REGIS CORP

(Unaudited)

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

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of March 31, 2025 and for the three and nine months ended March 31, 2025, and 2024, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of March 31, 2025, and its consolidated results of operations, comprehensive income (loss), shareholders' equity (deficit) and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2024, and other documents filed or furnished to the SEC during the current fiscal year.

Alline Salon Group Acquisition:

On December 19, 2024, the Company completed the previously announced transaction to acquire 100 percent ownership of Super C Group, LLC, doing business as Alline Salon Group (Alline). Under the terms of the agreement, the Company paid cash consideration of approximately $19 million, stock consideration valued at $3.0 million, and additional amounts for working capital adjustments and transaction-related fees. Refer to Note 13 to these unaudited Condensed Consolidated Financial Statements for additional information regarding the acquisition. The Company’s financial results for the three and nine months ended March 31, 2025, include the results of Alline subsequent to the December 19, 2024, acquisition date.

Goodwill:

The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. An interim impairment analysis was not required in the three or nine months ended March 31, 2025.

As further described in Note 13 of these unaudited Condensed Consolidated Financial Statements, the acquisition of Alline resulted in a preliminary recognition of approximately $12.1 million in goodwill, which was assigned to the company-owned operating segment.

As of March 31, 2025, and June 30, 2024, the franchise reporting unit had goodwill of $172.2 million and $173.1 million, respectively, and the company-owned reporting unit had $12.1 million of goodwill at March 31, 2025.

Acquisition-Related Costs:

Acquisition-related costs of $0.2 million and $1.4 million were incurred during the three and nine months ended March 31, 2025, respectively, and primarily represent third-party consulting and legal expenses associated with the acquisition of Alline completed on December 19, 2024. These costs were recorded within general and administrative expenses on the March 31, 2025, unaudited Condensed Consolidated Statements of Operations.

Inventory:

Other current assets includes an inventory balance of $2.9 million and $0.8 million as of March 31, 2025, and June 30, 2024, respectively, in the unaudited Condensed Consolidated Balance Sheets. Inventory primarily consists of beauty products sold and used in serving our customers in our company-owned salons. The preliminary inventory balance acquired in connection with the Alline Acquisition consists of shampoo, conditioner, hair care tools, and various other hair care and beauty products available for sale to salon customers and used in the servicing of our customers. The inventory is valued at the lower of cost or net realizable value, with cost determined using a weighted average.

Tax Benefits Preservation Plan:

On January 28, 2024, the Board authorized and declared a dividend ofone preferred stock purchase right (a Right) for each outstanding share of common stock. The dividend was payable on February 9, 2024 (the Record Date), to the holders of record of shares of common stock as of the close of business on the Record Date. The description and terms of the Rights are set forth in a Tax Benefits Preservation Plan (the Plan), dated as of January 29, 2024, as the same may be amended from time to time between the Company and Equiniti Trust Company, LLC, as Rights Agent. On January 27, 2025, the Company entered into Amendment No. 1 to the Plan, extending the expiration date of the Plan from January 29, 2025, to January 29, 2028 (the Extension). Pursuant to the terms of the Plan, the Company will submit the Extension to its shareholders for ratification at the next annual or special meeting of its shareholders. The Rights and the Plan will now expire on the earliest of (i) the close of business on January 29, 2028 (or such later date as may be established by the Board of Directors prior to the expiration date as long as the Extension is submitted to the shareholders of the Company for ratification at the next annual or special meeting of shareholders succeeding such extension), (ii) the time at which the Rights are redeemed or exchanged pursuant to the Plan, (iii) the time at which the Rights (other than Rights owned by an Acquiring Person, as defined by the Plan) are exchanged pursuant to the Plan, (iv) the repeal of Section 382 of the U.S. Internal Revenue Code of 1982, as amended, or any successor statute if the Board determines that the Plan is no longer necessary or desirable for the preservation of certain unrecognized tax benefits, or (v) the beginning of a taxable year to which the Board determines that no tax benefits may be carried forward.

Recently Issued Accounting Standards Not Yet Adopted:

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the entity’s CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. The pronouncement is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and for interim periods in fiscal years beginning after December 15, 2024. We do not expect the adoption of this pronouncement to impact our consolidated financial statements beyond the expansion of our reportable segment disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The ASU is effective for fiscal years beginning after December 15, 2024, and shall be applied prospectively. The Company is evaluating the standard and determining the extent of additional disclosures that will be required.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued the ASC 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-04) Disaggregation of Income Statement of Expenses" which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as disclosures about selling expenses. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

2. REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized over time

Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenues are billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statements of Operations. The treatment increases both the gross amount of reported revenue and expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opens and is then recognized over the term of the franchise agreement, which is typically 10 years. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees. The Company recognizes franchise rental income and expense when it is due to the landlord.

Revenue recognized at point of sale

Company-owned salon revenues are recognized at the time when the services are provided, or the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the guest. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized based on gift card balances with no activity over a 36-month basis. Product sales to franchisees are recorded at the time product is delivered to the franchisee.

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

Receivables relate primarily to payments due for royalties, advertising fees and rent. The receivables balance is presented net of an allowance for expected credit losses (i.e., doubtful accounts). The Company monitors the financial condition of its franchisees and records provisions for estimated losses on receivables when it believes franchisees are unable to make their required payments based on factors such as delinquencies and aging trends. The allowance for credit losses is the Company's best estimate of the amount of probable credit losses related to existing accounts and notes receivable. The Company offers financing to SmartStyle® franchisees when they remodel their salons. Included in other assets is a receivable of $0.8 million, partially offset by a credit loss reserve of $0.2 million, related to this financing program. The following table is a rollforward of the allowance for credit losses for the periods indicated:

(1)Includes currency fluctuation.

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

(1)In the nine months ended March 31, 2025, broker fees of $0.9 million were written off in connection with the Alline Acquisition.

Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended March 31, 2025, and 2024, was $1.8 million and $1.7 million, respectively, and for the nine months ended March 31, 2025, and 2024, was $5.5 million and $5.0 million, respectively. Deferred franchise fees of $0.7 million were recognized in connection with the acquisition of Alline in the nine months ended March 31, 2025. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of March 31, 2025, is as follows (dollars in thousands):

3. DISCONTINUED OPERATIONS:

On June 30, 2022, the Company sold its Opensalon® Pro (OSP) software-as-a-service solution to Soham, Inc. As a result of the sale, the Company classified the OSP business as discontinued operations in the financial statements for all periods presented. During the three and nine months ended March 31, 2025, the Company received $0.0 million and $8.5 million, respectively, of proceeds related to the number of salons migrating to Soham's Zenoti product. During the nine months ended March 31, 2024, the Company received $2.0 million of proceeds that had been previously held back for general indemnity provisions. No income taxes have been allocated to discontinued operations based on the methodology required by accounting for income taxes guidance. Cash (used in) provided by investing activities for the nine months ended March 31, 2025, and 2024, includes $8.5 million and $2.0 million, respectively, of cash from discontinued operations.

4. SHAREHOLDERS' EQUITY (DEFICIT):

Stock-Based Employee Compensation:

During the three and nine months ended March 31, 2025, the Company granted restricted stock units as follows:

The RSUs granted during the three and nine months ended March 31, 2025, vest in equal amounts over aone orthree-year period subsequent to the grant date.

Total compensation cost for stock-based payment arrangements totaling $0.4 million and $0.3 million, and $2.0 million and $1.2 million for the three and nine months ended March 31, 2025, and 2024, respectively, were recorded within general and administrative expense on the unaudited Condensed Consolidated Statements of Operations.

Alline Acquisition:

In connection with the Alline Acquisition, the Company issued 140,552 shares of common stock to affiliates of Alline, which are subject to aone-year lock-up following the closing.

Stock Warrants Issued in Connection with Long-Term Debt:

In connection with the 2024 Credit Agreement (as defined in Note 9 to the unaudited Condensed Consolidated Financial Statements), the Company issued detachable warrants to affiliates of TCW Asset Management Company, LLC, and Asilia Investments. Pursuant to the warrants, the holders can purchase up to an aggregate 407,542 shares of the Company’s common stock, par value $0.05 per share, at an exercise price equal to $7.00 per share. The warrants are exercisable for aseven-year period beginning June 24, 2024. The warrants may also be exercised on a cashless basis under certain circumstances under the agreement.

In addition, in connection with the issuance of the warrants, the Company granted an exemption in favor of each holder pursuant to Section 36 of the Plan, dated January 29, 2024, among the Company and Equiniti Trust Company, LLC, such that neither holder was deemed to be an Acquiring Person solely in connection with (i) the issuance of the warrants nor (ii) the acquisition of beneficial ownership of securities of the Company pursuant to the exercise of the warrants.

In December 2024, the Company amended the 2024 Credit Agreement. The Company issued additional warrants to affiliates of TCW Asset Management Company LLC and Asilia Investments. In connection with this amendment, the warrant holders can purchase up to an aggregate 64,372 shares of Common Stock, at an exercise price equal to $23.86 per share. The warrants are exercisable for aseven-year period beginning December 19, 2024 (the "Issue Date”). The warrants may also be exercised on a cashless basis if, at the time of exercise, there is no effective registration statement registering, or the prospectus therein is not available for, the issuance of the shares of common stock underlying the warrants. Prior to the second anniversary of the Issue Date, the Company may call for cancellation up to an aggregate 32,186 shares of common stock underlying the warrants for consideration equal to $51.13 per share; provided necessary requirements are met. These warrants were valued at $1.3 million at March 31, 2025.

The warrants and the shares of common stock issuable upon the exercise of such warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), and may not be sold absent registration or an applicable exemption from the registration requirements of the Securities Act. Based in part upon the representations of each holder in each warrant, the offering and sale of each warrant is exempt from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

The combined value of these warrants was valued at $2.8 million using a relative fair value method and accounted for through additional paid-in capital. Further, the related financing fees incurred as a result of warrant issuance is recorded through a contra-equity account and amounts to $0.2 million.

Prior to the second anniversary of the issue date, the Company may call for cancellation up to an aggregate 203,771 shares of common stock underlying the warrants for consideration equal to $15.00 per share; provided, that the volume weighted average price on the trading day immediately preceding the date the Company delivers a written call notice to a holder exceeds $20.00. As of March 31, 2025, the Company has no intention of exercising this call provision. The Company will reassess this provision on a quarterly basis.

5. INCOME TAXES:

A summary of the income tax benefit (expense) and corresponding effective tax rate is as follows:

The recorded tax provision and effective tax rate for the three and nine months ended March 31, 2025, and 2024, were different than what would normally be expected, primarily due to the impact of the deferred tax valuation allowance.

With limited exceptions, due to net operating loss carryforwards, our federal, state, and foreign tax returns are open to examination for all years since 2014, 2013, and 2016, respectively.

6. COMMITMENTS AND CONTINGENCIES:

The Company is a plaintiff or defendant in various lawsuits and claims arising out of the normal course of business. Like certain other franchisors, the Company has faced 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 has faced allegations of nonpayment of rent and associated charges. Further, similar to other retail employers, the Company has faced, and may continue to face, 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 incur judgments in the future or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.

7. CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

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

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

8. LEASES:

At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and its corporate facilities under operating leases. The original terms range fromone to 11 years with many leases renewable for an additional five to 10-year term at the option of the Company. In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels. For most leases, the Company is required to pay real estate taxes and other occupancy expenses. Total rent includes the following:

(1)Rental income associated with the sublease of corporate office space is recorded in other income and was $0.3 million and $0.9 million for the three and nine months ended March 31, 2025, respectively.

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

(3)Franchise salon rent is lower in the nine months ended March 31, 2024, due to settlements with landlords for less than previously accrued.

(4)Includes rent related to the Alline salons acquired December 2024. See Note 13.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease-related costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statements of Operations. For the three and nine months ended March 31, 2025, and 2024, franchise rental income and franchise rent expense were $16.9 million and $23.8 million, and $58.5 million and $72.5 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew the SmartStyle master lease and some leases for locations subleased to our franchisees upon expiration of those leases. Other leases are expected to be renewed by the franchisee upon expiration.

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

The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined. The Company uses the portfolio approach in applying the discount rate based on the original lease term. The weighted average remaining lease term was 4.82 years and 5.05 years, and the weighted average discount rate was 5.93% and 5.13% for all salon operating leases as of March 31, 2025, and June 30, 2024, respectively.

As of March 31, 2025, future operating lease commitments, includingone renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (dollars in thousands):

9. FINANCING ARRANGEMENTS:

The Company's debt consists of the following:

In June 2024, the Company entered into a new credit agreement (the 2024 Credit Agreement). The 2024 Credit Agreement includes a $105.0 million term loan and a $25.0 million revolving credit facility, with a $10.0 million minimum liquidity covenant and matures June 24, 2029. The Company incurred $14.2 million of refinancing fees (including $3.9 million of Original Issue Discount fee) that will be amortized on a straight-line basis over the term of the agreement. As of March 31, 2025, the Company had outstanding standby letters of credit under the revolving credit facility of $9.3 million, primarily related to the Company's self-insurance program. As of March 31, 2025, total available liquidity and available credit under the $25.0 million revolving credit facility, as defined by the 2024 Credit Agreement Amendment, were $19.0 million and $15.7 million, respectively.

The interest rate on the 2024 Credit Agreement is based on the secured overnight financing rate (SOFR) plus margin. The margin applicable to the 2024 Credit Agreement is subject to change based on the Company's total leverage ratio, remeasured annually on a predetermined date set by the lender. When the Company's total leverage ratio is greater than or equal to 3.75 to 1.00, the margin applicable to the term loan and revolving credit facility is 9.00%. If the Company's leverage ratio is less than 3.75 to 1.00, the margin rate is 8.50%. In either scenario,4.50% of the margin is paid-in-kind (PIK) interest (added to the principal balance and thereafter accruing interest), and the remainder is paid in cash. The SOFR base rate applicable to the debt has a floor of 2.50% per annum. The margin applicable to any letter of credit is 5.25% and paid in cash.

The agreement contains typical provisions and financial covenants regarding maximum leverage and minimum fixed-charge coverage and a minimum liquidity threshold of $10.0 million. In connection with the 2024 Credit Agreement, the Company issued detachable stock warrants to the debt lenders. The Company was in compliance with its covenants and other requirements of the financing arrangements as of March 31, 2025. The Company's assets serve as collateral to the credit facility.

The agreement includes scheduled payments totaling $1.1 million in fiscal years 2025 and 2026, payable quarterly. In fiscal years 2027, 2028, and 2029, scheduled payments total $2.6 million. Additionally, excess cash is swept annually per terms of the agreement.

On December 19, 2024, the Company amended the 2024 Credit Agreement (the 2024 Credit Agreement Amendment) for an additional $15.0 million in long-term debt in the form of a term loan. In connection with this 2024 Credit Agreement Amendment, the Company issued warrants as discussed in Note 4. The term loan was provided on the same terms as the original term loan, with respect to maturity and interest rate margins. The $15.0 million in proceeds were used as consideration for the Alline Acquisition. The Company incurred $0.4 million of Original Issue Discount fee that will be amortized on a straight-line basis over the term of the agreement. As of March 31, 2025, the Company had cash and cash equivalents of $13.3 million and current liabilities of $101.0 million.

10. FAIR VALUE MEASUREMENTS:

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

Changes in the earn-out liability measured at fair value using Level 3 inputs were as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of March 31, 2025, and June 30, 2024, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, accounts payable and debt approximated their carrying values.

The Company recorded the estimated fair value of the contingent consideration liability assumed with the acquisition of Alline on a preliminary basis. The estimated fair value of the contingent consideration liability is included in the unaudited Condensed Consolidated Balance Sheets within accrued expenses and other noncurrent liabilities, totaling $3.0 million at March 31, 2025. The earn-out liability is adjusted at fair value quarterly until settled, and changes in fair value will be reported in our unaudited Condensed Consolidated Statements of Operations.

The following provides information regarding fair value measurements for our remaining contingent earn-out liability as of March 31, 2025, according to the three-level fair value hierarchy:

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

11. EARNINGS PER SHARE:

The Company's basic earnings per share is calculated as net income (loss) divided by weighted average common shares outstanding, excluding unvested outstanding stock options (SOs), stock appreciation rights (SARs), and RSUs. The Company's diluted earnings per share is calculated as net income (loss) divided by weighted average common shares and common share equivalents outstanding, which include shares issued under the Company's stock-based compensation plans and warrants issued in connection with the Company's credit agreement. Stock-based awards with exercise prices greater than the average market price of the Company's common stock are excluded from the computation of diluted earnings per share. The computation of weighted average shares outstanding, assuming dilution, excluded stock-based awards as detailed below, as they were not dilutive under the treasury stock method.

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (EPS):

12. SEGMENT INFORMATION:

Segment information is prepared on the same basis that the CODM reviews financial information for operational decision-making purposes. The Company's reportable operating segments consisted of the following salons:

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

(2)Salon counts as of March 31, 2025, include salons acquired as part of the Alline Acquisition. See Note 13 to these unaudited Condensed Consolidated Financial Statements for further details on the transaction.

Financial information concerning the Company's reportable operating segments is shown in the table below. Segment information is presented in the same way that the Company internally organizes the business for assessing performance and making decisions regarding allocation of resources. The CODM’s primary measures of segment performance are revenue and segment adjusted EBITDA. Revenue and segment adjusted EBITDA are regularly reviewed by the CODM to make decisions about resources to be allocated to the segments, assess current performance, and forecast future performance. Asset information by segment is not provided to the CODM. Segment adjusted EBITDA is defined as income from continuing operations before interest, income taxes, depreciation, amortization, and impairment. Beginning in fiscal year 2025, management determined that stock-based compensation expenses will be excluded from adjusted EBITDA. This change has been retrospectively applied to all prior periods presented in this report. Consistent with our internal management reporting, unallocated expenses include certain items impacting comparability. These unallocated items are not defined terms within U.S. GAAP. They are based on how management views the business, makes financial, operating and planning decisions and evaluates the Company's ongoing performance and are not attributable to either segment. Unallocated fees include one-time professional fees and settlements, severance expense, the benefit from lease liability decreases in excess of previously impaired ROU assets, and lease termination fees.

(1)Unallocated expenses for the three and nine months ended March 31, 2025, include severance expenses of $0.4 million and $2.7 million, respectively.

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

13. ACQUISITIONS:

On December 19, 2024, the Company transferred consideration to acquire 100 percent of the equity interests of Alline (the Alline Acquisition), its largest franchisee, consisting of 314 salons. The transaction provides Regis with a turn-key operating infrastructure and gets the Company closer to salon operations alongside franchisees and the salon portfolio provides a testing ground for brand and operational initiatives. The transaction terminated the existing franchise arrangements between Regis and Alline, which resulted in the Company recognizing a loss of $0.2 million upon settlement, which is included in the unaudited Condensed Consolidated Financial Statements as a component of operating income for the nine months ended March 31, 2025.

The acquisition was accounted for as a business combination with the purchase price allocated on a preliminary basis using information available as of December 31, 2024. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable.

As of March 31, 2025, the purchase price and related allocation have been revised as a result of additional information obtained and revisions to the provisional estimates of fair value, including, but not limited to, the completion of independent appraisals and valuations related to property and equipment, intangible assets, right of use assets and corresponding lease obligations. Management is continuing to analyze the data and as such, the final valuations of assets acquired and liabilities assumed may be materially different from the estimated values shown below.

The preliminary fair value of total consideration transferred by the Company upon acquisition is $24.6 million, as detailed below.

(1)Includes cash transferred of $20.0 million, net of cash acquired of $1.4 million.

(2)The number of common shares (140,552) issued as part of the consideration paid for Alline was determined by dividing the $3.0 million by the 30-trading day volume weighted average price of the common stock as reported on the Nasdaq Global Market as of and including December 17, 2024.

(3)The contingent consideration arrangement requires Regis to pay the former owners of Alline additional cash consideration if certain 4-Wall EBITDA or Adjusted EBITDA thresholds are met for each of thethree subsequent annual earnout periods as well as a cumulative 4-Wall EBITDA or Adjusted EBITDA threshold for the cumulative three subsequent annual earnout periods. The potential undiscounted amount of all future payments that Regis could be required to make under the contingent consideration arrangement is between $0 and $3.0 million. Regis recognized a provisional fair value of $3.0 million on the acquisition date and as of March 31, 2025, which is included in accrued expenses ($1.0 million) and other noncurrent liabilities ($2.0 million) in the unaudited Condensed Consolidated Balance Sheets. The fair value of the contingent consideration arrangement is provisional while the Company completes its fair value assessment. 4-Wall EBITDA is defined as earnings before interest, tax, depreciation and amortization and excluding corporate general and administrative expenses for acquired salons.

The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed as of the acquisition date:

(1)Preliminary Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill that will be recorded as part of the acquisition of Alline includes the following:

a. the expected synergies and other benefits that we believe will result from combining the operations of Alline with the operations of Regis; and

b. any intangible assets that do not qualify for separate recognition.

Goodwill is not amortized and is deductible for tax purposes. All the goodwill related to the acquisition of Alline is related to our company-owned operating segment. The Company has not yet obtained all the information required to finalize the valuations of the assets acquired and liabilities assumed. As such, we expect that goodwill could change from the amount noted above.

(2)Intangible assets includes $2.4 million related to the preliminary fair value of reacquired rights and $1.4 million related to the preliminary fair value of favorable leasehold interests, net.

a. The reacquired rights were preliminarily valued using a form of the income approach where the asset's value is determined by its ability to generate future cash flows by isolating and discounting the cash flows attributable to the asset. The Company assumed afour-year life based on the weighted average remaining contract term, assuming no renewals.

b. Upon acquisition, the Company assumed lease agreements with lease payments fixed at a rate below the current market rate. As a result, a preliminary favorable lease asset of $1.4 million has been recorded on the balance sheet. This asset represents the benefit the Company receives from having lease payments below market and will be amortized to rent expense on a straight-line basis over the remaining terms of the respective leases.

The Company incurred $0.2 million and $1.4 million of acquisition related costs which are included in general and administrative expense in Regis’s unaudited Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2025, respectively.

The following table provides revenues and operating income from Alline that are included in our unaudited Condensed Consolidated Financial Statements:

The following table presents pro forma information as if the Alline Acquisition had occurred on July 1, 2023: