REGIS CORP

(Unaudited)

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

The unaudited Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of September 30, 2026, and for the three months ended September 30, 2026, and 2025, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2026, and its consolidated results of operations, comprehensive income, shareholders' equity and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited 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, 2026, and other documents filed or furnished to the SEC during the current fiscal year.

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 months ended September 30, 2026.

As of both September 30, 2026, and June 30, 2026, the franchise reporting unit had goodwill of $172.4 million, and the company-owned reporting unit had goodwill of $10.3 million.

Recently Issued Accounting Standards Not Yet Adopted:

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement 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 well 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 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 typically recognized overten years but is evaluated for immediate revenue recognition when a salon is acquired by Regis or closed. 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 24-month basis.

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

Receivables relate primarily to payments due for royalties, advertising fees, rent, and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected credit losses (i.e., doubtful accounts), related to receivables from franchisees. Management estimates the allowance based on the age of the receivable and creditworthiness of the franchisee. The following table is a rollforward of the allowance for credit losses for the periods indicated:

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

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

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, capitalized, and expensed over the term of the franchise agreement as general and administrative expense in the Condensed Consolidated Statements of Operations. The following table is a rollforward of the broker fee balance for the periods indicated:

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement but are evaluated for immediate revenue recognition when a salon is acquired by Regis or closed. Franchise fee revenue for the three months ended September 30, 2026, and 2025, was $0.8 million and $1.0 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2026, is as follows (Dollars in thousands):

3. SHAREHOLDERS' EQUITY:

Authorized Shares and Designation of Preferred Class:

The Company has 5.0 million shares of capital stock authorized, par value $0.05, of which all outstanding shares, and shares available under the Stock Option Plans, have been designated as common stock.

Stock-Based Employee Compensation:

During the three months ended September 30, 2026, and 2025, the Company granted restricted stock units as follows:

The RSUs granted during the three months ended September 30, 2025, vest afterone year or in equal amounts over athree-year period subsequent to the grant date. RSUs granted to non-employee directors generally vest on the earlier of the first anniversary of the grant date or the next annual shareholders' meeting following the grant date and distributions are deferred until the director's board service ends.

Total compensation cost for stock-based payment arrangements totaling $0.4 million and $0.6 million for the three months ended September 30, 2026, and 2025, respectively, was recorded within general and administrative on the Condensed Consolidated Statements of Operations.

Stock Warrants Issued in Connection with Long-Term Debt:

In connection with the 2024 Credit Agreement (as defined in Note 8 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 Common Stock of the Company, par value $0.05 per share (Common Stock), at an exercise price equal to $7.00 per share.

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 issued in connection with the 2024 Credit Agreement and the amendment thereto are exercisable for aseven-year period beginning June 24, 2024, and December 19, 2024, respectively. 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.

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 Tax Benefits Preservation Plan, dated January 29, 2024, as the same may be amended from time to time, among the Company and Equiniti Trust Company, LLC (the Plan), such that neither holder was deemed to be an “Acquiring Person” (as defined in the Plan) 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.

For the warrants issued in December 2024, 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, 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 $68.17. As of September 30, 2026, the Company has no intention of exercising the call provision. The Company will reassess this intention on a quarterly basis.

Stock Warrants Issued in Connection with Consulting Services Agreement:

On August 1, 2025, as part of a consulting services agreement, the Company issuedtwo warrants to purchase Common Stock of the Company to Forum3 Inc., consisting of an initial warrant exercisable through October 31, 2025 (the Initial Warrant) and a coverage warrant to purchase up to 35,000 shares of Common Stock at an exercise price of $24.20 per share (the Coverage Warrant). On September 11, 2025, Forum3 Inc. exercised $300,000 of the Initial Warrant at the 10-day average closing price of $23.87 per share for a total of 12,567 shares of Common Stock. The remaining $190,000 of the Initial Warrant expired on October 31, 2025. As a result of the partial exercise of the Initial Warrant, the Coverage Warrant vested with respect to 21,428 shares of Common Stock, which will remain exercisable until August 1, 2028.

Tax Benefits Preservation Plan:

The Company adopted a Tax Benefits Preservation Plan intended to help protect the availability of certain tax attributes (including net operating loss carryforwards) by deterring acquisitions of the Common Stock above a specified ownership threshold. In connection with the adoption of the Plan, the Company declared a dividend distribution ofone preferred stock purchase right (a Right) for each outstanding share of Common Stock to shareholders of record as of February 9, 2024. The dividend had a de minimis value. The Rights are set forth in the Plan. 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 submitted the Extension to its shareholders for ratification at the October 28, 2025 annual shareholders meeting, and the shareholders ratified the Plan.

The material terms of the Rights include, among others: (i) the ownership threshold that generally triggers the Rights becoming exercisable (an Acquiring Person) is 4.95% beneficial ownership, subject to customary exemptions, grandfathering, and Board discretion as set forth in the Plan; (ii) prior to the Distribution Date (as defined in the Plan), the Rights trade together with the Company’s common stock and are not exercisable; (iii) upon the Distribution Date, the Rights detach and become exercisable to purchase from the Company one one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an initial purchase price of $73.00, subject to adjustment; (iv) if a person becomes an Acquiring Person, each Right (other than Rights held by the Acquiring Person, which become void) generally entitles its holder to purchase, for the exercise price, a number of shares of the Company’s common stock having a market value of two times the exercise price (a “flip-in” feature), subject to the terms and limitations in the Plan; (v) upon certain business combination transactions following the occurrence of an Acquiring Person, Rights holders may have the right to purchase common stock of the acquiring company at a discount (a “flip-over” feature), subject to the terms of the Plan; (vi) the Rights are redeemable by the Board at $0.0001 per Right prior to the time a person becomes an Acquiring Person, and the Board may exchange the Rights for shares of Common Stock (or other consideration) under specified circumstances; and (vii) the Rights expire on January 29, 2028, unless earlier redeemed or exchanged in accordance with the Plan.

The Company evaluated the Rights under applicable U.S. GAAP, including the guidance for freestanding financial instruments indexed to, and potentially settled in, an entity’s own equity. The Company concluded that the declaration and distribution of the Rights did not result in recognition of an asset or liability and did not have an impact on the Company’s unaudited condensed consolidated balance sheets as of September 30, 2026, and June 30, 2026, or unaudited condensed consolidated statements of operations or cash flows for the three months ended September 30, 2026, and 2025, because (i) the Rights were issued to existing shareholders as a dividend with no proceeds received, (ii) the Rights were not exercised during the periods, and (iii) the Rights are contingently exercisable only upon the occurrence of specified events and, based on their terms, are intended to be classified in shareholders’ equity rather than as liabilities. Costs directly attributable to the adoption of the Plan (e.g., external legal, advisory, and filing fees) were recorded in general and administrative expense as incurred, consistent with the nature of the costs.

4. INCOME TAXES:

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

The decrease in the Company’s effective tax rate for the three months ended September 30, 2026, primarily relates to lower pre-tax earnings and a current period discrete tax benefit related to the Company's 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.

5. 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 non-payment of rent and associated charges. Further, similar to other large retail employers, the Company has faced, and may continue to face, allegations of purported patent, consumer, and wage and hour violations, some of which involve class actions.

In November 2025, the Company received a civil investigative demand (CID) from the U.S. Department of Justice (DOJ) issued pursuant to the False Claims Act. The investigative inquiry concerns applications for Paycheck Protection Program (PPP) loans and loan forgiveness obtained by Alline Salon Group (Alline) prior to the Company’s acquisition of Alline. The Company previously acquired Alline pursuant to the terms of the Membership Interest Purchase Agreement, dated December 19, 2024, by and among the Company, Super C Group, LLC d/b/a Alline Salon Group, ASG Holdings, LLC, Vision Cuts, LLC, SAAW Project, LLC, and VGP II, LLC. The Company is cooperating with the DOJ’s inquiry, and at this time, there has been no formal demand for the return of the PPP loan proceeds, and the Company is not aware of any formal claim or lawsuit having been initiated against the Company. Nevertheless, the Company has recorded an accrual of $2.5 million which relates to a PPP loan obtained by Alline in the principal aggregate amount of approximately $2 million which was forgiven in full by the Small Business Administration (the SBA) in December 2021, and which reflects the Company’s recent understanding as to the current focus of the inquiry. The Company is continuing to respond to additional requests for information, and while the timing of any ultimate resolution of the inquiry is uncertain, the Company is evaluating its rights to indemnification and other potential sources of recovery for any claim relating to this matter.

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.

6. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:

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

7. LEASES

At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and its corporate facilities under operating leases. The original terms range fromone toten years with many leases renewable for an additional five toten-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 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 the corporate office space is recorded in other income and was $0.3 million for both three-month periods ended September 30, 2026, and 2025.

(2)Costs incurred to exit salons before the lease end date in order to relieve the Company of future lease obligations.

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

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease-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 Condensed Consolidated Statements of Operations. For the three months ended September 30, 2026, and 2025, franchise rental income and franchise rent expense were $15.0 million and $17.4 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew the SmartStyle master lease and certain 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 expected lease term. The weighted average remaining lease term was 4.11 and 4.35 years, and the weighted average discount rate was 6.85% and 6.82% for all salon operating leases as of September 30, 2026, and June 30, 2026, respectively.

As of September 30, 2026, 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):

As a result of having assigned our interest in obligations under certain real estate leases directly to our franchisees, the Company is secondarily liable on such lease agreements as guarantor. These leases have varying terms, the latest of which expires in 2035. As of September 30, 2026, the maximum potential amount of future payments the Company could be required to make under these guarantees is approximately $4.3 million, andno liability has been recognized in the Unaudited Condensed Consolidated Balance Sheets for these guarantees, as the probability of default is considered remote.

8. FINANCING ARRANGEMENTS:

The Company's debt consists of the following:

(1)The term loan and revolving credit facility mature on June 24, 2029. The interest rate applicable to any letter of credit is 5.25% and paid currently in cash.

(2)Deferred financing fees, inclusive of $4.3 million of original issue discount fees, are amortized on a straight-line basis over the term of the related agreement.

The Company's credit agreement, as amended (the 2024 Credit Agreement), includes a $120.0 million term loan and a $25.0 million revolving credit facility, with a $10.0 million minimum liquidity covenant, is secured by the Company's assets, and is set to expire on June 24, 2029. In connection with the 2024 Credit Agreement, the Company issued detachable stock warrants to the debt lenders. See Note 3 for additional details.

As of September 30, 2026, the Company had outstanding standby letters of credit under the revolving credit facility of $5.4 million, primarily related to the Company's self-insurance program. As of September 30, 2026, total available liquidity, net of the $10.0 million minimum liquidity covenant, and available credit under the $25.0 million revolving credit facility, as defined by the amended agreement, were $30.4 million and $19.6 million, respectively. The Company was in compliance with its covenants and other requirements of the financing arrangements as of September 30, 2026.

The interest rate on the 2024 Credit Agreement is based on the secured overnight financing rate (SOFR) plus margin. The margin 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, the Company has elected the option to pay 4.50% of the margin as paid-in-kind (PIK) interest (added to the principal balance and thereafter accruing interest), and the remainder is paid currently in cash. The SOFR base rate applicable to the debt has a floor of 2.50% per annum. The interest rate applicable to any letter of credit is 5.25% and paid currently in cash.

The 2024 Credit Agreement includes scheduled payments totaling $3.0 million in each of fiscal years 2027, 2028, and 2029, plus a balloon payment at maturity. Additionally, excess cash is swept annually per the terms of the agreement. In the three months ended September 30, 2026, the Company paid $7.3 million to satisfy the annual mandatory prepayment of 75% of excess cash flow as defined in the 2024 Credit Agreement. This amount was applied as a prepayment of the term loan and reduced the Company's unrestricted cash balance accordingly.

9. FAIR VALUE MEASUREMENTS:

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2026, and June 30, 2026, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, debt, and accounts payable approximated their carrying values.

In December 2024, the Company acquired Alline, its largest franchisee, which included a contingent consideration arrangement requiring additional cash payments to Alline's former owners if certain EBITDA thresholds are met over three subsequent annual earn-out periods. The earn-out liability is recorded at estimated fair value within other noncurrent liabilities on the unaudited Condensed Consolidated Balance Sheets utilizing the Monte Carlo simulation, which is a Level 3 input, and changes in fair value are reported in the unaudited Condensed Consolidated Statements of Operations.

The change in the earn-out liability measured at fair value using significant unobservable inputs (Level 3) is as follows:

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.

10. EARNINGS PER SHARE:

The Company's basic earnings per share is calculated as net income divided by weighted average common shares outstanding, including nonforfeitable restricted stock units (RSUs) for which settlement has been deferred. Other unvested stock-based awards are excluded from basic earnings per share. The Company's diluted earnings per share is calculated as net income divided by weighted-average common shares and common share equivalents outstanding, including the dilutive effect of stock options (SOs), stock appreciation rights (SARs), RSUs, stock-settled performance units (PSUs), and warrants issued in connection with the Company's credit and consulting services agreements. Stock-based awards and warrants that are antidilutive are excluded from diluted earnings per share.

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

11. SEGMENT INFORMATION:

Segment information is presented on thesame basis that the Company internally organizes the business for assessing performance and making decisions regarding allocation of resources. The Company's Chief Operating Decision Maker (CODM) is our President and Chief Executive Officer. Revenue, expenses, and operating income (loss) by segment are regularly reviewed by the CODM to make decisions about resources to be allocated to the segments, assess current performance, and forecast future performance. Our CODM manages our business primarily by reviewing consolidated results by segment on a quarterly basis and using those results along with forecasts and other non-financial information in our annual budgeting process. The Company's CODM does not evaluate reportable segments using assets and capital expenditure information. Consistent with our internal management reporting, unallocated expenses include certain items impacting comparability. These unallocated items are not defined terms within 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, lease termination fees, asset retirement obligation costs, goodwill and long-lived asset impairment charges, and the benefit from the Company's debt refinancing.

Financial information concerning the Company's reportable operating segments is shown in the tables below.

(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

(2)Other expenses include advertising fund and franchise rent expenses which are offset in total revenue and, as such, not used as a primary measure of performance by our CODM.

(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.

(2)Other expenses include advertising fund and franchise rent expenses which are offset in total revenue and, as such, not used as a primary measure of performance by our CODM.

The franchise reportable operating segment is comprised of franchise salons located mainly in strip center locations and Walmart stores. Franchise salons offer high quality, convenient and value-priced hair care and beauty services and retail products. This segment operates primarily in the U.S., Puerto Rico, and Canada and primarily includes the Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters, and Magicuts concepts.

The company-owned salons reportable operating segment is comprised of company-owned salons located mainly in strip center locations. Company-owned salons offer high quality, convenient and value priced hair care and beauty services and retail products. Supercuts, Cost Cutters, and Holiday Hair operating in the U.S. are generally within the company-owned salons segment.

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.

12. OTHER EVENTS:

The Company previously agreed to pay the former Vice Chairman and his spouse an annual benefit for life. The former Vice Chairman passed away in October of 2013. The fair value of the remaining obligations to his spouse totaled $2.2 million as of June 30, 2026, with $0.6 million within accrued expenses and the remainder included in other non-current liabilities on the Condensed Consolidated Balance Sheet. During the three months ended September 30, 2026, the spouse passed away, which terminated the Company's obligation under this arrangement. As a result, the Company derecognized the liability previously recorded, recognizing a gain of $2.1 million within general and administrative on the Condensed Consolidated Statement of Operations for the three months ended September 30, 2026. No remaining obligation is recorded on the Condensed Consolidated Balance Sheet as of September 30, 2026.