- GAAP Diluted EPS Grows to $0.62; Increasing 6.9% Compared to
Prior Year
- Adjusted Diluted EPS Grows to $0.63; Increasing 8.6%
Compared to Prior Year
- Positive Same Store Sales Growth of +1.3% for Enterprise;
+3.7% for Sally Beauty U.S. and Canada
- E-commerce Sales Growth Continues: +69% Globally Compared to
Prior Year
- Gross Margin Sees Strong Expansion: Up 150 Basis Points
Compared to Prior Year to 51.1%
- Strong Cash Flow from Operations of $153 Million, Driven by
Working Capital Improvements; Operating Free Cash Flow of $131
Million
- $445 Million of Debt Reduction in Quarter, With Ample
Liquidity Remaining; Balance Sheet Cash of $514 Million
- Agile Reaction to COVID-19 and Continued Transformation
Progress Provide Runway for FY21
Sally Beauty Holdings, Inc.
(NYSE: SBH) (“the Company”) today announced financial results for
its fourth quarter ended September 30, 2020. The Company will hold
a conference call today at 7:30 a.m. Central Time to discuss these
results.
Fiscal 2020 Fourth Quarter Overview
For the fourth quarter, consolidated same store sales increased
by 1.3%. Consolidated net sales were $957.8 million in the fourth
quarter, down 0.8% compared to the prior year, as an increase in
same store sales, led by a +3.7% from the Sally Beauty U.S. and
Canadian retail business, and a favorable impact from foreign
currency translation of approximately 20 basis points on reported
sales, was offset by a slower recovery from elements of Beauty
Systems Group’s full-service business, the impact of lost
professional sales associated with the second round of COVID-19
related shut-downs of California salons during parts of July and
August, and a smaller store base with 23 fewer stores compared to
the prior year. Global e-commerce sales grew by 69% in the fourth
quarter compared to the prior year.
GAAP diluted earnings per share in the fourth quarter were
$0.62, compared to $0.58 in the prior year, an increase of 6.9%,
driven primarily by a much stronger gross margin rate, lower income
tax expense, and a lower average share count; which was partially
offset by modestly higher selling, general and administrative
expenses due to higher e-commerce delivery expense and continued
transformation investment, and an increase in interest expense.
Adjusted diluted earnings per share, excluding charges related to
the Company’s previously announced restructuring efforts in both
years and COVID-19 related income in the current year from a
Canadian wage subsidy, were $0.63 in the fourth quarter, compared
to $0.58 in the prior year, an increase of 8.6%.
“During the fourth quarter, we saw a significant acceleration in
our sales and margin performance compared to the third quarter
boosted by the reopening and stabilization of our operations across
the globe and progress from our strategic initiatives in
innovation, digital content, technology and talent. While total
reported sales for the fourth quarter slightly trailed the prior
year period, due primarily to the ongoing impact of the COVID
crisis and fewer stores, we are pleased to report positive same
store sales and significant gross margin expansion. We ended the
year with strong liquidity, including $131 million in operating
free cash flow for the quarter and a strengthened balance sheet
with over $500 million of cash after proactively reducing our debt
levels by $445 million. I am proud of our 30,000 associates around
the world who assisted our Company in meeting the needs of our
customers during this unsettling time,” said Chris Brickman,
president and chief executive officer.
“We begin fiscal 2021 focused on completing our transformation
plan while maintaining stringent financial discipline and ample
liquidity as uncertainty remains as to the duration and severity of
the pandemic. Our strategic initiatives will involve capitalizing
on strong consumer interest in DIY hair color, building and
refining our digital customer experience including the addition of
‘Buy Online / Pickup In-Store’, growing our new Private Label
Rewards Credit Card Program, expanding the rollout of JDA to the
rest of our distribution centers, and growing our partnerships with
Female-owned and Black-owned brands. This should provide our
Company with a strong platform as we navigate past COVID-19 and
achieve our goal of sustained long-term profitable growth.”
Update on Transformation Plan
Despite the disruptions caused by COVID-19, the Company
completed key objectives of our Transformation Plan in Fiscal Year
2020, including:
- The rollout of the Oracle-based point-of-sale system to both
Sally Beauty and Beauty Systems Group stores;
- The national launch of the new Sally Beauty brand campaign
‘Unleash Your PROtential’;
- The launch of new service models including ‘Ship-From-Store’ at
2,400 Sally Beauty stores, ‘Same-Day Delivery’ at 1,000 Beauty
Systems Group stores and ‘Curbside Pickup’ in both segments;
- The launch of the new Private Label Rewards Credit Card Program
at both Sally Beauty and Beauty Systems Group; and
- The addition of key talent across store operations,
merchandising, marketing, e-commerce and finance.
As we move into Fiscal Year 2021, the Company’s focus will be
on the following key initiatives:
- Leveraging elevated digital capabilities through the rollout of
‘Buy Online / Pickup In-Store’ at all Sally U.S. retail stores in
November and expanding it to Beauty Systems Group stores in the
second half of the year;
- Growing customer engagement and loyalty through the recently
launched Private Label Rewards Credit Card Program for the Sally
Beauty segment and the new Beauty Systems Group loyalty framework,
and redesigning of the Beauty Systems Group e-commerce site and
mobile app;
- Increasing brand partnerships that resonate strongly with our
customers, including growing our leadership in Female-owned and
Black-owned brands;
- Optimizing efficiencies and driving savings through the ongoing
rollout of JDA, our new merchandising and supply chain platform, to
all distribution centers; and
- Continuing to build and refine our digital customer experience,
globally.
Fiscal 2020 Fourth Quarter Financial Detail
Consolidated gross profit for
the fourth quarter was $489.1 million, an increase of $9.9 million
from the prior year. Consolidated gross margin was 51.1%, an
increase of 150 basis points compared to the prior year, driven
primarily by fewer promotions and favorable mix shifts to higher
margin categories, partially offset by a reduction in vendor
allowances from fewer promotions and reduced inventory
purchases.
As a percentage of sales,
selling, general and administrative expenses were 38.3% compared to
37.7% in the prior year, driven primarily by higher e-commerce
delivery expense, continued transformation investment, and a lower
sales volume compared to the prior year.
GAAP operating earnings and operating margin in the fourth
quarter were $119.7 million and 12.5%, respectively, compared to
$116.1 million and 12.0%, respectively, in the prior year. Adjusted
operating earnings and operating margin were $120.3 million and
12.6%, respectively, compared to $115.3 million and 11.9%,
respectively, in the prior year.
GAAP net earnings in the
fourth quarter were $70.2 million, an increase of $1.2 million, or
1.7% compared to the prior year. Adjusted EBITDA in the fourth
quarter was $146.6 million, an increase of $2.5 million, or
1.8%, compared to the prior year, and adjusted EBITDA margin was
15.3%, an increase of 40 basis points compared to the prior
year.
During the fourth quarter,
cash flow from operations was $152.5 million, an increase of 30.8% compared to the
prior year, driven in part by working capital improvements. Capital
expenditures totaled $21.1 million. Operating free cash flow was
$131.4 million, an
increase of 66.6% compared to the prior year.
The Company used cash to
reduce its debt levels by $445 million, including paying off its
outstanding balance on its revolving line of credit of $375
million, the entire FILO loan balance of $20 million, and $50
million of the fixed portion of its Term Loan B. The Company did
not repurchase any shares during the quarter. In addition, the
Company also completed a small acquisition in Quebec, Canada, which
added 10 stores, 17 direct sales consultants and exclusive
distribution rights to premier professional hair color and hair
care brands such as Wella Professional, Goldwell and
Oribé.
At the end of the fourth
quarter, the Company had $514 million in cash on the balance sheet
and a zero balance on its $600 million revolving line of credit.
Generally, the Company ended the quarter with a leverage ratio of
2.88x, reflecting our significant cash balance. For comparison
purposes, the leverage ratio, as defined in our loan agreements,
where the impact of cash on-hand is capped at $100 million for net
debt calculation purposes, was 3.79x.
Fiscal 2020 Fourth Quarter Segment Results
Sally Beauty Supply
- Global segment same store sales increased by 1.7% for the
fourth quarter. The Sally Beauty businesses in the U.S. and Canada
represented 80% of the segment sales for the quarter and had a same
store sales increase of 3.7%. Europe had a decrease in same store
sales for the quarter while Latin America had a significant decline
in same store sales given approximately 15% of the stores were
closed for more than half of the quarter due to COVID-19.
- Net sales were $576.6 million in the quarter, an increase of
0.8% compared to the prior year, driven primarily by the increase
in same store sales, a favorable foreign exchange impact of
approximately 40 basis points, partially offset by 42 fewer stores
compared to the prior year and the temporary store closures in
Latin America due to COVID-19.
- At the end of the quarter, net store count was 3,653, a decline
of 42 stores compared to the prior year.
- Gross margin increased by 180 basis points to 57.6% in the
quarter with the Sally Beauty business in the U.S. and Canada
hitting a gross margin of 61.0% for the first time. The positive
impact from fewer promotions and favorable product mix were
partially offset by lower vendor allowances.
- GAAP operating earnings were $103.9 million in the quarter, an
increase of 10.6% compared to the prior year. GAAP operating margin
was 18.0%, compared to 16.4% in the prior year.
Beauty Systems Group
- Total segment same store sales increased by 0.6% for the fourth
quarter. The COVID-19 related shut-down of California salons had an
unfavorable impact of approximately 90 basis points on the
segment’s same store sales.
- Net sales were $381.2 million in the quarter, a decrease of
3.3% compared to the prior year, driven primarily by a slower
recovery from the national account chain business, the impact of
lost sales associated with the second round of COVID-19 related
shut-downs of California salons during parts of July and August,
and an unfavorable foreign exchange impact of approximately 10
basis points.
- At the end of the quarter, net store count was 1,385, an
increase of 19 stores compared to the prior year.
- Gross margin increased by 60 basis points to 41.2% in the
quarter, driven primarily by fewer promotions but partially offset
by lower vendor allowances.
- GAAP operating earnings were $50.6 million in the quarter, a
decrease of 14.4% compared to the prior year. GAAP operating margin
in the quarter was 13.3%, compared to 15.0% in the prior year.
- At the end of the quarter, there were 715 distributor sales
consultants, compared to 748 in the prior year.
Fiscal 2020 Full-Year Financial Highlights
For the full fiscal year,
consolidated same store sales decreased by 8.1%. Consolidated net
sales were $3.51 billion, a decrease of 9.3%, driven primarily by
the impact of COVID-19 shut-downs, operating 23 fewer stores, and
an unfavorable impact from foreign currency translation of
approximately 10 basis points. Global e-commerce sales grew by 103%
compared to the prior year.
Full-year gross margin was 48.8%, a decrease of 50 basis points
compared to the prior year. The primary drivers for the decline
were from the non-cash write down of inventory of $27.1 million
that occurred in the third quarter and lower vendor allowances from
fewer promotions and reduced inventory purchases, which were mostly
offset by the benefits of fewer promotions and the favorable mix
shift to higher margin categories.
As a percentage of sales,
selling, general and administrative expenses were 41.1% compared to
37.5% in the prior year, driven primarily by the significant
deleveraging from lost sales related to COVID-19.
GAAP operating earnings and operating margin for the full fiscal
year were $258.8 million and 7.4%, respectively, compared to $458.5
million and 11.8%, respectively, in the prior year. Adjusted
operating earnings and operating margin, excluding COVID-19 net
expenses in the current year and charges related to the Company’s
transformation efforts in both years, were $294.4 million and 8.4%,
respectively, compared to $457.8 million and 11.8%, respectively,
in the prior fiscal year.
GAAP net earnings for the full
fiscal year were $113.2 million, a decrease of $158.4 million, or
58.3%, from the prior year. Full-year Adjusted EBITDA was $438.5
million, a decrease of 23.7% from the prior year, and Adjusted
EBITDA margin was 12.5%, a decline of approximately 230 basis
points from the prior year.
GAAP diluted earnings per share for the full fiscal year were
$0.99, a decline of 56.2% compared to the prior year. Adjusted
diluted earnings per share in fiscal year 2020 were $1.22, a
decline of 46.0% compared to the prior year.
For the full fiscal year, cash
flow from operations was $426.9 million, an increase of 33.2%
compared to the prior year, driven in part by working capital
improvements. Net payments for capital expenditures totaled $110.8
million. Operating free cash flow was $316.1 million, an increase
of 38.7% compared to the prior year. For the full fiscal year, the
Company repurchased 4.7 million shares at an aggregate cost of
$61.4 million.
Fiscal 2020 Full-Year Segment Results
Sally Beauty Supply
- Global segment same store sales decreased by 8.1% for the full
fiscal year, driven primarily by COVID-19 related store shutdowns.
The Sally Beauty businesses in the U.S. and Canada represented 80%
of the segment sales for the full fiscal year and had a decrease in
same store sales of 6.5%.
- Net sales were $2.08 billion for the full fiscal year, a
decrease of 9.3% compared to the prior year, driven primarily by
the disruption to business operations from COVID-19, 42 fewer
stores, and an unfavorable foreign exchange impact of approximately
20 basis points.
- Gross margin decreased by 110 basis points to 54.4% for the
full fiscal year, driven primarily by the non-cash write down of
inventory that occurred in the third quarter, lower vendor
allowances from fewer promotions and reduced inventory purchases,
which were partially offset by the benefits of fewer promotions and
the favorable mix shift to higher margin categories.
- GAAP operating earnings were $237.6 million for the full fiscal
year, a decrease of 35.2% compared to the prior year, driven
primarily by the impact from COVID-19. GAAP operating margin was
11.4% compared to 16.0% in the prior year.
Beauty Systems Group
- Total segment same store sales decreased by 8.3% for the full
fiscal year, driven primarily by the impact from COVID-19 related
shutdowns.
- Net sales were $1.43 billion for the full fiscal year, a
decrease of 9.5% compared to the prior year, driven primarily by
the disruption to business operations from COVID-19 and an
unfavorable foreign currency translation impact of approximately 10
basis points.
- Gross margin increased by 40 basis points at 40.7% for the full
fiscal year, driven primarily by fewer promotions, which was
partially offset by lower vendor allowances from fewer promotions
and reduced inventory purchases.
- GAAP operating earnings were $194.2 million for the full fiscal
year, a decrease of 18.9% compared to the prior year, driven
primarily by the impact of COVID-19. GAAP operating margin was
13.5% compared to 15.1% in the prior year.
Fiscal Year 2021 Outlook
The Company will provide
perspective on its outlook for the coming quarters during its
earnings conference call. The Company will not be providing formal
guidance at this time.
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,
sallybeautyholdings.com/investor-relations. The conference call can be accessed by
dialing (844) 867-6169 (International: (409) 207-6975) and
referencing the access code 4004457#. 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. A replay of the
earnings conference call will be available starting at 10:30 a.m.
Central Time, November 12, 2020, through November 19, 2020, by
dialing (866) 207-1041 (International: (402) 970-0847 and reference
access code 4087901. Also, a website replay will be available
on
sallybeautyholdings.com/investor-relations.
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 $3.5 billion annually. Through the
Sally Beauty Supply and Beauty Systems Group businesses, the
Company sells and distributes through 5,038 stores, including 143
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. On
average, Sally Beauty Supply stores offer about 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®. On average, Beauty
Systems Group stores, branded as Cosmo Prof or Armstrong McCall
stores, along with its outside sales consultants, sell about 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 related to COVID-19 and those 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, 2019, our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2020, and our Current Report on Form 8-K
dated as of July 30, 2020, each 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, costs related to COVID-19, costs related to
the non-cash write down of inventory related to slow moving SKUs
and impairment costs related to long-lived 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 costs 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 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 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,
2020
2019
Percentage
Change
2020
2019
Percentage
Change
Net sales
$ 957,812
$ 965,937
(0.8)%
$ 3,514,330
$ 3,876,411
(9.3)%
Cost of products sold
468,669
486,646
(3.7)%
1,798,736
1,965,869
(8.5)%
Gross profit
489,143
479,291
2.1 %
1,715,594
1,910,542
(10.2)%
Selling, general and administrative expenses
366,982
363,955
0.8 %
1,442,809
1,452,751
(0.7)%
Restructuring
2,484
(756)
(428.6)%
14,025
(682)
(2156.5)%
Operating earnings
119,677
116,092
3.1 %
258,760
458,473
(43.6)%
Interest expense
28,310
22,217
27.4 %
98,793
96,309
2.6 %
Earnings before provision for income taxes
91,367
93,875
(2.7)%
159,967
362,164
(55.8)%
Provision for income taxes
21,179
24,868
(14.8)%
46,722
90,541
(48.4)%
Net earnings
$ 70,188
$ 69,007
1.7 %
$ 113,245
$ 271,623
(58.3)%
Earnings per share: Basic
$0.63
$0.58
8.6 %
$0.99
$2.27
(56.4)%
Diluted
$0.62
$0.58
6.9 %
$0.99
$2.26
(56.2)%
Weighted average shares: Basic
112,296
118,374
113,881
119,636
Diluted
113,090
118,997
114,680
120,283
Basis Point
Change
Basis Point
Change
Comparison as a percentage of net
sales Consolidated gross margin
51.1%
49.6%
150
48.8%
49.3%
(50)
Selling, general and administrative expenses
38.3%
37.7%
60
41.1%
37.5%
360
Consolidated operating margin
12.5%
12.0%
50
7.4%
11.8%
(440)
Effective tax rate
23.2%
26.5%
(330)
29.2%
25.0%
420
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets (In
thousands) (Unaudited)
September 30,
2020
2019
Cash and cash equivalents
$ 514,151
$ 71,495
Trade and other accounts receivable
56,429
104,539
Inventory
814,503
952,907
Other current assets
48,014
34,612
Total current assets
1,433,097
1,163,553
Property and equipment, net
315,029
319,628
Operating lease asset
525,634
—
Goodwill and other intangible assets
598,321
592,837
Other assets
23,066
22,428
Total assets
$ 2,895,147
$ 2,098,446
Current maturities of long-term debt
$ 180
$ 1
Accounts payable
236,333
278,688
Accrued liabilities
170,665
169,054
Current operating lease liabilities
153,267
—
Income taxes payable
2,917
8,336
Total current liabilities
563,362
456,079
Long-term debt
1,796,897
1,594,542
Long-term operating lease liabilities
394,375
—
Other liabilities
32,976
27,757
Deferred income tax liabilities, net
92,094
80,391
Total liabilities
2,879,704
2,158,769
Total stockholders' equity (deficit)
15,443
(60,323)
Total liabilities and stockholders' equity (deficit)
$ 2,895,147
$ 2,098,446
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS,
INC. AND SUBSIDIARIES Segment Information (In thousands)
(Unaudited)
Three Months Ended September 30,
Twelve Months Ended September 30,
2020
2019
Percentage
Change
2020
2019
Percentage
Change
Net sales: Sally Beauty Supply ("SBS")
$
576,578
$
571,856
0.8
%
$
2,080,703
$
2,293,094
(9.3
)%
Beauty Systems Group ("BSG")
381,234
394,081
(3.3
)%
1,433,627
1,583,317
(9.5
)%
Total net sales
$
957,812
$
965,937
(0.8
)%
$
3,514,330
$
3,876,411
(9.3
)%
Operating earnings: SBS
$
103,904
$
93,942
10.6
%
$
237,588
$
366,412
(35.2
)%
BSG
50,649
59,172
(14.4
)%
194,206
239,572
(18.9
)%
Segment operating earnings
154,553
153,114
0.9
%
431,794
605,984
(28.7
)%
Unallocated expenses (1)
32,392
37,778
(14.3
)%
159,009
148,193
7.3
%
Restructuring
2,484
(756
)
(428.6
)%
14,025
(682
)
(2156.5
)%
Interest expense
28,310
22,217
27.4
%
98,793
96,309
2.6
%
Earnings before provision for income taxes
$
91,367
$
93,875
(2.7
)%
$
159,967
$
362,164
(55.8
)%
Segment gross margin:
2020
2019
Basis Point
Change
2020
2019
Basis Point
Change
SBS
57.6
%
55.8
%
180
54.4
%
55.5
%
(110
)
BSG
41.2
%
40.6
%
60
40.7
%
40.3
%
40
Segment operating margin: SBS
18.0
%
16.4
%
160
11.4
%
16.0
%
(460
)
BSG
13.3
%
15.0
%
(170
)
13.5
%
15.1
%
(160
)
Consolidated operating margin
12.5
%
12.0
%
50
7.4
%
11.8
%
(440
)
(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, 2020
As Reported Restructuring (1) COVID-19 (2)
As Adjusted
(Non-GAAP)
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
Three Months Ended September
30, 2019
As Reported Restructuring (1)
As Adjusted
(Non-GAAP)
Selling, general and administrative expenses
$
363,955
$
—
$
363,955
SG&A expenses, as a percentage of sales
37.7
%
37.7
%
Operating earnings
116,092
(756
)
115,336
Operating margin
12.0
%
11.9
%
Earnings before provision for income taxes
93,875
(756
)
93,119
Provision for income taxes (3)
24,868
(277
)
24,591
Net earnings
$
69,007
$
(479
)
$
-
$
68,528
Earnings per share: Basic
$
0.58
$
(0.00
)
$
0.58
Diluted
$
0.58
$
(0.00
)
$
0.58
(1) For the three months ended
September 30, 2020, restructuring represents expenses incurred
primarily in connection with Project Surge and the Transformation
Plan. For the three months ended September 30, 2019, restructuring
represents a gain in connection with the sale of our Marinette,
Wisconsin, fulfillment center, partially offset by expenses
incurred in connection with the 2018 Restructuring Plan. (2)
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, 2020 As Reported Restructuring (1) COVID-19 (2)
As Adjusted
(Non-GAAP)
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
Twelve Months Ended September 30, 2019 As Reported
Restructuring (1)
As Adjusted
(Non-GAAP)
Selling, general and administrative expenses
$
1,452,751
$
—
$
1,452,751
SG&A expenses, as a percentage of sales
37.5
%
37.5
%
Operating earnings
458,473
(682
)
457,791
Operating margin
11.8
%
11.8
%
Earnings before provision for income taxes
362,164
(682
)
361,482
Provision for income taxes (3)
90,541
(573
)
89,968
Net earnings
$
271,623
$
(109
)
$
271,514
Earnings per share: Basic
$
2.27
$
(0.00
)
$
2.27
Diluted
$
2.26
$
(0.00
)
$
2.26
(1) For fiscal year 2020, restructuring
represents expenses incurred primarily in connection with Project
Surge and the Transformation Plan. For fiscal year 2019,
restructuring represents gains in connection with the sale of our
secondary headquarters and certain fulfillment centers, partially
offset by expenses incurred in connection with the 2018
Restructuring Plan. (2) COVID-19 primarily represents costs
associated with disaster pay for 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:
2020
2019
Percentage
Change
2020
2019
Percentage
Change
Net earnings
$
70,188
$
69,007
1.7
%
$
113,245
$
271,623
(58.3
)%
Add: Depreciation and amortization
25,950
27,233
(4.7
)%
106,779
107,658
(0.8
)%
Interest expense
28,310
22,217
27.4
%
98,793
96,309
2.6
%
Provision for income taxes
21,179
24,868
(14.8
)%
46,722
90,541
(48.4
)%
EBITDA (non-GAAP)
145,627
143,325
1.6
%
365,539
566,131
(35.4
)%
Inventory charges (1)
—
—
—
27,054
—
100.0
%
COVID-19
(1,872
)
—
100.0
%
21,578
—
100.0
%
Restructuring
2,484
(756
)
(428.6
)%
14,025
(682
)
(2156.5
)%
Share-based compensation
(668
)
1,452
(146.0
)%
8,426
9,180
(8.2
)%
Impairment (2)
982
—
100.0
%
1,883
—
100.0
%
Adjusted EBITDA (non-GAAP)
$
146,553
$
144,021
1.8
%
$
438,505
$
574,629
(23.7
)%
Basis Point
Change
Basis Point
Change
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
15.3
%
14.9
%
40
12.5
%
14.8
%
(230
)
Operating Free Cash Flow:
2020
2019
Percentage
Change
2020
2019
Percentage
Change
Net cash provided by operating activities
$
152,505
$
116,592
30.8
%
$
426,889
$
320,415
33.2
%
Less: Payments for property and equipment, net (3)
21,103
37,701
(44.0
)%
110,805
92,443
19.9
%
Operating free cash flow (non-GAAP)
$
131,402
$
78,891
66.6
%
$
316,084
$
227,972
38.7
%
(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. (3) For the three and
twelve months ended September 30, 2019, payments for property and
equipment, net includes cash proceeds of $3.3 million and $15.3
million, respectively, from the sale of our secondary headquarters
and certain fulfillment centers in connection with the
Transformation Plan. Supplemental Schedule 5
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Store Count and Same Store
Sales (Unaudited)
As of September 30,
2020
2019
Change
Number of stores: SBS: Company-operated stores
3,644
3,682
(38
)
Franchise stores
9
13
(4
)
Total SBS
3,653
3,695
(42
)
BSG: Company-operated stores
1,251
1,220
31
Franchise stores
134
146
(12
)
Total BSG
1,385
1,366
19
Total consolidated
5,038
5,061
(23
)
Number of BSG distributor sales consultants
715
748
(33
)
BSG distributor sales consultants (DSC) include 183 and 202
sales consultants employed by our franchisees at September 30, 2020
and 2019, respectively. Additionally, the DSC count at September
30, 2020 includes 17 new DSCs in connection with a BSG acquisition.
Three Months Ended September 30, Twelve Months Ended
September 30,
2020
2019
Basis Point
Change
2020
2019
Basis Point
Change
Same store sales growth (decline): SBS
1.7
%
1.3
%
40
(8.1
)%
0.4
%
(850
)
BSG
0.6
%
0.8
%
(20
)
(8.3
)%
0.2
%
(850
)
Consolidated
1.3
%
1.1
%
20
(8.1
)%
0.3
%
(840
)
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/20201112005324/en/
Jeff Harkins Investor Relations 940-297-3877
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