- Transformation Plan and Supply Chain Modernization on
Track
- GAAP Diluted EPS of $0.59; Adjusted Diluted EPS of
$0.60
- Consolidated Same Store Sales Increased 0.1%
- Beauty Systems Group Same Store Sales Increased
1.4%
- Global Sally Beauty Same Store Sales Decreased
(0.6%)
- E-Commerce Sales Increased by 25.9% versus Prior
Year
- Strong Cash Flow from Operations Used to Reduce Indebtedness
by $105 Million
- Company Maintains Fiscal Year 2019 Financial
Guidance
Sally Beauty Holdings, Inc.
(NYSE: SBH) (“the Company”) today announced financial results for
its third quarter ended June 30, 2019. The Company will hold a
conference call today at 7:30 a.m. Central Time to discuss these
results.
Fiscal 2019 Third Quarter Overview
Consolidated same store sales increased 0.1% in the quarter.
Consolidated net sales were $975.2 million in the third quarter, a
decrease of 2.1% compared to the prior year, largely driven by 81
fewer stores as compared to the prior year. Foreign currency
translation had an unfavorable impact of approximately 80 basis
points on reported sales.
GAAP diluted earnings per share in the third quarter were $0.59
compared to $0.48 in the prior year, an increase of 22.9%, driven
primarily by reduced selling, general and administrative expenses
and lower restructuring charges as compared to the prior year.
Adjusted diluted earnings per share, excluding charges related to
the Company’s transformation efforts in both years and expenses
associated with previously disclosed data security incidents in the
prior year, were $0.60 in the third quarter, or flat compared to
the prior year.
“We continued to deliver against our transformation plan and
objectives in the third quarter,” said Chris Brickman, president
and chief executive officer. “We launched innovative and exclusive
brands at both Sally and Beauty Systems Group, advanced our digital
agenda by completing the launch of Sally Beauty’s new integrated
app and introducing sales transaction capabilities on our refreshed
BSG app. Our supply chain modernization efforts are accelerating,
as we streamlined our distribution node footprint and moved ahead
on a new multi-business distribution center that will enable us to
further optimize our operations and serve both digital clients and
our stores. Additionally, we reduced our debt levels by over $100
million.”
“Looking ahead, we remain focused on taking meaningful actions
to position the Company for sustainable growth and value creation,
including building on our market leadership and expertise in hair
color and care, improving our retail fundamentals, advancing our
digital commerce capabilities and continuing to reduce our cost
base. While we have work to do, we are confident in both our
strategic position and direction,” Brickman concluded.
Update on Transformation Plan
Based on our four key objectives, during the third quarter
and so far this quarter, we have:
Playing to Win with Our Customers
- Enhanced our innovation pipeline with the launch of additional
exclusive brands within Beauty Systems Group such as Elegance and
No Nothing, and the launch of exciting and exclusive brands like My
Black is Beautiful and Iroiro within Sally Beauty Supply;
- Increased the color palette for Ion box color/pro color kits to
30 shades in the U.S. and Canada;
Improving Our Retail Fundamentals
- Reached Sally Beauty Rewards Membership of more than 15.3
million active members;
- Completed the testing of our new concept stores in Las Vegas
and planned for further expansion for both Sally Beauty Supply and
CosmoProf, featuring enhanced technology and improved focus on the
customer experience;
- Rolled out the new Oracle-based point-of-sale systems to over
600 stores;
- Tested the fifth module (perpetual inventory) of the JDA
merchandising and supply chain platform, which now includes SKU
setup, space planning, EDI, demand planning and perpetual
inventory;
- Executed the lease for our new multi-business 500,000 square
foot distribution center in North Texas, with operations to begin
during the second quarter of fiscal year 2020;
Advancing Our Digital Commerce Capabilities
- Launched the Sally Beauty integrated mobile app nationwide,
which was downloaded by a younger mix of customers more than
255,000 times in the first few months of availability;
- Launched the first phase of our new order management system
which will, when fully implemented, enable ‘buy online, pick up in
store’ and ‘ship from store’ digital capabilities to better
leverage our inventory positions;
Continue to Drive Costs out of the Business
- Launched a digital work force management solution in stores to
optimize and track store labor; and
- Closed and contracted the sale of our Beauty Systems Group
distribution node in Marinette, Wisconsin, while consolidating
operations elsewhere. This represents the fourth distribution
building closure in six months across the network.
As we close out the fourth quarter of fiscal year 2019, we
will continue our transformation efforts by:
- Preparing for the launch of the new Sally Beauty brand campaign
nationwide;
- Continuing to build momentum and awareness of successful
launches of key brands like Pravana, Maria Nila, My Black is
Beautiful and Arctic Fox while adding new, innovative brands to the
pipeline;
- Launching our concept stores for Sally Beauty in a second
territory, Charlotte, North Carolina, with all new stores and
nationwide relocations designed consistent with learnings from Las
Vegas;
- Launching the sixth module of the JDA merchandising and supply
chain platform, store fulfillment, on a test basis within Beauty
Systems Group;
- Continuing our Supply Chain Modernization efforts;
- Accelerating the national rollout of the new Oracle-based
point-of-sale systems at both Sally Beauty Supply and Beauty
Systems Group, which is on-track to exceed 1,400 stores by the end
of the fiscal year; and
- Refreshing Beauty Systems Group’s e-commerce site, including
enhanced search and navigation features and a stronger focus on key
monthly priorities and promotions.
Fiscal 2019 Third Quarter Financial Detail
Consolidated gross margin for
the third quarter was 49.5%, flat compared to the prior year, with
increases in the North American business of Sally Beauty Supply
offset by continuing margin challenges in Europe and within Beauty
Systems Group. Selling, general and administrative expenses, after
adjusting for restructuring charges in both years and other
previously disclosed adjustments in the prior year, decreased by
$10.5 million, and were 36.9% as a percentage of sales, as compared
to 37.2% as a percentage of sales in the prior year.
GAAP operating earnings and operating margin in the third
quarter were $120.1 million and 12.3%, respectively, compared to
$102.2 million and 10.3%, respectively, in the prior year. Adjusted
operating earnings and operating margin were $122.0 million and
12.5%, respectively, compared to $122.7 million and 12.3%,
respectively, in the prior year.
GAAP net earnings in the third
quarter were $71.2 million, an increase of $12.9 million, or 22.2%,
from the prior year. Adjusted EBITDA in the third quarter was
$151.0 million, a decrease of $1.5 million, or 1.0%, from the prior
year, and adjusted EBITDA margin was 15.5%, an increase of
approximately 20 basis points from the prior year.
During the third quarter, cash
flow from operations was $93.7 million. Capital expenditures
totaled $20.4 million, primarily for information technology
projects related to the new Sally Beauty e-commerce platform, the
new Oracle-based point-of-sale system, the JDA merchandising and
supply chain platform and store remodels and maintenance. Operating
free cash flow was $73.4 million and was used to help reduce the
Company’s debt levels by an additional $105 million. At the end of
the third quarter, the Company’s leverage ratio was 2.69x, as a
result of actions to reduce our year-to-date debt levels by $168
million.
Fiscal 2019 Third Quarter Segment Results
Sally Beauty Supply
- Global segment same store sales decreased by 0.6% for the
quarter; same store sales in the U.S. and Canada were down
0.2%.
- Net sales were $575.0 million in the quarter, a decrease of
2.8% compared to the prior year, driven primarily by 70 fewer
stores, an unfavorable foreign exchange impact of approximately 120
basis points and continued challenges in Europe.
- The Sally Beauty businesses in the U.S. and Canada represented
78% of the segment sales for the quarter.
- At the end of the quarter, net store count was 3,705, a
decrease of 70 from the prior year.
- Gross margin increased 40 basis points to 55.8% in the quarter;
U.S. and Canada delivered significant gross margin improvements of
80 basis points.
- GAAP operating earnings were $95.8 million in the quarter, an
increase of 0.9% versus the prior year. GAAP operating margin was
16.7% as compared to 16.0% in the prior year.
Beauty Systems Group
- Same store sales increased by 1.4%.
- Net sales were $400.1 million in the quarter, a decrease of
1.1% compared to the prior year, driven primarily by declines in
the full service business. Foreign currency translation had an
unfavorable impact in the quarter of approximately 30 basis
points.
- At the end of the quarter, net store count was 1,384, a
decrease of 11 from the prior year.
- Gross margin decreased 60 basis points to 40.3% in the quarter.
While improvements were made from last quarter, the gross margin
decrease was driven primarily by continued challenges attributable
to the ongoing merchandising transformation.
- GAAP operating earnings were $61.6 million in the quarter, a
decrease of 0.8% versus the prior year. GAAP operating margin in
the quarter was 15.4% as compared to 15.3% in the prior year.
- At the end of the quarter, there were 791 distributor sales
consultants, compared to 837 in the prior year.
Fiscal Year 2019 Guidance
The Company remains on track
with its transformation plan for the remainder of the fiscal year
and is maintaining its full-year financial guidance.
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.
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, investor.sallybeautyholdings.com. The conference
call can be accessed by dialing (800) 230-1074 (International:
(612) 234-9960). 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. In addition, a
supplemental slide presentation may be viewed during the call at
the following link SBH Q3 Earnings Presentation. A replay of the
earnings conference call will be available starting at 9:30 a.m.
Central Time, July 31, 2019, through August 7, 2019, by dialing
(800) 475-6701 or if international, dial (320) 365-3844 and
reference the conference ID number 469312. Also, a website replay
will be available on investor.sallybeautyholdings.com
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH) is an international
specialty retailer and distributor of professional beauty supplies
with revenues of approximately $3.9 billion annually. Through the
Sally Beauty Supply and Beauty Systems Group businesses, the
Company sells and distributes through 5,089 stores, including 179
franchised units, and has operations throughout the United States,
Puerto Rico, Canada, Mexico, Chile, Peru, the United Kingdom,
Ireland, Belgium, France, the Netherlands, Spain and Germany. Sally
Beauty Supply stores offer up to 8,000 products for hair color,
hair care, skin care, and nails through proprietary brands such as
Ion®, Generic Value Products®, Beyond the Zone® and Silk Elements®
as well as professional lines such as Wella®, Clairol®, OPI®,
Conair® and Hot Shot Tools®. Beauty Systems Group stores, branded
as CosmoProf or Armstrong McCall stores, along with its outside
sales consultants, sell up to 10,500 professionally branded
products including Paul Mitchell®, Wella®, Matrix®, Schwarzkopf®,
Kenra®, Goldwell®, Joico® and CHI®, intended for use in salons and
for resale by salons to retail consumers. For more information
about Sally Beauty Holdings, Inc., please visit
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 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, but not limited to, the
risks and uncertainties described in our filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2018,
as filed with the Securities and Exchange Commission. 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 EBITDA and EBITDA Margin; (2) Adjusted Operating
Earnings and Operating Margin; (3) Adjusted Diluted Net Earnings
Per Share; and (4) 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 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 previously announced
restructuring plans and costs related to the previously disclosed
data security incidents 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 previously announced restructuring plans
and costs related to the previously disclosed data security
incidents 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 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 previously announced
restructuring plans and tax-effected costs related to the
previously disclosed data security incidents 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 Same Store 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,
2019
2018
Percentage Change
2019
2018
Percentage Change
Net sales
$
975,169
$
996,283
-2.1
%
$
2,910,474
$
2,966,568
-1.9
%
Cost of products sold
492,947
502,913
-2.0
%
1,479,222
1,500,247
-1.4
%
Gross profit
482,222
493,370
-2.3
%
1,431,252
1,466,321
-2.4
%
Selling, general and administrative expenses
360,183
378,598
-4.9
%
1,088,797
1,118,345
-2.6
%
Restructuring
1,908
12,544
-84.8
%
74
24,513
-99.7
%
Operating earnings
120,131
102,228
17.5
%
342,381
323,463
5.8
%
Interest expense
25,781
24,501
5.2
%
74,092
73,779
0.4
%
Earnings before provision for income taxes
94,350
77,727
21.4
%
268,289
249,684
7.5
%
Provision for income taxes
23,186
19,501
18.9
%
65,673
46,823
40.3
%
Net earnings
$
71,164
$
58,226
22.2
%
$
202,616
$
202,861
-0.1
%
Earnings per share: Basic
$
0.59
$
0.48
22.9
%
$
1.69
$
1.63
3.7
%
Diluted
$
0.59
$
0.48
22.9
%
$
1.68
$
1.62
3.7
%
Weighted average shares: Basic
120,119
120,901
120,062
124,331
Diluted
120,977
121,673
120,928
125,111
Basis Point Change
Basis Point Change
Comparison as a percentage of net
sales: Consolidated gross margin
49.5
%
49.5
%
—
49.2
%
49.4
%
(20
)
Selling, general and administrative expenses
36.9
%
38.0
%
(110
)
37.4
%
37.7
%
(30
)
Consolidated operating margin
12.3
%
10.3
%
200
11.8
%
10.9
%
90
Effective tax rate
24.6
%
25.1
%
(50
)
24.5
%
18.8
%
570
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
June 30, 2019
September 30, 2018
Cash and cash equivalents
$
57,855
$
77,295
Trade and other accounts receivable
96,996
90,490
Inventory
967,744
944,338
Other current assets
37,853
42,960
Total current assets
1,160,448
1,155,083
Property and equipment, net
292,371
308,357
Goodwill and other intangible assets
599,405
608,623
Other assets
20,047
25,351
Total assets
$
2,072,271
$
2,097,414
Current maturities of long-term debt
$
21,002
$
5,501
Accounts payable
272,629
303,241
Accrued liabilities
146,209
180,287
Income taxes payable
1,214
2,144
Total current liabilities
441,054
491,173
Long-term debt, including capital leases
1,589,663
1,768,808
Other liabilities
25,709
30,022
Deferred income tax liabilities
86,310
75,967
Total liabilities
2,142,736
2,365,970
Total stockholders' deficit
(70,465
)
(268,556
)
Total liabilities and stockholders' deficit
$
2,072,271
$
2,097,414
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Segment Information
(In thousands)
(Unaudited)
Three Months Ended June
30,
Nine Months Ended June
30,
2019
2018
Percentage Change
2019
2018
Percentage Change
Net sales: Sally Beauty Supply ("SBS")
$
575,025
$
591,583
-2.8
%
$
1,721,238
$
1,757,272
-2.1
%
Beauty Systems Group ("BSG")
400,144
404,700
-1.1
%
1,189,236
1,209,296
-1.7
%
Total net sales
$
975,169
$
996,283
-2.1
%
$
2,910,474
$
2,966,568
-1.9
%
Operating earnings: SBS
$
95,763
$
94,912
0.9
%
$
272,470
$
271,834
0.2
%
BSG
61,552
62,039
-0.8
%
180,401
186,553
-3.3
%
Segment operating earnings
157,315
156,951
0.2
%
452,871
458,387
-1.2
%
Unallocated expenses (1)
(35,276
)
(42,179
)
-16.4
%
(110,416
)
(110,411
)
0.0
%
Restructuring
(1,908
)
(12,544
)
-84.8
%
(74
)
(24,513
)
-99.7
%
Interest expense
(25,781
)
(24,501
)
5.2
%
(74,092
)
(73,779
)
0.4
%
Earnings before provision for income taxes
$
94,350
$
77,727
21.4
%
$
268,289
$
249,684
7.5
%
Segment gross margin:
2019
2018
Basis Point Change
2019
2018
Basis Point Change
SBS
55.8
%
55.4
%
40
55.4
%
55.2
%
20
BSG
40.3
%
40.9
%
(60
)
40.2
%
41.0
%
(80
)
Segment operating margin: SBS
16.7
%
16.0
%
70
15.8
%
15.5
%
30
BSG
15.4
%
15.3
%
10
15.2
%
15.4
%
(20
)
Consolidated operating margin
12.3
%
10.3
%
200
11.8
%
10.9
%
90
(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, Continued
(In thousands, except per share
data)
(Unaudited)
Three Months Ended June 30,
2019
As Reported (GAAP)
Restructuring (1)
As Adjusted (Non-GAAP)
Selling, general and administrative expenses
$
360,183
$
-
$
360,183
SG&A expenses, as a percentage of sales
36.9
%
36.9
%
Operating earnings
120,131
1,908
122,039
Operating margin
12.3
%
12.5
%
Earnings before provision for income taxes
94,350
1,908
96,258
Provision for income taxes (3)
23,186
469
23,655
Net earnings
$
71,164
$
1,439
$
72,603
Earnings per share: Basic
$
0.59
$
0.01
$
0.60
Diluted
$
0.59
$
0.01
$
0.60
Three Months Ended June 30,
2018
As Reported (GAAP)
Restructuring (1)
Charges from Data Security
Incidents (2)
As Adjusted (Non-GAAP)
Selling, general and administrative expenses
$
378,598
$
-
$
(7,935
)
$
370,663
SG&A expenses, as a percentage of sales
38.0
%
37.2
%
Operating earnings
102,228
12,544
7,935
122,707
Operating margin
10.3
%
12.3
%
Earnings before provision for income taxes
77,727
12,544
7,935
98,206
Provision for income taxes (3)
19,501
3,324
2,301
25,126
Net earnings
$
58,226
$
9,220
$
5,634
$
73,080
Earnings per share: Basic
$
0.48
$
0.08
$
0.05
$
0.60
Diluted
$
0.48
$
0.08
$
0.05
$
0.60
(1) For the three months ended June 30, 2019, restructuring
represents costs and expenses incurred in connection with the
supply chain modernization plan. For the three months ended June
30, 2018, restructuring represents costs and expenses incurred in
connection with the 2018 Restructuring Plan. (2) Charges
from data security incidents are included in selling, general and
administrative expenses and represent expenses (including
assessments by credit card networks, remediation costs, and other
costs and expenses) incurred in connection with the prior data
security incidents. (3) The income tax provision associated
with restructuring for the three months ended June 30, 2019 and
2018, was calculated using a 24.6% and 26.5% tax rate,
respectively. The income tax provision associated with other
charges for the three months ended June 30, 2018 was calculated
using a 29.0% tax rate.
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,
2019
As Reported (GAAP)
Restructuring (1)
As Adjusted (Non-GAAP)
Selling, general and administrative expenses
$
1,088,797
$
-
$
1,088,797
SG&A expenses, as a percentage of sales
37.4
%
37.4
%
Operating earnings
342,381
74
342,455
Operating margin
11.8
%
11.8
%
Earnings before provision for income taxes
268,289
74
268,363
Provision for income taxes (5)
65,673
(297
)
65,376
Net earnings
$
202,616
$
371
$
202,987
Earnings per share: Basic
$
1.69
$
0.00
$
1.69
Diluted
$
1.68
$
0.00
$
1.68
Nine Months Ended June 30,
2018
As Reported (GAAP)
Restructuring (1)
Charges from Data Security
Incidents (2)
Loss on Extinguishment of Debt
(3)
U.S. Tax Reform (4)
As Adjusted (Non-GAAP)
Selling, general and administrative expenses
$
1,118,345
$
-
$
(7,935
)
$
-
$
-
$
1,110,410
SG&A expenses, as a percentage of sales
37.7
%
37.4
%
Operating earnings
323,463
24,513
7,935
-
-
355,911
Operating margin
10.9
%
12.0
%
Earnings before provision for income taxes
249,684
24,513
7,935
876
-
283,008
Provision for income taxes (5)
46,823
5,687
2,301
254
22,202
77,267
Net earnings
$
202,861
$
18,826
$
5,634
$
622
$
(22,202
)
$
205,741
Earnings per share: Basic
$
1.63
$
0.15
$
0.05
$
0.01
$
(0.18
)
$
1.65
Diluted
$
1.62
$
0.15
$
0.05
$
0.00
$
(0.18
)
$
1.64
(1) For the nine months ended June 30, 2019, restructuring
represents costs and expenses incurred in connection with the
supply chain modernization plan, including a $6.6 million gain from
the sale of our secondary headquarters and fulfillment center, and
costs and expenses incurred in connection with the 2018
Restructuring Plan. For the nine months ended June 30, 2018,
restructuring represents costs and expenses incurred in connection
with the 2018 Restructuring Plan. (2) Charges from data
security incidents are included in selling, general and
administrative expenses and represent expenses (including
assessments by credit card networks, remediation costs, and other
costs and expenses) incurred in connection with the prior data
security incidents. (3) For the nine months ended June 30,
2018, interest expense reflects a loss on extinguishment of debt in
connection with a repricing of the variable-rate tranche of our
term loan B, resulting in a lower effective interest rate.
(4) U.S. tax reform represents the revaluation of deferred income
taxes and a deemed repatriation tax on previously undistributed
foreign earnings resulting from changes to U.S. federal tax law in
December 2017. (5) The income tax provision for the nine
months ended June 30, 2019, includes a provision in connection with
the $6.6 million gain, as described above, however, the realization
of tax benefits for a certain portion of the other costs associated
with restructuring are currently not deemed probable. The income
tax provision for the nine months ended June 30, 2018, was
calculated using a 23.2% tax rate for restructuring costs and 29.0%
tax rate for other charges.
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:
2019
2018
Percentage Change
2019
2018
Percentage Change
Net earnings
$
71,164
$
58,226
22.2
%
$
202,616
$
202,861
-0.1
%
Add: Depreciation and amortization
27,150
27,419
-1.0
%
80,425
81,428
-1.2
%
Interest expense
25,781
24,501
5.2
%
74,092
73,779
0.4
%
Provision for income taxes
23,186
19,501
18.9
%
65,673
46,823
40.3
%
EBITDA (non-GAAP)
147,281
129,647
13.6
%
422,806
404,891
4.4
%
Share-based compensation
1,858
2,387
-22.2
%
7,728
8,237
-6.2
%
Restructuring
1,908
12,544
-84.8
%
74
24,513
-99.7
%
Charges from Data Security Incidents
-
7,935
-100.0
%
-
7,935
-100.0
%
Adjusted EBITDA (non-GAAP)
$
151,047
$
152,513
-1.0
%
$
430,608
$
445,576
-3.4
%
Basis Point Change
Basis Point Change
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
15.5
%
15.3
%
20
14.8
%
15.0
%
(20
)
Operating Free Cash Flow:
2019
2018
Percentage Change
2019
2018
Percentage Change
Net cash provided by operating activities
$
93,713
$
102,480
-8.6
%
$
203,823
$
281,930
-27.7
%
Less: Payments for capital expenditures, net (1)
(20,354
)
(23,492
)
-13.4
%
(54,742
)
(62,171
)
-11.9
%
Operating free cash flow (non-GAAP)
$
73,359
$
78,988
-7.1
%
$
149,081
$
219,759
-32.2
%
(1) For the nine months ended June 30, 2019, payments for
capital expenditures, net includes cash proceeds of $12.0 million
from the sale of our secondary headquarters and fulfillment center
in connection with the supply chain modernization plan.
Supplemental Schedule 5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Store
Count and Same Store Sales (Unaudited)
As of June
30,
2019
2018
Change Number of stores: SBS: Company-operated stores
3,689
3,758
(69
)
Franchise stores
16
17
(1
)
Total SBS
3,705
3,775
(70
)
BSG: Company-operated stores
1,221
1,228
(7
)
Franchise stores
163
167
(4
)
Total BSG
1,384
1,395
(11
)
Total consolidated
5,089
5,170
(81
)
Number of BSG distributor sales consultants
791
837
(46
)
BSG distributor sales consultants (DSC) include 247 and 265
sales consultants employed by our franchisees at June 30, 2019 and
2018, respectively.
Three Months Ended June
30,
Nine Months Ended June
30,
2019
2018
Basis Point Change
2019
2018
Basis Point Change
Same store sales growth (decline): SBS
-0.6
%
-1.6
%
100
-0.1
%
-1.9
%
180
BSG
1.4
%
-2.9
%
430
0.0
%
-1.8
%
180
Consolidated
0.1
%
-2.0
%
210
-0.1
%
-1.9
%
180
For the purpose of calculating our same store sales metrics, we
compare the current period sales for stores open for 14 months or
longer as of the last day of a month with the sales for these
stores for the comparable period in the prior fiscal year. Our same
store sales are calculated in constant U.S. dollars and include
e-commerce sales, but do not generally include the sales from
stores relocated until 14 months after the relocation. The sales
from stores acquired are excluded from our same store sales
calculation until 14 months after the acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005141/en/
Jeff Harkins Investor Relations 940-297-3877
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