REVENUE RECOGNITION:

6 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION:

REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized at point of sale

Company-owned salon revenues are recognized at the time when the services are provided. Product revenues for company-owned salons are recognized when 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 customer. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns. Product sales by the Company to franchisees are included within product revenues in the unaudited Condensed Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery.

Revenue recognized over time

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

The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:

	Three Months Ended December 31, 2019				Three Months Ended December 31, 2018
	Franchise		Company-owned		Franchise		Company-owned
	(Dollars in thousands)
Revenue recognized at a point in time:
Service	$	—	$	101,805	$	—	$	190,419
Product	16,864		27,119		17,818		43,831
Total revenue recognized at a point in time	$	16,864	$	128,924	$	17,818	$	234,250
Revenue recognized over time:
Royalty and other franchise fees	$	18,644	$	—	$	14,736	$	—
Advertising fund fees	10,703		—		7,867		—
Franchise rental income	33,630		—		—		—
Total revenue recognized over time	62,977		—		22,603		—
Total revenue	$	79,841	$	128,924	$	40,421	$	234,250

	Six Months Ended December 31, 2019				Six Months Ended December 31, 2018
	Franchise		Company-owned		Franchise		Company-owned
	(Dollars in thousands)
Revenue recognized at a point in time:
Service	$	—	$	243,746	$	—	$	398,267
Product	29,969		59,670		33,447		85,793
Total revenue recognized at a point in time	$	29,969	$	303,416	$	33,447	$	484,060
Revenue recognized over time:
Royalty and other franchise fees	$	36,235	$	—	$	29,156	$	—
Advertising fund fees	21,129		—		15,843		—
Franchise rental income	65,054		—		—		—
Total revenue recognized over time	122,418		—		44,999		—
Total revenue	$	152,387	$	303,416	$	78,446	$	484,060

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

	December 31, 2019		June 30, 2019		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	22,512	$	23,210	Accounts receivable, net
Broker fees	$	20,384	$	17,819	Other assets
Deferred revenue:
Current
Gift card liability	$	3,461	$	3,050	Accrued expenses
Deferred franchise fees unopened salons	217		193		Accrued expenses
Deferred franchise fees open salons	5,042		4,164		Accrued expenses
Total current deferred revenue	$	8,720	$	7,407
Non-current
Deferred franchise fees unopened salons	$	12,860	$	15,173	Other non-current liabilities
Deferred franchise fees open salons	31,555		24,194		Other non-current liabilities
Total non-current deferred revenue	$	44,415	$	39,367

Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, franchise product sales and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. As of December 31, 2019 and June 30, 2019, the balance in the allowance for doubtful accounts was $1.9 and $2.0 million, respectively. 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 agreement.

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

Balance as of June, 30, 2019	$	17,819
Additions	3,938
Amortization	(1,341		)
Write-offs	(32		)
Balance as of December, 31, 2019	$	20,384

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Gift card revenue for the three months ended December 31, 2019 and 2018 was $0.7 and $1.1 million, respectively, and for the six months ended December 31, 2019 and 2018 was $1.5 and $2.2 million, respectively. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended December 31, 2019 and 2018 was $1.3 and $0.8 million, respectively, and for the six months ended December 31, 2019 and 2018 was $2.4 and $1.7 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of December 31, 2019 is as follows (in thousands):

Remainder of 2020	$	2,364
2021	4,930
2022	4,810
2023	4,633
2024	4,398
Thereafter	15,462
Total	$	36,597