- Q3 GAAP Operating Margin of 9.7%; Adjusted Operating Margin of
9.6%
- Q3 GAAP Diluted EPS of $0.46; Adjusted Diluted EPS of
$0.49
- Introduces New Store Concept – Happy Beauty Co.
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”), the
leader in professional hair color, today announced financial
results for its third quarter ended June 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 Third Quarter Summary
- Consolidated net sales of $931 million, a decrease of 3.2%
compared to the prior year;
- Consolidated comparable sales increased 0.6%;
- Global e-commerce sales increased 3% to $83 million,
representing 8.9% of net sales;
- GAAP gross margin at 51.0%; Adjusted Gross Margin at
50.9%;
- GAAP operating earnings of $90 million and GAAP operating
margin of 9.7%; Adjusted Operating Earnings of $90 million and
Adjusted Operating Margin of 9.6%; and
- GAAP diluted net earnings per share of $0.46 and Adjusted
Diluted Net Earnings Per Share of $0.49.
“We are pleased to report another solid quarter with net sales
of $931 million, Adjusted Gross Margin of 51%, Adjusted EBITDA of
$119 million and free cash flow of $32 million. Three quarters into
our fiscal year, we are on track with our operating initiatives and
the financial guidance we originally laid out for fiscal 2023,”
said Denise Paulonis, president and chief executive officer.
“Our teams remain focused on fueling growth through our core
strategic initiatives – enhancing customer centricity, driving
innovation and increasing operating efficiency. Of note, we
continue to pilot a number of growth driving initiatives, including
Cosmo Prof Direct, Studio by Sally and Happy Beauty Co. When
combined with our focus on innovation and owned brands, we are
confident that our strategies will continue to build upon our
modern and dynamic retail platform, taking us well into the future.
Importantly, we remain steadfast in our commitment to enhance value
for our customers and shareholders over the long-term.”
Fiscal 2023 Third Quarter Operating Results
Third quarter consolidated net sales were $931.0 million, a
decrease of 3.2% compared to the prior year. The Company was
operating 352 fewer stores at the end of the quarter compared to
the prior year. Foreign currency translation had a favorable impact
of 20 basis points on consolidated net sales for the quarter. At
constant currency, global e-commerce sales increased 3% compared to
the prior year to $83 million or 8.9% of consolidated net sales for
the quarter.
Consolidated comparable sales increased 0.6%, driven primarily
by Sally Beauty’s strong sales recapture rates from the Company’s
recent store optimization efforts, mostly offset by the
continuation of stylist demand trends seen over the last several
quarters at Beauty Systems Group.
Consolidated gross profit for the third quarter was $474.7
million compared to $490.2 million in the prior year, a decrease of
3.2%. Consolidated GAAP gross margin was 51.0%, flat compared to
the prior year. Adjusted Gross Margin, which excludes the true-up
of a non-cash inventory write-down in the fourth quarter of fiscal
2022 related to the Company’s previously announced distribution
center consolidation and store optimization plan, was 50.9%, a
decrease of 10 basis points compared to 51.0% in the prior year.
Higher product margin at Sally Beauty, driven by pricing leverage
and higher owned brand penetration, was offset by lower margin at
Beauty Systems Group resulting from an unfavorable sales mix shift
between the segment’s stores and expanded Regis partnership, as
well as a shift in some distribution center costs from selling,
general and administrative expenses into gross margin.
Selling, general and administrative (SG&A) expenses totaled
$384.2 million, a decrease of $6.8 million compared to $391.0
million in the prior year. The decrease was driven primarily by the
savings from the Company’s previously announced distribution center
consolidation and store optimization plan, lower advertising costs
and prudent cost control, partially offset by higher labor and
accrued bonus expenses. As a percentage of sales, SG&A expenses
were 41.3% compared to 40.7% in the prior year.
GAAP operating earnings and operating margin in the third
quarter were $90.1 million and 9.7%, compared to $99.2 million and
10.3%, in the prior year. Adjusted Operating Earnings and Operating
Margin, excluding the Company’s restructuring efforts and COVID-19
related net expenses, were $89.8 million and 9.6%, compared to
$100.6 million and 10.5%, in the prior year.
GAAP net earnings in the third quarter were $50.8 million, or
$0.46 per diluted share, compared to GAAP net earnings of $46.6
million, or $0.43 per diluted share in the prior year. Adjusted Net
Earnings, excluding the Company’s restructuring efforts, COVID-19
related net expenses, the loss on extinguishment of debt, and other
adjustments, were $53.3 million, or $0.49 per diluted share,
compared to Adjusted Net Earnings of $59.8 million, or $0.55 per
diluted share in the prior year. Adjusted EBITDA in the third
quarter was $118.8 million, a decrease of 7.5% compared to the
prior year, and Adjusted EBITDA Margin was 12.8%, a decrease of 50
basis points compared to the prior year.
Balance Sheet and Cash Flow
As of June 30, 2023, the Company had cash and cash equivalents
of $74 million and an outstanding balance of $16 million under its
asset-based revolving line of credit. At the end of the quarter,
inventory was $996 million, down 2% versus a year ago. Third
quarter cash flow from operations was $53.1 million. Capital
expenditures in the quarter totaled $21.6 million.
The Company ended the quarter with a net debt leverage ratio of
2.2x.
On April 28, 2023, the Company entered into a 3-year interest
rate swap agreement, which swaps a notional amount of $200 million
of the new term loan, which was refinanced in February of 2023,
from a floating term SOFR rate to a fixed rate of 3.705%.
Fiscal 2023 Third Quarter Segment Results
Sally Beauty Supply
- Segment net sales were $534.9 million in the quarter, a
decrease of 3.0% compared to the prior year. The segment operated
327 fewer stores at the end of the quarter compared to the prior
year and had a favorable impact of 70 basis points from foreign
currency translation on reported sales. At constant currency,
segment e-commerce sales decreased 5% to $32 million or 5.9% of
segment net sales for the quarter.
- Segment comparable sales increased 3.0% in the third quarter,
driven primarily by strong sales recapture rates from the Company’s
recent store optimization efforts. The Sally Beauty businesses in
the U.S. and Canada represented 77% of segment net sales for the
quarter and had a comparable sales increase of 3.1%.
- At the end of the quarter, net store count was 3,141.
- GAAP gross margin increased by 30 basis points to 58.8%
compared to the prior year. The increase was primarily driven by
higher product margin from pricing leverage and higher owned brand
penetration.
- GAAP operating earnings were $88.7 million compared to $88.8
million in the prior year, essentially flat. GAAP operating margin
increased to 16.6% compared to 16.1% in the prior year.
Beauty Systems Group
- Segment net sales were $396.1 million in the quarter, a
decrease of 3.3% compared to the prior year. The segment operated
25 fewer stores at the end of the quarter compared to the prior
year and had an unfavorable impact of 40 basis points on reported
sales from foreign currency translation. At constant currency,
segment e-commerce sales increased 8% to $51 million or 13.0% of
segment net sales for the quarter.
- Segment comparable sales decreased 2.4% in the third 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 1,336.
- GAAP gross margin decreased 40 basis points to 40.5% in the
quarter compared to the prior year, driven primarily by an
unfavorable sales mix shift between the segment’s stores and
expanded Regis partnership, as well as a shift in some distribution
center costs from selling, general and administrative expenses into
gross margin.
- GAAP operating earnings were $48.7 million in the quarter, a
decrease of 13.1% compared to $56.1 million in the prior year. GAAP
operating margin in the quarter was 12.3% compared to 13.7% in the
prior year.
- At the end of the quarter, there were 650 distributor sales
consultants compared to 700 in the prior year.
Fiscal Year 2023 Guidance
The Company is updating its full fiscal year 2023 guidance by
revising its Adjusted Operating Margin to the higher end of the
original guidance. All other components of the Company’s full
fiscal year 2023 original guidance are being maintained:
- Comparable sales are expected to increase by low single digits
compared to the prior year, driven by growth in key categories,
sales transfer from store closures related to the Company’s store
optimization efforts, the expanded Regis distribution and new
strategic initiatives;
- Net sales are expected to decline by low-single digits compared
to the prior year, reflecting the unfavorable impact due to store
closures from the Company’s store optimization efforts, net of
expected sales recapture rates;
- Gross margin is expected to remain above 50%; and
- Adjusted Operating Margin is now expected to be in the range of
9.0% and 9.4% (previously 8.5% to 9.5%).
- 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.
Sally Beauty Holdings Launches New Store Concept – Happy
Beauty Co.
The Company announced the launch of Happy Beauty Co., a unique
new retail store concept that brings to market an engaging beauty
experience with a value price point offering. Happy Beauty Co.
offers quality beauty at great prices in an accessible, fun and
expressive environment. All of the merchandise is priced under $10
with product offerings encompassing four key categories: Cosmetics
& Facial Care, Bath & Body, Nails and Hair, featuring both
third-party brands and the Company’s owned brands. The initial
pilot store was opened in the Dallas/Ft. Worth market in late
June.
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, August 3, 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 520214#. 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, August 3, 2023, through August 17, 2023, by dialing (866)
207-1041 (International: (402) 970-0847) and referencing access
code 5345065#. 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, 2022.
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 true-up of the inventory
non-cash write-down 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 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
and COVID-19 related net expenses 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,
tax-effected other adjustments, and tax-effected losses on
extinguishment of debt 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, tax-effected other
adjustments and tax-effected losses on extinguishment of debt 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 June
30,
Nine Months Ended June
30,
2023
2022
Percentage Change
2023
2022
Percentage Change
Net sales
$
931,008
$
961,467
(3.2
)%
$
2,806,775
$
2,853,105
(1.6
)%
Cost of products sold
456,303
471,259
(3.2
)%
1,375,157
1,397,436
(1.6
)%
Gross profit
474,705
490,208
(3.2
)%
1,431,618
1,455,669
(1.7
)%
Selling, general and administrative expenses
384,183
390,961
(1.7
)%
1,165,420
1,156,082
0.8
%
Restructuring
397
44
802.3
%
18,077
1,143
1481.5
%
Operating earnings
90,125
99,203
(9.2
)%
248,121
298,444
(16.9
)%
Interest expense
18,654
35,977
(48.2
)%
53,262
76,113
(30.0
)%
Earnings before provision for income taxes
71,471
63,226
13.0
%
194,859
222,331
(12.4
)%
Provision for income taxes
20,650
16,659
24.0
%
52,840
60,117
(12.1
)%
Net earnings
$
50,821
$
46,567
9.1
%
$
142,019
$
162,214
(12.4
)%
Earnings per share: Basic
$
0.47
$
0.44
6.8
%
$
1.32
$
1.48
(10.8
)%
Diluted
$
0.46
$
0.43
7.0
%
$
1.30
$
1.46
(11.0
)%
Weighted average shares: Basic
107,560
106,940
107,383
109,238
Diluted
109,668
108,526
109,519
110,907
Basis Point Change
Basis Point Change
Comparison as a percentage of net
sales Consolidated gross margin
51.0
%
51.0
%
—
51.0
%
51.0
%
0
Selling, general and administrative expenses
41.3
%
40.7
%
60
41.5
%
40.5
%
100
Consolidated operating margin
9.7
%
10.3
%
(60
)
8.8
%
10.5
%
(170
)
Effective tax rate
28.9
%
26.3
%
260
27.1
%
27.0
%
10
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
June 30, 2023
September 30, 2022
Cash and cash equivalents
$
74,337
$
70,558
Trade and other accounts receivable
77,758
72,277
Inventory
996,404
936,374
Other current assets
50,897
53,192
Total current assets
1,199,396
1,132,401
Property and equipment, net
281,181
297,876
Operating lease assets
569,103
532,177
Goodwill and other intangible assets
585,209
576,381
Other assets
40,516
38,032
Total assets
$
2,675,405
$
2,576,867
Current maturities of long-term debt
$
20,176
$
68,658
Accounts payable
243,976
275,717
Accrued liabilities
140,391
161,065
Current operating lease liabilities
154,749
157,734
Income taxes payable
6,345
4,740
Total current liabilities
565,637
667,914
Long-term debt, including capital leases
1,064,908
1,083,043
Long-term operating lease liabilities
450,656
424,762
Other liabilities
22,431
22,427
Deferred income tax liabilities, net
84,061
85,085
Total liabilities
2,187,693
2,283,231
Total stockholders’ equity
487,712
293,636
Total liabilities and stockholders’ equity
$
2,675,405
$
2,576,867
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three Months Ended June
30,
Nine Months Ended June
30,
2023
2022
Percentage Change
2023
2022
Percentage Change
Net sales: Sally Beauty Supply ("SBS")
$
534,932
$
551,725
(3.0
)%
$
1,614,650
$
1,639,040
(1.5
)%
Beauty Systems Group ("BSG")
396,076
409,742
(3.3
)%
1,192,125
1,214,065
(1.8
)%
Total net sales
$
931,008
$
961,467
(3.2
)%
$
2,806,775
$
2,853,105
(1.6
)%
Operating earnings: SBS
$
88,683
$
88,792
(0.1
)%
$
279,991
$
270,355
3.6
%
BSG
48,696
56,067
(13.1
)%
135,603
160,621
(15.6
)%
Segment operating earnings
137,379
144,859
(5.2
)%
415,594
430,976
(3.6
)%
Unallocated expenses (1)
46,857
45,612
2.7
%
149,396
131,389
13.7
%
Restructuring
397
44
802.3
%
18,077
1,143
1481.5
%
Interest expense
18,654
35,977
(48.2
)%
53,262
76,113
(30.0
)%
Earnings before provision for income taxes
$
71,471
$
63,226
13.0
%
$
194,859
$
222,331
(12.4
)%
Segment gross margin:
2023
2022
Basis Point Change
2023
2022
Basis Point Change
SBS
58.8
%
58.5
%
30
59.2
%
58.6
%
60
BSG
40.5
%
40.9
%
(40
)
40.0
%
40.8
%
(80
)
Segment operating margin: SBS
16.6
%
16.1
%
50
17.3
%
16.5
%
80
BSG
12.3
%
13.7
%
(140
)
11.4
%
13.2
%
(180
)
Consolidated operating margin
9.7
%
10.3
%
(60
)
8.8
%
10.5
%
(170
)
(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 June 30,
2023 As Reported(GAAP) Restructuring (1) Other (2) As
Adjusted(Non-GAAP) Cost of products sold
$
456,303
$
746
$
—
$
457,049
Consolidated gross margin
51.0
%
50.9
%
Selling, general and administrative expenses
384,183
—
—
384,183
SG&A expenses, as a percentage of sales
41.3
%
41.3
%
Operating earnings
90,125
(349
)
—
89,776
Operating margin
9.7
%
9.6
%
Interest expense
18,654
—
—
18,654
Earnings before provision for income taxes
71,471
(349
)
—
71,122
Provision for income taxes (5)
20,650
(89
)
(2,700
)
17,861
Net earnings
$
50,821
$
(260
)
$
2,700
$
53,261
Earnings per share: Basic
$
0.47
$
(0.00
)
$
0.03
$
0.50
Diluted
$
0.46
$
(0.00
)
$
0.02
$
0.49
Three Months Ended June 30, 2022 As Reported(GAAP)
Restructuring (1) COVID-19 (3) Loss on DebtExtinguishment (4) As
Adjusted(Non-GAAP) Cost of products sold
$
471,259
$
—
$
—
$
—
$
471,259
Consolidated gross margin
51.0
%
51.0
%
Selling, general and administrative expenses
390,961
—
(1,304
)
—
389,657
SG&A expenses, as a percentage of sales
40.7
%
40.5
%
Operating earnings
99,203
44
1,304
—
100,551
Operating margin
10.3
%
10.5
%
Interest expense
35,977
—
—
(16,439
)
19,538
Earnings before provision for income taxes
63,226
44
1,304
16,439
81,013
Provision for income taxes (5)
16,659
(25
)
335
4,225
21,194
Net earnings
$
46,567
$
69
$
969
$
12,214
$
59,819
Earnings per share: Basic
$
0.44
$
0.00
$
0.01
$
0.11
$
0.56
Diluted
$
0.43
$
0.00
$
0.01
$
0.11
$
0.55
(1) For the three months ended June 30, 2023,
restructuring represents adjustments and expenses related to store
closures in connection with our distribution center consolidation
and store optimization plan, including $0.8 million related to
adjustments to our expected obsolescence reserve in cost of
products sold. For the three months ended June 30, 2022,
restructuring represents expenses incurred primarily in connection
with the Transformation Plan. (2) Other represents
additional taxes and interest for the one-time transition tax on
unrepatriated foreign earnings (“Repatriation Tax”). (3)
COVID-19-related expense is comprised of disposal costs for
obsolete personal-protective equipment inventory ("PPE").
(4) Loss on debt extinguishment 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. (5) 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)
Nine Months Ended June
30, 2023 As Reported(GAAP) Restructuring (1) COVID-19 (2) Other
(3) As Adjusted(Non-GAAP) Cost of products sold
$
1,375,157
$
5,789
$
—
$
—
$
1,380,946
Consolidated gross margin
51.0
%
50.8
%
Selling, general and administrative expenses
1,165,420
—
(1,052
)
—
1,164,368
SG&A expenses, as a percentage of sales
41.5
%
41.5
%
Operating earnings
248,121
12,288
1,052
—
261,461
Operating margin
8.8
%
9.3
%
Interest expense
53,262
—
—
—
53,262
Earnings before provision for income taxes
194,859
12,288
1,052
—
208,199
Provision for income taxes (5)
52,840
3,109
270
(2,700
)
53,519
Net earnings
$
142,019
$
9,179
$
782
$
2,700
$
154,680
Earnings per share: Basic
$
1.32
$
0.09
$
0.01
$
0.03
$
1.44
Diluted
$
1.30
$
0.08
$
0.01
$
0.02
$
1.41
Nine Months Ended June 30, 2022 As Reported(GAAP)
Restructuring andOther (1) COVID-19 (2) Loss on DebtExtinguishment
(4) As Adjusted(Non-GAAP) Cost of products sold
$
1,397,436
$
—
$
(2,841
)
$
—
$
1,394,595
Consolidated gross margin
51.0
%
51.1
%
Selling, general and administrative expenses
1,156,082
(1,546
)
(3,382
)
—
1,151,154
SG&A expenses, as a percentage of sales
40.5
%
40.3
%
Operating earnings
298,444
2,689
6,223
—
307,356
Operating margin
10.5
%
10.8
%
Interest expense
76,113
—
—
(16,439
)
59,674
Earnings before provision for income taxes
222,331
2,689
6,223
16,439
247,682
Provision for income taxes (5)
60,117
(1,829
)
1,728
4,225
64,241
Net earnings
$
162,214
$
4,518
$
4,495
$
12,214
$
183,441
Earnings per share: Basic
$
1.48
$
0.04
$
0.04
$
0.11
$
1.68
Diluted
$
1.46
$
0.04
$
0.04
$
0.11
$
1.65
(1) For the nine months ended June 30, 2023,
restructuring represents expenses incurred primarily in connection
with our Distribution Center Consolidation and Store Optimization
Plan, including $5.8 million related to adjustments to our expected
obsolescence reserve in cost of products sold. For the nine months
ended June 30, 2022, restructuring and other represents costs and
expenses incurred primarily in connection with the Transformation
Plan and cancelled debt offering during the period. (2) For
the nine months ended June 30, 2023, COVID-19 expenses related to
use taxes around the donation of personal protection merchandise.
For the nine months ended June 30, 2022, COVID-19-related expense
is 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) Other represents additional
taxes and interest for the Repatriation Tax. (4) Loss on
debt extinguishment 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.
(5) 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 the nine
months ended June 30, 2022, provision for income taxes, for
restructuring and other, 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 June
30,
Nine Months Ended June
30,
Adjusted EBITDA:
2023
2022
Percentage Change
2023
2022
Percentage Change
Net earnings
$
50,821
$
46,567
9.1
%
$
142,019
$
162,214
(12.4
)%
Add: Depreciation and amortization
25,426
24,890
2.2
%
75,773
73,361
3.3
%
Interest expense
18,654
35,977
(48.2
)%
53,262
76,113
(30.0
)%
Provision for income taxes
20,650
16,659
24.0
%
52,840
60,117
(12.1
)%
EBITDA (non-GAAP)
115,551
124,093
(6.9
)%
323,894
371,805
(12.9
)%
Share-based compensation
3,550
2,876
23.4
%
12,523
8,866
41.2
%
Restructuring and other
(349
)
44
(893.2
)%
12,288
2,689
357.0
%
COVID-19
—
1,304
(100.0
)%
1,052
6,223
(83.1
)%
Adjusted EBITDA (non-GAAP)
$
118,752
$
128,317
(7.5
)%
$
349,757
$
389,583
(10.2
)%
Basis Point Change
Basis Point Change
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
12.8
%
13.3
%
(50
)
12.5
%
13.7
%
(120
)
Operating Free Cash Flow:
2023
2022
Percentage Change
2023
2022
Percentage Change
Net cash provided by operating activities
$
53,123
$
52,000
2.2
%
$
132,771
$
49,227
169.7
%
Less: Payments for property and equipment, net
21,615
23,125
(6.5
)%
63,796
67,234
(5.1
)%
Operating free cash flow (non-GAAP)
$
31,508
$
28,875
9.1
%
$
68,975
$
(18,007
)
483.0
%
Supplemental Schedule 5
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Store Count and Comparable
Sales
(Unaudited)
As of June 30,
2023
2022
Change
Number of stores: SBS: Company-operated stores (1)
3,141
3,467
(326
)
Franchise stores
—
1
(1
)
Total SBS
3,141
3,468
(327
)
BSG: Company-operated stores (1)
1,204
1,229
(25
)
Franchise stores
132
132
—
Total BSG
1,336
1,361
(25
)
Total consolidated
4,477
4,829
(352
)
Number of BSG distributor sales consultants (2)
650
700
(50
)
(1) Store count was impacted by the closure of 329 SBS
stores and 32 BSG stores related to our Distribution Center and
Site Optimization Plan. (2) BSG distributor sales consultants (DSC)
include 189 and 187 sales consultants employed by our franchisees
at June 30, 2023 and 2022, respectively.
Three Months Ended June
30,
Nine Months Ended June
30,
2023
2022
Basis Point Change
2023
2022
Basis Point Change
Comparable sales growth (decline): SBS
3.0
%
(5.0
)%
800
5.0
%
(0.5
)%
550
BSG
(2.4
)%
(1.6
)%
(80
)
(0.9
)%
2.6
%
(350
)
Consolidated
0.6
%
(3.6
)%
420
2.4
%
0.8
%
160
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 acquisitions 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/20230803445302/en/
Jeff Harkins Investor Relations 940-297-3877
jharkins@sallybeauty.com
Sally Beauty (NYSE:SBH)
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