Q4 GAAP Diluted EPS of $0.20; Adjusted Diluted
EPS of $0.50
Q4 GAAP Operating Margin of 4.1%; Adjusted
Operating Margin of 8.7%
- Announces Distribution Center Consolidation and Acceleration
of Store Optimization Plan
- Outlines New Strategic Initiatives and Long-Term
Outlook
- Provides Fiscal 2023 Guidance
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”), the
leader in professional hair color, today announced financial
results for its fourth quarter and full year ended September 30,
2022. The Company will hold a conference call today at 7:30 a.m.
Central Time to discuss these results and its business.
Fiscal 2022 Fourth Quarter Summary
- Consolidated net sales of $962 million, a decrease of 2.8%,
with comparable sales flat to the prior year;
- Global e-commerce sales of $90 million, representing 9.3% of
net sales;
- GAAP gross margin decreased 240 basis points to 48.2%, driven
primarily by a non-cash inventory write-down of $19.4 million
related to the distribution center consolidation and store
optimization plan; Adjusted Gross Margin decreased 60 basis points
to 50.1%;
- GAAP operating earnings of $39 million and GAAP operating
margin of 4.1%, Adjusted Operating Earnings of $84 million and
Adjusted Operating Margin of 8.7%; and
- GAAP diluted net earnings per share of $0.20 and Adjusted
Diluted Net Earnings Per Share of $0.50.
Fiscal 2022 Full Year Summary
- Consolidated net sales of $3.82 billion, a decrease of 1.5%,
with a comparable sales increase of 0.6%;
- Global e-commerce sales were $333 million, representing 8.7% of
net sales;
- GAAP gross margin decreased 10 basis points to 50.3% and
Adjusted Gross Margin expanded 30 basis points to 50.9%;
- GAAP operating earnings of $338 million and GAAP operating
margin of 8.8%, Adjusted Operating Earnings of $391 million and
Adjusted Operating Margin of 10.3%;
- GAAP diluted net earnings per share of $1.66 and Adjusted
Diluted Net Earnings Per Share of $2.16; and
- Repurchased 6.8 million shares at an aggregate cost of $130.3
million and completed full repayment of $300 million of 8.75%
senior secured notes.
“In fiscal 2022, we delivered net sales of $3.8 billion, gross
margins above 50% and adjusted EBITDA of more than $500 million
amidst a highly dynamic and challenging macro environment,” said
Denise Paulonis, president and chief executive officer. “Our teams
executed well, navigating inflationary pressures and supply chain
headwinds, while remaining focused on serving our customers.”
“As we turn to fiscal 2023, the teams will continue to leverage
the omni-channel capabilities and modern retail infrastructure we
have built. Additionally, we will be executing against three
strategic initiatives that will serve as the foundation for us to
inspire a more colorful, confident and welcoming world. We will
enhance our customer centricity, including an expanded services
ecosystem to support our professional stylists and increased
education and expertise to inspire and support all customers; grow
our Sally portfolio of high margin owned brands and amplify
innovation; and increase the efficiency of our operations.
Moreover, we will also advance our ESG and our diversity, inclusion
and belonging commitments. These strategic initiatives are designed
to build upon our core strengths in hair color and care, and drive
long-term financial performance and shareholder value.”
Distribution Center Consolidation and Store Optimization
Plan
Over the last several quarters, the Company has been piloting
store closures in various markets with the goal of maximizing the
value of its large store portfolio and providing a seamless
omni-channel experience to its customers. Based on positive sales
recapture rates and improved profitability within those markets,
the Company is accelerating its store optimization plan, including
the closure of approximately 350 stores with the majority closing
in December 2022. Most of the store closings will be Sally Beauty
locations in the U.S. In addition, the Company will also be
optimizing its supply chain by closing two small distribution
centers in Oregon and Pennsylvania and transferring the volumes to
larger distribution centers, effective in December 2022. As part of
this optimization plan, the Company incurred a $45.5 million charge
in the fourth quarter of 2022, which includes a $19.4 million
non-cash inventory write-down. The expense savings from this
optimization plan is expected to be approximately $50 million with
an expected benefit of approximately $10 million to adjusted
operating earnings for fiscal year 2023.
Long-Term Strategic Initiatives and Outlook
Beginning in fiscal 2023, the Company will be leveraging the
modern retail infrastructure it has built in recent years, and
focusing on three key strategic initiatives to drive growth and
profitability:
- Enhance our customer centricity, including an expanded services
ecosystem that supports professional stylists, and increased
education and expertise to inspire and support all customers;
- Grow high margin owned brands at Sally Beauty and amplify
innovation; and
- Increase the efficiency of operations and optimize our
capabilities.
The Company believes these initiatives will support a long-term
growth algorithm of low- to mid-single-digit net sales growth,
gross margins above 50% and low double-digit operating margins.
Fiscal 2022 Fourth Quarter Operating Results
Fourth quarter consolidated net sales were $962.5 million, a
decrease of 2.8% compared to the prior year. Comparable sales were
flat to the prior year, and were unfavorably impacted by
inflationary pressures that continued to impact consumer behavior
and supply chain challenges at Beauty Systems Group. The Company
was operating 117 fewer stores at the end of the quarter compared
to the prior year. Foreign currency translation had an unfavorable
impact of 170 basis points on consolidated net sales for the
quarter. At constant currency, global e-commerce sales increased
30% compared to the prior year to $90 million or 9.3% of
consolidated net sales for the quarter.
Consolidated gross profit for the fourth quarter was $463.5
million compared to $501.0 million in the prior year, a decrease of
7.5%. Consolidated GAAP gross margin was 48.2%, a decrease of 240
basis points compared to 50.6% in the prior year, driven primarily
by a non-cash inventory write-down of $19.4 million as a result of
the Company’s distribution center consolidation and store
optimization plan. Excluding the inventory write-down, Adjusted
Gross Margin was 50.1%, a decrease of 60 basis points compared to
50.7% in the prior year, as higher product margin from pricing
leverage at Sally Beauty was more than offset by a sales mix shift
between Sally Beauty and Beauty Systems Group and higher
distribution and freight costs in both segments.
Selling, general and administrative (SG&A) expenses totaled
$397.9 million, up $11.3 million compared to the prior year, driven
primarily by increased labor costs, partially offset by lower bonus
expense. As a percentage of sales, SG&A expenses were 41.3%
compared to 39.0% in the prior year.
GAAP operating earnings and operating margin in the fourth
quarter were $39.2 million and 4.1%, compared to $111.2 million and
11.2%, in the prior year. Adjusted Operating Earnings and Operating
Margin, excluding the Company’s restructuring efforts and COVID-19
related net expenses, were $83.9 million and 8.7%, compared to
$115.8 million and 11.7%, in the prior year.
GAAP net earnings in the fourth quarter were $21.3 million, or
$0.20 per diluted share, compared to GAAP net earnings of $68.1
million, or $0.59 per diluted share in the prior year. Adjusted Net
Earnings, excluding the Company’s restructuring efforts and
COVID-19 related net expenses, were $54.4 million, or $0.50 per
diluted share, compared to Adjusted Net Earnings of $73.1 million,
or $0.64 per diluted share in the prior year. Adjusted EBITDA in
the fourth quarter was $112.4 million, a decrease of 21.6% compared
to the prior year, and Adjusted EBITDA Margin was 11.7%, a decrease
of 280 basis points compared to the prior year.
Balance Sheet and Cash Flow
As of September 30, 2022, the Company had cash and cash
equivalents of $71 million and an outstanding balance of $69
million under its asset-based revolving line of credit. At the end
of the quarter, inventory was $936.4 million, up 7.5% versus a year
ago. Fourth quarter cash flow from operations was $107.3 million.
Capital expenditures in the quarter totaled $32.0 million.
The Company ended the quarter with a net debt leverage ratio of
2.2x.
Fiscal 2022 Fourth Quarter Segment Results
Sally Beauty Supply
- Segment net sales were $554.0 million in the quarter, a
decrease of 5.4% compared to the prior year. The segment had an
unfavorable impact of 270 basis points from foreign currency
translation on reported sales and operated 110 fewer stores at the
end of the quarter compared to the prior year. At constant
currency, segment e-commerce sales increased 20% to $33 million or
6.0% of segment net sales for the quarter.
- Segment comparable sales decreased 1.1% in the fourth quarter.
The Sally Beauty businesses in the U.S. and Canada represented 80%
of segment net sales for the quarter and had a comparable sales
decrease of 2.0%, primarily reflecting inflationary pressures that
impacted consumer behavior.
- At the end of the quarter, net store count was 3,439.
- GAAP gross margin decreased by 90 basis points to 56.6%
compared to the prior year. The decrease was primarily driven by
the inventory write-down related to the Company’s store
optimization plan. Excluding the inventory write-down, Adjusted
Gross Margin increased 60 basis points to 58.3% compared to the
prior year. The increase was primarily driven by pricing leverage,
partially offset by higher distribution and freight costs.
- GAAP operating earnings were $80.5 million compared to $105.7
million in the prior year, representing a decrease of 23.8%. GAAP
operating margin decreased to 14.5% compared to 18.1% in the prior
year.
Beauty Systems Group
- Segment net sales were $408.5 million in the quarter, an
increase of 0.9% compared to the prior year. The segment had an
unfavorable impact of 30 basis points on reported sales from
foreign currency translation and operated 7 fewer stores at the end
of the quarter compared to the prior year. At constant currency,
segment e-commerce sales increased 37% to $57 million or 13.9% of
segment net sales for the quarter.
- Segment comparable sales increased 1.5% in the fourth quarter,
notwithstanding continued inflationary pressures that impacted
salon customers and supply chain challenges.
- At the end of the quarter, net store count was 1,355.
- GAAP gross margin decreased 400 basis points to 36.7% in the
quarter compared to the prior year, driven primarily by the
inventory write-down related to the Company’s distribution center
consolidation and store optimization plan, lower product margin
from a sales mix shift between stores and full service, and higher
distribution and freight costs. Excluding the inventory write-down,
Adjusted Gross Margin decreased 180 basis points to 38.9% compared
to the prior year.
- GAAP operating earnings were $32.8 million in the quarter, a
decrease of 38.6% compared to $53.4 million in the prior year. GAAP
operating margin in the quarter was 8.0% compared to 13.2% in the
prior year.
- At the end of the quarter, there were 718 distributor sales
consultants compared to 719 in the prior year.
Fiscal Year 2023 Guidance
We remain encouraged by the rebuilt foundation of the business
and are excited about the potential of our new strategic
initiatives. As we leverage these strengths, we also expect that
the external environment will remain challenging in the nearer
term, most notably the inflationary pressure that is negatively
impacting consumer purchasing behavior and also driving increased
labor costs.
Factoring in the current macro environment and the impact from
the Company’s distribution center consolidation and store
optimization plan, the Company is providing the following guidance
for the full fiscal year 2023:
- Comparable sales, notwithstanding a notable change in consumer
behavior, are expected to increase by low single digits compared to
the prior year, driven by growth in key categories, sales transfer
from store closures, our expanded Regis distribution and new
strategic initiatives;
- Net sales are expected to decline by low-single digits compared
to the prior year. This reflects approximately 150 to 200 basis
points of net unfavorable impact due to store closures and expected
sales recapture rates from our optimization efforts, and
approximately 150 basis points of anticipated impact from foreign
exchange headwinds;
- Gross Margin is expected to remain above 50%; and
- Adjusted Operating Margin is expected to be in the range of
8.5% and 9.5%, inclusive of investment in our store labor as we
lean in to elevating the expertise of our associates to drive our
growth in the coming years.
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 10, 2022. 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
875677#. 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 2HFpGjMpV94. A replay of the earnings
conference call will be available starting at 10:30 a.m. Central
Time, November 10, 2022, through November 24, 2022, by dialing
(866) 207-1041 (International: (402) 970-0847) and referencing
access code 7597535#. Also, a website replay will be available on
sallybeautyholdings.com/investor-relations.
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH), as the leader in
professional hair color, sells and distributes professional beauty
supplies globally through its Sally Beauty Supply and Beauty
Systems Group businesses. Sally Beauty Supply stores offer up to
7,000 products for hair color, hair care, nails, and skin care
through proprietary brands such as Ion®, Strawberry Leopard®,
Generic Value Products®, Beyond the Zone® and Silk Elements® as
well as professional lines such as Wella®, Clairol®, OPI®, Conair®
and L’Oreal®. Beauty Systems Group stores, branded as CosmoProf® or
Armstrong McCall® stores, along with its outside sales consultants,
sell up to 8,000 professionally branded products including Paul
Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®
and Olaplex®, intended for use in salons and for resale by salons
to retail consumers. For more information about Sally Beauty
Holdings, Inc., please visit
https://www.sallybeautyholdings.com/.
Cautionary Notice Regarding Forward-Looking
Statements
Statements in this news release and the schedules hereto which
are not purely historical facts or which depend upon future events
may be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995, can be identified by the use of
forward-looking terminology such as “believes,” “projects,”
“expects,” “can,” “may,” “estimates,” “should,” “plans,” “targets,”
“intends,” “could,” “will,” “would,” “anticipates,” “potential,”
“confident,” “optimistic,” or the negative thereof, or other
variations thereon, or comparable terminology, or by discussions of
strategy, objectives, estimates, guidance, expectations and future
plans. Forward-looking statements can also be identified by the
fact that these statements do not relate strictly to historical or
current matters.
Readers are cautioned not to place undue reliance on
forward-looking statements as such statements speak only as of the
date they were made. Any forward-looking statements involve risks
and uncertainties that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements, including, but not limited to, the
risks and uncertainties related to COVID-19, and its continuing
impact on the economy 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, 2021. 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 and the write-down
of inventory related to the Company’s distribution center
consolidation and store optimization plan for the relevant time
periods as indicated in the accompanying non-GAAP reconciliations
to the comparable GAAP financial measures.
Adjusted Selling, General and Administrative Expenses – We
define the measure Adjusted Selling, General and Administrative
Expenses as GAAP selling, general and administrative expenses
excluding COVID-19 net expenses and other adjustments for the
relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures.
Adjusted EBITDA and EBITDA Margin – We define the measure
Adjusted EBITDA as GAAP net earnings before depreciation and
amortization, interest expense, income taxes, share-based
compensation, costs related to the Company’s restructuring plans,
COVID-19 related net expenses and other adjustments for the
relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures. Adjusted
EBITDA Margin is Adjusted EBITDA as a percentage of net sales.
Adjusted Operating Earnings and Operating Margin – Adjusted
operating earnings are GAAP operating earnings that exclude costs
related to the Company’s restructuring plans, net expenses related
to COVID-19 and other adjustments for the relevant time periods as
indicated in the accompanying non-GAAP reconciliations to the
comparable GAAP financial measures. Adjusted Operating Margin is
Adjusted Operating Earnings as a percentage of net sales.
Adjusted Net Earnings – Adjusted net earnings is GAAP net
earnings that exclude tax-effected costs related to the Company’s
restructuring plans, tax-effected net expenses related to COVID-19,
tax-effected expenses related to the loss on debt extinguishment,
and tax-effected other adjustments for the relevant time periods as
indicated in the accompanying non-GAAP reconciliations to the
comparable GAAP financial measures.
Adjusted Diluted Net Earnings Per Share – Adjusted diluted net
earnings per share is GAAP diluted earnings per share that exclude
tax-effected costs related to the Company’s restructuring plans,
tax-effected net expenses related to COVID-19, tax-effected
expenses related to the loss on debt extinguishment and
tax-effected other adjustments for the relevant time periods as
indicated in the accompanying non-GAAP reconciliations to the
comparable GAAP financial measures.
Operating Free Cash Flow – We define the measure Operating Free
Cash Flow as GAAP net cash provided by operating activities less
payments for capital expenditures (net). We believe Operating Free
Cash Flow is an important liquidity measure that provides useful
information to investors about the amount of cash generated from
operations after taking into account payments for capital
expenditures (net).
We believe that these non-GAAP financial measures provide
valuable information regarding our earnings and business trends by
excluding specific items that we believe are not indicative of the
ongoing operating results of our businesses; providing a useful way
for investors to make a comparison of our performance over time and
against other companies in our industry.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance and cash flows. Our management and Board of Directors
also use these non-GAAP measures as supplemental measures to
evaluate our businesses and the performance of management,
including the determination of performance-based compensation, to
make operating and strategic decisions, and to allocate financial
resources. We believe that these non-GAAP measures also provide
meaningful information for investors and securities analysts to
evaluate our historical and prospective financial performance.
These non-GAAP measures should not be considered a substitute for
or superior to GAAP results. Furthermore, the non-GAAP measures
presented by us may not be comparable to similarly titled measures
of other companies.
Supplemental Schedules
Segment Information
1
Non-GAAP Financial Measures
Reconciliations
2-3
Non-GAAP Financial Measures
Reconciliations; Adjusted EBITDA and
Operating Free Cash Flow
4
Store Count and Comparable Sales
5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Consolidated
Statements of Earnings (In thousands, except per share data)
(Unaudited)
Three Months Ended September 30,
Twelve Months Ended September 30,
2022
2021
PercentageChange
2022
2021
PercentageChange Net sales
$
962,460
$
990,260
(2.8
)%
$
3,815,565
$
3,874,997
(1.5
)%
Cost of products sold
498,964
489,285
2.0
%
1,896,400
1,921,663
(1.3
)%
Gross profit
463,496
500,975
(7.5
)%
1,919,165
1,953,334
(1.7
)%
Selling, general and administrative expenses
397,866
386,542
2.9
%
1,553,948
1,530,280
1.5
%
Restructuring
26,434
3,240
715.9
%
27,577
4,611
498.1
%
Operating earnings
39,196
111,193
(64.7
)%
337,640
418,443
(19.3
)%
Interest expense
17,429
20,196
(13.7
)%
93,543
93,509
0.0
%
Earnings before provision for income taxes
21,767
90,997
(76.1
)%
244,097
324,934
(24.9
)%
Provision for income taxes
428
22,848
(98.1
)%
60,544
85,076
(28.8
)%
Net earnings
$
21,339
$
68,149
(68.7
)%
$
183,553
$
239,858
(23.5
)%
Earnings per share: Basic
$
0.20
$
0.60
(66.7
)%
$
1.69
$
2.13
(20.7
)%
Diluted
$
0.20
$
0.59
(66.1
)%
$
1.66
$
2.10
(21.0
)%
Weighted average shares: Basic
106,964
112,797
108,665
112,653
Diluted
108,510
114,565
110,293
114,212
Basis PointChange Basis PointChange Comparison as a percentage of net sales
Consolidated gross margin
48.2
%
50.6
%
(240
)
50.3
%
50.4
%
(10
)
Selling, general and administrative expenses
41.3
%
39.0
%
230
40.7
%
39.5
%
120
Consolidated operating margin
4.1
%
11.2
%
(710
)
8.8
%
10.8
%
(200
)
Effective tax rate
2.0
%
25.1
%
(2,310
)
24.8
%
26.2
%
(140
)
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets (In
thousands) (Unaudited)
September 30,
2022
2021
Cash and cash equivalents
$
70,558
$
400,959
Trade and other accounts receivable
72,277
66,581
Inventory
936,374
871,349
Other current assets
53,192
44,686
Total current assets
1,132,401
1,383,575
Property and equipment, net
297,876
307,377
Operating lease asset
532,177
537,673
Goodwill and other intangible assets
576,381
596,741
Other assets
38,032
21,766
Total assets
$
2,576,867
$
2,847,132
Current maturities of long-term debt
$
68,658
$
194
Accounts payable
275,717
291,632
Accrued liabilities
161,065
206,155
Current operating lease liabilities
157,734
156,234
Income taxes payable
4,740
10,666
Total current liabilities
667,914
664,881
Long-term debt
1,083,043
1,382,530
Long-term operating lease liabilities
424,762
404,147
Other liabilities
22,427
29,056
Deferred income tax liabilities, net
85,085
85,777
Total liabilities
2,283,231
2,566,391
Total stockholders' equity
293,636
280,741
Total liabilities and stockholders' equity
$
2,576,867
$
2,847,132
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three Months Ended
September 30, Twelve Months Ended September 30,
2022
2021
PercentageChange
2022
2021
PercentageChange Net sales: Sally Beauty Supply ("SBS")
$
554,004
$
585,367
(5.4
)%
$
2,193,044
$
2,278,382
(3.7
)%
Beauty Systems Group ("BSG")
408,456
404,893
0.9
%
1,622,521
1,596,615
1.6
%
Total net sales
$
962,460
$
990,260
(2.8
)%
$
3,815,565
$
3,874,997
(1.5
)%
Operating earnings: SBS
$
80,529
$
105,683
(23.8
)%
$
350,884
$
417,658
(16.0
)%
BSG
32,786
53,398
(38.6
)%
193,407
205,078
(5.7
)%
Segment operating earnings
113,315
159,081
(28.8
)%
544,291
622,736
(12.6
)%
Unallocated expenses (1)
47,685
44,648
6.8
%
179,074
199,682
(10.3
)%
Restructuring
26,434
3,240
715.9
%
27,577
4,611
498.1
%
Interest expense
17,429
20,196
(13.7
)%
93,543
93,509
0.0
%
Earnings before provision for income taxes
$
21,767
$
90,997
(76.1
)%
$
244,097
$
324,934
(24.9
)%
Segment gross margin:
2022
2021
Basis PointChange
2022
2021
Basis PointChange SBS
56.6
%
57.5
%
(90
)
58.1
%
57.9
%
20
BSG
36.7
%
40.7
%
(400
)
39.8
%
39.8
%
0
Segment operating margin: SBS
14.5
%
18.1
%
(360
)
16.0
%
18.3
%
(230
)
BSG
8.0
%
13.2
%
(520
)
11.9
%
12.8
%
(90
)
Consolidated operating margin
4.1
%
11.2
%
(710
)
8.8
%
10.8
%
(200
)
(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,
2022 As Reported Restructuring (1) As Adjusted(Non-GAAP)
Cost of products sold
$
498,964
$
(18,316
)
$
480,648
Consolidated gross margin
48.2
%
50.1
%
Selling, general and administrative expenses
397,866
—
397,866
SG&A expenses, as a percentage of sales
41.3
%
41.3
%
Restructuring
26,434
(26,434
)
—
Operating earnings
39,196
44,750
83,946
Operating margin
4.1
%
8.7
%
Earnings before provision for income taxes
21,767
44,750
66,517
Provision for income taxes (3)
428
11,659
12,087
Net earnings
$
21,339
$
33,091
$
54,430
Earnings per share: Basic
$
0.20
$
0.31
$
0.51
Diluted
$
0.20
$
0.30
$
0.50
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
%
Restructuring
3,240
(3,240
)
—
—
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
(1) For the three months ended September 30, 2022,
restructuring included $45.5 million for our Distribution Center
Consolidation and Store Optimization Plan, including inventory
write-downs of $19.4 million within cost of products sold, and $0.8
million for our Transformation Plan. For the three months ended
September 30, 2021, restructuring, including inventory write-downs
of $1.4 million within cost of products sold, represents expenses
incurred primarily in connection with 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. (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, 2022 As Reported Restructuring (1) COVID-19 (2) Loss on
DebtExtinguishmentand Other (3) As Adjusted(Non-GAAP) Cost
of products sold
$
1,896,400
$
(18,316
)
$
(2,841
)
$
—
$
1,875,243
Consolidated gross margin
50.3
%
50.9
%
Selling, general and administrative expenses
1,553,948
—
(3,382
)
(1,546
)
1,549,020
SG&A expenses, as a percentage of sales
40.7
%
40.6
%
Restructuring
27,577
(27,577
)
—
—
—
Operating earnings
337,640
45,893
6,223
1,546
391,302
Operating margin
8.8
%
10.3
%
Earnings before provision for income taxes
244,097
45,893
6,223
17,985
314,198
Provision for income taxes (3)
60,544
9,830
2,132
3,821
76,327
Net earnings
$
183,553
$
36,063
$
4,091
$
14,164
$
237,871
Earnings per share: Basic
$
1.69
$
0.33
$
0.04
$
0.13
$
2.19
Diluted
$
1.66
$
0.33
$
0.04
$
0.13
$
2.16
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
%
Restructuring
4,611
(4,611
)
—
—
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
(1) For fiscal year 2022, restructuring included
$45.5 million for our Distribution Center Consolidation and Store
Optimization Plan, including inventory write-downs of $19.4 million
within cost of products sold, and $0.4 million for our
Transformation Plan. For fiscal year 2021, restructuring, including
inventory write-downs of $1.4 million in cost of products sold,
represents expenses incurred primarily in connection with Project
Surge and the Transformation Plan. (2) For fiscal year 2022,
COVID-19-related expense is comprised of disposal costs for
obsolete personal-protective equipment inventory ("PPE"). For
fiscal year 2021, COVID-19 expenses primarily represents the
write-down of PPE 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. (3) For fiscal year
2022, loss on debt extinguishment relates to the repayment of our
8.750% Senior Secured Second Lien Notes due 2025, which included a
redemption premium of $13.1 million and the write-off of
unamortized deferred financing costs of $3.3 million included in
interest expense. (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:
2022
2021
PercentageChange
2022
2021
PercentageChange Net earnings
$
21,339
$
68,149
(68.7
)%
$
183,553
$
239,858
(23.5
)%
Add: Depreciation and amortization
26,568
24,111
10.2
%
99,929
102,201
(2.2
)%
Interest expense
17,429
20,196
(13.7
)%
93,543
93,509
0.0
%
Provision for income taxes
428
22,848
(98.1
)%
60,544
85,076
(28.8
)%
EBITDA (non-GAAP)
65,764
135,304
(51.4
)%
437,569
520,644
(16.0
)%
COVID-19
—
(86
)
(100.0
)%
6,223
36,624
(83.0
)%
Restructuring and other
44,750
4,684
855.4
%
47,439
6,055
683.5
%
Share-based compensation (1)
1,841
3,498
(47.4
)%
10,708
11,656
(8.1
)%
Adjusted EBITDA (non-GAAP)
$
112,355
$
143,400
(21.6
)%
$
501,939
$
574,979
(12.7
)%
(1) For twelve months ended September 30, 2022, certain
forfeiture amounts in connection to our Transformation Plan are
included in restructuring and other.
Basis
PointChange Basis PointChange Adjusted EBITDA as a percentage of net sales
Adjusted EBITDA margin
11.7
%
14.5
%
(280
)
13.2
%
14.8
%
(160
)
Operating Free Cash Flow:
2022
2021
Percentage Change
2022
2021
Percentage Change Net cash provided by operating activities
$
107,273
$
164,132
(34.6
)%
$
156,500
$
381,860
(59.0
)%
Less: Payments for property and equipment, net
32,016
28,770
11.3
%
99,250
73,669
34.7
%
Operating free cash flow (non-GAAP)
$
75,257
$
135,362
(44.4
)%
$
57,250
$
308,191
(81.4
)%
Supplemental Schedule 5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Store
Count and Same Store Sales (Unaudited)
As of September
30,
2022
2021
Change Number of stores: SBS: Company-operated stores
3,439
3,547
(108
)
Franchise stores
-
2
(2
)
Total SBS
3,439
3,549
(110
)
BSG: Company-operated stores
1,223
1,230
(7
)
Franchise stores
132
132
-
Total BSG
1,355
1,362
(7
)
Total consolidated
4,794
4,911
(117
)
Number of BSG distributor sales consultants
718
719
(1
)
BSG distributor sales consultants (DSC) include 195 and 194
sales consultants employed by our franchisees at September 30, 2021
and 2020, respectively.
Three Months Ended September 30,
Twelve Months Ended September 30,
2022
2021
Basis PointChange
2022
2021
Basis PointChange Comparable sales growth (decline): SBS
(1.1
)%
2.0
%
(310
)
(0.6
) %
9.1
%
(970
)
BSG
1.5
%
5.7
%
(420
)
2.3
%
10.3
%
(800
)
Consolidated
0.0
%
3.4
%
(340
)
0.6
%
9.6
%
(900
)
Our comparable sales include sales from stores that have
been operating for 14 months or longer as of the last day of a
month and e-commerce revenue. Additionally, our comparable sales
include sales to franchisees and full service sales. Our comparable
sales excludes the effect of changes in foreign exchange rates and
sales from stores relocated until 14 months after the relocation.
Revenue from acquisitions are excluded from our comparable sales
calculation until 14 months after the acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221110005178/en/
Jeff Harkins Investor Relations 940-297-3877
jharkins@sallybeauty.com
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