedule of Real Estate Taxes and Other Occupancy Expenses

Total rent includes the following:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Office and warehouse rent	$	1,669	$	1,203
Lease termination expense (1)	1,340		5,554
Lease liability benefit (2)	(2,431)		(6,061)
Franchise salon rent	329		718
Company-owned salon rent	896		11,811
Total	$	1,803	$	13,225

_______________________________________________________________________________

(1)During the three months ended September 30, 2021, the Company paid $0.9 million to exit its distribution centers before the lease end dates and incurred costs of $0.4 million to exit salons before the lease end date in order to relieve the Company of future lease obligations. For the three months ended September 30, 2020, lease termination fees includes $2.5 million of early termination payments to close salons before the lease end date to relieve the Company of future lease obligations and $3.1 million to accrue future lease payments for salons that are no longer operating.

(2)Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities which results in a net gain. In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired.

Lessor, Future Operating Lease Commitments

As of September 30, 2021, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (in thousands):

Fiscal Year	Leases for Franchise Salons		Leases for Company-owned Salons		Corporate Leases		Total Operating Lease Payments		Sublease Income To Be Received From Franchisees		Net Rent Commitments
Remainder of 2022	$	96,767	$	4,460	$	2,071	$	103,298	$	(96,767)	$	6,531
2023	115,343		4,944		2,365		122,652		(115,343)		7,309
2024	100,818		3,005		1,486		105,309		(100,818)		4,491
2025	84,740		1,013		1,525		87,278		(84,740)		2,538
2026	71,674		566		1,563		73,803		(71,674)		2,129
Thereafter	177,274		904		6,498		184,676		(177,274)		7,402
Total future obligations	$	646,616	$	14,892	$	15,508	$	677,016	$	(646,616)	$	30,400
Less amounts representing interest	79,466		925		2,271		82,662
Present value of lease liabilities	$	567,150	$	13,967	$	13,237	$	594,354
Less current lease liabilities	106,010		5,407		2,168		113,585
Long-term lease liabilities	$	461,140	$	8,560	$	11,069	$	480,769

Lessee, Future Operating Lease Commitments

As of September 30, 2021, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (in thousands):

Fiscal Year	Leases for Franchise Salons		Leases for Company-owned Salons		Corporate Leases		Total Operating Lease Payments		Sublease Income To Be Received From Franchisees		Net Rent Commitments
Remainder of 2022	$	96,767	$	4,460	$	2,071	$	103,298	$	(96,767)	$	6,531
2023	115,343		4,944		2,365		122,652		(115,343)		7,309
2024	100,818		3,005		1,486		105,309		(100,818)		4,491
2025	84,740		1,013		1,525		87,278		(84,740)		2,538
2026	71,674		566		1,563		73,803		(71,674)		2,129
Thereafter	177,274		904		6,498		184,676		(177,274)		7,402
Total future obligations	$	646,616	$	14,892	$	15,508	$	677,016	$	(646,616)	$	30,400
Less amounts representing interest	79,466		925		2,271		82,662
Present value of lease liabilities	$	567,150	$	13,967	$	13,237	$	594,354
Less current lease liabilities	106,010		5,407		2,168		113,585
Long-term lease liabilities	$	461,140	$	8,560	$	11,069	$	480,769

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FINANCING ARRANGEMENTS (Tables)

3 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Schedule of long-term debt

The Company's long-term debt consists of the following:

Revolving Credit Facility

	Maturity Date	September 30, 2021	September 30, 2021		June 30, 2021
	(Fiscal Year)	(Interest rate %)	(Dollars in thousands)
Revolving credit facility	2023	5.00%	$	195,805	$	186,911

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of fair value impairments

The following impairments were based on fair values using Level 3 inputs:

	Three Months Ended September 30,
	2021		2020
	(Dollars in thousands)
Long-lived asset impairment (1)	$	163	$	5,824

_______________________________________________________________________________

(1)See Note 1 to the unaudited Condensed Consolidated Financial Statements.

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SEGMENT INFORMATION (Tables)

3 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Schedule of reportable operating segment salons

The Company's reportable operating segments consisted of the following salons:

	September 30, 2021		June 30, 2021
FRANCHISE SALONS:
SmartStyle/Cost Cutters in Walmart Stores	1,676		1,666
Supercuts	2,369		2,386
Portfolio Brands	1,391		1,357
Total North American salons	5,436		5,409
Total International salons (1)	151		154
Total Franchise salons	5,587		5,563
as a percent of total Franchise and Company-owned salons	96.9	%	95.3	%
COMPANY-OWNED SALONS:
SmartStyle/Cost Cutters in Walmart Stores	67		91
Supercuts	24		35
Portfolio Brands	88		150
Total Company-owned salons	179		276
as a percent of total Franchise and Company-owned salons	3.1	%	4.7	%
OWNERSHIP INTEREST LOCATIONS:
Equity ownership interest locations	77		78
Grand Total, System-wide	5,843		5,917

_______________________________________________________________________________

(1)Canadian and Puerto Rican salons are included in the North American salon totals.

Schedule of summarized financial information of reportable operating segments

Financial information concerning the Company's reportable operating segments is shown in the following tables:

	Three Months Ended September 30, 2021
	Franchise		Company-owned		Consolidated
	(Dollars in thousands)
Revenues:
Royalties	$	16,602	$	—	$	16,602
Fees	3,265		—		3,265
Product sales to franchisees	8,008		—		8,008
Advertising fund contributions	8,114		—		8,114
Franchise rental income	33,762		—		33,762
Company-owned salon revenue	—		8,005		8,005
Total revenue	69,751		8,005		77,756
Operating expenses:
Cost of product sales to franchisees	8,112		—		8,112
General and administrative	21,243		546		21,789
Rent	1,677		126		1,803
Advertising fund expense	8,114		—		8,114
Franchise rent expense	33,762		—		33,762
Company-owned salon expense	—		7,945		7,945
Depreciation and amortization	1,623		246		1,869
Long-lived asset impairment	—		163		163
Total operating expenses	74,531		9,026		83,557
Operating loss	$	(4,780)	$	(1,021)	$	(5,801)

	Three Months Ended September 30, 2020
	Franchise		Company-owned		Consolidated
	(Dollars in thousands)
Revenues:
Royalties	$	11,405	$	—	$	11,405
Fees	2,042		—		2,042
Product sales to franchisees	13,742		—		13,742
Advertising fund contributions	4,509		—		4,509
Franchise rental income	32,283		—		32,283
Company-owned salon revenue	—		47,415		47,415
Total revenue	63,981		47,415		111,396
Operating expenses:
Cost of product sales to franchisees	10,678		—		10,678
General and administrative	23,171		2,977		26,148
Rent	1,279		11,946		13,225
Advertising fund expense	4,510		—		4,510
Franchise rent expense	32,283		—		32,283
Company-owned salon expense	—		42,943		42,943
Depreciation and amortization	2,294		5,082		7,376
Long-lived asset impairment	610		5,214		5,824
Total operating expenses	74,825		68,162		142,987
Operating loss	$	(10,844)	$	(20,747)	$	(31,591)

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventories (Details) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2021 USD ($) distributionCenter	Jun. 30, 2021 USD ($)
Accounting Changes and Error Corrections [Abstract]
Number of distribution centers, closed during period | distributionCenter	1
Inventory reserve | $	$ 8.8	$ 11.8

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Goodwill	$ 229,007	$ 229,582
Franchise Reporting Unit
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Goodwill	$ 229,000	$ 229,600

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Depreciation (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
Depreciation expense, asset retirement obligation	$ 0.3	$ 1.3

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REVENUE RECOGNITION - Revenue Recognized (Details)	3 Months Ended
	Sep. 30, 2021
Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Performance obligations expected to be satisfied, expected timing	30 to 90 days
Revenue recognized over time
Disaggregation of Revenue [Line Items]
Performance obligations expected to be satisfied, expected timing	ten years

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REVENUE RECOGNITION - Receivables, Broker Fees and Deferred Revenue (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Revenue from Contract with Customer [Abstract]
Receivables from contracts with customers, net	$ 14,612	$ 19,112
Broker fees	18,272	19,254
Deferred revenue
Current	8,082	8,164
Non-current	36,925	38,936
Gift card liability
Deferred revenue
Current	2,150	2,240
Deferred franchise fees unopened salons
Deferred revenue
Current	31	40
Non-current	5,824	6,571
Deferred franchise fees open salons
Deferred revenue
Current	5,901	5,884
Non-current	$ 31,101	$ 32,365

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REVENUE RECOGNITION - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Franchise Fees
Disaggregation of Revenue [Line Items]
Revenues	$ 1.6	$ 1.6

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REVENUE RECOGNITION - Allowance For Doubtful Accounts (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2021 USD ($)
Revenue from Contract with Customer [Abstract]
Balance as of June 30, 2021	$ 7,774
Provision for doubtful accounts	237
Provision for franchisee rent	364
Reclass of accrued rent	396
Write-offs	(102)
Balance as of September 30, 2021	$ 8,669

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REVENUE RECOGNITION - Broker Fee Balance (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2021 USD ($)
Change In Deferred Costs [Roll Forward]
Balance as of June 30, 2021	$ 19,254
Additions	25
Amortization	(862)
Write-offs	(145)
Balance as of September 30, 2021	$ 18,272

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REVENUE RECOGNITION - Future Estimated Expected Revenue (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 37,002
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 4,391
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 5,866
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 5,631
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-07-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 5,246
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-07-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 4,776
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-07-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 11,092
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing

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SHAREHOLDERS' EQUITY - Equity Awards Granted (Details)	3 Months Ended
	Sep. 30, 2021 shares
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock granted (in shares)	2,987

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SHAREHOLDERS' EQUITY - Additional Information (Details) - USD ($) shares in Millions		3 Months Ended		12 Months Ended
	Oct. 01, 2021	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense (benefit)		$ 1,700,000	$ (1,200,000)
Stock issuance costs		1,000,000
Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from issuance of stock	$ 5,000,000
Sale of stock (in shares)	1.2
Shelf Registration
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Sale of stock, authorized				$ 150,000,000
Prospectus Supplement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Sale of stock, authorized				50,000,000
At-The-Market
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Sale of stock, authorized				$ 50,000,000
Proceeds from issuance of stock		33,200,000
CEO
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense (benefit)		$ (2,400,000)

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INCOME TAXES - Summary of Income Tax Benefits (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Income Tax Disclosure [Abstract]
Income tax benefit	$ 48	$ 635
Effective tax rate	0.50%	1.80%

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions	Sep. 30, 2021	Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]
Loss contingency accrual	$ 3.0	$ 3.0

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021	Sep. 30, 2020	Jun. 30, 2020
Cash and Cash Equivalents [Abstract]
Cash and cash equivalents	$ 45,508	$ 19,191
Restricted cash, included in Other current assets	10,550	9,961
Total cash, cash equivalents and restricted cash	$ 56,058	$ 29,152	$ 93,476	$ 122,880

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LEASES - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021
Lessor, Lease, Description [Line Items]
Franchise rental income	$ 33,762	$ 32,283
Rent expense	$ 33,800	32,300
Lessor, term of contract	5 years
Right of use asset	$ 573,475		$ 611,880
Weighted average remaining lease term	6 years 4 months 17 days		6 years 5 months 8 days
Weighted average discount rate	4.14%		4.11%
Long-lived asset impairment	$ 163	5,824
Operating lease, impairment loss	$ 100	$ 4,600
Minimum
Lessor, Lease, Description [Line Items]
Lessee, term of contract	1 year
Lessee, renewal term	5 years
Maximum
Lessor, Lease, Description [Line Items]
Lessee, term of contract	20 years
Lessee, renewal term	10 years

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LEASES - Real Estate Taxes and Other Occupancy Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Lessee, Lease, Description [Line Items]
Total	$ 33,800	$ 32,300
Early termination penalty payments		2,500
Adjustments to expected future lease payments for underperforming salons		3,100
Non-Franchise Lease
Lessee, Lease, Description [Line Items]
Office and warehouse rent	1,669	1,203
Lease termination expense	1,340	5,554
Lease liability benefit	(2,431)	(6,061)
Franchise salon rent	329	718
Company-owned salon rent	896	11,811
Total	1,803	$ 13,225
Distribution centers
Lessee, Lease, Description [Line Items]
Early termination penalty payments	900
Salons
Lessee, Lease, Description [Line Items]
Early termination penalty payments	$ 400

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LEASES Future - Operating Lease Commitments (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Leases, Operating [Abstract]
Remainder of 2022	$ 103,298
2023	122,652
2024	105,309
2025	87,278
2026	73,803
Thereafter	184,676
Total future obligations	677,016
Less amounts representing interest	82,662
Present value of lease liabilities	594,354
Less current lease liabilities	113,585	$ 116,471
Long-term lease liabilities	480,769	$ 518,866
Sublease Income To Be Received From Franchisees
Remainder of 2022	(96,767)
2023	(115,343)
2024	(100,818)
2025	(84,740)
2026	(71,674)
Thereafter	(177,274)
Total future obligations	(646,616)
Net Rent Commitments
Remainder of 2022	6,531
2023	7,309
2024	4,491
2025	2,538
2026	2,129
Thereafter	7,402
Total future obligations	30,400
Operating Segments | Franchise
Leases, Operating [Abstract]
Remainder of 2022	96,767
2023	115,343
2024	100,818
2025	84,740
2026	71,674
Thereafter	177,274
Total future obligations	646,616
Less amounts representing interest	79,466
Present value of lease liabilities	567,150
Less current lease liabilities	106,010
Long-term lease liabilities	461,140
Operating Segments | Company-owned
Leases, Operating [Abstract]
Remainder of 2022	4,460
2023	4,944
2024	3,005
2025	1,013
2026	566
Thereafter	904
Total future obligations	14,892
Less amounts representing interest	925
Present value of lease liabilities	13,967
Less current lease liabilities	5,407
Long-term lease liabilities	8,560
Unallocated Corporate
Leases, Operating [Abstract]
Remainder of 2022	2,071
2023	2,365
2024	1,486
2025	1,525
2026	1,563
Thereafter	6,498
Total future obligations	15,508
Less amounts representing interest	2,271
Present value of lease liabilities	13,237
Less current lease liabilities	2,168
Long-term lease liabilities	$ 11,069

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FINANCING ARRANGEMENTS - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Debt Instrument [Line Items]
Long-term debt	$ 195,805	$ 186,911
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Interest rate percentage	5.00%
Long-term debt	$ 195,805	$ 186,911

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FINANCING ARRANGEMENTS - Revolving Credit Facility (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Sep. 30, 2020	Jun. 30, 2020
Debt Instrument [Line Items]
Cash, cash equivalents and marketable securities	$ 45,500
Long-term debt	195,805	$ 186,911
Estimated proceeds from sale of salon assets	20,900
Liquidity amount	148,200
Cash, cash equivalents, and restricted cash	56,058	29,152	$ 93,476	$ 122,880
Current liabilities	182,468	198,485
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Long-term debt	195,805	186,911
Maximum borrowing capacity	293,300	$ 294,400
Decrease in borrowing capacity	1,100
Long-term line of credit	15,700
Unused borrowing capacity, amount	81,800
Minimum liquidity	$ 75,000

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FAIR VALUE MEASUREMENTS - Schedule of Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Assets and liabilities measured at fair value on a nonrecurring basis
Long-lived asset impairment	$ 163	$ 5,824
Nonrecurring | Level 3
Assets and liabilities measured at fair value on a nonrecurring basis
Long-lived asset impairment	$ 163	$ 5,824

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SEGMENT INFORMATION - Reportable Operating Segment Salons (Details) - salon	Sep. 30, 2021	Jun. 30, 2021
Franchisor Disclosure [Line Items]
Number of salons	5,843	5,917
Equity ownership interest locations
Franchisor Disclosure [Line Items]
Number of salons	77	78
Franchise
Franchisor Disclosure [Line Items]
Number of salons	5,587	5,563
Salons as a percent of total Company-owned and Franchise salons	96.90%	95.30%
Franchise | North American
Franchisor Disclosure [Line Items]
Number of salons	5,436	5,409
Franchise | International
Franchisor Disclosure [Line Items]
Number of salons	151	154
Franchise | SmartStyle/Cost Cutters in Walmart Stores
Franchisor Disclosure [Line Items]
Number of salons	1,676	1,666
Franchise | Supercuts
Franchisor Disclosure [Line Items]
Number of salons	2,369	2,386
Franchise | Portfolio Brands
Franchisor Disclosure [Line Items]
Number of salons	1,391	1,357
Company-owned
Franchisor Disclosure [Line Items]
Number of salons	179	276
Salons as a percent of total Company-owned and Franchise salons	3.10%	4.70%
Company-owned | SmartStyle/Cost Cutters in Walmart Stores
Franchisor Disclosure [Line Items]
Number of salons	67	91
Company-owned | Supercuts
Franchisor Disclosure [Line Items]
Number of salons	24	35
Company-owned | Portfolio Brands
Franchisor Disclosure [Line Items]
Number of salons	88	150

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SEGMENT INFORMATION - Operating Results (Details) - USD ($) $ in Thousands		3 Months Ended
		Sep. 30, 2021	Sep. 30, 2020
Revenues:
Franchise rental income		$ 33,762	$ 32,283
Total revenues		77,756	111,396
Operating expenses:
General and administrative		21,789	26,148
Rent		33,800	32,300
Advertising fund expense		8,114	4,510
Company-owned salon expense		7,945	42,943
Depreciation and amortization		1,869	7,376
Long-lived asset impairment		163	5,824
Total operating expenses		83,557	142,987
Operating loss		(5,801)	(31,591)
Non-Franchise Lease
Operating expenses:
Rent		1,803	13,225
Franchisor
Operating expenses:
Rent		33,762	32,283
Operating Segments | Franchise
Revenues:
Franchise rental income		33,762	32,283
Total revenues		69,751	63,981
Operating expenses:
General and administrative		21,243	23,171
Advertising fund expense		8,114	4,510
Company-owned salon expense		0	0
Depreciation and amortization		1,623	2,294
Long-lived asset impairment		0	610
Total operating expenses		74,531	74,825
Operating loss		(4,780)	(10,844)
Operating Segments | Franchise | Non-Franchise Lease
Operating expenses:
Rent		1,677	1,279
Operating Segments | Franchise | Franchisor
Operating expenses:
Rent		33,762	32,283
Operating Segments | Company-owned
Revenues:
Franchise rental income		0	0
Total revenues		8,005	47,415
Operating expenses:
General and administrative		546	2,977
Advertising fund expense		0	0
Company-owned salon expense		7,945	42,943
Depreciation and amortization		246	5,082
Long-lived asset impairment		163	5,214
Total operating expenses		9,026	68,162
Operating loss		(1,021)	(20,747)
Operating Segments | Company-owned | Non-Franchise Lease
Operating expenses:
Rent		126	11,946
Operating Segments | Company-owned | Franchisor
Operating expenses:
Rent		0	0
Royalties
Revenues:
Revenues		16,602	11,405
Royalties | Operating Segments | Franchise
Revenues:
Revenues		16,602	11,405
Royalties | Operating Segments | Company-owned
Revenues:
Revenues		0	0
Fees
Revenues:
Revenues		3,265	2,042
Fees | Operating Segments | Franchise
Revenues:
Revenues		3,265	2,042
Fees | Operating Segments | Company-owned
Revenues:
Revenues		0	0
Franchisees products
Revenues:
Revenues		8,008	13,742
Operating expenses:
Cost of product sales to franchisees		8,112	10,678
Franchisees products | Operating Segments | Franchise
Revenues:
Revenues		8,008	13,742
Operating expenses:
Cost of product sales to franchisees		8,112	10,678
Franchisees products | Operating Segments | Company-owned
Revenues:
Revenues		0	0
Operating expenses:
Cost of product sales to franchisees		0	0
Advertising fund contributions
Revenues:
Revenues		8,114	4,509
Advertising fund contributions | Operating Segments | Franchise
Revenues:
Revenues		8,114	4,509
Advertising fund contributions | Operating Segments | Company-owned
Revenues:
Revenues		0	0
Company owned salon products and services
Revenues:
Revenues		8,005	47,415
Operating expenses:
Company-owned salon expense	[1]	7,945	42,943
Company owned salon products and services | Operating Segments | Franchise
Revenues:
Revenues		0	0
Company owned salon products and services | Operating Segments | Company-owned
Revenues:
Revenues		$ 8,005	$ 47,415

[1] Includes cost of service and product sold to guests in our Company-owned salons. Excludes general and administrative expense, rent and depreciation and amortization related to Company-owned salons