- Generated Q4 Cash Flow from Operations of $117 Million and
Operating Free Cash Flow of $90 Million
- Beauty Systems Group Announces Strategic Acquisition of
Assets from Goldwell of New York
- Executed $15 Million in Share Repurchases and Repaid the
Outstanding Balance of $16 Million on ABL Credit Facility
- Provides Fiscal 2024 Guidance
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”), the
leader in professional hair color, today announced financial
results for its fourth quarter and full year ended September 30,
2023. The Company will hold a conference call today at 7:30 a.m.
Central Time to discuss these results and its business.
Fiscal 2023 Fourth Quarter Summary
- Consolidated net sales of $921 million, a decrease of 4.3%
compared to the prior year;
- Consolidated comparable sales decline of 1.6%;
- Global e-commerce sales of $87 million, representing 9.4% of
net sales;
- GAAP gross margin increased 240 basis points to 50.6%, driven
primarily by the prior year’s non-cash inventory write-down of
$19.4 million related to the distribution center consolidation and
store optimization plan; Adjusted Gross Margin increased 50 basis
points to 50.6%;
- GAAP operating earnings of $77 million and GAAP operating
margin of 8.3%; Adjusted Operating Earnings of $79 million and
Adjusted Operating Margin of 8.6%;
- GAAP diluted net earnings per share of $0.39 and Adjusted
Diluted Net Earnings Per Share of $0.42; and
- Cash flow from operations of $117 million and Operating Free
Cash Flow of $90 million.
Fiscal 2023 Full Year Summary
- Consolidated net sales of $3.73 billion, a decrease of 2.3%
compared to the prior year, primarily driven by the Company’s store
optimization plan;
- Consolidated comparable sales increase of 1.4%;
- Global e-commerce sales were $348 million, representing 9.3% of
net sales;
- GAAP gross margin increased 60 basis points to 50.9% and
Adjusted Gross Margin decreased 10 basis points to 50.8%;
- GAAP operating earnings of $325 million and GAAP operating
margin of 8.7%, Adjusted Operating Earnings of $341 million and
Adjusted Operating Margin of 9.1%;
- GAAP diluted net earnings per share of $1.69 and Adjusted
Diluted Net Earnings Per Share of $1.83; and
- Cash flow from operations of $249 million and Operating Free
Cash Flow of $159 million.
“We are pleased to report full year financial results in line
with the expectations we laid out at the beginning of fiscal 2023,”
said Denise Paulonis, president and chief executive officer. “We
drove a comparable sales gain, maintained healthy gross margins and
generated strong cash flow from operations against a rapidly
shifting backdrop. We also advanced our consumer-centric strategies
during the year, launching new concepts and bringing new services
to the market, while delivering unparalleled product innovation to
both our Sally and BSG customers.”
“Our teams are executing well on our strategic initiatives
designed to reignite top line growth and improve profitability --
enhancing our customer centricity, growing our high margin own
brands and amplifying innovation, and increasing the efficiency of
our operations. Building on our strong foundation, we are focused
on the future and remain committed to creating value for our
shareholders.”
Beauty Systems Group Announces Strategic Acquisition of
Assets from Goldwell of New York
In September, Beauty Systems Group acquired certain assets from
Goldwell of New York, which included 5 stores, as well as
full-service sales and distribution rights for all sales channels
of Goldwell, Deva Curl and other key brands in the upstate New York
territory. In addition, the expanded distribution rights also apply
to 28 Cosmo Prof stores in the same territory. The transaction also
included full-service and e-commerce distribution rights for Amika
hair care. The acquisition is expected to result in an incremental
sales benefit of approximately 1% to the Company’s Beauty Systems
Group segment in fiscal 2024.
Fiscal 2023 Fourth Quarter Operating Results
Fourth quarter consolidated net sales were $921.4 million, a
decrease of 4.3% compared to the prior year. The Company was
operating 308 fewer stores at the end of the quarter compared to
the prior year. Foreign currency translation had a favorable impact
of 110 basis points on consolidated net sales for the quarter. At
constant currency, global e-commerce sales were $87 million or 9.4%
of consolidated net sales for the quarter.
Consolidated comparable sales declined 1.6%, driven primarily by
lower traffic and inflationary pressures that continued to impact
consumer behavior at Sally Beauty and the continuation of stylist
demand trends seen over the last several quarters at Beauty Systems
Group.
Consolidated gross profit for the fourth quarter was $466.6
million compared to $463.5 million in the prior year, an increase
of 0.7%. Consolidated GAAP gross margin was 50.6%, an increase of
240 basis points compared to 48.2% in the prior year, driven
primarily by the prior year’s non-cash inventory write-down of
$19.4 million, related to the Company’s previously announced
distribution center consolidation and store optimization plan.
Excluding the inventory write-down, Adjusted Gross Margin was
50.6%, an increase of 50 basis points compared to 50.1% in the
prior year, driven primarily by higher product margin, and lower
distribution and freight costs from supply chain efficiencies.
Selling, general and administrative (SG&A) expenses totaled
$390.5 million, a decrease of $7.3 million compared to the prior
year. Adjusted Selling, General and Administrative Expenses,
excluding the Company’s restructuring efforts and COVID-19 related
net expenses for the disposal of obsolete personal-protective
equipment, totaled $387.3 million, a decrease of $10.6 million
compared to the prior year. The decrease was driven primarily by
the savings from the Company’s previously announced distribution
center consolidation and store optimization plan and lower
advertising costs, partially offset by higher labor costs. As a
percentage of sales, Adjusted SG&A expenses were 42.0% compared
to 41.3% in the prior year.
GAAP operating earnings and operating margin in the fourth
quarter were $76.9 million and 8.3%, compared to $39.2 million and
4.1%, in the prior year. Adjusted Operating Earnings and Operating
Margin, excluding the Company’s restructuring efforts and COVID-19
related net expenses, were $79.3 million and 8.6%, compared to
$83.9 million and 8.7%, in the prior year.
GAAP net earnings in the fourth quarter were $42.6 million, or
$0.39 per diluted share, compared to GAAP net earnings of $21.3
million, or $0.20 per diluted share in the prior year. Adjusted Net
Earnings, excluding the Company’s restructuring efforts, COVID-19
related net expenses, and the loss on debt extinguishment related
to the Company’s repricing of its term loan, were $45.7 million, or
$0.42 per diluted share, compared to Adjusted Net Earnings of $54.4
million, or $0.50 per diluted share in the prior year. Adjusted
EBITDA in the fourth quarter was $109.3 million, a decrease of 2.7%
compared to the prior year, and Adjusted EBITDA Margin was 11.9%,
an increase of 20 basis points compared to the prior year.
Balance Sheet and Cash Flow
As of September 30, 2023, the Company had cash and cash
equivalents of $123 million and a zero-balance outstanding under
its asset-based revolving line of credit. At the end of the
quarter, inventory was $975.2 million, up 4.1% versus a year ago.
The Company ended the quarter with a net debt leverage ratio of
2.1x.
Fourth quarter cash flow from operations was $116.5 million.
Capital expenditures in the quarter totaled $26.9 million. During
the quarter, the Company utilized its strong cash flow to acquire
assets from Goldwell of New York for $9 million, repay the
remaining $16 million outstanding balance under its asset-revolving
line of credit, and to repurchase 1.5 million shares under its
share repurchase program at an aggregate cost of $15 million.
On September 13, 2023, the Company repriced its term loan B,
reducing the pricing from SOFR (secured overnight financing rate)
plus a spread of 250 basis points to SOFR plus a spread of 225
basis points. The 25 basis point reduction in the spread results in
approximately $1 million in annual interest expense savings.
Fiscal 2023 Fourth Quarter Segment Results
Sally Beauty Supply
- Segment net sales were $524.6 million in the quarter, a
decrease of 5.3% compared to the prior year. The segment operated
291 fewer stores at the end of the quarter compared to the prior
year and had a favorable impact of 200 basis points from foreign
currency translation on reported sales. At constant currency,
segment e-commerce sales were $32 million or 6.1% of segment net
sales for the quarter.
- Segment comparable sales decreased 1.2% in the fourth quarter.
The Sally Beauty businesses in the U.S. and Canada represented 76%
of segment net sales for the quarter and had a comparable sales
decrease of 2.0%, primarily reflecting lower traffic and
inflationary pressures that impacted consumer behavior.
- At the end of the quarter, net store count was 3,148.
- GAAP gross margin increased by 260 basis points to 59.2%
compared to the prior year. The increase was driven primarily by
the prior year’s non-cash inventory write-down related to the
Company’s previously announced distribution center consolidation
and store optimization plan. Excluding the inventory write-down,
Adjusted Gross Margin increased 90 basis points to 59.2% compared
to the prior year. The increase was driven primarily by higher
product margin due to higher owned brand penetration, and lower
distribution and freight costs from supply chain efficiencies,
partially offset by an unfavorable sales mix shift between Sally US
(higher margin) and Sally international (lower margin).
- GAAP operating earnings were $78.5 million compared to $80.5
million in the prior year, representing a decrease of 2.5%. GAAP
operating margin increased to 15.0% compared to 14.5% in the prior
year.
Beauty Systems Group
- Segment net sales were $396.8 million in the quarter, a
decrease of 2.9% compared to the prior year. The segment operated
17 fewer stores at the end of the quarter compared to the prior
year and had an unfavorable impact of 20 basis points on reported
sales from foreign currency translation. At constant currency,
segment e-commerce sales were $55 million or 13.9% of segment net
sales for the quarter.
- Segment comparable sales decreased 2.3% in the fourth quarter,
primarily reflecting the continuation of stylist demand trends seen
over the last several quarters.
- At the end of the quarter, net store count was 1,338.
- GAAP gross margin increased 260 basis points to 39.3% in the
quarter compared to the prior year, driven primarily by the prior
year’s non-cash inventory write-down related to the Company’s
previously announced distribution center consolidation and store
optimization plan. Excluding the inventory write-down, Adjusted
Gross Margin increased 40 basis points to 39.3% compared to the
prior year. The increase was driven primarily by higher product
margin and a favorable sales mix shift between stores (higher
margin) and full service (lower margin).
- GAAP operating earnings were $45.7 million in the quarter, an
increase of 39.3% compared to $32.8 million in the prior year. GAAP
operating margin in the quarter was 11.5% compared to 8.0% in the
prior year.
- At the end of the quarter, there were 670 distributor sales
consultants compared to 718 in the prior year.
Fiscal Year 2024 Guidance
The Company remains focused on driving top line growth through
its strategic initiatives, including product innovation, expanded
distribution at Beauty Systems Group, and new concepts and
services. Additionally, the Company’s Fuel for Growth initiative
positions the Company to capture gross margin and SG&A
benefits, while also investing for growth and returning value to
shareholders through its share repurchase program.
The Company is providing the following guidance for the full
fiscal year 2024:
- Net sales and comparable sales are expected to be approximately
flat compared to the prior year, reflecting growth from the
Company’s strategic initiatives, offset by anticipated pressure on
consumer spending;
- Gross Margin is expected to remain above 50%;
- Adjusted Operating Margin is expected to be at least 9.0%;
- Operating Cash Flow is expected to be at least $260 million;
and
- Capital expenditures are expected to be approximately $100
million. * The Company does not provide a reconciliation for
forward-looking non-GAAP financial measures where it is unable to
provide a meaningful or accurate calculation or estimation of
reconciling items and the information is not available without
unreasonable effort. This is due to the inherent difficulty of
forecasting the occurrence and the financial impact of various
items that have not yet occurred, are out of the Company’s control
or cannot be reasonably predicted. For the same reasons, the
Company is unable to address the probable significance of the
unavailable information. Forward-looking non-GAAP financial
measures provided without the most directly comparable GAAP
financial measures may vary materially from the corresponding GAAP
financial measures.
Conference Call and Where You Can Find Additional
Information
The Company will hold a conference call and audio webcast today
to discuss its financial results and its business at approximately
7:30 a.m. Central Time today, November 14, 2023. During the
conference call, the Company may discuss and answer one or more
questions concerning business and financial matters and trends
affecting the Company. The Company’s responses to these questions,
as well as other matters discussed during the conference call, may
contain or constitute material information that has not been
previously disclosed. Simultaneous to the conference call, an audio
webcast of the call will be available via a link on the Company’s
website, sallybeautyholdings.com/investor-relations. The conference
call can be accessed by dialing (844) 867-6169 (International:
(409) 207-6975) and referencing the access code 2762682#. The
teleconference will be held in a “listen-only” mode for all
participants other than the Company’s current sell-side and
buy-side investment professionals. A replay of the earnings
conference call will be available starting at 10:30 a.m. Central
Time, November 14, 2023, through November 28, 2023, by dialing
(866) 207-1041 (International: (402) 970-0847) and referencing
access code 5652142#. Also, a website replay will be available on
sallybeautyholdings.com/investor-relations.
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH), as the leader in
professional hair color, sells and distributes professional beauty
supplies globally through its Sally Beauty Supply and Beauty
Systems Group businesses. Sally Beauty Supply stores offer up to
7,000 products for hair color, hair care, nails, and skin care
through proprietary brands such as Ion®, Strawberry Leopard®,
Generic Value Products®, Beyond the Zone® and Silk Elements® as
well as professional lines such as Wella®, Clairol®, OPI®, Conair®
and L’Oreal®. Beauty Systems Group stores, branded as CosmoProf® or
Armstrong McCall® stores, along with its outside sales consultants,
sell up to 8,000 professionally branded products including Paul
Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®
and Olaplex®, intended for use in salons and for resale by salons
to retail consumers. For more information about Sally Beauty
Holdings, Inc., please visit
https://www.sallybeautyholdings.com/.
Cautionary Notice Regarding Forward-Looking
Statements
Statements in this news release and the schedules hereto which
are not purely historical facts or which depend upon future events
may be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995, can be identified by the use of
forward-looking terminology such as “believes,” “projects,”
“expects,” “can,” “may,” “estimates,” “should,” “plans,” “targets,”
“intends,” “could,” “will,” “would,” “anticipates,” “potential,”
“confident,” “optimistic,” or the negative thereof, or other
variations thereon, or comparable terminology, or by discussions of
strategy, objectives, estimates, guidance, expectations and future
plans. Forward-looking statements can also be identified by the
fact that these statements do not relate strictly to historical or
current matters.
Readers are cautioned not to place undue reliance on
forward-looking statements as such statements speak only as of the
date they were made. Any forward-looking statements involve risks
and uncertainties that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements, including, those described in our
filings with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended September 30, 2023.
Consequently, all forward-looking statements in this release are
qualified by the factors, risks and uncertainties contained
therein. We assume no obligation to publicly update or revise any
forward-looking statements.
Use of Non-GAAP Financial Measures
This news release and the schedules hereto include the following
financial measures that have not been calculated in accordance with
accounting principles generally accepted in the United States, or
GAAP, and are therefore referred to as non-GAAP financial measures:
(1) Adjusted Gross Margin; (2) Adjusted Selling, General and
Administrative Expenses; (3) Adjusted EBITDA and EBITDA Margin; (4)
Adjusted Operating Earnings and Operating Margin; (5) Adjusted Net
Earnings; (6) Adjusted Diluted Net Earnings Per Share; and (7)
Operating Free Cash Flow. We have provided definitions below for
these non-GAAP financial measures and have provided tables in the
schedules hereto to reconcile these non-GAAP financial measures to
the comparable GAAP financial measures.
Adjusted Gross Margin – We define the measure Adjusted Gross
Margin as GAAP gross margin excluding the write-down of inventory
related to the Company’s distribution center consolidation and
store optimization plan for the relevant time periods as indicated
in the accompanying non-GAAP reconciliations to the comparable GAAP
financial measures.
Adjusted Selling, General and Administrative Expenses – We
define the measure Adjusted Selling, General and Administrative
Expenses as GAAP selling, general and administrative expenses
excluding costs related to the Company’s restructuring plans and
COVID-19 net expenses for the relevant time periods as indicated in
the accompanying non-GAAP reconciliations to the comparable GAAP
financial measures.
Adjusted EBITDA and EBITDA Margin – We define the measure
Adjusted EBITDA as GAAP net earnings before depreciation and
amortization, interest expense, income taxes, share-based
compensation, costs related to the Company’s restructuring plans,
COVID-19 related net expenses and other adjustments for the
relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures. Adjusted
EBITDA Margin is Adjusted EBITDA as a percentage of net sales.
Adjusted Operating Earnings and Operating Margin – Adjusted
operating earnings are GAAP operating earnings that exclude costs
related to the Company’s restructuring plans and net expenses
related to COVID-19 for the relevant time periods as indicated in
the accompanying non-GAAP reconciliations to the comparable GAAP
financial measures. Adjusted Operating Margin is Adjusted Operating
Earnings as a percentage of net sales.
Adjusted Net Earnings – Adjusted net earnings is GAAP net
earnings that exclude tax-effected costs related to the Company’s
restructuring plans, tax-effected net expenses related to COVID-19,
and tax-effected expenses related to the loss on debt
extinguishment for the relevant time periods as indicated in the
accompanying non-GAAP reconciliations to the comparable GAAP
financial measures.
Adjusted Diluted Net Earnings Per Share – Adjusted diluted net
earnings per share is GAAP diluted earnings per share that exclude
tax-effected costs related to the Company’s restructuring plans,
tax-effected net expenses related to COVID-19, and tax-effected
expenses related to the loss on debt extinguishment for the
relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures.
Operating Free Cash Flow – We define the measure Operating Free
Cash Flow as GAAP net cash provided by operating activities less
payments for capital expenditures (net). We believe Operating Free
Cash Flow is an important liquidity measure that provides useful
information to investors about the amount of cash generated from
operations after taking into account payments for capital
expenditures (net).
We believe that these non-GAAP financial measures provide
valuable information regarding our earnings and business trends by
excluding specific items that we believe are not indicative of the
ongoing operating results of our businesses; providing a useful way
for investors to make a comparison of our performance over time and
against other companies in our industry.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance and cash flows. Our management and Board of Directors
also use these non-GAAP measures as supplemental measures to
evaluate our businesses and the performance of management,
including the determination of performance-based compensation, to
make operating and strategic decisions, and to allocate financial
resources. We believe that these non-GAAP measures also provide
meaningful information for investors and securities analysts to
evaluate our historical and prospective financial performance.
These non-GAAP measures should not be considered a substitute for
or superior to GAAP results. Furthermore, the non-GAAP measures
presented by us may not be comparable to similarly titled measures
of other companies.
Supplemental Schedules
Segment Information
1
Non-GAAP Financial Measures
Reconciliations
2-3
Non-GAAP Financial Measures
Reconciliations; Adjusted EBITDA and
Operating Free Cash Flow
4
Store Count and Comparable Sales
5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Earnings (In thousands, except per share
data) (Unaudited)
Three Months Ended September
30,
Twelve Months Ended September
30,
2023
2022
Percentage
Change
2023
2022
Percentage
Change
Net sales
$
921,356
$
962,460
(4.3
)%
$
3,728,131
$
3,815,565
(2.3
)%
Cost of products sold
454,794
498,964
(8.9
)%
1,829,951
1,896,400
(3.5
)%
Gross profit
466,562
463,496
0.7
%
1,898,180
1,919,165
(1.1
)%
Selling, general and administrative expenses
390,526
397,866
(1.8
)%
1,555,946
1,553,948
0.1
%
Restructuring
(872
)
26,434
(103.3
)%
17,205
27,577
(37.6
)%
Operating earnings
76,908
39,196
96.2
%
325,029
337,640
(3.7
)%
Interest expense
19,717
17,429
13.1
%
72,979
93,543
(22.0
)%
Earnings before provision for income taxes
57,191
21,767
162.7
%
252,050
244,097
3.3
%
Provision for income taxes
14,610
428
3313.6
%
67,450
60,544
11.4
%
Net earnings
$
42,581
$
21,339
99.5
%
$
184,600
$
183,553
0.6
%
Earnings per share: Basic
$
0.40
$
0.20
100.0
%
$
1.72
$
1.69
1.8
%
Diluted
$
0.39
$
0.20
95.0
%
$
1.69
$
1.66
1.8
%
Weighted average shares: Basic
107,181
106,964
107,332
108,665
Diluted
109,098
108,510
109,336
110,293
Basis Point
Change
Basis Point
Change
Comparison as a percentage of net
sales Consolidated gross margin
50.6
%
48.2
%
240
50.9
%
50.3
%
60
Selling, general and administrative expenses
42.4
%
41.3
%
110
41.7
%
40.7
%
100
Consolidated operating margin
8.3
%
4.1
%
420
8.7
%
8.8
%
(10
)
Effective tax rate
25.5
%
2.0
%
2,350
26.8
%
24.8
%
200
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands)
September 30,
2023
2022
Cash and cash equivalents
$
123,001
$
70,558
Trade and other accounts receivable
75,875
72,277
Inventory
975,218
936,374
Other current assets
53,903
53,192
Total current assets
1,227,997
1,132,401
Property and equipment, net
297,779
297,876
Operating lease assets
570,657
532,177
Goodwill and other intangible assets
588,252
576,381
Other assets
40,565
38,032
Total assets
$
2,725,250
$
2,576,867
Current maturities of long-term debt
$
4,173
$
68,658
Accounts payable
258,884
275,717
Accrued liabilities
163,366
161,065
Current operating lease liabilities
150,479
157,734
Income taxes payable
2,355
4,740
Total current liabilities
579,257
667,914
Long-term debt, including capital leases
1,065,811
1,083,043
Long-term operating lease liabilities
455,071
424,762
Other liabilities
23,140
22,427
Deferred income tax liabilities, net
93,224
85,085
Total liabilities
2,216,503
2,283,231
Total stockholders’ equity
508,747
293,636
Total liabilities and stockholders’ equity
$
2,725,250
$
2,576,867
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three Months Ended September
30,
Twelve Months Ended September
30,
2023
2022
Percentage
Change
2023
2022
Percentage
Change
Net sales: Sally Beauty Supply ("SBS")
$
524,556
$
554,004
(5.3
)%
$
2,139,206
$
2,193,044
(2.5
)%
Beauty Systems Group ("BSG")
396,800
408,456
(2.9
)%
1,588,925
1,622,521
(2.1
)%
Total net sales
$
921,356
$
962,460
(4.3
)%
$
3,728,131
$
3,815,565
(2.3
)%
Operating earnings: SBS
$
78,483
$
80,529
(2.5
)%
$
358,474
$
350,884
2.2
%
BSG
45,672
32,786
39.3
%
181,275
193,407
(6.3
)%
Segment operating earnings
124,155
113,315
9.6
%
539,749
544,291
(0.8
)%
Unallocated expenses (1)
48,119
47,685
0.9
%
197,515
179,074
10.3
%
Restructuring
(872
)
26,434
(103.3
)%
17,205
27,577
(37.6
)%
Interest expense
19,717
17,429
13.1
%
72,979
93,543
(22.0
)%
Earnings before provision for income taxes
$
57,191
$
21,767
162.7
%
$
252,050
$
244,097
3.3
%
Segment gross margin:
2023
2022
Basis Point
Change
2023
2022
Basis Point
Change
SBS
59.2
%
56.6
%
260
59.2
%
58.1
%
110
BSG
39.3
%
36.7
%
260
39.8
%
39.8
%
—
Segment operating margin: SBS
15.0
%
14.5
%
50
16.8
%
16.0
%
80
BSG
11.5
%
8.0
%
350
11.4
%
11.9
%
(50
)
Consolidated operating margin
8.3
%
4.1
%
420
8.7
%
8.8
%
(10
)
(1) Unallocated expenses, including share-based
compensation expense, consist of corporate and shared costs and are
included in selling, general and administrative expenses.
Supplemental Schedule 2
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations (In thousands, except per share
data) (Unaudited)
Three Months Ended September 30,
2023 As Reported(GAAP) Restructuring(1) COVID andOther(2) Loss
on DebtExtinguishment(3) As Adjusted(Non-GAAP) Cost of
products sold
$
454,794
$
—
$
—
$
—
$
454,794
Consolidated gross margin
50.6
%
50.6
%
Selling, general and administrative expenses
390,526
(606
)
(2,649
)
—
387,271
SG&A expenses, as a percentage of sales
42.4
%
42.0
%
Restructuring
(872
)
872
—
—
—
Operating earnings
76,908
(266
)
2,649
—
79,291
Operating margin
8.3
%
8.6
%
Interest expense
19,717
—
—
(1,793
)
17,924
Earnings before provision for income taxes
57,191
(266
)
2,649
1,793
61,367
Provision for income taxes (4)
14,610
(181
)
779
461
15,669
Net earnings
$
42,581
$
(85
)
#
$
1,870
$
1,332
$
45,698
Earnings per share: Basic
$
0.40
$
(0.00
)
$
0.02
$
0.01
$
0.43
Diluted
$
0.39
$
(0.00
)
$
0.02
$
0.01
$
0.42
Three Months Ended September 30, 2022 As
Reported(GAAP) Restructuring(1) As Adjusted(Non-GAAP) Cost
of products sold
$
498,964
$
(18,316
)
$
480,648
Consolidated gross margin
48.2
%
50.1
%
Selling, general and administrative expenses
397,866
—
397,866
SG&A expenses, as a percentage of sales
41.3
%
41.3
%
Restructuring
26,434
(26,434
)
—
Operating earnings
39,196
44,750
83,946
Operating margin
4.1
%
8.7
%
Interest expense
17,429
—
17,429
Earnings before provision for income taxes
21,767
44,750
66,517
Provision for income taxes (4)
428
11,659
12,087
Net earnings
$
21,339
$
33,091
$
54,430
Earnings per share: Basic
$
0.20
$
0.31
$
0.51
Diluted
$
0.20
$
0.30
$
0.50
(1) For the three months ended September 30, 2023,
restructuring primarily related to favorable adjustments to the
settlement of store lease terminations, resulting in income, in
connection with our Distribution Center Consolidation and Store
Optimization Plan (the "Plan"). For the three months ended
September 30, 2022, restructuring represents expenses incurred
primarily in connection with the Plan, including inventory
write-downs of $19.4 million within cost of products sold, and $0.8
million for our Transformation Plan, including $1.1 million related
to favorable adjustments to our expected obsolescence reserve in
cost of products sold. (2) COVID and Other relates primarily
to obsolete personal-protective equipment ("PPE") related to store
supplies in selling, general and administrative expense. (3)
Loss on debt extinguishment relates to the repricing of our Term
Loan B, which resulted in the write-off of unamortized deferred
financing costs of $1.8 million. (4) The provision for
income taxes was calculated using the applicable tax rates for each
country, while excluding the tax benefits for countries where the
tax benefit is not currently deemed probable of being realized.
Supplemental Schedule 3
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands, except
per share data) (Unaudited)
Twelve Months Ended
September 30, 2023 As Reported(GAAP) Restructuring(1) COVID(2)
Loss on DebtExtinguishment andOther(3) As Adjusted(Non-GAAP)
Cost of products sold
$
1,829,951
$
5,789
$
—
$
—
$
1,835,740
Consolidated gross margin
50.9
%
50.8
%
Selling, general and administrative expenses
1,555,946
(606
)
(3,701
)
—
1,551,639
SG&A expenses, as a percentage of sales
41.7
%
41.6
%
Restructuring
17,205
(17,205
)
—
—
—
Operating earnings
325,029
12,022
3,701
—
340,752
Operating margin
8.7
%
9.1
%
Interest expense
72,979
—
—
(1,793
)
71,186
Earnings before provision for income taxes
252,050
12,022
3,701
1,793
269,566
Provision for income taxes (4)
67,450
2,928
1,049
(2,239
)
69,188
Net earnings
$
184,600
$
9,094
$
2,652
$
4,032
$
200,378
Earnings per share: Basic
$
1.72
$
0.08
$
0.02
$
0.04
$
1.87
Diluted
$
1.69
$
0.08
$
0.02
$
0.04
$
1.83
Twelve Months Ended September 30, 2022 As
Reported(GAAP) Restructuring(1) COVID-19(2) Loss on
DebtExtinguishment andOther(3) As Adjusted(Non-GAAP) Cost of
products sold
$
1,896,400
$
(18,316
)
$
(2,841
)
$
—
$
1,875,243
Consolidated gross margin
50.3
%
50.9
%
Selling, general and administrative expenses
1,553,948
—
(3,382
)
(1,546
)
1,549,020
SG&A expenses, as a percentage of sales
40.7
%
40.6
%
Restructuring
27,577
(27,577
)
—
—
—
Operating earnings
337,640
45,893
6,223
1,546
391,302
Operating margin
8.8
%
10.3
%
Interest expense
93,543
—
—
(16,439
)
77,104
Earnings before provision for income taxes
244,097
45,893
6,223
17,985
314,198
Provision for income taxes (4)
60,544
9,830
2,132
3,821
76,327
Net earnings
$
183,553
#
$
36,063
$
4,091
$
14,164
$
237,871
Earnings per share: Basic
$
1.69
#
$
0.33
$
0.04
$
0.13
$
2.19
Diluted
$
1.66
#
$
0.33
$
0.04
$
0.13
$
2.16
(1) For fiscal year 2023, restructuring represents
expenses and adjustments incurred primarily in connection with the
Plan, including $5.8 million related to favorable adjustments to
our expected obsolescence reserve in cost of products sold. For
fiscal year 2022, restructuring included $45.5 million for the
Plan, including inventory write-downs of $19.4 million within cost
of products sold, and $0.4 million for our Transformation Plan,
including $1.1 million related to adjustments to our expected
obsolescence reserve in cost of products sold. (2) For
fiscal year 2023, COVID primarily relates obsolete PPE related to
store supplies in selling, general and administrative expenses and
to use taxes around the donation of personal protection
merchandise. For fiscal year 2022, COVID primarily comprised of
obsolete PPE included in costs of products sold of $2.8 million, as
well as costs associated with the disposal of the obsolete PPE,
vaccinations and testing in selling, general and administrative
expenses. (3) For fiscal year 2023, loss on debt
extinguishment relates to the repricing of our Term Loan B, which
resulted in the write-off of unamortized deferred financing costs
of $1.8 million. For fiscal year 2022, loss on debt extinguishment
and other relates to the repayment of our 8.750% Senior Secured
Second Lien Notes due 2025, which included a redemption premium of
$13.1 million and the write-off of unamortized deferred financing
costs of $3.3 million included in interest expense, and cost
associated with a cancelled debt offering earlier in the fiscal
year. (4) The provision for income taxes was calculated
using the applicable tax rates for each country, while excluding
the tax benefits for countries where the tax benefit is not
currently deemed probable of being realized. Additionally, for
fiscal year 2023, provision for income taxes, within loss on debt
extinguishment and other, includes additional $2.7 million in taxes
and interest for the one-time transition tax on unrepatriated
foreign earnings (“Repatriation Tax”). Furthermore, for fiscal year
2022, provision for income taxes, within restructuring, includes
the impact of a deferred tax asset write-down related to expired
options in connection with the Transformation Plan.
Supplemental Schedule 4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands)
(Unaudited)
Three Months Ended September
30,
Twelve Months Ended September
30,
Adjusted EBITDA:
2023
2022
Percentage
Change
2023
2022
Percentage
Change
Net earnings
$
42,581
$
21,339
99.5
%
$
184,600
$
183,553
0.6
%
Add: Depreciation and amortization
26,639
26,568
0.3
%
102,412
99,929
2.5
%
Interest expense
19,717
17,429
13.1
%
72,979
93,543
(22.0
)%
Provision for income taxes
14,610
428
3313.6
%
67,450
60,544
11.4
%
EBITDA (non-GAAP)
103,547
65,764
57.5
%
427,441
437,569
(2.3
)%
Share-based compensation
3,339
1,841
81.4
%
15,862
10,708
48.1
%
Restructuring
(266
)
44,750
(100.6
)%
12,022
47,439
(74.7
)%
COVID-19 and Other
2,649
—
100.0
%
3,701
6,223
(40.5
)%
Adjusted EBITDA (non-GAAP)
$
109,269
$
112,355
(2.7
)%
$
459,026
$
501,939
(8.5
)%
Basis Point
Change
Basis Point
Change
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
11.9
%
11.7
%
20
12.3
%
13.2
%
(90
)
Operating Free Cash Flow:
2023
2022
Percentage
Change
2023
2022
Percentage
Change
Net cash provided by operating activities
$
116,540
$
107,273
8.6
%
$
249,311
$
156,500
59.3
%
Less: Payments for property and equipment, net
26,946
32,016
(15.8
)%
90,742
99,250
(8.6
)%
Operating free cash flow (non-GAAP)
$
89,594
$
75,257
19.1
%
$
158,569
$
57,250
177.0
%
Supplemental Schedule 5
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Store Count and Comparable
Sales
(Unaudited)
As of September 30,
2023
2022
Change
Number of stores: SBS: Company-operated stores (1)
3,148
3,439
(291
)
BSG: Company-operated stores (1)
1,206
1,223
(17
)
Franchise stores
132
132
—
Total BSG
1,338
1,355
(17
)
Total consolidated
4,486
4,794
(308
)
Number of BSG distributor sales consultants (2)
670
718
(48
)
(1) Store count was impacted by the closure of 294 SBS
stores and 26 BSG stores in the last twelve months related to our
Distribution Center and Site Optimization Plan. (2) BSG distributor
sales consultants (DSC) include 193 and 195 sales consultants
employed by our franchisees at September 30, 2023 and 2022,
respectively.
Three Months Ended September 30,
Twelve Months Ended September 30,
2023
2022
Basis Point
Change
2023
2022
Basis Point
Change
Comparable sales growth (decline): SBS
(1.2
)%
(1.1
)%
(10
)
3.4
%
(0.6
)%
400
BSG
(2.3
)%
1.5
%
(380
)
(1.3
)%
2.3
%
(360
)
Consolidated
(1.6
)%
—
%
(160
)
1.4
%
0.6
%
80
Our comparable sales include sales from stores that
have been operating for 14 months or longer as of the last day of a
month and e-commerce revenue. Additionally, our comparable sales
include sales to franchisees and full service sales. Our comparable
sales excludes the effect of changes in foreign exchange rates and
sales from stores relocated until 14 months after the relocation.
Revenue from acquired stores are excluded from our comparable sales
calculation until 14 months after the acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231114751795/en/
Jeff Harkins Investor Relations 940-297-3877
jharkins@sallybeauty.com
Sally Beauty (NYSE:SBH)
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