Q4 GAAP Diluted EPS of $0.59; Adjusted Diluted
EPS of $0.64
Q4 GAAP Operating Margin of 11.2%; Adjusted
Operating Margin of 11.7%
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, 2021. The Company will hold a conference
call today at 7:30 a.m. Central Time to discuss the
results.
Fiscal 2021 Fourth Quarter Summary
- Consolidated net sales increased 3.4% to $990 million with a
same store sales increase of 2.1%;
- Global e-commerce sales were $71 million, representing 7.1% of
net sales;
- Gross margin of 50.6%, down 50 basis points compared to the
prior year;
- GAAP operating earnings of $111 million and GAAP operating
margin of 11.2%, Adjusted Operating Earnings of $116 million and
Adjusted Operating Margin of 11.7%;
- Interest expense of $20 million compared to $28 million in the
prior year, reflecting the Company’s deleveraging efforts;
- GAAP diluted net earnings per share of $0.59 and Adjusted
Diluted Net Earnings Per Share of $0.64; and
- Strong cash flow from operations of $164 million, primarily
driven by strong earnings and timing of working capital
requirements.
Fiscal 2021 Full Year Summary
- Consolidated net sales increased 10.3% to $3.87 billion, with a
same store sales increase of 10.2%;
- Global e-commerce sales were $281 million, representing 7.2% of
net sales;
- Gross margin expanded 160 basis points to 50.4% compared to the
prior year;
- GAAP operating earnings of $418 million and GAAP operating
margin of 10.8%, Adjusted Operating Earnings of $461 million and
Adjusted Operating Margin of 11.9%;
- GAAP diluted net earnings per share of $2.10 and Adjusted
Diluted Net Earnings Per Share of $2.40;
- Strong cash flow from operations of $382 million;
- Strong liquidity position, cash and cash equivalents of $401
million with no outstanding borrowings under the $500 million
asset-based revolving line of credit at year end; and
- Retired approximately $420 million of debt during the fiscal
year.
“We are pleased to conclude the year with strong fourth quarter
performance, highlighted by net sales growth of 3.4%, adjusted
operating margin of 11.7% and operating cash flow of $164 million,”
said Denise Paulonis, president and chief executive officer. “In
fiscal 2021, we successfully executed on our stated priorities to
substantially complete the remaining elements of our transformation
and leverage our new capabilities and tools in service of our
mission to recruit and retain color customers. We rebounded
strongly from last year’s pandemic challenges, delivering net sales
growth of 10.3% while generating strong profitability and cash flow
and reducing our debt levels by over $400 million in fiscal
2021.”
“Serving on the Board of Directors over the last four years, I
have admired the tremendous work and dedication of our teams and
associates as they prioritized the customer and transformed our
business into a modern, dynamic beauty company. I am incredibly
excited to join this management team and look forward to building
upon our strong foundation of enhanced capabilities across CRM,
loyalty, e-commerce, merchandising, technology and talent, as we
pivot to a new era for SBH focused on customer centricity and the
acceleration of long-term profitable growth.”
Fiscal 2021 Fourth Quarter Operating Results
Fourth quarter consolidated net sales were $990.3 million, an
increase of 3.4% compared to the prior year, with a same store
sales increase of 2.1%. Foreign currency translation had a
favorable impact of approximately 90 basis points on reported
sales. The Company was operating 127 fewer stores at the end of the
quarter compared to the prior year. Global e-commerce sales were
$71 million or 7.1% of net sales for the quarter.
Consolidated gross profit for
the fourth quarter was $501.0 million compared to $489.1 million in
the prior year, an increase of 2.4%. Consolidated gross margin was
50.6%, a decrease of 50 basis points compared to 51.1% in the prior
year, primarily reflecting a higher mix of Beauty Systems Group
sales and a lower gross margin at Beauty Systems Group.
Selling, general and
administrative (SG&A) expenses totaled $386.5 million, up $19.6
million compared to the prior year, driven primarily by increased
labor and advertising costs, as previously planned. As a percentage
of sales, SG&A expenses were 39.0% compared to 38.3% in the
prior year.
GAAP operating earnings and operating margin in the fourth
quarter were $111.2 million and 11.2%, compared to $119.7 million
and 12.5%, in the prior year. Adjusted Operating Earnings and
Operating Margin, excluding the Company’s previously announced
restructuring efforts and COVID-19 related income in both years,
were $115.8 million and 11.7%, compared to $120.3 million and
12.6%, in the prior year.
GAAP net earnings in the
fourth quarter were $68.1 million, or $0.59 per diluted share,
compared to net earnings of $70.2 million, or $0.62 per diluted
share in the prior year. Adjusted Net Earnings were $73.1 million,
or $0.64 per diluted share, compared to Adjusted Net Earnings of
$70.7 million, or $0.63 per diluted share in the prior year.
Adjusted EBITDA in the fourth quarter was $143.4
million, a decrease of 2%
compared to the prior year, and Adjusted EBITDA Margin was 14.5%, a
decrease of 80 basis points compared to the prior year.
Balance Sheet and Cash Flow
As of September 30, 2021, the
Company had cash and cash equivalents of $401 million and no
borrowings outstanding under its asset-based revolving line of
credit. Fourth quarter cash flow from operations totaled
$164.1 million, capital
expenditures totaled $28.8 million and Operating Free Cash Flow totaled
$135.4 million. For the full fiscal year, cash flow from operations
totaled $381.9 million, capital expenditures totaled $73.7 million
and Operating Free Cash Flow totaled $308.2 million.
In fiscal 2021, the Company
reduced its debt levels by approximately $420 million.
Additionally, the Company ended the year with a net debt leverage
ratio of 1.69x.
Fiscal 2021 Fourth Quarter Segment Results
Sally Beauty Supply
- Segment net sales were $585.4 million in the quarter, an
increase of 1.5% compared to the prior year. The segment had a
favorable impact of 120 basis points from foreign currency
translation on reported sales and operated 104 fewer stores at the
end of the quarter compared to the prior year. Segment e-commerce
sales were $29 million or 5.0% of segment net sales for the
quarter.
- Segment same store sales increased 2.3% in the fourth quarter.
The Sally Beauty businesses in the U.S. and Canada represented 79%
of segment net sales for the quarter and had a same store sales
increase of 1.9%.
- At the end of the quarter, net store count was 3,549, a
decrease of 104 stores compared to the prior year.
- Gross margin decreased by 10 basis points to 57.5%, with the
Sally Beauty business in the U.S. and Canada delivering gross
margin of 60.9%. Product margin was up slightly compared to the
prior year, offset by higher distribution and freight costs.
- GAAP operating earnings were $105.7 million compared to $103.9
million in the prior year, representing an increase of 1.7%. GAAP
operating margin increased to 18.1% compared to 18.0% in the prior
year.
Beauty Systems Group
- Segment net sales were $404.9 million in the quarter, an
increase of 6.2% compared to the prior year. The segment had a
favorable impact from foreign currency translation of approximately
60 basis points on reported sales and operated 23 fewer stores at
the end of the quarter compared to the prior year. Segment
e-commerce sales were $42 million or 10.3% of segment net sales for
the quarter.
- Segment same store sales increased 1.7% in the fourth
quarter.
- At the end of the quarter, net store count was 1,362, a
decrease of 23 stores compared to the prior year.
- Gross margin decreased 50 basis points to 40.7% in the quarter,
driven primarily by a sales mix shift towards large volume/lower
margin full service customers that continued to rebound from the
COVID-19 impact in the prior year.
- GAAP operating earnings were $53.4 million in the quarter, an
increase of 5.4% compared to $50.6 million in the prior year. GAAP
operating margin in the quarter was 13.2% compared to 13.3% in the
prior year.
- At the end of the quarter, there were 719 distributor sales
consultants compared to 715 in the prior year.
Fiscal Year 2022 Guidance
The Company’s full year
guidance for fiscal year 2022 is outlined below and additional
perspective will be provided during the earnings conference
call.
- Net sales are expected to increase 3% to 4% compared to the
prior year;
- Net store count is expected to decrease by approximately 1% to
2% for the fiscal year, reflecting the Company’s focus on
optimizing its store portfolio;
- Gross margin is expected to expand by 40 to 60 basis points
compared to the prior year;
- GAAP operating margin is expected to increase by approximately
90 to 110 basis points compared to fiscal year 2021; and
- Adjusted Operating Margin is expected to be approximately flat
compared to fiscal year 2021.
Update on Financial Disclosures
Beginning in fiscal 2022, the Company will be replacing the same
store sales metric with comparable sales, which will include sales
from the full service divisions and franchise operations, including
any related e-commerce sales. In fiscal 2022, for each quarter the
Company will disclose both current and prior year comparable sales
under the new definition.
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 11, 2021. 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) 291-4185 (International: (409)
207-6997) and referencing the access code 3661420#. 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 Q4 Earnings Presentation and entering the event
password Ke5Yd3Prgt8. A
replay of the earnings conference call will be available starting
at 10:30 a.m. Central Time, November 11, 2021, through November 25,
2021, by dialing (866) 207-1041 (International: (402) 970-0847) and
referencing access code 5241224#. 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®, 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 10,000
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, but not limited to, the
risks and uncertainties related to COVID-19 and 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,
2020. 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 COVID-19
related personal protective equipment inventory 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 previously announced
restructuring plans, COVID-19 related net expenses, costs related
to the non-cash write down of inventory, and impairment charges
related to long-lived assets and operating lease assets not
included in restructuring 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 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
previously announced restructuring plans and tax-effected 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 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 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.
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 Consolidated
Statements of Earnings (In thousands, except per share data)
(Unaudited)
Three Months Ended September 30,
Twelve Months Ended September 30,
2021
2020
PercentageChange
2021
2020
PercentageChange Net sales
$
990,260
$
957,812
3.4
%
$
3,874,997
$
3,514,330
10.3
%
Cost of products sold
489,285
468,669
4.4
%
1,921,663
1,798,736
6.8
%
Gross profit
500,975
489,143
2.4
%
1,953,334
1,715,594
13.9
%
Selling, general and administrative expenses
386,542
366,982
5.3
%
1,530,280
1,442,809
6.1
%
Restructuring
3,240
2,484
30.4
%
4,611
14,025
(67.1
)%
Operating earnings
111,193
119,677
(7.1
)%
418,443
258,760
61.7
%
Interest expense
20,196
28,310
(28.7
)%
93,509
98,793
(5.3
)%
Earnings before provision for income taxes
90,997
91,367
(0.4
)%
324,934
159,967
103.1
%
Provision for income taxes
22,848
21,179
7.9
%
85,076
46,722
82.1
%
Net earnings
$
68,149
$
70,188
(2.9
)%
$
239,858
$
113,245
111.8
%
Earnings per share: Basic
$
0.60
$
0.63
(4.8
)%
$
2.13
$
0.99
115.2
%
Diluted
$
0.59
$
0.62
(4.8
)%
$
2.10
$
0.99
112.1
%
Weighted average shares: Basic
112,797
112,296
112,653
113,881
Diluted
114,565
113,090
114,212
114,680
Basis PointChange Basis PointChange Comparison as a percentage of net sales
Consolidated gross margin
50.6
%
51.1
%
(50
)
50.4
%
48.8
%
160
Selling, general and administrative expenses
39.0
%
38.3
%
70
39.5
%
41.1
%
(160
)
Consolidated operating margin
11.2
%
12.5
%
(130
)
10.8
%
7.4
%
340
Effective tax rate
25.1
%
23.2
%
190
26.2
%
29.2
%
(300
)
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
September 30,
2021
2020
Cash and cash equivalents
$
400,959
$
514,151
Trade and other accounts receivable
66,581
56,429
Inventory
871,349
814,503
Other current assets
44,686
48,014
Total current assets
1,383,575
1,433,097
Property and equipment, net
307,377
315,029
Operating lease asset
537,673
525,634
Goodwill and other intangible assets
596,741
598,321
Other assets
21,766
23,066
Total assets
$
2,847,132
$
2,895,147
Current maturities of long-term debt
$
194
$
180
Accounts payable
291,632
236,333
Accrued liabilities
206,155
170,665
Current operating lease liabilities
156,234
153,267
Income taxes payable
10,666
2,917
Total current liabilities
664,881
563,362
Long-term debt
1,382,530
1,796,897
Long-term operating lease liabilities
404,147
394,375
Other liabilities
29,056
32,976
Deferred income tax liabilities, net
85,777
92,094
Total liabilities
2,566,391
2,879,704
Total stockholders' equity
280,741
15,443
Total liabilities and stockholders' equity
$
2,847,132
$
2,895,147
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three
Months Ended September 30, Twelve Months Ended September
30,
2021
2020
Percentage Change
2021
2020
PercentageChange Net sales: Sally Beauty Supply ("SBS")
$
585,367
$
576,578
1.5
%
$
2,278,382
$
2,080,703
9.5
%
Beauty Systems Group ("BSG")
404,893
381,234
6.2
%
1,596,615
1,433,627
11.4
%
Total net sales
$
990,260
$
957,812
3.4
%
$
3,874,997
$
3,514,330
10.3
%
Operating earnings: SBS
$
105,683
$
103,904
1.7
%
$
417,658
$
237,588
75.8
%
BSG
53,398
50,649
5.4
%
205,078
194,206
5.6
%
Segment operating earnings
159,081
154,553
2.9
%
622,736
431,794
44.2
%
Unallocated expenses (1)
44,648
32,392
37.8
%
199,682
159,009
25.6
%
Restructuring
3,240
2,484
30.4
%
4,611
14,025
(67.1
)%
Interest expense
20,196
28,310
(28.7
)%
93,509
98,793
(5.3
)%
Earnings before provision for income taxes
$
90,997
$
91,367
(0.4
)%
$
324,934
$
159,967
103.1
%
Segment gross margin:
2021
2020
Basis PointChange
2021
2020
Basis PointChange SBS
57.5
%
57.6
%
(10
)
57.9
%
54.4
%
350
BSG
40.7
%
41.2
%
(50
)
39.8
%
40.7
%
(90
)
Segment operating margin: SBS
18.1
%
18.0
%
10
18.3
%
11.4
%
690
BSG
13.2
%
13.3
%
(10
)
12.8
%
13.5
%
(70
)
Consolidated operating margin
11.2
%
12.5
%
(130
)
10.8
%
7.4
%
340
(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, 2021 As
Reported Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP)
Cost of products sold
$
489,285
$
(1,444
)
$
—
$
487,841
Consolidated gross margin
50.6
%
50.7
%
Selling, general and administrative expenses
386,542
—
86
386,628
SG&A expenses, as a percentage of sales
39.0
%
39.0
%
Operating earnings
111,193
4,684
(86
)
115,791
Operating margin
11.2
%
11.7
%
Earnings before provision for income taxes
90,997
4,684
(86
)
95,595
Provision for income taxes (3)
22,848
376
(738
)
22,486
Net earnings
$
68,149
$
4,308
$
652
$
73,109
Earnings per share: Basic
$
0.60
$
0.04
$
0.01
$
0.65
Diluted
$
0.59
$
0.04
$
0.01
$
0.64
Three Months Ended September 30, 2020 As Reported
Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP) Cost of
products sold
$
468,669
$
—
$
—
$
468,669
Consolidated gross margin
51.1
%
51.1
%
Selling, general and administrative expenses
366,982
—
1,872
368,854
SG&A expenses, as a percentage of sales
38.3
%
38.5
%
Operating earnings
119,677
2,484
(1,872
)
120,289
Operating margin
12.5
%
12.6
%
Earnings before provision for income taxes
91,367
2,484
(1,872
)
91,979
Provision for income taxes (3)
21,179
584
(502
)
21,261
Net earnings
$
70,188
$
1,900
$
(1,370
)
$
70,718
Earnings per share: Basic
$
0.63
$
0.02
$
(0.01
)
$
0.63
Diluted
$
0.62
$
0.02
$
(0.01
)
$
0.63
(1) For the three months ended September 30, 2021,
restructuring represents expenses incurred primarily in connection
with the Transformation Plan, including $1.4 million related to
inventory. For the three months ended September 30, 2020,
restructuring represents expenses incurred primarily in connection
with Project Surge and the Transformation Plan. (2) For the
three months ended September 30, 2021, COVID-19 primarily
represents a rent subsidy provided by the Canadian government and
additional tax impact from the donation of personal-protective
equipment. For the three months ended September 30, 2020, COVID-19
primarily represents a wage subsidy provided by the Canadian
government under the Canada Emergency Wage Subsidy. (3) 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, 2021 As Reported Restructuring (1) COVID-19 (2) As
Adjusted(Non-GAAP) Cost of products sold
$
1,921,663
$
(1,444
)
$
(6,957
)
$
1,913,262
Consolidated gross margin
50.4
%
50.6
%
Selling, general and administrative expenses
1,530,280
—
(29,667
)
1,500,613
SG&A expenses, as a percentage of sales
39.5
%
38.7
%
Operating earnings
418,443
6,055
36,624
461,122
Operating margin
10.8
%
11.9
%
Earnings before provision for income taxes
324,934
6,055
36,624
367,613
Provision for income taxes (3)
85,076
640
7,910
93,626
Net earnings
$
239,858
$
5,415
$
28,714
$
273,987
Earnings per share: Basic
$
2.13
$
0.05
$
0.25
$
2.43
Diluted
$
2.10
$
0.05
$
0.25
$
2.40
Twelve Months Ended September 30, 2020 As Reported
Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP) Cost of
products sold
$
1,798,736
$
—
$
—
$
1,798,736
Consolidated gross margin
48.8
%
48.8
%
Selling, general and administrative expenses
1,442,809
—
(21,578
)
1,421,231
SG&A expenses, as a percentage of sales
41.1
%
40.4
%
Operating earnings
258,760
14,025
21,578
294,363
Operating margin
7.4
%
8.4
%
Earnings before provision for income taxes
159,967
14,025
21,578
195,570
Provision for income taxes (3)
46,722
3,551
5,183
55,456
Net earnings
$
113,245
$
10,474
$
16,395
$
140,114
Earnings per share: Basic
$
0.99
$
0.09
$
0.14
$
1.23
Diluted
$
0.99
$
0.09
$
0.14
$
1.22
(1) For fiscal year 2021, restructuring
represents expenses incurred primarily in connection with Project
Surge and the Transformation Plan, including the write-down of
inventory of $1.4 million in cost of products sold. For fiscal year
2020, restructuring represents expenses incurred primarily in
connection with Project Surge and the Transformation Plan.
(2) For fiscal year 2021, COVID-19 expenses primarily represents
the write-down of personal-protective equipment inventory of $7.0
million in cost of products sold and donation expense related to
the personal-protective equipment inventory of $33.0 million in
selling, general, and administrative expenses, partially offset by
wage and rent subsidies provided by the Canadian government of $3.4
million. For fiscal year 2020, COVID-19 primarily represents costs
associated with disaster pay and furloughed employees in response
to the coronavirus pandemic. These cost were partially offset by an
employee retention payroll tax credit provided by the U.S.
Coronavirus Aid, Relief, and Economic Security Act, or CARES Act,
and the Canada Emergency Wage Subsidy provided by the Canadian
government. (3) The provision for income taxes was
calculated using the applicable tax rates for each country upon the
recognition of expenses or gains, while excluding the tax benefits
for countries where the tax benefit is not currently deemed
probable of being realized.
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:
2021
2020
PercentageChange
2021
2020
PercentageChange Net earnings
$
68,149
$
70,188
(2.9
)%
$
239,858
$
113,245
111.8
%
Add:
Depreciation and amortization
24,111
25,950
(7.1
)%
102,201
106,779
(4.3
)%
Interest expense
20,196
28,310
(28.7
)%
93,509
98,793
(5.3
)%
Provision for income taxes
22,848
21,179
7.9
%
85,076
46,722
82.1
%
EBITDA (non-GAAP)
135,304
145,627
(7.1
)%
520,644
365,539
42.4
%
Inventory charges (1)
—
—
—
—
27,054
(100.0
)%
COVID-19
(86
)
(1,872
)
(95.4
)%
36,624
21,578
69.7
%
Restructuring
4,684
2,484
88.6
%
6,055
14,025
(56.8
)%
Share-based compensation
3,498
(668
)
(623.7
)%
11,656
8,426
38.3
%
Impairment (2)
—
982
(100.0
)%
—
1,883
(100.0
)%
Adjusted EBITDA (non-GAAP)
$
143,400
$
146,553
(2.2
)%
$
574,979
$
438,505
31.1
%
Basis PointChange Basis PointChange
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
14.5
%
15.3
%
(80
)
14.8
%
12.5
%
230
Operating Free Cash Flow:
2021
2020
PercentageChange
2021
2020
PercentageChange Net cash provided by operating activities
$
164,132
$
152,505
7.6
%
$
381,860
$
426,889
(10.5
)%
Less: Payments for property and equipment, net
28,770
21,103
36.3
%
73,669
110,805
(33.5
)%
Operating free cash flow (non-GAAP)
$
135,362
$
131,402
3.0
%
$
308,191
$
316,084
(2.5
)%
(1) Incremental, non-cash write down of inventory as part of
aggressive tactical inventory clearance actions. (2) Impairment
charges related to long-lived assets and operating lease assets
outside of restructuring. Supplemental Schedule 5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Store Count and
Same Store Sales (Unaudited)
As of September
30,
2021
2020
Change Number of stores: SBS: Company-operated stores
3,547
3,644
(97
)
Franchise stores
2
9
(7
)
Total SBS
3,549
3,653
(104
)
BSG: Company-operated stores
1,230
1,251
(21
)
Franchise stores
132
134
(2
)
Total BSG
1,362
1,385
(23
)
Total consolidated
4,911
5,038
(127
)
Number of BSG distributor sales consultants
719
715
4
BSG distributor sales consultants (DSC) include 194 and 183
sales consultants employed by our franchisees at September 30, 2021
and 2020, respectively.
Three Months Ended September 30,
Twelve Months Ended September 30,
2021
2020
Basis Point Change
2021
2020
Basis Point Change Same store sales growth (decline): SBS
2.3
%
1.7
%
60
9.7
%
(8.1
)%
1,780
BSG
1.7
%
0.6
%
110
11.0
%
(8.3
)%
1,930
Consolidated
2.1
%
1.3
%
80
10.2
%
(8.1
)%
1,830
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/20211111005461/en/
Jeff Harkins Investor Relations 940-297-3877
jharkins@sallybeauty.com
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