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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, 2025, the Company franchised or owned 3,941 salons in North America and the United Kingdom. Each of the Company's salon concepts generally offer similar salon products and services and serve the mass market. As of June 30, 2025, we had 1,777 corporate employees worldwide. See discussion within Part I, Item 1 of this Form 10-K.

In December 2024, the Company acquired the Alline Salon Group (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.

On June 30, 2022, the Company sold its Opensalon® Pro (OSP) software-as-a-service solution to Soham Inc. (Zenoti). The

Company received $13.0 million in proceeds in June 2022 and received an additional $5.0 million in proceeds in fiscal year 2023, offset by a $0.5 million transaction fee. In fiscal year 2024, the Company received an additional $2.0 million of proceeds that had been previously held back for general indemnity provisions. In fiscal year 2025, the Company received $8.5 million in additional proceeds related to salons migrating to Zenoti. The Zenoti migration was successfully completed in fiscal year 2025. 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.

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. Franchisees 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 year 2023, the Company experienced an inventory reserve charge of $1.2 million related to the exit of the distribution centers.

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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:

The global coronavirus pandemic (COVID-19) had an adverse impact on operations. As a result, in fiscal year 2023, the Company received a $1.1 million grant from the state of North Carolina included in Other, net on the Consolidated Statements of Operations in Part II, Item 8, of this Form 10-K.

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. In fiscal year 2025, a net 430 franchise salons, excluding any impact from the Alline Acquisition, have closed. An additional 314 salons were acquired as part of the Alline Acquisition, which will reduce future royalty income. The Alline Acquisition will increase future company-owned salon revenue and expenses.

The following table summarizes system-wide revenue and system-wide same-store sales by concept:

Fiscal Years

(Dollars in millions)

Total system-wide same-store sales (1) (0.6) % 0.7 % 4.4 %

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(1)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. 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 Statements of Operations. The percentages are computed as a percent of total consolidated revenues, except as otherwise indicated, and the increase (decrease) is measured in basis points. Variances calculated on amounts shown in millions may result in rounding differences.

Fiscal Years

(Dollars in millions) % of Total Revenues (1) (Decrease) Increase

Inventory reserve — — 1.2 — — 0.5 — (50)

Gain on extinguishment of long-term debt, net — 94.6 — — 46.6 — N/A N/A

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

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

(3)Computed as a percent of income (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, 2025, Compared with Fiscal Year Ended June 30, 2024

Royalties

During fiscal year 2025, royalties decreased $5.9 million, or 9.2%, mainly due to a decrease in franchise salon count primarily caused by franchise salon closures and the Alline Acquisition.

Fees

During fiscal year 2025, fees decreased $0.5 million, or 4.9%, primarily due to salon closures and lower rebate fees from franchise product vendors, offset partially by terminated franchise fees related to the acquisition of the Alline salons.

Product Sales to Franchisees

Product sales to franchisees decreased $0.5 million, or 100.0%, during fiscal year 2025, due to the Company's shift in its product business to a third-party distribution model.

Advertising Fund Contributions

Advertising fund contributions decreased $3.8 million, or 14.8%, during fiscal year 2025, primarily due to the decrease in franchise salon count and a decrease in advertising fund contribution rates.

Franchise Rental Income

During fiscal year 2025, franchise rental income decreased $18.7 million, or 19.6%, primarily due to the decrease in franchise salon count and franchisees signing their own leases.

Company-Owned Salon Revenue

During fiscal year 2025, company-owned salon revenue increased $36.4 million, or 498.6%, due primarily to the Alline Acquisition.

Cost of Product Sales to Franchisees

Cost of product sales to franchisees decreased $0.4 million, or 100.0%, as a result of the Company's shift in its product business to a third-party distribution model.

General and Administrative

The increase of $1.4 million, or 3.1%, in general and administrative expense during fiscal year 2025 was primarily due to acquisition related costs of $1.4 million, as well as operating expenses related to Alline, offset partially by company-wide cost saving measures.

Rent

The increase of $5.0 million, or 90.9%, in rent expense during fiscal year 2025 was primarily due to Alline Acquisition salon rent expense.

Advertising Fund Expense

Advertising fund expense decreased $3.8 million, or 14.8%, during fiscal year 2025, primarily due to the decrease in franchise salon count and a decrease in advertising fund contribution rates.

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Franchise Rent Expense

During fiscal year 2025, franchise rent expense decreased $18.7 million, or 19.6%, primarily due to the decrease in franchise salon count and franchisees signing their own leases.

Company-Owned Salon Expense

Company-owned salon expense increased $26.0 million, or 509.8%, during fiscal year 2025, as a result of the strategic Alline Acquisition.

Depreciation and Amortization

The decrease of $0.9 million, or 23.1%, in depreciation and amortization during fiscal year 2025 was primarily due to company-owned salon closures, partially offset by the Alline Acquisition.

Long-Lived Asset Impairment

The Company recorded long-lived asset impairment charges of $0.4 million and $0.8 million in fiscal years 2025 and 2024, respectively. The decrease in long-lived asset impairment was primarily due to more right-of-use assets being impaired in fiscal year 2024 resulting from subleasing excess corporate office space to unrelated third parties.

Interest Expense

The $5.1 million decrease in interest expense during fiscal year 2025 was primarily due to less debt outstanding.

Gain on Extinguishment of Long-Term Debt, Net

In June 2024, the Company recorded a gain of $94.6 million related to the extinguishment of long-term debt. Additionally, the net gain includes the write off of paid-in-kind interest accruals and the write off of unamortized debt financing fees.

Other, Net

Other, net improved $2.0 million in fiscal year 2025, primarily due to unclaimed property and corporate office sublease income.

Income Tax Benefit (Expense)

During fiscal year 2025, the Company recognized an income tax benefit of $115.5 million with a corresponding effective tax rate of (7,519.3)% primarily due to the partial release of the valuation allowance on our deferred tax assets, compared to recognizing an income tax expense of $0.9 million, with a corresponding effective tax rate of 1.0% during fiscal year 2024. See Note 10 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

Income from Discontinued Operations, net of tax

The Company recorded income from discontinued operations, net of tax of $6.5 million and $2.0 million in fiscal years 2025 and 2024, respectively. Income in fiscal year 2025 is due to proceeds from the sale of OSP related to the number of salons migrating to the Zenoti platform, partially offset by a non-cash income tax expense allocated to discontinued operations, and income in fiscal year 2024 is due to the receipt of sales proceeds related to the sale of OSP that had previously been held back for general indemnity provisions. See Note 3 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

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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

(Dollars in millions) (Decrease) Increase (1)

Product sales to franchisees — 0.4 2.8 (0.4) (2.4)

Franchise same-store sales (2) (0.6) % 0.6 % 4.4 %

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

(2)Franchise same-store sales 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, 2025, Compared with Fiscal Year Ended June 30, 2024

Franchise Revenue

Franchise revenue decreased $29.3 million during fiscal year 2025. The decrease in franchise revenue was primarily due to the decrease in franchise rental income, royalties, and advertising fund collections as a result of lower salon count, primarily driven by the Alline portfolio moving to the Company-owned segment. During fiscal year 2025, franchisees constructed (net of relocations) and closed 18 and 448 franchise salons, respectively.

Franchise Adjusted EBITDA

During fiscal year 2025, franchise adjusted EBITDA totaled $28.4 million, an improvement of $0.6 million compared to fiscal year 2024. The improvement is primarily due to a decrease in general and administrative expense, partially offset by lower royalties and fees.

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Company-Owned Salons

Fiscal Years

(Dollars in millions) Increase (Decrease) (1)

Company-owned salon adjusted EBITDA $ 3.2 $ (0.3) $ (1.8) $ 3.5 $ 1.5

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

Fiscal Year Ended June 30, 2025, Compared with Fiscal Year Ended June 30, 2024

Company-Owned Salon Revenue

Company-owned salon revenue improved $36.4 million in fiscal year 2025, primarily due to the Alline Acquisition, partially offset by the closure of loss-generating company-owned salons.

Company-Owned Salon Adjusted EBITDA

During fiscal year 2025, company-owned salon adjusted EBITDA improved $3.5 million, primarily due to the Alline Acquisition, partially offset by the wind-down of underperforming company-owned stores.

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.

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LIQUIDITY AND CAPITAL RESOURCES

In June 2024, the Company entered into a new credit agreement with TCW Asset Management Company, LLC, and MidCap Financial Trust, which matures in June 2029 (the 2024 Credit Agreement). In addition to a $10.0 million minimum liquidity covenant, the agreement includes typical provisions and financial covenants, including leverage and fixed-charge coverage ratio covenants. The agreement was amended in December 2024 in connection with the Alline Acquisition (the December 2024 Amendment). See Note 8 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 until maturity of the credit agreement in June 2029.

As of June 30, 2025, cash and cash equivalents were $17.0 million, with $16.0 million and $1.0 million within the United States and Canada, respectively.

As of June 30, 2025, the Company's borrowing arrangements include a $118.9 million term loan, $5.4 million of paid-in-kind interest, and a $25.0 million revolving credit facility with a $10.0 million minimum liquidity covenant that expires in June 2029. As of June 30, 2025, the unused available credit under the revolving credit facility was $19.0 million and total liquidity per the agreement was $25.9 million. See additional discussion under Financing Arrangements and Note 8 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K.

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, credit facilities and borrowing arrangements, and working capital management. The Company has a disciplined approach to capital allocation, which focuses on ensuring we can meet our interest obligations and investing in key priorities to support the Company's strategic plan as discussed within Part I, Item 1. Additional information about the Company's current use of cash is described under "Sources of Liquidity."

Cash Requirements

The Company's most significant contractual cash requirements as of June 30, 2025, were lease commitments and interest payments. See Notes 6 and 8 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K for further detail.

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Cash Flows

Cash Flows from Operating Activities

During fiscal year 2025, cash provided by operating activities was $13.7 million. Cash provided by operations improved year over year due primarily to an $8.4 million build in restricted ad fund cash, our lower cost structure, less cash used for working capital, and lower cash interest.

Cash Flows from Investing Activities

During fiscal year 2025, cash used in investing activities of $11.5 million was primarily related to $18.6 million used in the Alline Acquisition, partially offset by $8.5 million received related to the sale of OSP.

Cash Flows from Financing Activities

During fiscal year 2025, cash provided by financing activities of $3.6 million was primarily a result of proceeds from issuance of long-term debt, partially offset by net payments on the revolving credit facility.

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Financing Arrangements

Financing activities are discussed in Note 8 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:

Twelve months ended June 30,

(Cash interest rate %) (Dollars in thousands)

Fair value of warrants issued to lenders (2,314) (1,501)

less: Long-term debt, current portion (1,100) —

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(1)The term loan and revolving credit facility mature on June 24, 2029.

In June 2024, the Company entered into a new credit agreement between TCW Asset Management Company, LLC, and MidCap Financial Trust Company which includes a $25.0 million revolving credit facility, a term loan of $105.0 million with a $10.0 million minimum liquidity covenant that expires in June 2029. On December 19, 2024, the Company amended the 2024 Credit Agreement for an additional $15.0 million term loan. The 2024 Credit Agreement, as amended, includes typical provisions and financial covenants, including leverage and fixed-charge coverage ratio covenants. As of June 30, 2025, the unused available credit under the revolving credit facility was $19.0 million, outstanding letters of credit were $6.0 million, and total liquidity per the agreement was $25.9 million. The interest rate on the 2024 Credit Agreement is based on the secured overnight financing rate (SOFR) plus margin. The agreement utilizes an interest rate margin that is subject to change year-over-year. The margin applicable to the new term loan and revolving credit facility is subject to change based on the Company's total leverage ratio, remeasured at a specific point during the year. When the Company's total leverage ratio is greater than or equal to 3.75 to 1.00, the margin applicable to the new 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, 4.5% of the margin is paid-in-kind (PIK) interest (added to the principal balance and thereafter accruing interest), and the remainder is paid currently in cash. The margin applicable to any letter of credit is 5.25% and paid currently in cash. See additional discussion in Note 8 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, including paid-in-kind interest accrued, as a percentage of the principal amount of debt and shareholders' equity (deficit) at fiscal year end, was as follows:

As of June 30, Debt toCapitalization (1)

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(1)Excludes the long-term lease liability as that liability is offset by the right-of-use (ROU) asset.

The decrease in the debt to capitalization ratio as of June 30, 2025, compared to June 30, 2024, was primarily due to higher total shareholder's equity as of June 30, 2025, as a result of earnings during the 2025 period.

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Contractual Obligations and Commercial Commitments

On-Balance Sheet Obligations

Our debt obligations are primarily composed of our 2024 Credit Agreement, as amended, at June 30, 2025.

Non-current deferred benefits of $5.6 million includes $1.6 million related to a non-qualified deferred salary plan, a salary deferral program of $1.6 million and a bonus deferral plan of $2.4 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. Declines in system-wide revenue in certain brands over the past few years have 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, 2025, 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

Under the 2024 Credit Agreement, as amended, the margin applicable to any letter of credit is 5.25% and is paid currently in cash. See Note 8 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.

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, 2025. 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.

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Dividends

The Company has not declared a quarterly dividend payment since December 2013.

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, 2025, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program. All repurchased shares become authorized but unissued shares of the Company. The timing and amounts of any repurchases depend on many factors, including the market price of the common stock and overall market conditions. During fiscal year 2025, the Company did not repurchase shares. As of June 30, 2025, 1.5 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.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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, 2025, and 2024, the franchise reporting unit had $173.2 million and $173.1 million of goodwill, respectively, and the company-owned segment had $10.3 million goodwill relating to the Alline Acquisition as of June 30, 2025. 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 as of April 30, 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 each 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, allocated corporate overhead, franchise and company-owned salon counts, and long-term growth rates for determining terminal value. 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.

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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 2025, 2024, and 2023 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, adjusted for expected changes in future market conditions and other factors. The period of time used to determine the estimates of the future cash flows for the recoverability test was based on the remaining useful life of the primary asset of the group, which was the ROU asset in all cases.

The second step of the long-lived asset impairment test requires that the fair value of the asset group be estimated when determining the amount of any impairment loss. For the salon asset groups that failed the recoverability test, an impairment loss was measured as the amount by which the carrying amount of the asset group exceeds its fair value. The Company applied the fair value guidance within ASC 820-10 to determine the fair value of the asset group from the perspective of a market-participant considering, among other things, appropriate discount rates, multiple valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group. To determine the fair value of the salon asset groups, the Company utilized market-participant assumptions rather than the Company's own assumptions about how it intends to use the asset group. The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include the market rent of comparable properties and a discount rate. The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available. The fair value of the right of use asset is estimated by determining what a market participant would pay over the life of the primary asset in the group, discounted back to June 30, 2025.

During fiscal years 2025, 2024, and 2023, the Company recognized long-lived asset impairment charges of $0.4 million, $0.8 million, and $0.1 million, respectively, related to ROU assets on the Consolidated Statements 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 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 assets, including its ROU assets. If actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

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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 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 $60.5 million and $181.8 million at June 30, 2025, and 2024, respectively.

Significant changes to the valuation allowance that occurred during fiscal year 2025 are as follows:

•We have determined that it is more likely than not that the majority of our U.S. federal and state deferred tax assets will be realizable as of June 30, 2025. In determining the need, or continued need, for a valuation allowance, we considered the weighting of the positive and negative evidence, which includes, among other things, recent historical income and losses, future growth, forecasted earnings and expected future taxable income. As of June 30, 2025, we achieved three years of cumulative U.S. income when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded that it is more likely than not that the majority of our U.S. federal and state deferred tax assets will be realizable. As such, we released $110.2 million of our valuation allowance associated with the U.S. federal and state deferred tax assets. A valuation allowance will remain on certain U.S. tax credit carryforwards and state deferred tax assets in which we have concluded that it is more likely than not that they will expire unused.

•We have determined that it is more likely than not that a portion of our Canadian deferred tax assets will be realizable as of June 30, 2025, and released $6.1 million of our Canadian valuation allowance.

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.

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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 credit agreement, 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's interest payments are based on the SOFR, such that a hypothetical 100 basis point increase or decrease in the SOFR will have an impact on our annual cash flows of approximately $1.2 million annually.As of June 30, 2025, the Company had outstanding variable rate debt of $125.3 million, and the Company did not have any outstanding interest rate swaps. SOFR variability does not impact our letters of credit, which are charged at a fixed rate of 5.25%.

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, 2025, the Company did not have any derivative instruments to manage its foreign currency risk.

During fiscal years 2025, 2024, and 2023, the Company recorded foreign currency losses of $0.1 million, $0.5 million, and $0.3 million in income (loss) from continuing operations, respectively, in the Consolidated Financial Statements.

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID: 248) 46

Notes to Consolidated Financial Statements 53

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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, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

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.

Realizability of deferred tax assets

As described further in Note 1 and 10 to the consolidated financial statements, the Company recognized a change in the deferred tax asset valuation allowance of $116.3 million during the year ended June 30, 2025 primarily related to a partial release of its valuation allowance. Deferred tax assets are reduced by a valuation allowance, if based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. During the year ended June 30, 2025, the Company released $116.3 million of its previously recorded valuation allowance. The Company considered the achievement three years of cumulative income as well as forecasted income to be significant positive evidence. The Company determined that the positive evidence outweighed the negative evidence and supported a partial release of the valuation allowance. We identified the release of a portion of the Company’s valuation allowance as a critical audit matter.

The principal consideration for our determination that the partial release of its valuation allowance is a critical audit matter is that auditing management’s assessment of the realizability of the Company’s deferred tax assets involved complex judgments due to the significant assumptions required in measuring the future utilization of deferred tax assets.

Our audit procedures related to the partial release of the valuation allowance included the following, among others.

•We analyzed the significant assumptions used by management, including forecasted revenue and forecasted income to (1) historical results, and (2) current industry trends and evaluated whether economic trends and other factors support the significant assumptions.

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•We evaluated management’s historical ability to forecast income.

•We evaluated whether the estimates of forecasted income were consistent with evidence obtained in other areas of the audit.

•With the assistance of professionals with specialized skills and knowledge, we evaluated (1) the application of tax laws in the Company’s scheduling of the release of existing taxable temporary differences and carryforward amounts, and (2) the ability to utilize the deferred tax assets.

Goodwill Quantitative Impairment Assessment – Franchise Reporting Unit

As described further in Note 1 to the consolidated financial statements, the Company’s goodwill balance attributable to their Franchise reporting unit was $173.2 million as of June 30, 2025. Management performed the Company’s annual quantitative impairment assessment for the Franchise reporting unit as of April 30, 2025, to test goodwill for impairment. As a result of the assessment performed, the Company determined that the fair value of the Franchise reporting unit was more likely than not greater than the carrying value of the reporting unit as of April 30, 2025. We identified the goodwill quantitative impairment assessment of the Franchise reporting unit as a critical audit matter.

The principal considerations for our determination that the goodwill quantitative impairment assessment of the Franchise reporting unit is a critical audit matter are that subjective auditor judgment was required to evaluate: (1) the assumptions used by management engaged professionals with specialized skills and knowledge, including the accuracy of data provided to management’s specialist to determine the fair value; and (2) the assumptions used by management to calculate the undiscounted cash flows, including assumptions of franchisee store openings and closures.

Our audit procedures related to the annual goodwill quantitative impairment assessment of the Franchise reporting unit included the following, among others.

•We evaluated management’s historical ability to forecast income.

•We evaluated whether the estimates of forecasted income were consistent with evidence obtained in other areas of the audit.

•With the assistance of professionals with specialized skill and knowledge, we tested management’s process for calculating the goodwill impairment assessment, including the reasonableness of the valuation methodology and certain significant assumptions used in the calculations including the discount rate applied to the estimated future cash flows.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2020.

Minneapolis, Minnesota

September 3, 2025

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REGIS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

ASSETS

Current assets:

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Long-term debt, current portion (Note 8) 1,100 —

Commitments and contingencies (Note 9)

Shareholders' equity:

Accumulated other comprehensive income 8,286 8,584

Total liabilities and shareholders' equity $ 598,957 $ 530,496

______________________________________________________________________________

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

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REGIS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Fiscal Years

Revenues:

Product sales to franchisees — 451 2,802

Operating expenses:

Cost of product sales to franchisees — 436 3,540

Inventory reserve — — 1,228

Other (expense) income:

Gain on extinguishment of long-term debt, net — 94,611 —

Income (loss) from operations before income taxes 1,536 89,936 (11,998)

Net income (loss) per share:

Basic:

Income (loss) from continuing operations $ 49.51 $ 38.08 $ (4.88)

Income from discontinued operations 2.75 0.85 1.70

Net income (loss) per share, basic (1) $ 52.26 $ 38.93 $ (3.18)

Diluted:

Income (loss) from continuing operations $ 43.67 $ 37.50 $ (4.88)

Income from discontinued operations 2.43 0.84 1.70

Net income (loss) per share, diluted (1) $ 46.10 $ 38.34 $ (3.18)

Weighted average common and common equivalent shares outstanding:

_____________________________________________________________________________

(1)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.

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REGIS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

Fiscal Years

Other comprehensive loss, net of tax:

Net current period foreign currency translation adjustments (177) (321) (448)

Recognition of deferred compensation (121) (118) 16

_______________________________________________________________________________

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

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REGIS CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

(Dollars in thousands, except share data)

Shares Amount

Foreign currency translation (Note 1) — — — (448) — (448)

Stock-based compensation — — 2,077 — — 2,077

Recognition of deferred compensation (Note 11) — — — 16 — 16

Net restricted stock activity 2,799 — (37) — — (37)

Foreign currency translation (Note 1) — — — (321) — (321)

Stock-based compensation — — 1,622 — — 1,622

Recognition of deferred compensation (Note 11) — — — (118) — (118)

Net restricted stock activity 2,120 — (18) — — (18)

Stock warrants issued in connection with debt (2) — — 1,292 — — 1,292

Foreign currency translation (Note 1) — — — (177) — (177)

Stock-based compensation — — 1,413 — — 1,413

Net restricted stock activity 15,481 1 (75) — — (74)

Recognition of deferred compensation (Note 11) — — — (121) — (121)

Stock warrants issued in connection with debt (2) — — 1,252 — — 1,252

_______________________________________________________________________________

(1) This activity represents the common stock issued in connection with the Alline Acquisition on December 19, 2024. See Note 16 for additional details.

(2) This activity represents the stock warrants issued in connection with the new credit facility agreement and amendment. Stock warrant value shown net of allocated financing costs. See Note 8 and Note 14 for additional details.

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

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REGIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Fiscal Years

Cash flows from operating activities:

Inventory reserve — — 1,228

Gain on extinguishment of long-term debt, net — (94,611) —

Amortization of debt discount and financing costs 3,418 2,987 2,891

Other non-cash items affecting earnings (202) 432 155

Changes in operating assets and liabilities (1):

Net cash provided by (used in) operating activities: 13,744 (2,040) (7,889)

Cash flows from investing activities:

Net cash (used in) provided by investing activities: (11,453) 1,624 4,019

Cash flows from financing activities:

Proceeds from issuance of long-term debt 15,000 105,000 —

Repayments of revolving credit facility (13,534) — —

Taxes paid for shares withheld (75) (16) (36)

Net cash provided by (used in) financing activities: 3,589 8,363 (2,145)

Effect of exchange rate changes on cash and cash equivalents 13 (31) (53)

Cash, cash equivalents and restricted cash:

_______________________________________________________________________________

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Description:

Regis Corporation franchises and owns hair care salons, primarily in North America. The business is evaluated in two segments, franchise salons and company-owned salons. Franchise salons in operation decreased from 4,391 at June 30, 2024, to 3,647 at June 30, 2025. Company-owned salons in operation increased from 17 at June 30, 2024, to 294 at June 30, 2025, primarily due to the Company's strategic acquisition of Alline Salon Group as described below. See Note 15 and Note 16 to the Consolidated Financial Statements for information regarding our Segments and Acquisitions, respectively. Salons are located in leased space in strip center locations, malls, or Walmart stores.

Alline Salon Group Acquisition:

On December 19, 2024, the Company completed the 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 16 to the Consolidated Financial Statements for additional information regarding the acquisition. The Company’s financial results for the fiscal year ended June 30, 2025, include the results of Alline subsequent to the December 19, 2024, acquisition date.

Acquisition-Related Costs:

Acquisition-related costs of $1.4 million were incurred during the fiscal year ended June 30, 2025, 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 in the Consolidated Statements of Operations for the year ended June 30, 2025.

COVID-19 Impact:

The global coronavirus pandemic (COVID-19) had an adverse impact on operations. As a result, the Company received funds in prior years, including a grant from the state of North Carolina of $1.1 million in fiscal year 2023, which was recorded within Other, net on the Consolidated Statements of Operations. No funds were received in fiscal years 2025, or 2024.

Consolidation:

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries after the elimination of intercompany accounts and transactions. All material subsidiaries are wholly owned. The Company consolidates variable interest entities where it has determined it is the primary beneficiary of those entities' operations.

Variable Interest Entities:

The Company has interests in certain privately held entities through arrangements that do not involve voting interests. Such entities, known as variable interest entities (VIE), are required to be consolidated by its primary beneficiary. The Company evaluates whether it is the primary beneficiary for each VIE using a qualitative assessment that considers the VIE's purpose and design, the involvement of each of the interest holders and the risk and benefits of the VIE. As of June 30, 2025, the Company has no VIE's where the Company is the primary beneficiary.

The Company previously held an investment in Empire Education Group, Inc. (EEG). On May 2, 2024, the Company sold its interest in EEG to the other shareholder. The sale did not have a significant impact on the Company's operations or financial position. When the Company held a majority ownership interest in EEG it was a co-signatory to the Title IV program participation agreements of the EEG schools with the Department of Education. As a co-signatory to the Title IV program participation agreements, the Department of Education could hold the Company responsible for EEG's Title IV program liabilities. In connection with the sale, Regis is no longer a co-signatory to the Title IV program participation agreements of the EEG schools with the Department of Education.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Use of Estimates:

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes may differ from management's estimates and assumptions.

Cash, Cash Equivalents and Restricted Cash:

Cash equivalents consist of investments in short-term, highly liquid securities having original maturities of three months or less, which are made as a part of the Company's cash management activity. The carrying values of these assets approximate their fair market values. The Company primarily utilizes a cash management system with a series of separate accounts consisting of lockbox accounts for receiving cash, concentration accounts that funds are moved to, and several "zero balance" disbursement accounts for funding of payroll and accounts payable. As a result of the Company's cash management system, checks issued, but not presented to the banks for payment, may create negative book cash balances. There were no checks outstanding in excess of related book cash balances at June 30, 2025, and 2024.

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. The self-insurance restricted cash arrangement can be canceled by the Company at any time if substituted with letters of credit.The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded within other current assets on the Consolidated Balance Sheets to the amount of cash, cash equivalents and restricted cash reported on the Consolidated Statements of Cash Flows:

(Dollars in thousands)

Restricted cash, included in other current assets 18,246 19,246

Total cash, cash equivalents and restricted cash $ 35,205 $ 29,312

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Receivables and Allowance for Credit Losses:

The receivable balance on the Company's Consolidated Balance Sheets primarily includes accounts and notes receivable from franchisees and credit card receivables. The balance is presented net of an allowance for credit losses (i.e., doubtful accounts), related to receivables from the Company's franchisees. 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 receivables. As of June 30, 2025, and 2024, the allowance for credit losses was $5.0 million and $6.2 million, respectively. See Note 2 to the Consolidated Financial Statements.

Inventories:

Inventories of finished goods consist principally of hair care products for retail product sales. A portion of inventories are also used for salon services consisting of hair color, hair care products including shampoo and conditioner and hair care treatments including permanents, neutralizers, and relaxers. Inventories are stated at the lower of cost or net realizable value, with cost determined on a weighted average cost basis.

The Company has inventory valuation reserves for excess and obsolete inventories, or other factors that may render inventories unmarketable at their historical costs. In fiscal year 2021, the Company announced it would transition away from its wholesale product distribution model in favor of a third-party distribution model. As a result, the Company exited its two distribution centers in fiscal year 2022 and previously stored inventory at a third-party facility through the second quarter of fiscal year 2024. To facilitate the exit of the distribution centers, the Company sold inventory at discounts. The inventory valuation reserve as of June 30, 2025, and 2024 was $0.0 million and $0.3 million, respectively. During fiscal year 2023, the Company recorded a total inventory reserve charge of $1.2 million, which was recorded in inventory reserve in the Consolidated Statements of Operations.

Property and Equipment:

Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over their estimated useful asset lives (i.e., 10 years or lease life for improvements and three to 10 years or lease life for equipment, furniture, and software). Depreciation expense was $2.6 million, $3.7 million, and $7.4 million in fiscal years 2025, 2024, and 2023, respectively. Depreciation expense for fiscal years 2025, 2024, and 2023 includes $0.1 million, $0.5 million, and $1.0 million of asset retirement obligations, respectively, which are cash expenses.

The Company capitalizes both internal and external costs of developing or obtaining computer software for internal use. Costs incurred to develop internal-use software during the application development stage are capitalized, while data conversion, training and maintenance costs associated with internal-use software are expensed as incurred. Estimated useful lives range from three to seven years.

Expenditures for maintenance and repairs and minor renewals and betterments, which do not improve or extend the life of the respective assets, are expensed. All other expenditures for renewals and betterments are capitalized. The assets and related depreciation and amortization accounts are adjusted for property retirements and disposals with the resulting gain or loss included in operating income (loss). Fully depreciated or amortized assets remain in the accounts until retired from service.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Right of Use Asset, Lease Liabilities and Rent Expense:

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 corporate facilities under operating leases. The original terms of the salon leases range from one 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.

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 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 Consolidated Statements of Operations.

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, including one lease term option when the lease is expected to be renewed. The right of use (ROU) asset is initially and subsequently measured throughout the 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.

Certain leases provide for contingent rents that are determined as a percentage of revenues in excess of specified levels. The Company records a contingent rent liability in accrued expenses on the Consolidated Balance Sheets, along with the corresponding rent expense in the Consolidated Statements of Operations, when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

A lessee's ROU asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, applied to other elements of property, plant, and equipment. The Company has identified its asset groups at the individual salon level as this represents the lowest level that identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Poor salon performance in fiscal years 2025, 2024, and 2023 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 Company assesses impairment of long-lived salon assets and ROU assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in our use of the assets.

The second step of the long-lived asset impairment test requires that the fair value of the asset group be estimated when determining the amount of any impairment loss. For the salon asset groups that failed the recoverability test, an impairment loss was measured as the amount by which the carrying amount of the asset group exceeds its fair value. The Company applied the fair value guidance within ASC 820-10 to determine the fair value of the asset group from the perspective of a market-participant considering, among other things, appropriate discount rates, multiple valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group. To determine the fair value of the salon asset groups, the Company utilized market-participant assumptions rather than the Company's own assumptions about how it intends to use the asset group. The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include the market rent of comparable properties and a discount rate. The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available. The fair value of the ROU asset is estimated by determining what a market participant would pay over the life of the primary asset in the group, discounted back to June 30, 2025.

During fiscal years 2025, 2024, and 2023, the Company recognized long-lived asset impairment charges of $0.4 million, $0.8 million, and $0.1 million, respectively, related to ROU assets on the Consolidated Statements of Operations. 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 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 assets, including its ROU assets. If actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material. See Note 6 to the Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill:

As further described in Note 16, the acquisition of Alline resulted in the recognition of approximately $10.3 million in goodwill, which was assigned to the company-owned operating segment.

As of June 30, 2025, and 2024, the franchise reporting unit had goodwill of $173.2 million and $173.1 million, respectively, and the company-owned reporting unit had $10.3 million and $0.0 million goodwill as of June 30, 2025, and 2024, respectively. See Note 5 to the Consolidated Financial Statements for changes to the goodwill balance. The Company assesses goodwill impairment on an annual basis as of April 30, 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.

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 was less than its carrying value (Step 0). Qualitative factors could 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 determined 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 following is a description of the goodwill impairment assessments for each of the fiscal years:

Fiscal 2025

The Company engaged a third-party valuation specialist to perform its annual impairment assessment as of April 30. For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and market approach to evaluate the reporting units. The discounted cash flows model reflects management's assumptions regarding revenue growth rates, economic and market trends, cost structure, and other expectations about the anticipated short-term and long-term operating results. The Company compared the carrying value of the reporting units, including goodwill, to their estimated fair values. The results of this assessment indicated that the estimated fair values of the Company's franchise and company-owned reporting units exceeded the carrying values, resulting in no goodwill impairment charge.

The company-owned reporting unit had substantial headroom and the franchise reporting unit had headroom of approximately 5%. The fair value of the franchise reporting unit was determined based on a discounted cash flow analysis and comparable market multiples. The assumptions used in determining fair value were the number of salons in operation, projected salon generated royalties, projected salon closures, projected salon development, weighted average cost of capital, general and administrative expenses and utilization of net operating loss benefits. We selected the assumptions by considering our historical financial performance and trends, historical same store sales, and estimated same store sales. The preparation of our fair value estimate includes uncertain factors and requires significant judgments and estimates which are subject to change. A 100 basis point increase in our weighted average cost of capital within the franchise reporting unit would result in a reduction in headroom to approximately 3%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other uncertain factors or events exist which may result in a future triggering event and require us to perform an interim impairment analysis with respect to the carrying value of goodwill for the franchise reporting unit prior to our annual assessment. These internal and external factors include but are not limited to the following:

•Changes in the company-owned and franchise salon strategy,

•Future market earnings multiples deterioration,

•Our financial performance falls short of our projections due to internal operating factors,

•Economic recession,

•Reduced salon traffic,

•Deterioration of industry trends,

•Increased competition,

•Inability to reduce general and administrative expenses, or

•Other factors causing our cash flow to deteriorate.

If the triggering event analysis indicates the fair value of the franchise reporting unit has potentially fallen below the 5% headroom, we may be required to perform an updated impairment assessment which may result in a non-cash impairment charge to reduce the carrying value of goodwill.

As of June 30, 2025, the Company's estimated fair value, as determined by the sum of our reporting units' fair values, fell within a reasonable range of our market capitalization, which included an assumed control premium of 23.7%.

Assessing goodwill for impairment requires management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates, 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 of goodwill. However, if actual results are not consistent with the estimates and assumptions used in the calculations, or if there are significant changes to the Company's planned strategy for franchise salons, the Company may be exposed to future impairment losses that could be material.

Fiscal 2024

The Company determined a triggering event occurred related to a decrease in the Company's stock price, resulting in a quantitative impairment test performed over goodwill. Accordingly, the Company engaged a third-party valuation specialist to perform an impairment analysis on the franchise reporting unit of the business as of November 30, 2023. For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and a market approach to evaluate the franchise reporting unit. The discounted cash flows model reflects management's assumptions regarding discount rates, revenue growth rates, economic and market trends, cost structure, and other expectations about the anticipated short-term and long-term operating results. These assumptions are inherently uncertain. An increase in the discount rate or a decrease in revenue growth rate or market trends would have a negative impact on the fair value of the reporting unit which could be material. As a result of the impairment testing, the franchise reporting unit was determined to have a fair value in excess of its carrying value, resulting in no goodwill impairment charge.

The Company performed its annual impairment assessment as of April 30. For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and market approach to evaluate the franchise reporting unit. The discounted cash flows model reflects management's assumptions regarding revenue growth rates, economic and market trends, cost structure, and other expectations about the anticipated short-term and long-term operating results. The results of this assessment indicated that the estimated fair value of the Company's franchise reporting unit exceeded the carrying value.

Fiscal 2023

During fiscal year 2023, the Company did not experience any triggering events that required an interim goodwill analysis. The Company performed its annual impairment assessment as of April 30. For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and market approach to evaluate the franchise reporting unit. The discounted cash flows model reflects management's assumptions regarding revenue growth rates, economic and market trends, cost structure, and other expectations about the anticipated short-term and long-term operating results. The discount rate of 17.0% was also a key assumption utilized in the discounted cash flows. The results of this assessment indicated that the estimated fair value of the Company's franchise reporting unit exceeded the carrying value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reverse Stock Split:

On November 29, 2023, the Company effected a one-for-20 reverse stock split of its outstanding common stock, par value $0.05 per share. As a result of the reverse stock split, every 20 shares of common stock issued and outstanding was converted into one share of common stock. The reverse stock split affected all shareholders uniformly and did not alter any shareholder’s percentage interest in the Company’s equity. No fractional shares were issued in connection with the reverse stock split. Shareholders who would otherwise be entitled to a fractional share of common stock were instead entitled to receive a proportional cash payment. All common share and per share amounts presented in the consolidated financial statements and accompanying notes have been retroactively adjusted to reflect the reverse stock split.

The reverse stock split affected all issued and outstanding shares of the Company’s common stock, as well as the number of shares of common stock available for issuance under the Company’s outstanding stock options and stock unit awards. The reverse stock split reduced the number of shares of common stock issuable upon the exercise of stock options outstanding and the vesting of stock unit awards outstanding immediately prior to the reverse stock split and correspondingly increased the respective exercise prices or other price dependent terms.

Tax Benefits Preservation Plan:

On January 28, 2024, the Board authorized and declared a dividend of one 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.

Self-Insurance Accruals:

The Company uses a combination of third-party insurance and self-insurance for a number of risks including workers' compensation, health insurance, employment practice liability, and general liability claims. The liability represents the Company's estimate of the undiscounted ultimate cost of uninsured claims incurred as of the Consolidated Balance Sheets date.

The Company estimates self-insurance liabilities using a number of factors, primarily based on independent third-party actuarially determined amounts, historical claims experience, estimates of incurred but not reported claims, demographic factors, and severity factors.

Although the Company does not expect the amounts ultimately paid to differ significantly from the estimates, self-insurance accruals could be affected if future claims experience differs significantly from historical trends and actuarial assumptions. For fiscal years 2025, 2024, and 2023, the Company recorded decreases in expense for changes in estimates related to prior year open policy periods of $0.8 million, $0.9 million, and $1.4 million, respectively. The Company updates loss projections bi-annually and adjusts its liability to reflect updated projections. The updated loss projections consider new claims and developments associated with existing claims for each open policy period. As certain claims can take years to settle, the Company has multiple policy periods open at any point in time.

As of June 30, 2025, the Company had $1.2 million and $3.5 million recorded in current liabilities and non-current liabilities, respectively, related to the Company's workers' compensation and general liability self-insurance accruals. As of June 30, 2024, the Company had $1.7 million and $4.7 million recorded in current liabilities and non-current liabilities, respectively, related to the Company's workers' compensation and general liability self-insurance accruals.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition and Deferred Revenue:

Franchise revenues primarily include royalties, fees, product sales to franchisees, and advertising fund fees. Royalties and advertising fund revenues represent sales-based royalties that are recognized as revenue in the period in which the sales occur. The Company defers franchise fees until the salon is open and then recognizes the revenue over the term of the franchise agreement. See Note 2 to the Consolidated Financial Statements. Product sales by the Company to its franchisees are recorded at the time product is delivered to franchise locations. Company-owned salon revenues are recognized at the time when the services are provided, or the guest receives and pays for merchandise.

Classification of Revenue and Expenses:

Below is a summary of the primary financial statement captions.

Royalties - Sales-based royalty received from franchisees.

Fees - Fees received from franchisees and third parties, including franchise fees and fees received from the third-party distributor.

Product sales to franchisees - Wholesale product sales to franchisees. The Company changed its franchise product sales business in fiscal year 2022 from a wholesale distribution model to a third-party distribution model.

Advertising fund contributions - Sales-based advertising fund contributions received from franchisees.

Franchise rental income - Rental income earned as a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees.

Company-owned salon revenue - Service revenue and revenue derived from sales of product in company-owned salons.

Cost of product sales to franchisees - Direct cost of inventory and freight and other costs of sales.

Franchise rental expense - Expense incurred as a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees.

Company-owned salon expense - Cost of service and product sold to guests in our company-owned salons and other salon-related costs. Excluded from this caption are general and administrative expense, rent and depreciation and amortization related to company-owned salons.

Consideration Received from Vendors:

The Company receives consideration for a variety of vendor-sponsored programs. These programs primarily include volume rebates and promotion and advertising reimbursements.

With respect to volume rebates, the Company estimates the amount of rebate it will receive and accrues it as a reduction to the cost of inventory over the period in which the rebate is earned based upon historical purchasing patterns and the terms of the volume rebate program. A quarterly analysis is performed in order to ensure the estimated rebate accrued is reasonable and any necessary adjustments are recorded.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Advertising and Advertising Funds:

Advertising costs consist of the Company's corporate funded advertising costs, the Company's advertising fund contributions, and franchisee's advertising fund contributions. Corporate funded advertising costs are expensed as incurred. The Company has various franchising programs supporting specific franchise salon concepts. Most maintain advertising funds that provide comprehensive advertising and sales promotion support. All salons are required to participate in the advertising funds for the same salon concept. The Company administers the advertising funds in accordance with franchise operating and other agreements. Advertising fund contributions are expensed when the contribution is made.

The Company's advertising costs included in the Consolidated Statements of Operations consist of the following:

Fiscal Years

(Dollars in thousands)

Advertising fund contributions from company-owned salons (1) 545 70 105

Corporate funded advertising costs (1) (2) 209 (28) 264

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(1)Included in general and administrative in the Consolidated Statements of Operations.

(2)Corporate funded advertising costs for fiscal year 2024 relates to a credit received.

The Company records all advertising funds as assets and liabilities within the Company's Consolidated Balance Sheets. As of June 30, 2025, approximately $17.4 million, and as of June 30, 2024, approximately $8.8 million, representing the advertising funds' assets and liabilities, were recorded within total assets and total liabilities in the Company's Consolidated Balance Sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Employee Compensation Plans:

The Company recognizes stock-based compensation expense based on the fair value of the awards at the grant date. Compensation expense is recognized on a straight-line basis over the requisite service period of the award (or to the date a participant becomes eligible for retirement, if earlier). The Company uses fair value methods that require the input of subjective assumptions, including the expected term, expected volatility, dividend yield, and risk-free interest rate.

The Company estimates the likelihood and the rate of achievement for performance sensitive stock-based awards at the end of each reporting period. Changes in the estimated rate of achievement can have a significant effect on the recorded stock-based compensation expense as the effect of a change in the estimated achievement level is recognized in the period the change occurs.

Interest Expense:

During fiscal years 2023 and 2024, the Company’s credit agreement had variable interest rates over the term of the debt. Accordingly, interest expense was recorded using a weighted average effective interest rate by estimating total future cash flows related to the debt to determine interest expense. The estimated cash flows included the margin rate, PIK interest, SOFR interest, and tenor fee applied to the forecasted outstanding debt balance in each future period. The significant assumptions used in the estimate were future SOFR rates and expected debt balance, as well as the length of time the debt would be outstanding. Management applied the weighted average rate to the debt balance to record interest expense for the period. Due to the interest rate increases over the debt term, the Company recorded more interest expense than interest paid in cash in fiscal years 2023 and 2024.

On June 24, 2024, Regis entered into a new credit agreement with a variable interest rate based on SOFR plus margin which was amended on December 19, 2024. The margin applicable to the new 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, 4.5% of the margin is paid-in-kind (PIK) interest (added to the principal balance and thereafter accruing interest), and the remainder is paid currently in cash. The interest rate applicable to any letter of credit is 5.25% and paid currently in cash. The SOFR base rate applicable to the debt has a floor of 2.50% per annum.See additional discussion in Note 8 to the Consolidated Financial Statements.

Gain on Extinguishment of Long-Term Debt, Net

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Sales Taxes:

Sales taxes are recorded on a net basis (rather than as both revenue and an expense) within the Company's Consolidated Statements of Operations.

Income Taxes:

We recognize deferred tax assets to the extent 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 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 of $60.5 million and $181.8 million at June 30, 2025, and 2024, respectively.

Significant changes to the valuation allowance which occurred during fiscal year 2025 are as follows:

•We have determined that it is more likely than not that the majority of our U.S. federal and state deferred tax assets will be realizable as of June 30, 2025. In determining the need, or continued need, for a valuation allowance, we considered the weighting of the positive and negative evidence, which includes, among other things, recent historical income and losses, future growth, forecasted earnings and future taxable income. As of June 30, 2025, we achieved three years of cumulative U.S. income when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded that it is more likely than not that the majority of our U.S. federal and state deferred tax assets will be realizable. As such, we released $110.2 million of our valuation allowance associated with the U.S. federal and state deferred tax assets. A valuation allowance will remain on certain US tax credit carryforwards and state deferred tax assets in which we have concluded that it is more likely than not that they will expire unused.

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.

See Note 10 to the Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Net Income (Loss) 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 awards. The Company's dilutive earnings per share is calculated as net income divided by weighted average common shares and common share equivalents outstanding, which includes shares issuable under the Company's stock option plan and long-term incentive plan and dilutive securities, including warrants issued in connection with the Company's credit agreement. Stock-based awards with exercise prices greater than the average market value of the Company's common stock are excluded from the computation of diluted earnings per share.

Comprehensive Income (Loss):

Components of comprehensive income (loss) include net income (loss), foreign currency translation adjustments and recognition of deferred compensation, net of tax within shareholders' equity (deficit).

Foreign Currency Translation:

The Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows of the Company's international operations are measured using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rates in effect at each Consolidated Balance Sheet date. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income within shareholders' equity (deficit). Consolidated Statements of Operations accounts are translated at the average rates of exchange prevailing during the year. During fiscal years 2025, 2024, and 2023, the Company recorded foreign currency losses of $0.1 million, $0.5 million, and $0.3 million in income (loss) from continuing operations, respectively, in the Consolidated Financial Statements.

Accounting Standards Recently Adopted by the Company:

On June 30, 2025 the Company adopted Accounting Standards Update (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 adoption of ASU 2023-07 did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted:

In December 2023, the Financial Accounting Standards Board (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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 over 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. In the fourth quarter of fiscal year 2024, the Company revised its estimate related to the gift card breakage and recognized $1.3 million of non-cash gift card revenue. 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 revenue recognition guidance is as follows:

(Dollars in thousands)

Receivables from contracts with customers, net $ 7,378 $ 6,887 Receivable, net

Deferred revenue:

Current

Gift card liability $ 476 $ 366 Accrued expenses

Deferred franchise fees open salons 3,832 4,738 Accrued expenses

Total current deferred revenue $ 4,308 $ 5,104

Non-current

Deferred franchise fees open salons 9,394 14,972 Other non-current liabilities

Total non-current deferred revenue $ 10,869 $ 16,755

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Receivables relate primarily to payments due for royalties, advertising fees, rent, franchise product sales, and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected 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:

Fiscal Years

(Dollars in thousands)

Balance at beginning of period $ 6,227 $ 7,297

Provision for doubtful accounts (1) 3,040 538

Provision for franchisee rent (2) 790 1,538

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

(2)The provision for franchisee rent is recognized as rent in the 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 and recognized as general and administrative expense over the term of the franchise agreement in the Consolidated Statements of Operations. The following table is a rollforward of the broker fee balance for the periods indicated:

Fiscal Years

(Dollars in thousands)

Balance at beginning of period $ 9,369 $ 12,471

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for fiscal years 2025, 2024, and 2023 was $6.8 million, $6.5 million, and $6.7 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of June 30, 2025, is as follows (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. DISCONTINUED OPERATIONS

On June 30, 2022, the Company sold its 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. The Company received $13.0 million in proceeds in June 2022 and received an additional $5.0 million in proceeds in fiscal year 2023, offset by a $0.5 million transaction fee. In fiscal year 2024, the Company received $2.0 million of proceeds that had been previously held back for general indemnity provisions. In fiscal year 2025, the Company received additional proceeds of $8.5 million related to the number of salons migrating to Soham's Zenoti product. Cash (used in) provided by investing activities for the years ended June 30, 2025, 2024, and 2023, includes $8.5 million, $2.0 million, and $4.5 million respectively, of cash from discontinued operations.

The following summarizes the results of discontinued operations for the periods presented:

Fiscal Years

(Dollars in thousands)

Discontinued operations:

Fees $ — $ — $ (226)

General and administrative — — (27)

Income from discontinued operations, before taxes 8,396 1,993 3,958

Income tax expense from discontinued operations (1) (1,892) — —

Income from discontinued operations, net of tax $ 6,504 $ 1,993 $ 3,958

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(1) Income taxes have been allocated to continuing and discontinued operations based on the methodology required by accounting for income taxes guidance. The tax expense in fiscal year 2025 is due to a GAAP and tax difference in timing of the gain recognition and does not reflect a current or cash tax liability. There was no tax impact in fiscal years 2024, or 2023, due to a valuation allowance.

The following summarizes the gain from the sale of OSP for the periods presented:

Fiscal Years

(Dollars in thousands)

Software write-off (1) — — (64)

Hardware write-down (2) — — (367)

Other, net, including professional fees (67) (7) (7)

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(1)Write-off of internally developed capitalized software.

(2)Prior to the sale, hardware used to run OSP was sold to franchisees. As a result of the sale, the Company wrote down the value of the hardware to its net realizable value and the charge is included in the gain on the sale of OSP.

The Company exited its office space in Fremont, California, but was liable for lease payments through September 2024. The related liability is included in accrued expenses as of June 30, 2024, in the Consolidated Balance Sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. OTHER FINANCIAL STATEMENT DATA

The following provides additional information concerning selected balance sheet accounts:

(Dollars in thousands)

Other current assets:

Property and equipment:

RGS US Equity

RGS · 10-K · period ended 2025-06-30

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

RGS US Equity☆

RGS · 10-K · period ended 2025-06-30

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

RGS US Equity