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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedJune 30, 2022
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,MinneapolisMinnesota 55416
(Address of principal executive offices)(Zip Code)
(952947-7777
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbolName of each exchange on which registered
Common Stock, $0.05 par value RGSNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 
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 every Interactive Data File required to be submitted 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 submit 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 the definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filerSmaller 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes   No 
The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which common equity was last sold as of the last business day of the registrant's most recently completed second fiscal quarter, December 31, 2021, was approximately $78,213,138. The registrant has no non-voting common equity.
As of August 15, 2022, the registrant had 45,514,877 shares of Common Stock, par value $0.05 per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the annual fiscal 2022 meeting of shareholders (the "2022 Proxy Statement") (to be filed pursuant to Regulation 14A within 120 days after the registrant's fiscal year-end of June 30, 2022) are incorporated by reference into Part III.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission (the SEC) 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." In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These uncertainties include a potential material adverse impact on our business and results of operations as a result of the COVID-19 pandemic, including any adverse impact from variants; 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, fashion trends and consumer spending patterns; compliance with New York Stock Exchange listing requirements; reliance on franchise royalties and overall success of our franchisees’ salons; the return of sales at franchise locations to pre-pandemic levels; new merchandising strategy that utilizes third-party preferred supplier arrangements; our franchisees' ability to attract, train and retain talented stylists and salon leaders; the success of our franchisees, which operate independently; our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, franchisees, 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; the successful migration of our franchisees to the Zenoti salon technology platform; 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; the effectiveness of our enterprise risk management program; compliance with covenants in our financing arrangement, access to the existing revolving credit facility, and we may face an accelerated obligation to repay our indebtedness; our capital investments in technology may not achieve appropriate returns; premature termination of agreements with our franchisees; financial performance of Empire Education Group, Inc.; the continued ability of the Company to implement cost reduction initiatives and achieve expected cost savings; 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; the ability to use U.S. net operating loss carryforwards; 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 of this 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.
2

REGIS CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
INDEX
   
 
   
 
   
   

3

PART I

Item 1.    Business
General:
Regis Corporation franchises and owns hairstyling and hair care salons. The Company is listed on the NYSE under the ticker symbol "RGS." Unless the context otherwise provides, when we refer to the "Company," "we," "our," or "us," we are referring to Regis Corporation, the Registrant, together with its subsidiaries.
As of June 30, 2022, the Company franchised, owned or held ownership interests in 5,576 locations worldwide. The Company's locations consist of 5,395 franchised salons, 105 company-owned salons, and 76 locations in which we maintain a non-controlling ownership interest. Each of the Company's salon concepts generally offer similar salon products and services.
The major services supplied by the salons are haircutting and styling (including shampooing and conditioning), hair coloring and other services. Salons also sell a variety of hair care and other beauty products. We earn royalty revenue based on service and product sales at our franchise locations and earn revenue for services and products sold at our company-owned salons. Salons operate primarily under the trade names of Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters and Roosters and they generally serve the value category within the industry. Salons are primarily located in strip center locations and Walmart Supercenters.
Financial information about our segments and geographic areas for fiscal years 2022 and 2021 are included in Note 15 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
We have substantially completed our multi-year transformation to an asset-light fully-franchised business. As of June 30, 2022, 98.1% of our salons are owned by franchisees. The remaining 105 company-owned salons will be sold or closed when the leases expire.
Industry Overview:
The hair salon market is highly fragmented, with the vast majority of locations independently-owned and operated. However, the influence of salon chains, both franchised and corporate-owned, continues to grow within this market. Management believes salon chains will continue to have significant influence on this market and will continue to increase their presence due to name recognition and benefits that come with scale.
In nearly every area in which the Company has a salon, there are competitors offering similar hair care services and products at similar prices. The Company faces competition from chains, such as Great Clips, Fantastic Sams, Sport Clips and Ulta Beauty, independently-owned salons, department store salons located within malls, in-home hair services, booth rentals and blow dry bars. The Company also faces competition from other franchise organizations outside of the hair salon industry in attracting new franchisees.
At the individual salon level, barriers to entry are low; however, barriers exist for chains to expand nationally due to the need to establish systems and infrastructure, the ability to recruit franchisees, experienced field and salon management and stylists, and to lease quality sites. The principal factors of competition in the hair care category are quality and consistency of the guest experience, the ability to attract, retain, and train stylists, technology, convenience, location and price. The Company continually strives to improve its performance in each of these areas and to create additional points of brand differentiation versus the competition.
4

Salon Franchising Program:
General.    We have various franchise support functions our 5,395 franchised salons as of June 30, 2022, consisting mainly of Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters and Roosters salons. We provide our franchisees with a comprehensive system of business training, stylist education, site approval, professional marketing, promotion, and advertising programs, and other forms of ongoing support designed to help franchisees build successful businesses. Historically, we have signed the salon lease and then subleased the space to our franchisees. However, moving forward, for all new locations and some lease renewals, franchisees will seek to sign the salon leases directly with the landlords; however, there may be cases where we decide to stay on the lease. We have the right to approve salon leases.
Standards of Operations.    The Company does not control the day-to-day operations of its franchisees, including employment, benefits and wage determination, prices charged for products and services, business hours, personnel management, and capital expenditure decisions. However, the franchise agreements afford certain rights to the Company, such as the right to approve locations, suppliers and the sale of a franchise. Additionally, franchisees are required to conform to the Company's established operational policies and procedures relating to quality of service, training, salon design and decor and trademark usage. The Company's field personnel make periodic visits to franchised salons to ensure they are operating in conformity with the standards for each franchising program. All of the rights afforded to the Company with regard to franchised operations allow the Company to protect its brands, but do not allow the Company to control day-to-day franchise operations or make decisions that have a significant impact on the success of the franchised salons. The Company's franchise agreements do not give the Company any right, ability or potential to determine or otherwise influence any terms and/or conditions of employment of franchisees' employees (except for those, if any, that are specifically related to quality of service, training, salon design, decor and trademark usage), including, but not limited to, franchisees' employees' wages and benefits, hours of work, scheduling, leave programs, seniority rights, promotional or transfer opportunities, layoff/recall arrangements, grievance and dispute resolution procedures, and/or discipline and discharge.
Franchise Terms.    Pursuant to a franchise agreement with the Company, each franchisee pays an initial fee for each store and ongoing royalties to the Company. In addition, for most brands, the Company collects advertising funds from franchisees and administers the funds on behalf of the brands. Franchisees are responsible for the costs of leasehold improvements, furniture, fixtures, equipment, supplies, inventory, payroll costs and certain other items, including initial working capital. The majority of franchise agreements provide the Company a right of first refusal if the store is to be sold and the franchisee must obtain the Company's approval in all instances where there is a sale of a franchise location.
Additional information regarding each of the major franchised brands is listed below:
Supercuts
Supercuts franchise agreements have a perpetual term, subject to termination of the underlying lease agreement or termination of the franchise agreement by either the Company or the franchisee. All new franchisees enter into development agreements, which give them the right to enter into a defined number of franchise agreements. These franchise agreements are site specific. The development agreement provides limited territorial protection for the stores developed under those franchise agreements. Older franchisees have grandfathered expansion rights, which allow them to develop stores outside of development agreements and provide them with greater territorial protections in their markets. The Company has a comprehensive impact policy that resolves potential conflicts among Supercuts franchisees and/or the Company's Supercuts locations regarding proposed store sites.
SmartStyle and Cost Cutters in Walmart Supercenters
The majority of existing SmartStyle and Cost Cutters franchise agreements for salons located in Walmart Supercenters have a five-year term with a five-year option to renew. The franchise agreements are site specific.
Cost Cutters (not located in Walmart Supercenters), First Choice Haircutters and Magicuts
The majority of existing Cost Cutters franchise agreements have a 15-year term with a 15-year option to renew (at the option of the franchisee), while the majority of First Choice Haircutters franchise agreements have a 10-year term with a five-year option to renew. The majority of Magicuts franchise agreements have a term equal to the greater of five years or the current initial term of the lease agreement with an option to renew for two additional five-year periods. The current franchise agreement is site specific. Franchisees may enter into development agreements with the Company, which provide limited territorial protection.
Roosters Men’s Grooming Center
Roosters franchise agreements have a 10-year term with a 10-year option to renew (at the option of the franchisee). New franchisees enter into a franchise agreement concurrent with the opening of their first store, along with a development agreement with the right to open two additional locations.
5

Franchisee Training.    The Company provides new franchisees with training, focusing on the various aspects of salon management, including: operations, management training, marketing fundamentals and controls. Existing franchisees receive training, counseling and information from the Company on a regular basis. The Company provides franchisee salon managers and stylists with access to technical training resources.
Guests
Among other factors, consistent delivery of an exceptional guest experience, haircut quality, convenience, competitive pricing, salon location, inviting salon appearance and atmosphere, comprehensive retail assortments, and engagement through technology all drive guest traffic and improve guest retention.
Guest Experience. Our portfolio of salon concepts enables our guests to select different service scheduling options based upon their preference. We believe the ability to serve walk-in appointments and minimize guest wait times are essential elements in delivering an efficient guest experience. Our mobile applications and online check-in capabilities, including check-ins directly from Google®, allow us to capitalize on our guests' desire for convenience. Our franchisees continue to focus on stylist staffing and retention, optimizing schedules, balancing variable labor hours with guest traffic and managing guest wait times. Our franchise salons are located in high-traffic strip centers and Walmart Supercenters, with guest parking and easy access, and are generally open seven days per week to offer guests a variety of convenient ways to fulfill their beauty needs.
Affordability. The Company strives to offer an exceptional value for its services. In the value category, our guests expect outstanding service at competitive prices. These expectations are met with the average service price of transactions ranging from $20 to $28. Pricing decisions are considered on a salon-level basis and are established based on local conditions. Our franchisees control all pricing at their locations.
Salon Safety, Appearance and Atmosphere. Guest and stylist safety is our first priority and became even more important by the novel strain of coronavirus and all related variants (COVID-19). We have invested heavily in safety and personal protective equipment and training employees on safety measures. Our salon repairs and maintenance program is designed to ensure we invest in salon cleanliness and safety, as well as in maintaining the normal operation of our company-owned salons. The Company's salons range from 500 to 5,000 square feet, with the typical salon approximating 1,200 square feet.
Retail Assortments. Salons sell nationally recognized hair care and beauty products, as well as an assortment of corporate-owned brand products. Stylists are compensated and regularly trained to sell hair care and beauty products to their guests. Additionally, guests are encouraged to purchase products after stylists demonstrate their efficacy by using them in the styling of our guests' hair. The top selling brands within the Company's retail assortment include: L'Oreal Professional Brands, Regis Private Label Brand, Designline®, and Paul Mitchell. We also distribute our Designline brand through distribution channels, including Amazon.com and Walmart.com.
Technology.  In fiscal year 2022, we sold our proprietary back-office salon management system, Opensalon® Pro to a third party, Zenoti. See Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. We expect all of our salons will transition to the Zenoti salon management system in fiscal year 2023. We also use mobile applications to allow guests to view wait times and interact in other ways with salons.
Marketing. Our marketing is brand specific and funded primarily from contractual contributions, based on sales, to the brand's cooperative advertising funds. These funds are used largely in support of advertising and other efforts to increase guest traffic to our salons, grow online booking usage, and improve overall awareness of and affinity for our brands. A portion of our marketing funds are used in support of stylist recruitment to grow the number of active stylists in our system.
Stylists
Our Company depends on its stylists to help deliver great guest experiences. We believe in the importance of the ongoing development of our stylists' craft. We aim to be an industry leader in stylist training, including the utilization of both live and digital training. Our stylists deliver a superior experience for our guests when they are well-trained technically and through years of experience. We employ trainers who provide new hire training for stylists joining the Company and train franchisee trainers. We supplement internal training with targeted vendor training and external trainers that bring specialized expertise to our stylists. We utilize training materials to help all levels of field employees navigate the operation of a salon and essential elements of guest service training within the context of brand positions.
6

Salon Support
Our corporate headquarters is referred to as Salon Support. We take a service-oriented mentality to best support our franchisees and stylists in an effort to ensure guest satisfaction by helping our franchisees drive their business, as well as overseeing our company-owned operations.
Organization. Salon Support and our associated priorities are aligned with our brands to enhance the effectiveness and efficiency of the service we provide.
Simplification. Our ongoing simplification efforts focus on aligning our cost structure with our transition to an asset-light franchise model and improving the way we plan and execute across our portfolio of brands. In fiscal year 2022 and 2021, we completed a corporate reorganization based on a zero-based budgeting philosophy to ensure each employee was performing the "right work," each team was the "right size" based on resources and priorities and overall, we have the "right structure" to succeed as a company. This exercise reduced Salon Support headcount in fiscal year 2022 and 2021.
Location. Salon Support is primarily located in Minneapolis, Minnesota while allowing for hybrid and remote work.
Salon Concepts:
The Company's salon concepts focus on providing high-quality hair care services and professional hair care products. A description of the Company's salon concepts is listed below:
Supercuts.    Supercuts salons provide consistent, high-quality hair care services and professional hair care products to its guests at convenient times and locations at value prices. This concept appeals to men, women, and children. The Company has 2,264 franchised and 18 company-owned Supercuts locations throughout North America.
SmartStyle/Cost Cutters in Walmart stores.    SmartStyle and Cost Cutters salons offer a full range of custom styling, cutting, and hair coloring, as well as professional hair care products and are currently located exclusively in Walmart Supercenters. This concept has primarily a "walk-in" guest base with value pricing. The Company has 1,646 franchised and 49 company-owned SmartStyle and Cost Cutters salons located in Walmart Supercenter locations throughout North American.
Portfolio Brands.   Portfolio Brands salons are made up of acquired regional salon groups operating under the primary concepts of Cost Cutters, First Choice Haircutters, Roosters, Hair Masters, Cool Cuts for Kids, Style America, Famous Hair, Magicuts, Holiday Hair, and TGF, as well as other concept names. Most concepts offer a full range of custom hairstyling, cutting and coloring services, as well as professional hair care products. The Company has 1,344 franchised and 38 company-owned Portfolio Brands locations throughout North America.
International Salons.    International salons are locations operating in the United Kingdom, primarily under the Supercuts and Regis concept. These salons offer similar levels of service as our North American salons. Salons are usually located in prominent high-traffic locations and offer a full range of custom hairstyling, cutting and coloring services, as well as professional hair care products. The Company has 141 franchised International locations.
The tables on the following pages set forth the number of system-wide locations (franchised and company-owned) and activity within the various salon concepts.
7

System-wide location counts
 June 30,
 20222021
FRANCHISE SALONS:
Supercuts2,264 2,386 
SmartStyle/Cost Cutters in Walmart stores1,646 1,666 
Portfolio Brands1,344 1,357 
Total North American salons5,254 5,409 
Total International salons (1)141 154 
Total Franchise salons5,395 5,563 
as a percent of total Franchise and Company-owned salons98.1 %95.3 %
COMPANY-OWNED SALONS:  
Supercuts18 35 
SmartStyle/Cost Cutters in Walmart stores49 91 
Portfolio Brands38 150 
Total Company-owned salons105 276 
as a percent of total Franchise and Company-owned salons1.9 %4.7 %
OWNERSHIP INTEREST LOCATIONS:  
Equity ownership interest locations76 78 
Grand Total, System-wide5,576 5,917 

Constructed locations (net relocations)
 Fiscal Years
 20222021
FRANCHISE SALONS:
Supercuts15 21 
SmartStyle/Cost Cutters in Walmart stores— 
Portfolio Brands10 
Total North American salons21 31 
Total International salons (1)— 
Total Franchise salons21 32 
COMPANY-OWNED SALONS:  
Supercuts— 
SmartStyle/Cost Cutters in Walmart stores— — 
Portfolio Brands— — 
Total Company-owned salons— 
8

Closed locations
 Fiscal Years
 20222021
FRANCHISE SALONS:
Supercuts(156)(273)
SmartStyle/Cost Cutters in Walmart stores(49)(56)
Portfolio Brands(81)(82)
Total North American salons(286)(411)
Total International salons (1)(13)(14)
Total Franchise salons(299)(425)
COMPANY-OWNED SALONS:  
Supercuts(6)(54)
SmartStyle/Cost Cutters in Walmart stores(15)(252)
Portfolio Brands(40)(307)
Total Company-owned salons(61)(613)
Conversions (including net franchisee transactions) (2)
 Fiscal Years
 20222021
FRANCHISE SALONS:
Supercuts19 130 
SmartStyle/Cost Cutters in Walmart stores28 405 
Portfolio Brands63 212 
Total Franchise salons110 747 
COMPANY-OWNED SALONS:  
Supercuts(11)(125)
SmartStyle/Cost Cutters in Walmart stores(27)(408)
Portfolio Brands(72)(214)
Total Company-owned salons(110)(747)
_______________________________________________________________________________
(1)Canadian and Puerto Rican salons are included in the North American salon totals.
(2)During fiscal years 2022 and 2021, the Company acquired 0 and 1 salon locations, respectively, from franchisees. During fiscal years 2022 and 2021, the Company sold 110 and 748 salon locations, respectively, to franchisees.

9

Affiliated Ownership Interest:
The Company maintains a non-controlling 55.1% ownership interest in Empire Education Group, Inc. (EEG), which is accounted for as an equity method investment. See Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. EEG operates accredited cosmetology schools. We entered into an agreement to sell our stake in EEG to the controlling owner in fiscal year 2020, the closing of which is pending state approvals. The sale is not expected to have a significant impact on the Company's operations or financial position.
Corporate Trademarks:
The Company holds numerous trademarks, both in the United States. and in many foreign countries. The most recognized trademarks are "SmartStyle®," "Supercuts®," "Regis Salons®," "Cost Cutters®," "First Choice Haircutters®," "Roosters®" and "Magicuts®."
Human Capital Management:
Our Culture
We are committed to our purpose of Unleashing the Beauty of Potential, which is supported by our four core values:
Foster Trust.    Create powerful relationships by acting with empathy and integrity.
Create Community.    Connect and collaborate with all your partners. Share the challenges as much as you celebrate the wins.
Be Brave.    Dream big and courageously challenge the status quo.
Own It.    You are empowered. Take responsibility and own your role and your results.
These values support a collaborative and inclusive culture that is critical to the success and growth of our Company. To help reinforce our values and incorporate them into everything we do, we have a values committee comprised of cultural ambassadors who serve as the voice of employees and help ensure a best-in-class employee experience.
Our People
As of June 30, 2022, the Company employed approximately 630 employees; 122 of whom were corporate employees serving the Company's headquarters in Minnesota, 10 of whom served at its product engineering headquarters in California, 52 of whom provided artistic education to its hair care salons, and the remainder of whom served as field employees or at its company-owned salons. The Company offers flexible work arrangements such as hybrid and remote work.
Diversity and Inclusion
The Company promotes diversity of thoughts, backgrounds, experiences, and ideas. As of June 30, 2022, racial minorities comprise over 32% of the Company's U.S. workforce, which is summarized below.
68% White
12% Hispanic or Latinx
9% Asian
6% Black or African American
1% American Indian or Alaska Native
1% Native Hawaiian
3% Two or more races
Also, 85% of the Company's entire workforce are women and 15% are men. Additionally, 67% of the Company's leadership positions are held by women.
10

Families First
One hundred years ago, the Company began as a family business and its support of families continues today. It offers up to 16 weeks of parental leave, including adoption, up to 12 of which are paid, so that parents have time to focus on their newest family members. It also offers flexible work arrangements, including full-time telecommuting. Additionally, the Company offers flexible paid time off, which allows employees to control their time away from work based on individual needs, not years of service.
Other Compensation and Benefits
The Company also takes care of its people by offering competitive compensation and benefits packages that are designed to support the total well-being and promote the full potential of our employees and their families. These include short- and long-term incentive packages, an employee stock purchase plan, retirement plans, health, dental, and vision benefits, basic life insurance, long-term disability coverage, and wellness and employee assistance programs. The Company analyzes market trends and monitors its own compensation practices to attract, retain, and promote employees and reduce turnover and associated costs. In addition, its short- and long-term incentive plans are aligned with its core values and key business objectives, which are intended to motivate strong performance.
Development and Engagement
Continuous employee development and engagement are essential to creating a high-performance culture. In fiscal year 2022, we increased our investment in learning and development. In addition to the resources available on our internal Learning Hub, we launched our Beauty of Series, which consists of interactive sessions designed to help our employees unleash their potential. This series included the following topics. The Beauty of Being Remarkable, where employees learned the importance of self-promotion in both their personal and professional lives. The Beauty of Wellness, which was designed to help employees manage stress more effectively and create healthy habits and coping skills. And The Beauty of Being Tech-Enabled, where panelists discussed how technology fueled and disrupted their industries.
We survey our employees to provide them with an opportunity to share anonymous feedback with management in a variety of areas, including support from leadership, communication and collaboration, growth and career opportunities, available resources, and recognition. Leaders reviewed the results to determine opportunities and develop action plans for their teams to improve engagement and the overall employee experience. We introduced Regis Listens, which highlights offerings that we've implemented as a result of employee feedback to show employees that we are listening.
Corporate Responsibility
The Company will not do business with organizations that employ or condone unfair labor practices. Instead, it partners with companies who share its commitment to ethical business conduct and fair labor practices. The Company also specifically condemns human trafficking and abuse of child labor.
11

Executive Officers of the Registrant:
Information relating to the Executive Officers of the Company follows:
NameAgePosition
John Davi44 Executive Vice President, Chief Digital Officer
Matthew Doctor35 President and Chief Executive Officer
Michael Ferranti39 Executive Vice President, Chief People Officer
Jim Lain58 Executive Vice President, Chief Operating Officer
James Suarez47 Senior Vice President, Merchandising and Education
Andra Terrell51 Senior Vice President, General Counsel and Corporate Secretary
Kersten Zupfer47 Executive Vice President, Chief Financial Officer
John Davi was appointed to Executive Vice President and Chief Technology Officer in October 2021, and Executive Vice President and Chief Digital Officer in July 2022. Prior to joining the Company, he served as Chief Product Officer for BriteCore, Senior Vice President of Product at MINDBODY, Inc, founding Vice President of Product for Diffbot, and Head of Engineering for Cisco Systems' Media Solutions Group.
Matthew Doctor was appointed to President and Chief Executive Officer in May 2022, after holding such position on an interim basis since December 2021. Previously, he served as Executive Vice President and Chief Strategy Officer since February 2021. Prior to joining the Company, he was Chief Financial Officer of Kava Restaurants LLC, a Tim Horton's franchisee. Earlier in his career, Mr. Doctor worked in business development at Restaurant Brands International and was in investment banking with J.P. Morgan.
Michael Ferranti was appointed to Executive Vice President and Chief People Officer in December 2021. Previously, he served as Senior Vice President, People and Culture since March 2021. Before joining the Company, Mr. Ferranti served as Head of M&A and Franchising for Subway Restaurants U.S. and Canada on their Development team. Prior to Subway Restaurants, Mr. Ferranti held a variety of senior leadership roles with Le Pain Quotidien, KraftHeinz and Restaurant Brands International.
Jim Lain was appointed to Executive Vice President and Chief Operating Officer in December 2021. Previously, he served as President of Portfolio Brands since December 2020, President of SmartStyle since June 2021, and Executive Vice President and Chief Operating Officer since November 2013. Before joining the Company, Mr. Lain served as Vice President at Gap, Inc. from August 2006 to November 2013.
James Suarez was appointed to Senior Vice President, Merchandising and Education in February 2022. Prior to his promotion to Senior Vice President, Merchandising and Education, Mr. Suarez had 25 years of combined salon operations and education experience at the Company.
Andra Terrell was appointed to Senior Vice President, General Counsel and Corporate Secretary in February 2022. Prior to joining the Company, she served as Deputy General Counsel and Assistant Secretary of Cajun Operating Company for the Church's Chicken and Texas Chicken brands. Ms. Terrell also served as Assistant General Counsel - Franchise for Luxottica Retail, Assistant General Counsel for General Nutrition Centers Inc., Franchise Counsel for Precision Tune Auto Care, Inc. and General Counsel of Decorating Den Systems, Inc.
Kersten Zupfer was appointed to Executive Vice President and Chief Financial Officer in November 2019. For more than 13 years before her promotion to Chief Financial Officer, Ms. Zupfer served in accounting and finance roles of increasing leadership at the Company. Ms. Zupfer served as Senior Vice President and Chief Accounting Officer since November 2017, prior to which she served as Vice President, Corporate Controller and Chief Accounting Officer since December 2014.

12

Governmental Regulations:
The Company is subject to various federal, state, local and provincial laws affecting its business, as well as a variety of regulatory provisions relating to the conduct of its beauty-related business, including health and safety. At the end of fiscal year 2020, the majority of state and local governments where we operate temporarily mandated the closure of our salons in response to the COVID-19 global pandemic. These pandemic related government-mandated closures continued into fiscal year 2021 and even into fiscal year 2022 in parts of Canada. We monitor state and local regulations carefully to ensure the safety of our stylists and guests.
In the United States, the Company's franchise operations are subject to the Federal Trade Commission's Trade Regulation Rule on Franchising (the FTC Rule) and by state laws and administrative regulations that regulate various aspects of franchise operations and sales. The Company's franchises are offered to franchisees by means of a disclosure document containing specified disclosures in accordance with the FTC Rule and the laws and regulations of certain states. The Company has registered its offering of franchises with the regulatory authorities of those states in which it offers franchises and where registration is required. State laws that regulate the franchisee/franchisor relationship presently exist in a substantial number of states and, in certain cases, apply substantive standards to this relationship. Such laws may, for example, require that the franchisor deal with the franchisee in good faith, prohibit interference with the right of free association among franchisees, and limit termination of franchisees without payment of reasonable compensation. The Company believes that the current trend is for government regulation of franchising to increase over time. However, such laws have not had, and the Company does not expect such laws to have, a significant effect on the Company's operations.
In Canada, the Company's franchise operations are subject to franchise laws and regulations in the provinces of Ontario, Alberta, Manitoba, New Brunswick, Prince Edward Island and British Columbia. The offering of franchises in Canada occurs by way of a disclosure document, which contains certain disclosures required by the applicable provincial laws. The provincial franchise laws and regulations primarily focus on disclosure requirements, although each requires certain relationship requirements, such as a duty of fair dealing and the right of franchisees to associate and organize with other franchisees.
The Company believes it is operating in substantial compliance with applicable laws and regulations governing all of its operations.
The Company maintains an ownership interest in Empire Education Group, Inc. Beauty schools derive a significant portion of their revenue from student financial assistance originating from the U.S. Department of Education's Title IV Higher Education Act of 1965. For the students to receive financial assistance at the schools, the beauty schools must maintain eligibility requirements established by the U.S. Department of Education. In 2020, the Company signed an agreement to sell our ownership interest in EEG to the other owner. The transaction is expected to close after receipt of state ownership transfer approvals.
Financial Information about Foreign and North American Operations
Financial information about foreign and North American operations is incorporated herein by reference to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 and segment information in Note 15 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Available Information
The Company is subject to the informational requirements of the Securities and Exchange Act of 1934, as amended (Exchange Act). The Company therefore files periodic reports, proxy statements and other information with the Securities and Exchange Commission (SEC). Such reports may be obtained by visiting the Public Reference Room of the SEC at 100 F Street NE, Washington, DC 20549, or by calling the SEC at 1-800-SEC-0330. All of our reports, proxy and information statements and other information are available on the SEC's internet site (www.sec.gov).
Financial and other information can be accessed in the Investor Relations section of the Company's website at www.regiscorp.com. The Company makes available, free of charge, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

13

Item 1A.    Risk Factors
Business and Industry Risks
The impact of the COVID-19 pandemic, including variants, and the measures implemented to contain the spread of the virus have had, and may continue to have, a material adverse impact on our business and results of operations.
Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19, that has spread globally. COVID-19 has had, and may continue to have, an adverse impact on our operations. The pandemic may affect the health and welfare of our stylist community, customers, franchise partners or Salon Support personnel. As of the date of this filing, our salons across essentially all geographies are allowed to be open; however, states may again decide to require the closure of salons as the level of COVID-19 cases continue to fluctuate.
Some of our franchisees, many of whom were in the early stages of developing their businesses prior to the onset of the pandemic, have chosen, or may choose, not to resume operation of their salons and/or are facing challenges rehiring employees, reestablishing operations with their landlords and other vendors, and attracting customers back to their salons. As a result, many of our franchisees requested reductions or other modifications to their royalty payments or other amounts due to us, which may be critical to their ability to reestablish operations, and they may simply be unable or unwilling to make lease, royalty or other payments to us and may be unable to continue to operate or may need to close their salons. The removal or reduction of these payments, including the added expense associated with closed locations where we may have residual lease liability, has and is expected to continue to have, an adverse impact on our revenues and cash flows. Customers and employees have been cautious about returning to personal service providers. Furthermore, as a result of the pandemic, many of our customers have themselves experienced adverse financial impacts, including loss of disposable income, which may limit their spending on personal care, including purchasing of beauty products, or have identified other means for hair care. The trend of increased remote work and utilization of advanced video-conferencing technology has led to a less-formal work environment, which could impact the frequency of our hair care services. In addition, COVID-19 may cause additional workers' compensation claims and customer claims associated with the pandemic.
As a result, COVID-19 has negatively affected, and may continue to negatively affect, our revenue, increased the cost of salon operations and potentially exposed us to additional liability, the combination of which has reduced and may continue to reduce our profitability, including the profitability of our franchisees. In addition, we retain a residual real estate lease liability of $501.3 million for company-owned and franchise salons that either sublease the premises of their location from us or that require us to guarantee the franchisee's lease. The combination of the revenue reduction, obligations we ultimately owe to landlords, and other costs both related and unrelated to COVID-19 could significantly reduce or exhaust our available liquidity over time and limit our ability to access liquidity sources.
The COVID-19 pandemic caused disruption to the global economy and to our business, which may lead to triggering events that prevent our recovery of the carrying value of certain assets, including accounts receivables, long-lived assets, intangibles, and goodwill. Assessing goodwill for impairment can be difficult to predict because, among other things, it requires management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates, all of which can be affected by economic conditions and other factors.

14

Consumer shopping trends and changes in manufacturer choice of distribution channels may negatively affect both service and product revenues.
Our salons are partly dependent on the volume of customer foot traffic around their locations to generate both service and product revenues. Customer foot traffic may be adversely affected by changing consumer shopping trends that favor internet-based shopping or alternative shopping methods or locations. In recent years, we have experienced substantial declines in foot traffic in some shopping malls that changed traffic patterns at those salons that may affect our revenues and impact the health of our brands.
In addition, we are experiencing a proliferation of alternative channels of distribution, such as blow dry bars, booth rental facilities, discount brick-and-mortar and online professional product retailers, as well as manufacturers selling directly to consumers online, all of which may negatively affect our product and service revenue. Also, product manufacturers may decide to utilize these other distribution channels to a larger extent than in the past and they generally have the right to terminate relationships with us with little advance notice. These trends could reduce the volume of foot traffic around our salons, and in turn, our revenues may be adversely affected.
Changes in regulatory and statutory laws, such as increases in the minimum wage and changes that make collective bargaining easier, and the costs of compliance and non-compliance with such laws, may result in increased costs to our business.
With 5,576 locations and approximately 630 employees worldwide, our financial results can be adversely impacted by regulatory or statutory changes in laws. Due to the number of people we or our franchisees employ, laws that increase minimum wage rates, employment taxes, overtime requirements or costs to provide employee benefits or administration may result in additional costs to our Company or our franchisees.

15

We are subject to laws and regulations that could require us to modify our current business practices and incur increased costs, which could have an adverse effect on our business, financial condition and revenues.
In our U.S. markets, numerous laws and regulations at the federal, state and local levels can affect our business. Legal requirements are frequently changed and subject to interpretations, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. If we fail to comply with any present or future laws or regulations, we could be subject to future liabilities or a prohibition on the operation of our salons.
A number of U.S. states, Canadian provinces, and municipalities in which we do business with have recently increased, or are considering increasing, the minimum wage, with increases generally phased over several years depending upon the size of the employer. Increases in minimum wages and overtime pay result in an increase in our costs, and our ability to offset these increases through price increases may be limited. In fact, increases in minimum wages have increased our costs over the last five years. In addition, a growing number of states, provinces and municipalities have passed, or are considering passing, requirements for paid sick leave, family leave, predictive scheduling (which imposes penalties for changing an employee's shift as it nears), and other requirements that increase the administrative complexity of managing our workforce. Finally, changes in labor laws designed to facilitate union organizing, could increase the likelihood of some of our employees being subjected to greater organized labor influence. If a significant portion of our employees were to become unionized, it would have an adverse effect on our business and financial results.
Increases in minimum wages, administrative requirements and unionization could also have an adverse effect on the performance of our franchisees, especially if the National Labor Relations Board (NLRB) treats our franchisees as "joint employers" with us or if our franchisees are classified as large employers under minimum wage statutes because of their affiliations with us. In addition, we must comply with state employment laws, including the California Labor Code, which has stringent requirements and penalties for non-compliance.
Various state and federal laws govern our relationships with our franchisees and our potential sale of a franchise. If we fail to comply with these laws, we may subject the Company and our personnel to claims lodged by our franchisees, as well as federal and state government agencies, and those claims may include, among others, fraud, misrepresentation, unfair business practices and wrongful terminations. As a result of those claims, we could be liable for fines, damages, stop orders or other penalties. A franchisee or government agency may bring legal action against us based on the franchisee/franchisor relationship. Also, under the franchise business model, we may face claims and liabilities based on vicarious liability, joint-employer liability or other theories or liabilities. All such legal actions could not only result in changes to laws and interpretations, which could make it more difficult to appropriately support our franchisees and, consequently, impact our performance, but could also result in expensive litigation with our franchisees, third parties or government agencies, which could adversely affect both our profits and our important relationships with our franchisees. In addition, other regulatory or legal developments may result in changes to laws or to the franchisee/franchisor relationship that could negatively impact the franchise business model and, accordingly, our profits.
We are also subject to federal statutes and regulations, including the rules promulgated by the U.S. Federal Trade Commission, as well as certain state laws governing the offer and sale of franchises. Many state franchise laws impose substantive requirements on franchise agreements, including limitations on non-competition provisions and on provisions concerning the termination or non-renewal of a franchise. Some states require that certain materials be filed for a franchisor to be registered and approved before franchises can be offered or sold in that state. The failure to obtain or retain licenses or approvals to sell franchises could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition to employment and franchise laws, we are also subject to a wide range of federal, state, provincial and local laws and regulations in the jurisdictions in which we operate, including those affecting public companies, product manufacturing and sale and those governing the franchisee/franchisor relationship. Compliance with new, complex, and changing laws may cause our expenses to increase. In addition, any non-compliance with laws or regulations could result in penalties, fines, product recalls and enforcement actions or otherwise restrict our ability to market certain products or attract or retain employees, which could adversely affect our business, financial condition and results of operations.

16

Changes in the general economic environment may impact our business and results of operations.
Changes to the U.S., Canada and U.K.'s economies have an impact on our business. General economic factors that are beyond our control, such as recession, inflation, deflation, tax rates and policy, energy costs, unemployment trends, extreme weather patterns, viruses, pandemics, stay-at-home orders and other casualty events that influence consumer confidence and spending, may impact our business and results of operations. In particular, visitation patterns to our salons can be adversely impacted by increases in unemployment rates and decreases in discretionary income levels.
Changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns may impact our revenue.
Our success depends, in part, on our ability to anticipate, gauge and react in a timely manner to changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns. If we do not timely identify and properly respond to evolving trends and changing consumer demands for hair care or services, our sales may decline. The recent trend to work remotely reduces foot traffic in downtowns, city centers, and other business districts where our salons are located, causing a reduction in our revenue.
As of June 30, 2022, we were not in compliance with New York Stock Exchange listing requirements.
In June 2022, we received written notice from the New York Stock Exchange ("NYSE") that we did not meet certain NYSE continued listing standards. Under the NYSE continued listing standards, the Company is required to maintain (a) a minimum average closing price of $1.00 per share over a period of 30 consecutive trading days, and (b) an average market capitalization of at least $50.0 million over a period of 30 consecutive trading days, and at the same time, total stockholders' equity equal to or greater than $50.0 million. If we are unable to improve our stock price to over $1.00 by December 13, 2022 and our market capitalization to greater than $50.0 million by December 13, 2023, we will be subject to the NYSE’s suspension and delisting procedures. We are closely monitoring the closing share price of our common stock and are considering all available options. We intend to regain compliance with the NYSE listing standards by pursuing measures that are in the best interest of the Company and our shareholders. A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; limiting our ability to issue additional securities or obtain additional financing in the future; decreasing the amount of news and analyst coverage of us; and causing us reputational harm with investors, our employees, and parties conducting business with us.
17

Operating Risks
We are now substantially dependent on franchise royalties and the overall success of our franchisees' salons.
We are now substantially dependent on franchise royalties and the overall success of our franchisees' salons. It customarily takes new franchisees time to develop their salons and increase their sales. Further, a number of our historically successful and more experienced franchisees are onboarding new salon operations. This could adversely impact our revenue and profitability during this next stage of our transformation. To support and enhance our franchisees' businesses, we may need to invest in certain unanticipated new capabilities and/or services and we will need to determine the appropriate amount of investment to optimize the success of our franchisees, while ensuring that the level of investment supports our expected return on those investments. If we are not able to identify the right level of support and effectively deliver those resources to our franchisees, our results of operations and business may be adversely affected. Furthermore, our transition to a fully-franchised model may expose us to additional legal, compliance and operational risks specific to this different business model, including the business failure of unproven new salon owners.
Sales at franchise locations may not return to pre-pandemic levels.
Sales at most of our franchise locations have not returned to their pre-pandemic levels causing our franchisees to earn less profits or incur losses. Franchisees may be unable to pay their royalties or rents as they come due, which could decrease cash collections and increase our cash outflows if the franchisee subleases from us or we guarantee the lease. Franchisees may decide to close their salons and there may not be another franchisee willing to take over the business, which would decrease the size of our fleet and our revenues.
We have exited our wholesale distribution business and entered into a preferred supplier agreement with a third party.
We exited our wholesale distribution business and entered into a preferred supplier agreement with a supplier. This change has and will continue to reduce our future revenue. If our new supplier is unable to source the products at the prices expected by our franchisees, our franchisees' profitability and our profitability may be adversely impacted. Further, economic instability and other impactful events and circumstances in the regions in which our supplier and their manufacturers are located, the financial instability of our supplier, our supplier's failure to meet our terms and conditions or our supplier standards, product safety and quality issues, disruption or delay in the transportation of products from our supplier and their manufacturers to our salons, transport availability and cost, transport security, inflation and other factors relating to the suppliers and the areas in which they are located are beyond our control.
It is important for us and our franchisees to attract, train and retain talented stylists and salon leaders.
Guest loyalty is strongly dependent upon the stylists who serve our guests and the customer experience in our salons. Qualified, trained stylists are key to a memorable guest experience that creates loyal customers. In order to profitably grow our business, it is important for our salons to attract, train and retain talented stylists and salon leaders and to adequately staff our salons. Because the salon industry is highly fragmented and comprised of many independent operators, the market for stylists is typically highly competitive. In addition, labor shortages and increases in minimum wage requirements may impact the number of stylists considering careers outside the beauty industry. In most markets, we and our franchisees have experienced a shortage of qualified stylists or a reduction in the hours stylist will work. Offering competitive wages, benefits, education, and training programs are important elements to attracting and retaining qualified stylists. In addition, due to challenges facing the for-profit education industry, cosmetology schools have experienced declines in enrollment, revenues, and profitability in recent years. If the cosmetology school industry sustains further declines in enrollment or some schools close entirely, or if stylists leave the beauty industry, we expect that we and our franchisees would have increased difficulty staffing our salons in some markets. We are making significant investments in programs to attract and retain stylists. If our strategies are not successful in attracting, training and retaining stylists or in staffing salons, our same-store sales or the performance of our franchise business could experience periods of volatility or sales could decline and our results of operations could be adversely affected.
18

Our continued success depends, in part, on the success of our franchisees, which operate independently.
As of June 30, 2022, 98.1% of our salons were franchised locations. We derive revenues associated with our franchised locations primarily from royalties and fees. Our financial results are therefore substantially dependent upon the operational and financial success of our franchisees. As a franchise business, we are dependent on our franchisees.
We have limited control over how our franchisees' businesses are operated. Though we have established operational standards and guidelines, franchisees own, operate, and oversee the daily operations of their salon, including employee-related matters and pricing. If franchisees do not successfully operate their salons in compliance with our standards, our brand reputation and image could be harmed, and our financial results could be affected. Additionally, if franchisees do not price their goods and services competitively, the franchisee may fail to maximize the financial performance of their salon. We could experience greater risks as the scale of our franchised salons increases. Further, some franchise owners may not successfully execute the rebranding and/or turnaround of under-performing salons that we have transferred to them.
In addition, our franchisees are subject to the same general economic risks as our Company, and their results are influenced by competition for both guests and stylists, market trends, price competition and disruptions in their markets and business operations due to public health issues, including pandemics, severe weather and other external events. Like us, they rely on external vendors for some critical functions and to protect their company data. They may also be limited in their ability to open new locations by an inability to secure adequate financing, especially because many of them are small businesses with much more limited access to financing than our Company or by the limited supply of favorable real estate for new salon locations. They may also experience financial distress because of over-leveraging, which could negatively affect our operating results due to delayed or non-payments to us. The bankruptcy, default, abandonment, or breach by or of a franchisee could also expose us to lease liability due to our lease guarantees or subleases as explained previously.
A deterioration in the financial results of our franchisees, a failure of our franchisees to renew their franchise agreements or closure of locations could adversely affect our operating results through decreased royalty payments and fees. We also must continue to attract qualified franchisees and work with them to make their businesses successful.
In addition, challenges in supporting our expanding franchise system could cause our operating results to suffer. If we are unable to effectively select and train new franchisees and support our growing franchisee base, it could affect our brand standards, cause disputes between us and our franchisees, and potentially lead to material liabilities.
Our business is dependent on franchisees continuing to operate. If a franchisee exits the franchise system, we need to recruit an existing or new franchisee to run that salon location or our salon count would decline and our revenues would decline. A decline in salon count could also reduce the value of our brands. Additionally, we are dependent on our franchisees to grow their business in order for our business to grow. However, franchisees may not have access to capital, labor, etc., to support their growth.
19

Data security and data privacy compliance requirements could increase our costs, and cybersecurity incidents could result in the compromise of potentially sensitive information about our guests, franchisees, employees, vendors or Company and expose us to business disruption, negative publicity, costly government enforcement actions or private litigation and our reputation could suffer.
The normal operations of our business and our investments in technology involve processing, transmitting and storing potentially sensitive personal information about our guests, employees, franchisees, vendors and our Company, all of which require the appropriate and secure utilization of such information and subjects us to increased focus regarding our data security compliance. Cyber-attacks, including ransomware, designed to gain access to sensitive information by breaching mission critical systems of large organizations (and their third-party vendors) are constantly evolving and high-profile electronic security breaches leading to unauthorized release of sensitive information have occurred at a number of large U.S. companies in recent years. Furthermore, there has been heightened legislative and regulatory focus on data security in the U.S. and abroad, including requirements for varying levels of customer notification in the event of a data breach. These laws are changing rapidly and vary among jurisdictions. We will continue our efforts to meet any applicable privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase our costs. We rely on commercially available systems, software, and tools to provide security for processing, transmitting, and storing of sensitive information. As this risk of cyber-attacks increases, our related insurance premiums may also increase. Despite the security measures and processes we have in place, our efforts (and those of our third-party vendors) to protect sensitive guest, employee, franchisee, vendor, and Company information may not be successful in preventing a breach in our systems or detecting and responding to a breach on a timely basis. As a result of a security incident or breach in our systems, our systems could be interrupted or damaged, and/or sensitive information could be accessed by third parties. If that occurred, our guests could lose confidence in our ability to protect their information, which could cause them to stop visiting our salons altogether or our franchisees could exit the system due to lack of confidence. Such events could also lead to lost future sales and adversely affect our results of operations. In addition, as the regulatory environment relating to retailers and other companies' obligations to protect sensitive data becomes stricter, a material failure on our part to comply with applicable regulations could potentially subject us to fines, penalties, other regulatory sanctions, or lawsuits with the possibility of substantial damages. The costs to remediate security incidents or breaches that may occur could be material. Also, as cyber-attacks become more frequent, intense, and sophisticated, the costs of proactive defensive measures may increase. Furthermore, while our franchisees are independently responsible for data security at their franchised salon locations, a security incident or breach at a franchised salon location could negatively affect public perception of our brands. More broadly, our incident response preparedness and disaster recovery planning efforts may be inadequate or ill-suited for a security incident and we could suffer disruption of operations or adverse effects to our operating results.
Our SmartStyle salon operations are dependent on our relationship with Walmart.
As of June 30, 2022, we had 1,695 SmartStyle or Cost Cutters salons within Walmart locations. Walmart is our largest landlord. Our business within each of those 1,695 salons relies primarily on the traffic of visitors to the Walmart location, so our success is tied to Walmart's success in bringing shoppers into their stores. We have limited control over the locations and markets in which we open new SmartStyle locations, as we only have potential opportunities in locations offered to us by Walmart. Furthermore, Walmart has the right to (a) close up to 100 of our salons per year for any reason, upon payment of certain buyout fees; (b) terminate lease agreements for breach, such as if we failed to conform with required operating hours, subject to a notice and cure period; (c) non-renew the lease agreements if our salons fail to reach certain sales thresholds; and (d) to terminate the lease if the Walmart store is closed. Future franchising activity is dependent upon a continued relationship between us and Walmart, as well as Walmart's approval of our proposed franchisee on a location-by-location basis. Further, Walmart may attempt to impose changes to the terms and conditions of our agreements, which may be contrary to our economic interests. Operating SmartStyle salons adds complexity in overseeing franchise compliance and coordination with Walmart. Additionally, there are various remodel requirements of our franchisees, whether it be upon lease expiration or the remodeling of a Walmart location. To the extent Walmart accelerates the pace of their own store remodels, our stores in remodeled Walmart locations would be held to the same standard. The cost of these remodels may be prohibitive to our franchisees and could lead to the Company bearing a portion of the cost, or closures if the remodel requirement is not satisfied.

20

Our future growth and profitability may depend, in part, on our ability to build awareness and drive traffic with advertising and marketing efforts and on delivering a quality guest experience to drive repeat visits to our salons.
Our future growth and profitability may depend on the effectiveness, efficiency and spending levels of our marketing and advertising efforts to drive awareness and traffic to our salons. In addition, delivering a quality guest experience is crucial to drive repeat visits to our salons. We are developing our marketing and advertising strategies, which might include national and local campaigns, to build awareness, drive interest, consideration and traffic to our salons. We are also focusing on improving guest experiences to provide brand differentiation and preference as well as ensure our guests' needs are met. If our marketing, advertising, and improved guest experience efforts do not generate sufficient customer traffic and repeat visits to our company-owned and franchise-owned salons, our business, financial condition, and results of operations may be adversely affected. Our future growth and profitability may depend on the effectiveness, efficiency and spending levels of our marketing and advertising efforts to drive awareness and traffic to our salons. Additionally, we plan to increase our digital marketing efforts, and the success of those efforts are dependent upon our franchisee's migration to the Zenoti salon technology platform and customers opting-in to receive marketing messages from us.
Our success depends substantially on the migration of our Franchisees to the Zenoti salon technology platform.
The success of our digital marketing efforts discussed previously, as well as providing franchisees with back-office and salon management, including walk-in or advanced appointments, is dependent upon our franchisees' adoption of the Zenoti point-of-sale software. We previously developed a mobile application, platform and salon management system called Opensalon Pro, which we sold to Soham, Inc. ("Zenoti"), in fiscal year 2022. That agreement requires us to receive certain payments based upon the migration of our salons to the Zenoti software. Additionally, some of our technology capabilities will require development by Zenoti, and thus if not developed, may adversely affect our digital marketing efforts as well as providing our franchisees with critical functionality and information.
Our success depends substantially on the value of our brands.
Our success depends, in large part, on our ability to maintain and enhance the value of our brands, our customers' connection to our brands and a positive relationship with our franchisees. Declining franchisee revenue reduces the advertising funds available to invest in the brands and a decline in the Company's investment in its brands could reduce brand awareness and the overall value of our brands. Brand value can be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity, including via social media or if they result in litigation. Some of these incidents may relate to the way we manage our relationships with our franchisees, our growth strategies, our development efforts or the ordinary course of our, or our franchisees' business. Other incidents may arise from events that may be beyond our control and may damage our brands, such as actions taken (or not taken) by one or more franchisees or their employees relating to health, safety, welfare or otherwise, litigation and claims, security breaches or other fraudulent activities associated with our back-office management or payment systems, and illegal activity targeted at us or others. Consumer demand for our products and services and our brands' value could diminish significantly if any such incidents or other matters erode consumer confidence in us or our products or services. This could result in lower sales and, ultimately, lower royalty income, which could materially and adversely affect our business and operating results.
21

We rely heavily on our information technology systems for our key business processes. If we experience an interruption in their operation, our results of operations may be affected.
The efficient operation of our business is dependent on our management information systems. We rely heavily on our management information systems to collect daily sales information and guest demographics, generate payroll information, monitor salon performance, manage salon staffing and payroll costs, and other functions. Such systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, hacker attempts, security breaches and natural disasters. Certain capabilities or entire systems may be outdated or have limited functionality. These management information systems may require upgrades or replacements periodically, which involve implementation and other operational risks. In addition, our management information systems are developed and maintained by external vendors and we are transitioning our franchisees onto the Zenoti salon technology platform beginning in fiscal year 2023. The failure of our management information systems to perform as we anticipate, to meet the continuously evolving needs of our business, or to provide an affordable long-term solution, could disrupt our business operations and result in other negative consequences, including remediation costs, loss of revenue and reputational damage. Further, if our external vendors fail to adequately provide technical support for any one of our key existing management information systems or if new or updated components are not integrated smoothly, we could experience service disruptions that could result in the loss of important data, increase our expenses, decrease our revenues and generally harm our business, reputation and brands. Also, any such conduct with respect to our franchisees could also result in litigation.
We rely on external vendors for products and services critical to our operations.
We rely on external vendors for the manufacture, supply and distribution of our owned brand products, other retail products we sell, and products we use during salon services, such as color and chemical treatments. We also rely on external vendors for various services critical to our operations and the security of certain Company data. Our dependence upon vendors exposes us to operational, reputational, financial and compliance risk.
If our product offerings do not meet our guests' expectations regarding safety and quality, we could experience lost sales, increased costs, and exposure to legal and reputational risk. All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products and packages we buy, for either use on a guest during a service or resale to the public, comply with all safety and quality standards. Events that give rise to actual, potential or perceived product safety concerns or mislabeling could expose us to government enforcement action and/or private litigation and result in costly product recalls and other liabilities.
Our vendors are also responsible for the security of certain Company data, as discussed above. If one of our key vendors becomes unable to continue to provide products and services, or their systems fail, or are compromised or the quality of their systems deteriorate, we may suffer operational difficulties and financial loss.
The use of social media may have an adverse effect on our reputation.
Our reputation is critical to our ability to compete and succeed. However, our reputation may be damaged by negative publicity on social media or other channels regarding the quality of products or services we provide. There has been a substantial increase in the use of social media platforms, which allow individuals to be heard by a broad audience of consumers and other interested persons. Negative or false commentary regarding us or the products or services we offer may be posted on social media platforms at any time. Customers value readily available information and may act on information without further investigation or regard to its accuracy. The harm to our reputation may be immediate, without affording us an opportunity for redress or correction. Our reputation may also be damaged by factors that are mostly or entirely out of our control, including actions by a franchisee or a franchisee's employee.
We also use social media platforms as marketing tools. As laws and regulations rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our direction, to abide by applicable laws and regulations in the use of these platforms could adversely affect our business, financial condition and revenues.
Failure to simplify and standardize our operating processes across our brands could have a negative impact on our financial results.
We expect standardization of operating processes across our brands, marketing and products to enable us to simplify our operating model and decrease our costs and believe failure to do so could adversely impact our ability to grow revenue and realize further efficiencies within our results of operations.
22

Our enterprise risk management program may leave us exposed to unidentified or unanticipated risks.
We maintain an enterprise risk management program that is designed to identify, assess, mitigate and monitor the risks that we face. There can be no assurance that our frameworks or models for assessing and managing known risks, compliance with applicable laws and related controls will effectively mitigate risk and limit losses in all market environments or against all types of risk in our business. If conditions or circumstances arise that expose flaws or gaps in our risk management or compliance programs, the performance and value of our business could be adversely affected.
Insurance and other traditional risk-shifting tools may be held by, or made available to, us in order to manage certain types of risks, but they are subject to terms such as deductibles, retentions, limits and policy exclusions, as well as risk of denial of coverage, default or insolvency. If we suffer unexpected or uncovered losses, or if any of our insurance policies or programs are terminated for any reason or are not effective in mitigating our risks, we may incur losses that are not covered or that exceed our coverage limits and could adversely impact our results of operations, cash flows and financial position.
The franchise agreements require each franchisee to maintain specified insurance coverages and levels. Certain extraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks. Moreover, any loss incurred could exceed policy limits and policy payments made to franchisees may not be made on a timely basis. Any such loss or delay in payment could have a material and adverse effect on a franchisee's ability to satisfy its obligations under its franchise agreement, including its ability to make royalty payments.
Financial and Economic Risks
If we fail to comply with any of the covenants in our existing financing arrangement, we may not be able to access our existing revolving credit facility, and we may face an accelerated obligation to repay our indebtedness.
If we fail to comply with our existing financing arrangements, such a failure may cause a default under our financing arrangement, which could limit our ability to obtain new replacement financing or additional financing under our existing credit facility, require us to pay higher levels of interest or accelerate our obligation to repay our indebtedness. The impacts of significant business disruptions could ultimately impair our ability to comply with our covenants, which could preclude our ability to access our credit facility or accelerate our debt repayment obligation, which is secured by a lien on substantially all of the Company's assets.
If our capital investments in developing new and improving current technology infrastructure do not achieve appropriate returns, our financial condition and results of operations may be adversely affected.
We are currently making, and expect to continue to make, strategic investments in technology to increase traffic to salons and improve guest experiences, including without limitation, our mobile applications. These investments may not provide the anticipated benefits or desired return and could expose us to additional legal and compliance risks. Furthermore, some of our technology capabilities and developments involve third-party partnerships that we are dependent on. If these partnerships are unsuccessful, the technology-enabled capabilities may not fully achieve their anticipated returns.
Premature termination of franchise agreements can cause losses.
Our franchise agreements may be subject to premature termination in certain circumstances, such as failure of a franchisee to cure a default, monetary or otherwise, a franchisee bankruptcy, voluntary termination, or abandonment of the franchise. If terminations occur for these or other reasons, we may need to enforce our right to damages for breach of contract and related claims, which could cause us to incur significant legal fees and expenses and/or to take back and operate such salons as company-owned salons. Any damages we ultimately collect could be less than the projected future value of the fees and other amounts we would have otherwise collected under the franchise agreement. In addition, with many of our brands, we remain liable under the lease and, therefore, will be obligated to pay rent or enter into a settlement with the landlord, and we may not be made whole by the franchisee. A significant loss of franchisee agreements due to premature terminations could hurt our financial performance or our ability to grow our business.
23

Empire Education Group, Inc. may be unsuccessful, which could adversely affect our financial results.
In 2020, we entered into an agreement to sell to the other owner our 55.1% ownership stake in Empire Education Group, Inc. (EEG), an operator of accredited cosmetology schools. The transaction is subject to regulatory approval before it can close, and there is no guarantee that the regulatory approval will occur, which has been delayed, in part, due to COVID-19. Due to poor financial performance of EEG, we fully impaired the investment in prior years. If the transaction does not close as anticipated and EEG is unsuccessful in executing its business plan, or if economic, regulatory and other factors, including declines in enrollment, revenue and profitability continue for the for-profit secondary education market, our financial results may be affected by certain potential liabilities related to this investment.
Failure to control costs may adversely affect our operating results.
We must continue to control our expense structure. Failure to manage our cost of product, labor and benefit rates, advertising and marketing expenses, operating lease costs, other store expenses, or indirect spending could delay or prevent us from achieving increased profitability or otherwise adversely affect our operating results.
If we are not able to successfully compete in our business markets, our financial results may be affected.
Competition on a market-by-market basis remains challenging as many smaller chain competitors are franchise systems with local operating strength in certain markets and the hair salon industry, as a whole, is fragmented and highly competitive for customers, stylists and prime locations. Therefore, our ability to attract guests, raise prices and secure suitable locations in certain markets can be adversely impacted by this competition. Our strategies for competing are complicated by the fact that we have multiple brands in multiple segments, which compete on different factors. We also face significant competition for prime real estate, particularly in strip malls. We compete for lease locations not only with other hair salons, but with a wide variety of businesses looking for similar square footage and high-quality locations. If we are unable to successfully compete, we may lose market share and our ability to grow same-store sales and increase our revenue and earnings may be impaired.
Corporate Structure and Governance Risks
We rely on our management team and other key personnel.
We depend on the skills, working relationships and continued services of key personnel, including our management team and others throughout our Company. We are also dependent on our ability to attract and retain qualified personnel, for whom we compete with other companies both inside and outside our industry. We may be required to increase wages and/or benefits to attract and retain qualified personnel or risk considerable turnover. Our business, financial condition or results of operations may be adversely impacted by the unexpected loss of any of our management team or other key personnel, or more generally if we fail to identify, recruit, train and/or retain talented personnel. In addition, our business may be harmed if we lose too many individuals with institutional knowledge.
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results and prevent or detect material misstatement due to fraud, which could reduce investor confidence and adversely affect the value of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and effectively prevent and detect material fraud. If we cannot provide reliable financial reports or prevent or detect material fraud, our operating results could be materially misstated. There can be no assurances that we will be able to prevent control deficiencies from occurring, which could cause us to incur unforeseen costs, reduce investor confidence, cause the market price of our common stock to decline or have other potential adverse consequences.

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We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.
We are subject to income taxes in the U.S. and other foreign jurisdictions. Significant judgment is required in determining our tax provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are subject to the examination of our income tax returns, payroll taxes and other tax matters by the Internal Revenue Service and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for income taxes and payroll tax accruals. There can be no assurances as to the outcome of these examinations. Although we believe our tax estimates are reasonable, the final determination of tax audits, and any related litigation, could be materially different from our historical tax provisions and employment taxes. The results of an audit or litigation could have a material effect on our Consolidated Financial Statements in the period or periods where that determination is made. Also, in the future, our effective income tax rate could be adversely affected by a number of factors, including changes in the mix of earnings in countries with different statutory tax rates, changes in tax laws or the outcome of income examinations.
Our ability to use our U.S. net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
Utilization of the net operating loss carryforwards may be subject to an annual limitation if an ownership change under Section 382 of the Internal Revenue Code of 1986 occurs. An ownership change could be triggered by subsequent sales of securities by us or our stockholders and such a change of ownership may limit our utilization of net operating losses.
Litigation and other legal or regulatory proceedings or claims and the outcome of such litigation, proceedings or claims, including possible fines and penalties, could have an adverse effect on our business and any loss contingency accruals may be inadequate to cover actual losses.
From time-to-time in the ordinary course of our business operations, we are subject to litigation, including potential class action and single-plaintiff litigation, arbitration and other legal or regulatory proceedings or claims. Litigation to defend ourselves against claims by third parties, or to enforce any rights that we may have against third parties, may be necessary, which could require significant time commitments from our management team and result in substantial costs and diversion of our resources, which may cause an adverse effect on our business, financial condition and revenues. We establish accruals for potential liabilities arising from litigation and other legal or regulatory proceedings or claims when potential liabilities are probable and the amount of the loss can be reasonably estimated based on currently available information. We may still incur legal costs for a matter even if we have not accrued a liability. In addition, actual losses may be higher than the amount accrued for a certain matter or in the aggregate. Any resolution of litigation or other legal or regulatory proceedings as well as claims could adversely affect our business, financial condition or revenues.

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Item 1B.    Unresolved Staff Comments
None.

Item 2.    Properties
The Company leases its corporate headquarters in Minneapolis, Minnesota and the lease expires in 2030. The Company also operated an office in Fremont, California related to its product engineering business, which it will exit in fiscal year 2023.
In fiscal year 2022, the Company exited its distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah and signed agreements to sublease the facilities in the short-term before a full lease novation in fiscal years 2023 and 2024.
The Company also leases the premises in which approximately 88% of its franchisees operate and has entered into corresponding sublease arrangements with these franchisees. Generally, these leases have a five-year initial term and one or more five-year renewal options. All lease costs are passed through to the franchisees. Remaining franchisees who do not enter into sublease arrangements with the Company negotiate and enter into leases on their own behalf. As leases renew, the Company intends for franchisees to sign the non-Walmart leases directly so it will no longer be the primary tenant.
The Company operates all of its company-owned salons under lease agreements with original terms of at least five years, generally with the ability to renew at the Company's option, for one or more additional five-year periods.
None of the Company's salon leases are individually material to the operations of the Company, and the Company expects that it will be able to renew its leases on satisfactory terms as they expire or identify and secure other suitable locations. See Note 6 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

Item 3.    Legal Proceedings
The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other franchisors, the Company has been faced with allegations of franchise regulation and agreement violations. Additionally, because the Company may be the tenant under a master lease for a location subleased to a franchisee, the Company faces allegations of non-payment of rent and associated charges. Further, similar to 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. See Note 9 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

Item 4.    Mine Safety Disclosures
Not applicable.
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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Regis common stock is listed and traded on the New York Stock Exchange under the symbol "RGS." As of August 15, 2022, Regis had approximately 1,125 shareholders of record. The closing stock price was $1.27 per share on August 15, 2022.
In accordance with its capital allocation policy, the Company does not pay dividends.
The following graph compares the cumulative total shareholder return on the Company's stock for the last five years with the cumulative total return of the Standard and Poor's 500 Stock Index and the cumulative total return of a peer group index (the Peer Group) constructed by the Company. In addition, the Company has included the Standard and Poor's 400 Midcap Index and the Dow Jones Consumer Services Index in this analysis because the Company believes these two indices provide a comparative correlation to the cumulative total return of an investment in shares of Regis Corporation.
The Peer Group consists of the following companies: Brinker International, Inc., The Cheesecake Factory, Inc., Cracker Barrel Old Country Store, Inc., Dine Brands Global, Inc., Fossil Group, Inc., Franchise Group, Inc., Jack in the Box, Inc., Papa John's International, Inc., Penn National Gaming, Inc., Planet Fitness, Inc., Revlon, Inc., Sally Beauty Holdings, Inc., Service Corporation International, Ulta Beauty, Inc. and Winmark Corporation. The Peer Group is a self-constructed peer group of companies that are in the franchise industry, beauty industry, or other industries where guest service, multi-unit expansion or franchise play a part. Information regarding executive compensation will be set forth in the 2022 Proxy Statement.
The comparison assumes the initial investment of $100 in the Company's common stock, the S&P 500 Index, the Peer Group, the S&P 400 Midcap Index and the Dow Jones Consumer Services Index on June 30, 2017 and that dividends, if any, were reinvested.
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Comparison of Five Year Cumulative Total Return
Assumes Initial Investment of $100
June 30, 2022
rgs-20220630_g1.jpg
 June 30,
 201720182019202020212022
Regis$100.00 $161.05 $161.64 $79.65 $91.14 $10.52 
S & P 500100.00 114.37 126.29 135.77 191.15 170.86 
S & P 400 Midcap100.00 113.50 115.05 107.35 164.49 140.41 
Dow Jones Consumer Services Index100.00 119.57 136.11 145.76 201.67 142.15 
Peer Group100.00 101.26 122.30 93.22 155.12 128.66 
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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 common stock in "at-the-market" offerings. During fiscal year 2022, the Company issued 9.3 million shares for proceeds of $38.4 million offset by fees of $1.2 million. There were no shares issued in the fiscal quarter ended June 30, 2022. On June 30, 2022, $11.6 million remains under the prospectus supplement, which equates to 10.7 million shares based on the share price as of June 30, 2022.
The Company issued the following common stock through its share issuance program:
Fiscal Years
20222021
Issued Shares9,295,618 — 
Average Price (per share)$4.13 $— 
Price range (per share)$3.76 - $5.99$— 
Total$38.4 million$— 
Share Repurchase Program
In May 2000, the Company's Board of Directors (Board) approved a stock repurchase program with no stated expiration date. Since that time and through June 30, 2022, 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 depends on many factors, including the market price of the common stock and overall market conditions. There were no shares repurchased in the fiscal year ended June 30, 2022. As of June 30, 2022, 30.0 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remained authorized for repurchase. The Company does not anticipate repurchasing shares of common stock for the forseeable future.

Item 6.    Reserved
Not applicable.
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Item 7.    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 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.
BUSINESS DESCRIPTION
Regis Corporation (the Company) franchises, owns and operates beauty salons. As of June 30, 2022, the Company franchised, owned or held ownership interests in 5,576 locations worldwide. Our locations consisted of 5,500 system-wide North American and International salons, and in 76 locations where we maintain a non-controlling ownership interest. Each of the Company's salon concepts generally offer similar salon products and services and serve the mass market. As of June 30, 2022, we had approximately 630 corporate employees worldwide. See discussion within Part I, Item 1 of this Form 10-K.
On June 30, 2022, the Company sold its Opensalon Pro (OSP) software-as-a-service solution to Soham Inc. for a purchase price of $20.0 million in cash plus up to an additional $19.0 million in cash contingent upon the number of salons that migrate to Soham's Zenoti product as their salon technology platform. The Company received $13.0 million in proceeds in June 2022. The remaining $7.0 million of the purchase price is subject to holdbacks including $4.0 million of the proceeds retained in escrow to be paid upon completion of the Company’s refinancing, $1.0 million once the Company ends its arrangement with its former third-party salon technology provider in December 2022 and $2.0 million of proceeds held back until general indemnity provisions are satisfied within 18 months from closing. As a result of the sale, the Company classified the OSP business as discontinued operations in the financial statements as discussed in Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
As part of the Company's strategic transition to a fully-franchised model, the Company is selling salons to franchisees. The impact of these transactions are as follows:
 Fiscal Years
20222021
(Dollars in thousands)
Salons sold to franchisees110 748
Cash proceeds received$— $8,437 
Loss from sale of salon assets to franchisees, net$(2,334)$(16,696)
The Company shifted its product business from a wholesale model to a third-party distribution model as part of its asset-light transformation. In fiscal year 2022, the Company exited its distribution centers and ceased selling products to franchisees. Going forward, franchisees will source product from a third-party distribution partner and the Company receives a royalty payment based on franchisee purchases. This change has significantly decreased both the Company's franchise product revenue and general and administrative expense, including the Franchise distribution costs discussed in Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. In fiscal years 2022 and 2021, the Company experienced the following charges related to the plan to exit the distribution centers:
 Fiscal Years
 20222021
 Financial Statement Caption(Dollars in thousands)
Inventory reserve (1)Inventory reserve$7,655 $— 
Inventory valuation adjustment (2)Company-owned salon expense2,823  12,068 
Gain from disposal of distribution center assetsInterest income and other, net— (14,997)
____________________________________________________________________________
(1)Includes charges in the third and fourth quarter of fiscal year 2022 associated with the liquidation of distribution center inventory, which primarily related to reserving for personal protective equipment acquired as a result of the COVID-19 pandemic.
(2)Due to the reduction in company-owned salons, the Company cannot redistribute inventory from closed salons causing an increase to the reserve. Also included in fiscal year 2021 was the write-off of marketing and promotional items.
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RESULTS OF OPERATIONS
The Company reports its operations in two operating segments: Franchise salons and Company-owned salons.
COVID-19 Impact:
During fiscal years 2022 and 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 and profitability. In response to COVID-19, the Company received Canadian rent relief, Canadian wage relief and U.S. employee retention payroll tax credits. In fiscal years 2022 and 2021, the Company received the following amounts in rent and wage assistance:
 Fiscal Years
 20222021
 Financial Statement Caption(Dollars in thousands)
Canadian rent reliefRent $1,235 $— 
Canadian wage reliefCompany-owned salon expense1,966  1,629 
U.S. employee retention payroll tax creditCompany-owned salon expense— 1,547 
Additionally, in December 2021, the Company paid $2.5 million of social security contributions that had been deferred under the CARES Act. 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 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.
System-wide results
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 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:
Fiscal Years
20222021
SmartStyle5.7 %(26.7)%
Supercuts22.1 (25.8)
Portfolio Brands11.2 (24.8)
Total14.8 %(25.8)%
____________________________________________________________________________
(1)Fiscal years 2022 and 2021 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. 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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Consolidated Results of Operations
The following table sets forth, for the periods indicated, certain information derived from our Consolidated Statement of Operations. The percentages are computed as a percent of total revenues, and the increase (decrease) is measured in basis points.
 Fiscal Years
 20222021202220212022
 (Dollars in millions)% of Total Revenues (1)Increase (Decrease)
Royalties$65.8 $52.4 23.8 %12.7 %1,110 
Fees11.6 10.2 4.2 2.6 160 
Product sales to franchisees15.1 56.7 5.5 13.8 (830)
Advertising fund contributions32.6 22.0 11.8 5.3 650 
Franchise rental income130.8 127.4 47.4 30.9 1,650 
Company-owned salon revenue20.2 143.0 7.3 34.7 (2,740)
Cost of product sales to franchisees (2)17.4 43.8 115.2 77.2 3,800 
Inventory reserve7.7 — 2.8 — N/A
General and administrative65.3 96.4 23.7 23.4 30 
Rent9.4 40.8 3.4 9.9 (650)
Advertising fund expense32.6 22.0 11.8 5.3 650 
Franchise rent expense130.8 127.4 47.4 30.9 1,650 
Company-owned salon expense22.0 141.2 8.0 34.3 (2,630)
Depreciation and amortization6.2 21.7 2.2 5.3 (310)
Long-lived asset impairment0.5 13.0 0.2 3.2 (300)
Goodwill impairment13.1 — 4.7 — N/A
Operating loss (3)(28.9)(94.7)(10.5)(23.0)1,250 
Interest expense(12.9)(13.2)(4.7)(3.2)(150)
Loss from sale of salon assets to franchisees, net(2.3)(16.7)(0.8)(4.1)330 
Interest income and other, net(0.3)15.9 (0.1)3.9 (400)
Income tax (expense) benefit (4)(2.0)5.4 (4.5)5.0 N/A
Loss from discontinued operations, net of taxes(39.4)(10.1)(14.3)(2.5)(1,180)
Net loss (3)(85.9)(113.3)(31.1)(27.5)(360)
____________________________________________________________________________
(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 below is related to the effective income tax rate.
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Fiscal Year Ended June 30, 2022 Compared with Fiscal Year Ended June 30, 2021
Consolidated Revenues
Consolidated revenues are primarily comprised of royalties, fees, advertising fund contributions, product sales to franchisees, franchise rental income and company-owned salon revenue.
Consolidated revenues decreased $135.7 million, or 33.0%, during fiscal year 2022. Royalty revenue increased $13.4 million during fiscal year 2022 due to higher franchise system-wide sales and a higher average franchise salon count during the year. The overall decrease in revenue is due to the sale of company-owned salons to franchisees, the closure of company-owned salons which contributed $105.4 million to the decline and the reduction in product sales to franchisees of $41.6 million. During fiscal year 2022, 110 salons were sold to franchisees, net of buy backs, and 360 and 21 system-wide salons were closed and constructed, respectively (2022 Net Salon Count Changes). Additionally, our sales continue to be challenged by labor issues with active stylists and stylist hours worked below pre-COVID levels.
Royalties
During fiscal year 2022, royalties increased $13.4 million, or 25.6%, primarily due to a higher average franchise salon count and higher franchise system-wide sales.
Fees
During fiscal year 2022, fees increased $1.4 million, primarily due to the rebate from the Company's third-party distributor included in fees, which was a new source of revenue in fiscal year 2022. Training revenues also increased year over year. See Note 2 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Product Sales to Franchisees
Product sales to franchisees decreased $41.6 million, or 73.4%, during fiscal year 2022, primarily due to the Company's shift in its product business to a third-party distribution model. The Company expected revenue from product sales to decrease significantly during fiscal year 2022 and expects it to continue to decrease in fiscal year 2023.
Advertising Fund Contributions
Advertising fund contributions increased $10.6 million, or 48.2%, during fiscal year 2022, primarily due to a higher average franchise salon count in fiscal year 2022 and system-wide sales and an increase in the contribution rate that had been reduced in the first half of fiscal year 2021 in response to COVID-19.
Franchise Rental Income
During fiscal year 2022, franchise rental income increased $3.4 million, or 2.7%, primarily due to a higher average franchise salon count.
Company-owned Salon Revenue
During fiscal year 2022, company-owned salon revenue decreased $122.8 million, or 85.9%, 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 associated with the closure of our warehouses in fiscal year 2022.
Cost of Product Sales to Franchisees
The 3,800 basis point increase in cost of product as a percent of product revenue during fiscal year 2022 was primarily due to the Company reducing prices to liquidate distribution center inventory.
Inventory Reserve
During fiscal year 2022, the Company recorded an inventory reserve charge of $7.7 million related to distribution center inventory, primarily consisting of personal protective equipment the Company no longer believes is marketable. During fiscal year 2021, the Company recorded an inventory reserve charge of $12.1 million, which was included in company-owned salon expense in connection with our distribution center exit strategy.

33

General and Administrative
The decrease of $31.1 million, or 32.3%, in general and administrative expense during fiscal year 2022 was primarily due to lower administrative and field management compensation resulting from headcount reductions and a decrease in expenses associated with the distribution centers closed in fiscal year 2022.
Rent
The decrease of $31.4 million, or 77.0%, in rent expense during fiscal year 2022 was primarily due to the net reduction in the number of company-owned salons. Additionally in fiscal year 2022, the Company accrued less rent deemed uncollectible from franchisees. Partially offsetting the decrease was a $0.9 million broker fee incurred in fiscal year 2022 related to exiting the Company's distribution centers.
Advertising Fund Expense
Advertising fund expense increased $10.6 million, or 48.2%, during fiscal year 2022, primarily due to a higher average franchise salon count in fiscal year 2022 and system-wide sales and an increase in the contribution rate that had been reduced in the first half of fiscal year 2021 in response to COVID-19.
Franchise Rent Expense
During fiscal year 2022, franchise rent expense increased $3.4 million, or 2.7%, primarily due to a higher average franchise salon count.
Company-owned Salon Expense
Company-owned salon expense decreased $119.2 million, or 84.4%, during fiscal year 2022, primarily due to the reduction in company-owned salons, a reduction in the inventory reserve charge and a decline in product sales.
Depreciation and Amortization
The decrease of $15.5 million, or 71.4%, in depreciation and amortization during fiscal year 2022 was primarily due to the net reduction in company-owned salon count and no depreciation expense in fiscal year 2022 related to the distribution center assets that were derecognized in fiscal year 2021.
Long-Lived Asset Impairment
In fiscal year 2022, the Company recorded a long-lived asset impairment charge of $0.5 million, which represents a right of use (ROU) asset impairment charge of $0.5 million. In fiscal year 2021, the Company recorded a long-lived asset impairment charge of $13.0 million, which included a ROU asset impairment of $9.5 million. The decrease in long-lived asset impairment was primarily due to more salon ROU assets being impaired in prior periods.
Goodwill Impairment
During fiscal year 2022, the Company recorded a goodwill impairment charge of $13.1 million. See Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Interest Expense
The $0.3 million decrease in interest expense during fiscal year 2022 was primarily due to interest incurred in fiscal year 2021 related to the financing liabilities associated with our sale leasebacks. Interest expense is expected to increase in fiscal year 2023 as fees related to the credit amendment signed in the first quarter of 2023 are amortized as interest expense over the new term of the credit agreement. Additionally, under the terms of the amended credit agreement, we expect interest expense to increase in the fourth quarter of fiscal year 2023.
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Loss from Sale of Salon Assets to Franchisees, net
The $14.4 million decrease in the loss from the sale of salon assets to franchises, net during fiscal year 2022 was primarily due to fewer salons sold in fiscal year 2022.
Interest Income and Other, net
The decrease of $16.2 million in interest income and other, net during fiscal year 2022 was primarily due to the $15.0 million gain associated with the leases for the Company's distribution centers that was recognized in fiscal year 2021.
Income Tax (Expense) Benefit
During fiscal year 2022, the Company recognized tax expense of $(2.0) million, with a corresponding effective tax rate of (4.5)%, compared to recognizing a tax benefit of $5.4 million, with a corresponding effective tax rate of 5.0% during fiscal year 2021. See Note 10 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Loss from Discontinued Operations, net of Income Taxes
In fiscal year 2022, the loss from discontinued operations includes the loss from the sale of OSP, including goodwill derecognition of $38.4 million, partially offset by proceeds from the sale. In fiscal year 2021, loss from discontinued operations includes the income generated from OSP software subscriptions. See Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. In fiscal year 2023, we expect to record gains relate to discontinued operations as we receive cash related to the release of holdbacks of the purchase price in connection with the sale of OSP.
35

Results of Operations by Segment
Based on our internal management structure, we report two segments: Franchise salons and Company-owned salons. See Note 15 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. Significant results of continuing operations are discussed below with respect to each of these segments.
Franchise Salons
Fiscal Years
202220212022
(Dollars in millions)Increase (Decrease) (1)
Royalties$65.8 $52.4 $13.4 
Fees11.6 10.2 1.4 
Product sales to franchisees15.1 56.7 (41.6)
Advertising fund contributions32.6 22.0 10.6 
Franchise rental income130.8 127.4 3.4 
Total franchise revenue (1)$255.8 $268.7 $(12.9)
Franchise same-store sales (2)15.0 %(24.5)%
Operating loss$(11.8)$(24.6)$12.8 
_______________________________________________________________________________
(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 and 2021 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. 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.
Fiscal Year Ended June 30, 2022 Compared with Fiscal Year Ended June 30, 2021
Franchise Revenues
Franchise revenues decreased $12.9 million during fiscal year 2022. The decrease in franchise revenue was primarily due to the decrease in product sales to franchisees due to the Company's shift to third-party distributors, partially offset by higher royalties and advertising fund contributions due to a higher average salon count and increase in system-wide sales. During fiscal year 2022, franchisees purchased 110 salons from the Company and constructed (net of relocations) and closed 21 and 299 franchise salons, respectively.
Franchise Operating Loss
During fiscal year 2022, franchise salon operations generated operating losses of $11.8 million, and generated an operating loss of $24.6 million during fiscal year 2021. The operating loss improved during fiscal year 2022 compared to the prior comparable period due to the increase in royalties and decrease in general and administrative expense and rent, partially offset by the $13.1 million goodwill impairment charge.
36

Company-owned Salons
Fiscal Years
202220212022
(Dollars in millions)(Decrease) Increase (1)
Total revenue$20.2 $143.0 $(122.8)
Operating loss$(9.5)$(70.0)$60.5 
Total company-owned salons105 276 
_______________________________________________________________________________
(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.
Fiscal Year Ended June 30, 2022 Compared with Fiscal Year Ended June 30, 2021
Company-owned Salon Revenues
Company-owned salon revenues decreased $122.8 million in fiscal year 2022, primarily due to the 2022 Net Salon Count Changes.
Company-owned Salon Operating Loss
During fiscal year 2022, company-owned salon operating loss improved $60.5 million, compared to the prior comparable period. The improvement in the loss during fiscal year 2022 was primarily due to reduced general and administrative expense primarily related to salaries, a decrease in long-lived asset impairment and the exiting of loss-generating company-owned salons. We expect losses associated with the company-owned segment to decrease as we reduce the number of remaining salons through closures or lease buyouts.

Recent Accounting Pronouncements
Recent accounting pronouncements are discussed in Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

37

LIQUIDITY AND CAPITAL RESOURCES
In August 2022, the Company reached an agreement to amend its credit agreement and extend the maturity to August 2025 from March 2023. Under the amendment, the revolving credit facility was converted to a $180.0 million term loan and $55.0 million revolving credit facility with the minimum liquidity covenant reduced to $10.0 million from $75.0 million. The amended credit agreement includes typical provisions and financial covenants, including minimum EBITDA, leverage and fixed-charge coverage ratio covenants, the latter two of which are not tested until December 31, 2023. See additional discussion under Financing Arrangements and Note 8 and Note 16 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Sources of Liquidity
Funds generated by operating activities, available cash and cash equivalents and our borrowing agreements are our most significant sources of liquidity. The Company believes it has sufficient liquidity, cash on hand and borrowing capacity, to meet its obligations in the next twelve months and beyond.
As of June 30, 2022, cash and cash equivalents were $17.0 million, with $14.9 and $2.1 million within the United States and Canada, respectively.
As of June 30, 2022, the Company's borrowing arrangements include a $277.5 million five-year revolving credit facility that expires in March 2023, of which $81.9 million was available as of June 30, 2022. 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 June 30, 2022. Total liquidity per the agreement was $119.8 million compared to a minimum liquidity covenant of $75.0 million as of June 30, 2022. See additional discussion under Financing Arrangements and Notes 8 and 16 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Additionally, on February 3, 2021, the Company filed a $150 million shelf registration and $50 million prospectus supplement with the Securities and Exchange Commission under which it may offer and sell, from time to time, up to $50 million worth of its 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 of our brands and franchisees. The timing and amount of sales of shares, if any, will depend on a variety of factors, including prevailing market conditions, the trading price of shares, and other factors as determined by the Company. During fiscal year 2022, the Company issued 9.3 million shares and received net proceeds of $37.2 million.
Uses of Cash
The Company closely manages its liquidity and capital resources. The Company's liquidity requirements depend on key variables, including the performance of the business, the level of investment needed to support its business strategies, 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 in the Company's business environment. The Company has a disciplined approach to capital allocation, which focuses on investing in key priorities to support the Company's strategic plan as discussed within Part I, Item 1.
Cash Requirements
The Company's most significant contractual cash requirements as of June 30, 2022 were lease commitments. See Note 6 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K for further detail. Additionally, the Company is committed to purchasing $1.8 million of Designline inventory in the first quarter of fiscal year 2023. This inventory will be sold to our third-party supplier and customers.
38

Cash Flows
Cash Flows from Operating Activities
During fiscal year 2022, cash used in operating activities was $38.6 million. Cash used in operations improved due to higher royalties, lower general and administrative expense, lower rent and the exiting of loss-generating company-owned salons. These improvements were partially offset by $2.5 million of social security contributions that had been deferred under the CARES Act and $3.6 million of costs related to our debt refinancing. Quarter-over-quarter cash use improved throughout fiscal year 2022. Cash used in operating activities was $12.3, $12.1, $10.0 and $4.3 million in the first, second, third and fourth quarters, respectively. We expect cash use in first quarter of fiscal year 2023 to increase due to approximately $5.0 million of costs paid in connection with the credit amendment and approximately $2.8 million of bonus payments.
Cash Flows from Investing Activities
During fiscal year 2022, cash provided by investing activities of $7.7 million was primarily related to cash received of $13.0 million from the sale of OSP, partially offset by capital expenditures primarily related to developing the OSP software. In the first quarter of fiscal year 2023, we expect to receive approximately $4 million related to the release of purchase price holdbacks in connection with the sale of OSP. Additionally, due to the sale of OSP, we expect capital expenditures to decrease in fiscal year 2023.
Cash Flows from Financing Activities
During fiscal year 2022, cash provided by financing activities of $29.4 million was primarily a result of net proceeds of $37.2 million related to the issuance of common stock and a net $6.9 million paydown on the Company's revolving credit facility. The additional purchase price of approximately $4 million expected to be received in the first quarter of fiscal year 2023 will be used to repay the term loan as required by the credit agreement.
39

Financing Arrangements
Financing activities are discussed in Note 8 and Note 16 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. Derivative activities are discussed in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk."
The Company's financing arrangements consist of the following:
  June 30,
 Maturity Dates2022202120222021
 (Fiscal year)(Interest rate %)(Dollars in thousands)
Revolving credit facility20235.50%5.00%$179,994 $186,911 
As of June 30, 2022 and 2021, the Company had $180.0 and $186.9 million, respectively, of outstanding borrowings under its revolving credit facility. The five-year revolving credit facility expires in March 2023 and includes a minimum liquidity covenant of $75.0 million, provides the Company's lenders security in substantially all of the Company's assets, adds additional guarantors, and grants a first priority lien and security interest to the lenders in substantially all of the Company's and the guarantors' existing and future property. Total liquidity per the agreement was $119.8 million as of June 30, 2022. See Note 8 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. The revolving credit facility includes a $30.0 million sub-facility for the issuance of letters of credit and a $30.0 million sublimit for swingline loans. The Company may request an increase in revolving credit commitments under the facility of up to $115.0 million under certain circumstances. The applicable margin for loans bearing interest at the Secured Overnight Financing Rate (SOFR) ranges from 3.75%-4.25%, the applicable margin for loans bearing interest at the base rate ranges from 2.75%-3.25%, and the facility fee ranges from 0.5%-0.75%, each depending on average utilization of the revolving line of credit.
In August 2022, the Company amended its credit agreement. Under the amendment, the revolving credit facility was converted to a $180.0 million term loan and $55.0 million revolving credit facility. The amendment also extends the maturity date to August 31, 2025 and includes, among other things, financial covenants, including minimum EBITDA, leverage and fixed charge coverage ratios and a minimum liquidity covenant which was reduced from $75.0 million to $10.0 million. The amendment also eliminates the $115.0 million incremental loan facility. See additional discussion in Note 16 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Our debt to capitalization ratio, calculated as the principal amount of debt as a percentage of the principal amount of debt and shareholders' (deficit) equity at fiscal year-end, was as follows:
As of June 30,Debt to
Capitalization (1)
2022120.8 %
202191.6 %
_______________________________________________________________________________
(1)Excludes the long-term lease liability as that liability is offset by the ROU asset.
The increase in the debt to capitalization ratio as of June 30, 2022 compared to June 30, 2021 was primarily due to the decrease in shareholders' (deficit) equity as a result of the loss from operations.
40

Contractual Obligations and Commercial Commitments
On-Balance Sheet Obligations
Our debt obligations are primarily composed of our revolving credit facility at June 30, 2022.
Non-current deferred benefits of $6.3 million includes $1.8 million related to a non-qualified deferred salary plan, a salary deferral program of $2.3 million and a bonus deferral plan of $2.2 million related to established contractual payment obligations under retirement and severance agreements for a small number of employees. See Note 4 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Operating leases primarily represent long-term obligations for the rental of salons, including leases for company-owned locations, as well as salon franchisee lease obligations, which are reimbursed to the Company by franchisees. Regarding franchisee subleases, we generally retain the right to the related salon assets, net of any outstanding obligations, in the event of a default by a franchise owner. Recent trends in system-wide revenue over the past few years has increased the risk of default by franchisees, which may be material.
The Company has unfunded deferred compensation contracts covering certain management and executive personnel. We cannot predict the timing or amount of future payments related to these contracts. See Note 11 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
As of June 30, 2022, we have liabilities for uncertain tax positions. We are not able to reasonably estimate the amount by which the liabilities will increase or decrease over time; however, at this time, we do not expect a significant payment related to these obligations within the next fiscal year. See Note 10 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Off-Balance Sheet Arrangements
Interest payments on long-term debt are calculated based on the revolving credit facility's rates. As of June 30, 2022, the applicable margin for loans bearing interest at SOFR ranges from 3.75%-4.25%, the applicable margin for loans bearing interest at the base rate ranges from 2.75%-3.25% and the facility fee ranges from 0.5%-0.75%, each depending on average utilization of the revolving line of credit.
Under the amended credit facility entered into in August 2022, the applicable margins for the loans bearing interest are subject to annual increases. The margin applicable to loans bearing interest at SOFR will initially be 3.875%. Effective March 27, 2023, the margin will increase to 6.25%, of which 4.25% will be paid currently in cash and 2.00% will be paid in kind (PIK) interest (added to the principal balance and thereafter accruing interest). Effective March 27, 2024, the margin will increase to 7.25%, of which 4.25% will be paid currently in cash and 3.00% will be PIK interest. The margin applicable to base rate loans will be 100 basis points (1.00%) less than the margin applicable to SOFR loans. See Note 16 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
We are a party to a variety of contractual agreements that we may be obligated to indemnify the other party for certain matters, which indemnities may be secured by operation of law or otherwise, in the ordinary course of business. These contracts primarily relate to our commercial contracts, operating leases and other real estate contracts, financial agreements, agreements to provide services and agreements to indemnify officers, directors and employees in the performance of their work. While our aggregate indemnification obligation could result in a material liability, we are not aware of any current matter that we expect will result in a material liability.
We do not have any unconditional purchase obligations or significant other commercial commitments such as standby repurchase obligations or other commercial commitments.
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements or other contractually narrow or limited purposes at June 30, 2022. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
41

Dividends
In December 2013, the Board elected to discontinue declaring regular quarterly dividends.
Share Issuance Program
In February 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 common stock in "at-the-market" offerings. As of June 30, 2022, the Company has issued 9.3 million shares for net proceeds of $37.2 million.
Share Repurchase Program
In May 2000, the Board approved a stock repurchase program with no stated expiration date. Since that time and through June 30, 2022, 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 depends on many factors, including the market price of the common stock and overall market conditions. During fiscal year 2022, the Company did not repurchase any shares. As of June 30, 2022, 30.0 million shares have been cumulatively repurchased for $595.4 million, and $54.6 million remained authorized for repurchase. The Company does not anticipate repurchasing shares of common stock for the foreseeable future.
42

CRITICAL ACCOUNTING POLICIES
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States. In preparing the 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 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 Consolidated Financial Statements.
Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. We believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.
Goodwill
As of June 30, 2022 and 2021, the Franchise reporting unit had $174.4 and $229.6 million of goodwill, respectively, and the Company-owned segment had no goodwill at either period. See Note 5 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K. 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.
Goodwill impairment assessments are performed at the reporting unit level, which is the same as the Company's operating segments. The goodwill assessment involves a one-step comparison of the reporting unit's fair value to its carrying value, including goodwill (Step 1). If the reporting unit's fair value exceeds its carrying value, no further procedures are required. However, if the reporting unit's fair value is less than the carrying value, an impairment charge is recorded for the difference between the fair value and carrying value of the reporting unit.
In applying the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting units is less than its carrying value (Step 0). Qualitative factors may include, but are not limited to, economic, market and industry conditions, cost factors, and overall financial performance of the reporting unit. If after assessing these qualitative factors, the Company determines it is more likely than not that the carrying value is less than the fair value, then performing Step 1 of the goodwill impairment assessment is unnecessary.
The carrying value of the reporting unit is based on the assets and liabilities associated with the operations of the reporting unit, including allocation of shared or corporate balances among reporting units. Allocations are generally based on the number of salons in each reporting unit as a percent of total salons or expenses of the reporting unit as a percentage of total company expenses.
The Company calculates estimated fair values of the reporting units based on discounted cash flows utilizing estimates in annual revenue, fixed expense rates, franchise salon counts, long-term growth rates and discount rates for determining terminal value. During fiscal year 2022, our estimates of annual revenue and salon counts were decreased to reflect recent trends in the business and, in fourth quarter, the removal of OSP revenues and expenses from our forecast. In addition, discount rates have increased during this period to reflect changes in the market interest rates. Where available and as appropriate, comparative market multiples are used in conjunction with the results of the discounted cash flows. The Company engages third-party valuation consultants to assist in evaluating the Company's estimated fair value calculations. See Note 1 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
43

Long-Lived Assets, Excluding Goodwill
The Company follows the guidance in ASC 360, Property, Plant, and Equipment and applies the guidance to property, plant, and equipment as well as right of use (ROU) assets. 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 in fiscal years 2022 and 2021, primarily due to the COVID-19 pandemic, resulted in ASC 360-10-35-21 triggering events. 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. 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 based on the best information available, 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 and a discount rate.
For fiscal years 2022 and 2021, the Company recognized long-lived asset impairment charges of $0.5 and $13.0 million, respectively, which included $0.5 and $9.5 million, respectively, related to ROU assets on the Consolidated Statement of Operations in Part II, Item 8, of this Form 10-K. The impairment loss for each salon asset group that was recognized was allocated among the long-lived assets of the group on a pro-rata basis using their relative carrying amounts. Additionally, the impairment losses did not reduce the carrying amount of an individual asset below its fair value, including for the ROU assets included in the salon asset groups. 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 asset, including its ROU assets. However, actual results may not be consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.
44

Income Taxes
Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the Consolidated Financial Statements or income tax returns. Deferred income tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using currently enacted tax rates in effect for the years in which the differences are expected to reverse.
We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. The Company evaluates all evidence, including recent financial performance, the existence of cumulative year losses and our forecast of future taxable income, to assess the need for a valuation allowance against our deferred tax assets. While the determination of whether or not to record a valuation allowance is not fully governed by a specific objective test, accounting guidance places significant weight on recent financial performance.
The Company has a valuation allowance on its deferred tax assets amounting to $201.7 and $192.5 million at June 30, 2022 and 2021, respectively. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make necessary adjustments to the deferred tax asset valuation, which would reduce the provision for income taxes.
Significant components of the valuation allowance which occurred during fiscal year 2022 are as follows:
The Company determined that it no longer had sufficient U.S. state indefinite-lived taxable temporary differences to support realization of its U.S. state indefinite-lived NOLs and its existing U.S. deferred tax assets that upon reversal are expected to generate state indefinite-lived NOLs. As a result, the Company recorded a $4.1 million valuation allowance on its U.S. state indefinite-lived deferred tax assets.
Significant components of the valuation allowance which occurred during fiscal year 2021 are as follows:
The Company recognized a tax loss on its investment in Luxembourg and established a corresponding valuation allowance of $34.4 million.
The Company reserves for unrecognized tax benefits, interest and penalties related to anticipated tax audit positions in the U.S. and other tax jurisdictions based on an estimate of whether additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of these liabilities would result in tax benefits being recognized in the period in which it is determined that the liabilities are no longer necessary. If the estimate of unrecognized tax benefits, interest and penalties proves to be less than the ultimate assessment, additional expenses would result.
Inherent in the measurement of deferred balances are certain judgments and interpretations of tax laws and published guidance with respect to the Company's operations. Income tax expense is primarily the current tax payable for the period and the change during the period in certain deferred tax assets and liabilities.
See Note 10 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
45

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
The primary market risk exposure of the Company relates to changes in interest rates in connection with its debt, specifically the revolving credit facility, which bears interest at variable rates based on SOFR plus an applicable borrowing margin. Additionally, the Company is exposed to foreign currency translation risk related to changes in the Canadian dollar, and to a lesser extent, the British pound. The Company has established policies and procedures that govern the management of these exposures through the use of derivative financial instrument contracts. By policy, the Company does not enter into such contracts for the purpose of speculation. The following details the Company's policies and use of financial instruments.
Interest Rate Risk:
The Company has established an interest rate management policy that attempts to minimize its overall cost of debt, while taking into consideration earnings implications associated with volatility in short-term interest rates. In the past, the Company has used interest rate swaps to further mitigate the risk associated with changing interest rates and to maintain its desired balances of fixed and floating rate debt. In addition, access to variable rate debt is available through the Company's revolving credit facility. The Company reviews its policy and interest rate risk management quarterly and adjusts in accordance with market conditions and the Company's short- and long-term borrowing needs. As of June 30, 2022, the Company had outstanding variable rate debt of $180.0 million and the Company did not have any outstanding interest rate swaps.

In August 2022, the Company amended and extended its revolving credit facility to convert it to a $180.0 million term loan and $55.0 million revolving credit facility with varying interest rates. See Note 16 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.
Foreign Currency Exchange Risk:
Over 90% of the Company's operations are transacted in U.S. dollars. However, because a portion of the Company's operations consist of activities outside of the U.S., the Company has transactions in other currencies, primarily the Canadian dollar, and to a lesser extent, the British pound. In preparing the Consolidated Financial Statements, the Company is required to translate the financial statements of its foreign subsidiaries from the currency in which they keep their accounting records, generally the local currency, into U.S. dollars. Different exchange rates from period to period impact the amounts of reported income and the amount of foreign currency translation recorded in accumulated other comprehensive income (AOCI). As part of its risk management strategy, the Company frequently evaluates its foreign currency exchange risk by monitoring market data and external factors that may influence exchange rate fluctuations. As a result, the Company may engage in transactions involving various derivative instruments to hedge assets, liabilities and purchases denominated in foreign currencies. As of June 30, 2022, the Company did not have any derivative instruments to manage its foreign currency risk.
During fiscal years 2022 and 2021, a $0.6 million foreign currency loss and $0.3 million foreign currency gain is included in loss from continuing operations, respectively.
46

47

Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Regis Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Regis Corporation (a Minnesota corporation) and subsidiaries (the "Company") as of June 30, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, shareholders' (deficit) equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated August 22, 2022 expressed as an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Goodwill impairment analysis
As described further in Note 1 to the financial statements, the Company’s consolidated goodwill balance was $174.4 million as of June 30, 2022 and is assigned to the Franchise reporting unit. Goodwill is tested annually for impairment on April 30th or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. At March 31, 2022, a triggering event was identified and a quantitative goodwill impairment test was performed which resulted in impairment expense of $16.0 million. We identified the Company’s March 31, 2022 goodwill impairment analysis as a critical audit matter.
The principal considerations for our determination that the goodwill impairment analysis is a critical audit matter are that the significant estimates and assumptions made by management involve subjectivity and judgment in determining the fair value of the reporting unit using the discounted future cash flows valuation technique. The reporting unit discounted future cash flows include certain management assumptions that are complex and have a higher degree of estimation uncertainty and changes in these assumptions could have a significant impact on the results of the impairment analysis. These assumptions include forward-looking projections related to salon counts, revenue, EBITDA margin and determination of discount rates. Performing audit procedures to evaluate management's assumptions required a high degree of auditor judgement and an increased extent of effort, including the need to involve valuation specialists.

48

Our audit procedures related to the annual goodwill impairment analysis included the following, among others.
We tested the design and operating effectiveness of controls relating to management's goodwill impairment test, including the controls over the determination of key inputs such as the forecasting of future cash flows and determination of the discount rate;
We tested the reasonableness of management's forecasts of future revenues and EBITDA margin by comparing to third-party industry projections and historical operating results;
We performed sensitivity analysis on the Company's future revenue and salon counts to evaluate the reasonableness of management's forecasts;
We utilized a valuation specialist to assist in recalculating the Company's discounted future cash flows model and in evaluating the reasonableness of significant assumptions including the discount rate; and
We evaluated the competency and objectivity of management's specialists who assisted with preparing the discounted cash flow analysis.
Accounting for Discontinued Operations
As discussed in Note 3 of the consolidated financial statements, on June 29, 2022, the Company completed the sale of its OSP software-as-a-service business ("OSP") to Soham Inc. ("Buyer") for $20.0 million in cash plus up to an additional $19.0 million in proceeds contingent upon the number of salons that transition to the Buyer's salon technology platform. In connection with the sale, the Company recognized a pre-tax loss of $36.6 million in discontinued operations. As a result of the discontinued operations classification, the comparative period consolidated financial statements for fiscal year 2021 have been recast to reclassify balance sheet, operations and cash flow amounts related to OSP discontinued operations. We identified the Company’s accounting for the OSP discontinued operations as a critical audit matter.
The principal considerations for our determination that the discontinued operations is a critical audit matter are that auditing the Company's discontinued operations was complex due to judgments made by management in applying the relevant accounting principles including management's determination that OSP is a business, that the sale is a strategic shift, and the fair value determinations used in allocating goodwill attributable to the OSP component of the Franchise reporting unit.
Our audit procedures related to the discontinued operations included the following, among others.
We tested the design and operating effectiveness of financial reporting controls over the Company's accounting for the discontinued operations.
We evaluated the appropriateness of the Company's application of the criteria for reporting of discontinued operations by inspecting management's supporting documentation, reading board of directors meeting minutes and other entity information, and evaluating whether there was contrary evidence, based on our understanding of the business.
We consulted with our national office as to the appropriateness of the conclusion reached regarding discontinued operations treatment.
To test the allocation of goodwill to the OSP component for purposes of computing the loss, we evaluated the determination of the fair value of OSP based on the terms of the sale and the fair value of the overall Franchise reporting unit based on the most recent fair value determinations used in conjunction with goodwill impairment testing.
We evaluated the presentation of the discontinued operations in the consolidated financial statements, including testing significant balances for appropriate allocation to discontinued operations in 2022 and 2021 and assessing the reasonableness of key judgments applied by management in allocating expenses to the discontinued operations.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2020.
Minneapolis, Minnesota
August 22, 2022
49

Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Regis Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Regis Corporation (a Minnesota Corporation) and subsidiaries (the "Company") as of June 30, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated financial statements of the Company as of and for the year ended June 30, 2022, and our report dated August 22, 2022, expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting ("Management’s Report"). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
August 22, 2022

50

REGIS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
 June 30,
 20222021
ASSETS  
Current assets:  
Cash and cash equivalents$17,041 $19,191 
Receivables, net14,531 26,270 
Inventories3,109 20,639 
Other current assets13,984 17,017 
Current assets related to discontinued operations (Note 3)
 3,542 
Total current assets48,665 86,659 
Property and equipment, net12,835 16,906 
Goodwill (Note 5)
174,360 188,257 
Other intangibles, net3,226 3,761 
Right of use asset (Note 6)
493,749 610,599 
Other assets36,465 41,388 
Non-current assets related to discontinued operations (Note 3)
 48,813 
Total assets$769,300 $996,383 
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY  
Current liabilities:  
Accounts payable$15,860 $27,157 
Accrued expenses33,784 51,242 
Short-term lease liability (Note 6)
103,196 116,348 
Current liabilities related to discontinued operations (Note 3)
 3,738 
Total current liabilities152,840 198,485 
Long-term debt, net (Note 8)
179,994 186,911 
Long-term lease liability (Note 6)
408,445 517,626 
Other non-current liabilities58,974 75,075 
Non-current liabilities related to discontinued operations (Note 3)
 1,240 
Total liabilities800,253 979,337 
Commitments and contingencies (Note 9)
Shareholders' (deficit) equity:  
Common stock, $0.05 par value; issued and outstanding, 45,510,245 and 35,795,844 common shares at June 30, 2022 and 2021, respectively
2,276 1,790 
Additional paid-in capital62,562 25,102 
Accumulated other comprehensive income9,455 9,543 
Accumulated deficit(105,246)(19,389)
Total shareholders' (deficit) equity(30,953)17,046 
Total liabilities and shareholders' (deficit) equity$769,300 $996,383 
______________________________________________________________________________
The accompanying notes are an integral part of the Consolidated Financial Statements.
51

REGIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars and shares in thousands, except per share data)
 Fiscal Years
 20222021
Revenues:  
Royalties$65,753 $52,357 
Fees11,587 10,215 
Product sales to franchisees15,072 56,699 
Advertising fund contributions32,573 22,023 
Franchise rental income (Note 6)
130,777 127,392 
Company-owned salon revenue20,205 142,965 
Total revenue275,967 411,651 
Operating expenses:  
Cost of product sales to franchisees17,391 43,756 
Inventory reserve (1)7,655  
General and administrative65,274 96,427 
Rent (Note 6)
9,357 40,754 
Advertising fund expense32,573 22,023 
Franchise rent expense130,777 127,392 
Company-owned salon expense (2)21,952 141,204 
Depreciation and amortization6,224 21,749 
Long-lived asset impairment (Note 1)
542 13,023 
Goodwill impairment (Note 5)
13,120  
Total operating expenses304,865 506,328 
Operating loss(28,898)(94,677)
Other (expense) income:  
Interest expense(12,914)(13,163)
Loss from sale of salon assets to franchisees, net(2,334)(16,696)
Interest income and other, net(296)15,902 
Loss from operations before income taxes(44,442)(108,634)
Income tax (expense) benefit(2,017)5,428 
Loss from continuing operations(46,459)(103,206)
Loss from discontinued operations, net of income taxes (Note 3)(39,398)(10,125)
Net loss$(85,857)$(113,331)
Net loss per share:  
Basic and diluted:  
Loss from continuing operations$(1.07)$(2.87)
Loss from discontinued operations(0.90)(0.28)
Net loss per share, basic and diluted (3)$(1.97)$(3.15)
Weighted average common and common equivalent shares outstanding:  
Basic and diluted43,582 35,956 
_____________________________________________________________________________
(1)Includes charges in the third and fourth quarter associated with liquidation of distribution center inventory. Excludes reserves for inventory at salons.
(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.
(3)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 Consolidated Financial Statements.
52

REGIS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(Dollars in thousands)
 Fiscal Years
 20222021
Net loss$(85,857)$(113,331)
Other comprehensive (loss) income, net of tax:  
Net current period foreign currency translation adjustments(547)1,888 
Recognition of deferred compensation459 206 
Other comprehensive (loss) income(88)2,094 
Comprehensive loss$(85,945)$(111,237)
_______________________________________________________________________________
The accompanying notes are an integral part of the Consolidated Financial Statements.
53

REGIS CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIT) EQUITY
(Dollars in thousands, except share data)
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Retained Earnings (Deficit)Total
 SharesAmount
Balance, June 30, 202035,625,716 $1,781 $22,011 $7,449 $94,462 $125,703 
Net loss— — — — (113,331)(113,331)
Foreign currency translation (Note 1)— — — 1,888 — 1,888 
Exercise of SARs3,775 — (24)— — (24)
Stock-based compensation— — 3,254 — — 3,254 
Recognition of deferred compensation (Note 11)
— — — 206 — 206 
Net restricted stock activity166,353 9 (139)