GAAP Diluted EPS of $0.66; Adjusted Diluted EPS
of $0.68
GAAP Operating Margin of 12.5%; Adjusted
Operating Margin of 12.6%
Sally Beauty Holdings, Inc.
(NYSE: SBH) (“the Company”), the leader in professional hair color,
today announced financial results for its third quarter ended June
30, 2021. The Company will hold a conference call today at 7:30
a.m. Central Time to discuss the results.
Fiscal 2021 Third Quarter Summary
- Consolidated net sales of $1.02 billion with a same store sales
increase of 44.7%, primarily reflecting strong consumer demand in
the U.S. and the easing of COVID-19 restrictions globally;
- Global e-commerce sales were $71 million, representing 7.0% of
net sales;
- Gross margin of 50.3%, up 470 basis points compared to the
prior year;
- GAAP operating earnings of $127 million and GAAP operating
margin of 12.5%, Adjusted Operating Earnings of $129 million and
Adjusted Operating Margin of 12.6%;
- GAAP diluted net earnings per share of $0.66 and Adjusted
Diluted Net Earnings Per Share of $0.68, up 414% and 718%,
respectively, compared to the prior year;
- Strong liquidity position, cash and cash equivalents of $270
million, reduced debt levels by $205 million with a zero balance
outstanding under the $500 million asset-based revolving line of
credit at quarter end.
“We are pleased to report another strong quarter, which was
driven by strengthening consumer demand and solid execution by our
teams,” said Chris Brickman, president and chief executive officer.
“The combination of improving macro factors in the U.S. and the
easing of COVID-19 restrictions across our international
territories, drove net sales over $1 billion. Our top line
performance, coupled with ongoing strength in gross margin,
resulted in significant growth in earnings.”
“As we approach our fiscal year-end, we are pleased with our
strong financial performance to date, and ability to deliver
against our strategic priorities despite the challenges of the
pandemic. We remain focused on the completion of our multi-year
transformation in 2021, and as we enter 2022, we will continue to
scale and optimize a full suite of omni-channel services designed
to delight our customers. We believe that with the significant
investments we have made in the business and the talented team we
have assembled, the company is well positioned to achieve long-term
growth.”
COVID-19 Update
The table below includes the operating status of corporate-owned
stores at the end of each month during the third quarter,
reflecting the easing of COVID-19 restrictions on global stores
operations.
April May June Territory
HardClosed ReducedCapacity FullyOpen
HardClosed ReducedCapacity FullyOpen
HardClosed ReducedCapacity FullyOpen Sally
US/CAN
0%
33%
67%
0%
33%
67%
0%
9%
91%
Sally Europe
0%
44%
56%
0%
23%
77%
0%
1%
99%
Sally LATAM
9%
22%
69%
4%
27%
69%
3%
29%
68%
BSG US/CAN
0%
4%
96%
0%
4%
96%
0%
0%
100%
SBH Total *
1%
26%
73%
0%
24%
76%
0%
7%
93%
*Includes corporate stores only (excludes franchises)
Fiscal 2021 Third Quarter Operating Results
Third quarter consolidated net sales were $1.02 billion, an
increase of 45.0%, as compared to the prior year with a same store
sales increase of 44.7%, primarily driven by the favorable impact
in the U.S. from improving consumer confidence and the easing of
COVID-19 restrictions across international territories. Foreign
currency translation had a favorable impact of approximately 260
basis points on reported sales and the Company operated 84 fewer
stores compared to the prior year. Global e-commerce sales were $71
million or 7.0% of net sales.
Consolidated gross profit for
the third quarter was $514.4 million compared to $321.8 million in
the prior year, an increase of 59.8%. Consolidated gross margin was
50.3%, an increase of 470 basis points compared to 45.6% in the
prior year, driven primarily by a higher gross margin at Sally
Beauty Supply, partially offset by a lower gross margin at Beauty
Systems Group.
Selling, general and
administrative (SG&A) expenses totaled $386.5 million, up $71.9
million compared to the prior year, driven primarily by the impact
of the prior year’s savings from furloughed employees, rent
abatements and reduced advertising expense related to the shut down
of global store operations from COVID-19. As a percentage of sales,
SG&A expenses were 37.8% compared to 44.6% in the prior
year.
GAAP operating earnings and operating margin in the third
quarter were $127.4 million and 12.5%, respectively, compared to
$1.4 million and 0.2%, respectively, in the prior year. Adjusted
Operating Earnings and Operating Margin, excluding the Company’s
previously announced restructuring efforts and COVID-19 related
expenses in both years, increased to $128.7 million and 12.6%,
respectively, compared to $16.0 million and 2.3%, respectively, in
the prior year.
GAAP net earnings in the third
quarter were $76.2 million, or $0.66 per diluted share, compared to
a net loss of $23.5 million, or $0.21 per diluted share in the
prior year. Adjusted Net Earnings were $78.0 million, or $0.68 per
diluted share, compared to a net loss of $12.7 million, or $0.11
per diluted share in the prior year, which represents an increase
of 718%. Adjusted EBITDA in the third quarter was $156.5
million, an increase of 113%
compared to the prior year, and Adjusted EBITDA Margin was 15.3%,
an increase of 490 basis points compared to the prior
year.
Balance Sheet and Cash Flow
During the third quarter, the
Company utilized excess cash to reduce its debt levels by $205
million by fully repaying the outstanding balance of $197 million
of its 5.50% senior unsecured notes due 2023 and paying down an
additional $8 million of its floating rate term loan. At June 30,
2021, the Company had cash and cash equivalents of $270 million and
a zero balance outstanding under its asset-based revolving line of
credit. Additionally, the Company ended the quarter with a net debt
leverage ratio of 1.90x. For comparison purposes, the leverage
ratio, as defined in our loan agreements where the impact of
balance sheet cash and cash equivalents is capped at $100 million
for net debt calculation purposes, was 2.19x.
In May 2021, the Company
extended the maturity on its asset-based revolving line of credit
agreement by five years to May 2026. The new agreement returned the
pricing and terms back to pre-COVID levels and right-sized the
facility to $500 million.
Third quarter cash flow from
operations totaled $86.2 million, capital expenditures totaled
$17.8 million and
Operating Free Cash Flow totaled $68.4 million.
Fiscal 2021 Third Quarter Segment Results
Sally Beauty Supply
- Global segment same store sales increased 43.3% in the third
quarter. The Sally Beauty businesses in the U.S. and Canada
represented 79% of the segment sales for the quarter and had a same
store sales increase of 35.2%. Both Europe and Latin America had
significant increases in same store sales for the quarter due to
the easing of COVID-19 restrictions.
- Net sales were $602.7 million in the quarter, an increase of
45.1% compared to the prior year, driven primarily by improving
consumer confidence in the U.S. and the easing of COVID-19
restrictions across international territories. The segment had a
favorable impact of 370 basis points from foreign currency
translation on reported sales and operated 80 fewer stores compared
to the prior year.
- At the end of the quarter, net store count was 3,611, a
decrease of 80 stores compared to the prior year.
- Gross margin increased by 920 basis points to 57.9%, with the
Sally Beauty business in the U.S. and Canada delivering gross
margin of 60.8%. The increase in gross margin was primarily driven
by the impact of the prior year’s non-cash inventory write down and
inventory clearance efforts, partially offset by a higher sales
volume coming from the lower margin European operations as a
percentage of total segment sales compared to the prior year.
- GAAP operating earnings increased substantially to $116.8
million compared to $3.1 million in the prior year. GAAP operating
margin was 19.4% compared to 0.7% in the prior year.
Beauty Systems Group
- Total segment same store sales increased 47.8% in the third
quarter.
- Net sales were $419.7 million in the quarter, an increase of
44.8% compared to the prior year, driven primarily by the favorable
impact from the easing of COVID-19 restrictions, resulting in
higher operating capacities in salons and increased demand. Foreign
currency translation had a favorable impact of approximately 120
basis points on reported sales.
- At the end of the quarter, net store count was 1,367, a
decrease of 4 stores compared to the prior year.
- Gross margin decreased 180 basis points to 39.4% in the
quarter, driven primarily by a higher sales volume coming from
large volume/lower margin full service customers that rebounded
from the COVID-19 impact in the prior year.
- GAAP operating earnings were $55.3 million in the quarter, an
increase of 38% compared to the prior year. GAAP operating margin
in the quarter was 13.2% compared to 13.8% in the prior year.
- At the end of the quarter, there were 724 distributor sales
consultants compared to 651 in the prior year.
Fiscal Year 2021 Outlook
The Company will provide
perspective on its outlook for the fourth quarter during its
earnings conference call.
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, July 29, 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) 867-6169 (International:
(409-207-6975) and referencing the access code 580008#. The
teleconference will be held in a “listen-only” mode for all
participants other than the Company’s current sell-side and
buy-side investment professionals. In addition, a supplemental
slide presentation may be viewed during the call at the following
link SBH Q3 Earnings Presentation and entering the event password
yaKPyjk6g35. A replay of
the earnings conference call will be available starting at 10:30
a.m. Central Time, July 29, 2021, through August 5, 2021, by
dialing (866) 207-1041 (International: (402) 970-0847) and
reference access code 8927781#. 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. The Company operates approximately 5,000
stores, including 141 franchised locations. Sally Beauty Supply
stores offer up to 8,000 products for hair color, hair care, skin
care, and nails through proprietary brands such as Ion®, Generic
Value Products®, Beyond the Zone® and Silk Elements® as well as
professional lines such as Wella®, Clairol®, OPI®, Conair® and Hot
Shot Tools®. Beauty Systems Group stores, branded as CosmoProf® or
Armstrong McCall® stores, along with its outside sales consultants,
sell up to 10,500 professionally branded products including Paul
Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®
and CHI®, intended for use in salons and for resale by salons to
retail consumers. For more information about Sally Beauty Holdings,
Inc., please visit 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 (Loss) (In thousands, except per share data)
(Unaudited)
Three Months Ended June
30,
Nine Months Ended June
30,
2021
2020
Percentage Change
2021
2020
Percentage Change
Net sales
$
1,022,387
$
705,287
45.0
%
$
2,884,737
$
2,556,518
12.8
%
Cost of products sold
507,981
383,441
32.5
%
1,432,378
1,330,067
7.7
%
Gross profit
514,406
321,846
59.8
%
1,452,359
1,226,451
18.4
%
Selling, general and administrative expenses
386,481
314,599
22.8
%
1,143,738
1,075,827
6.3
%
Restructuring
508
5,816
(91.3
)%
1,371
11,541
(88.1
)%
Operating earnings
127,417
1,431
8804.1
%
307,250
139,083
120.9
%
Interest expense
23,452
27,298
(14.1
)%
73,313
70,483
4.0
%
Earnings (loss) before provision for income taxes
103,965
(25,867
)
501.9
%
233,937
68,600
241.0
%
Provision (benefit) for income taxes
27,759
(2,341
)
1285.8
%
62,228
25,543
143.6
%
Net earnings (loss)
$
76,206
$
(23,526
)
423.9
%
$
171,709
$
43,057
298.8
%
Earnings (loss) per share: Basic
$
0.68
$
(0.21
)
423.8
%
$
1.52
$
0.38
300.0
%
Diluted
$
0.66
$
(0.21
)
414.3
%
$
1.50
$
0.37
305.4
%
Weighted average shares: Basic
112,739
112,271
112,605
114,413
Diluted
114,927
112,271
114,274
115,370
Basis PointChange Basis PointChange Comparison as a percentage of net sales
Consolidated gross margin
50.3
%
45.6
%
470
50.3
%
48.0
%
230
Selling, general and administrative expenses
37.8
%
44.6
%
(680
)
39.6
%
42.1
%
(250
)
Consolidated operating margin
12.5
%
0.2
%
1,230
10.7
%
5.4
%
530
Effective tax rate
26.7
%
9.1
%
1,760
26.6
%
37.2
%
(1,060
)
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
June 30,2021 September 30,2020 Cash and
cash equivalents
$
270,317
$
514,151
Trade and other accounts receivable
76,439
56,429
Inventory
935,427
814,503
Other current assets
46,928
48,014
Total current assets
1,329,111
1,433,097
Property and equipment, net
283,033
315,029
Operating lease assets
540,480
525,634
Goodwill and other intangible assets
601,935
598,321
Other assets
23,623
23,066
Total assets
$
2,778,182
$
2,895,147
Current maturities of long-term debt
$
181
$
180
Accounts payable
268,868
236,333
Accrued liabilities
213,099
170,665
Current operating lease liabilities
159,094
153,267
Income taxes payable
8,963
2,917
Total current liabilities
650,205
563,362
Long-term debt, including capital leases
1,383,145
1,796,897
Long-term operating lease liabilities
401,706
394,375
Other liabilities
30,008
32,976
Deferred income tax liabilities, net
90,848
92,094
Total liabilities
2,555,912
2,879,704
Total stockholders’ equity
222,270
15,443
Total liabilities and stockholders’ equity
$
2,778,182
$
2,895,147
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three Months Ended June
30,
Nine Months Ended June
30,
2021
2020
Percentage Change
2021
2020
Percentage Change
Net sales: Sally Beauty Supply ("SBS")
$
602,681
$
415,468
45.1
%
$
1,693,015
$
1,504,125
12.6
%
Beauty Systems Group ("BSG")
419,706
289,819
44.8
%
1,191,722
1,052,393
13.2
%
Total net sales
$
1,022,387
$
705,287
45.0
%
$
2,884,737
$
2,556,518
12.8
%
Operating earnings: SBS
$
116,784
$
3,087
3683.1
%
$
311,975
$
133,684
133.4
%
BSG
55,265
40,084
37.9
%
151,680
143,557
5.7
%
Segment operating earnings
172,049
43,171
298.5
%
463,655
277,241
67.2
%
Unallocated expenses (1)
44,124
35,924
22.8
%
155,034
126,617
22.4
%
Restructuring
508
5,816
(91.3
)%
1,371
11,541
(88.1
)%
Interest expense
23,452
27,298
(14.1
)%
73,313
70,483
4.0
%
Earnings (loss) before provision for income taxes
$
103,965
$
(25,867
)
501.9
%
$
233,937
$
68,600
241.0
%
Segment gross margin:
2021
2020
Basis Point Change
2021
2020
Basis Point Change
SBS
57.9
%
48.7
%
920
58.0
%
53.2
%
480
BSG
39.4
%
41.2
%
(180
)
39.5
%
40.5
%
(100
)
Segment operating margin: SBS
19.4
%
0.7
%
1,870
18.4
%
8.9
%
950
BSG
13.2
%
13.8
%
(60
)
12.7
%
13.6
%
(90
)
Consolidated operating margin
12.5
%
0.2
%
1,230
10.7
%
5.4
%
530
(1) Unallocated expenses, including
share-based compensation expense, consist of corporate and shared
costs and are included in selling, general and administrative
expenses. Supplemental Schedule 2
SALLY BEAUTY HOLDINGS,
INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations (In thousands, except per share data) (Unaudited)
Three Months Ended June 30, 2021 As
Reported(GAAP) Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP)
Selling, general and administrative expenses
$
386,481
$
-
$
(824
)
$
385,657
SG&A expenses, as a percentage of sales
37.8
%
37.7
%
Operating earnings
127,417
508
824
128,749
Operating margin
12.5
%
12.6
%
Earnings before provision for income taxes
103,965
508
824
105,297
Provision (benefit) for income taxes (3)
27,759
86
(550
)
27,295
Net earnings
$
76,206
$
422
$
1,374
$
78,002
Earnings per share: Basic
$
0.68
$
0.00
$
0.01
$
0.69
Diluted
$
0.66
$
0.00
$
0.01
$
0.68
Three Months Ended June 30, 2020 As Reported(GAAP)
Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP)
Selling, general and administrative expenses
$
314,599
$
-
$
(8,753
)
$
305,846
SG&A expenses, as a percentage of sales
44.6
%
43.4
%
Operating earnings
1,431
5,816
8,753
16,000
Operating margin
0.2
%
2.3
%
Earnings (loss) before provision for income taxes
(25,867
)
5,816
8,753
(11,298
)
Provision (benefit) for income taxes (3)
(2,341
)
1,532
2,248
1,439
Net earnings (loss)
$
(23,526
)
$
4,284
$
6,505
$
(12,737
)
Earnings (loss) per share: Basic
$
(0.21
)
$
0.04
$
0.06
$
(0.11
)
Diluted
$
(0.21
)
$
0.04
$
0.06
$
(0.11
)
(1) For the three months ended June 30, 2021 and
2020, restructuring represents costs and expenses incurred
primarily in connection with Project Surge and the Transformation
Plan. (2) For the three months ended June 30, 2021, COVID-19
expenses primarily represents donation expense related to the
personal-protective equipment inventory of $1.9 million, partially
offset by wage and rent subsidies provided by the Canadian
government of $1.1 million. For the three months ended June 30,
2020, COVID-19 expenses primarily represents costs associated with
disaster pay and furloughed employees in response to the
coronavirus pandemic, partially offset by an employee retention
payroll tax credit provided by the U.S. Coronavirus Aid, Relief,
and Economic Security Act ("CARES Act"). (3) The provision
(benefit) for income taxes was calculated using the applicable tax
rates for each country, while excluding the tax benefits for
countries where the tax benefit is not currently deemed probable of
being realized. Supplemental Schedule 3
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands, except per share data)
(Unaudited)
Nine Months Ended June 30, 2021 As
Reported Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP)
Cost of products sold
$
1,432,378
$
-
$
(6,957
)
$
1,425,421
Consolidated gross margin
50.3
%
50.6
%
Selling, general and administrative expenses
1,143,738
-
(29,753
)
1,113,985
SG&A expenses, as a percentage of sales
39.6
%
38.6
%
Operating earnings
307,250
1,371
36,710
345,331
Operating margin
10.7
%
12.0
%
Earnings before provision for income taxes
233,937
1,371
36,710
272,018
Provision for income taxes (3)
62,228
263
8,648
71,139
Net earnings
$
171,709
$
1,108
$
28,062
$
200,879
Earnings per share: Basic
$
1.52
$
0.01
$
0.25
$
1.78
Diluted
$
1.50
$
0.01
$
0.25
$
1.76
Nine Months Ended June 30, 2020 As Reported
Restructuring (1) COVID-19 (2) As Adjusted(Non-GAAP) Cost of
products sold
$
1,330,067
$
-
$
-
$
1,330,067
Consolidated gross margin
48.0
%
48.0
%
Selling, general and administrative expenses
1,075,827
-
(23,450
)
1,052,377
SG&A expenses, as a percentage of sales
42.1
%
41.2
%
Operating earnings
139,083
11,541
23,450
174,074
Operating margin
5.4
%
6.8
%
Earnings before provision for income taxes
68,600
11,541
23,450
103,591
Provision for income taxes (3)
25,543
2,967
5,685
34,195
Net earnings
$
43,057
$
8,574
$
17,765
$
69,396
Earnings per share: Basic
$
0.38
$
0.07
$
0.16
$
0.61
Diluted
$
0.37
$
0.07
$
0.15
$
0.60
(1) For the nine months ended June 30,
2021 and 2020, restructuring represents costs and expenses incurred
primarily in connection with Project Surge and the Transformation
Plan. (2) For the nine months ended June 30, 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 $3.3 million. For the nine months ended
June 30, 2020, COVID-19 expenses primarily represents costs
associated with disaster pay and furloughed employees in response
to the coronavirus pandemic, partially offset by an employee
retention payroll tax credit provided by the CARES Act. (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 4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands)
(Unaudited)
Three Months Ended June
30,
Nine Months Ended June
30,
Adjusted EBITDA:
2021
2020
Percentage Change
2021
2020
Percentage Change
Net earnings (loss)
$
76,206
$
(23,526
)
423.9
%
$
171,709
$
43,057
298.8
%
Add: Depreciation and amortization
25,145
26,832
(6.3
)%
78,090
80,829
(3.4
)%
Interest expense
23,452
27,298
(14.1
)%
73,313
70,483
4.0
%
Provision (benefit) for income taxes
27,759
(2,341
)
1285.8
%
62,228
25,543
143.6
%
EBITDA (non-GAAP)
152,562
28,263
439.8
%
385,340
219,912
75.2
%
Inventory charges (1)
-
27,054
(100.0
)%
-
27,054
(100.0
)%
Share-based compensation
2,617
2,562
2.1
%
8,158
9,094
(10.3
)%
Restructuring
508
5,816
(91.3
)%
1,371
11,541
(88.1
)%
COVID-19 (2)
824
8,753
(90.6
)%
36,710
23,450
56.5
%
Impairment (3)
-
901
(100.0
)%
-
901
(100.0
)%
Adjusted EBITDA (non-GAAP)
$
156,511
$
73,349
113.4
%
$
431,579
$
291,952
47.8
%
Basis PointChange Basis PointChange
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
15.3
%
10.4
%
490
15.0
%
11.4
%
360
Operating Free Cash Flow:
2021
2020
Percentage Change
2021
2020
Percentage Change
Net cash provided by operating activities
$
86,172
$
198,253
(56.5
)%
$
217,728
$
274,384
(20.6
)%
Less: Payments for property and equipment, net
17,804
17,742
0.3
%
44,899
89,702
(49.9
)%
Operating free cash flow (non-GAAP)
$
68,368
$
180,511
(62.1
)%
$
172,829
$
184,682
(6.4
)%
(1) Incremental, non-cash write down of inventory as part of
aggressive tactical inventory clearance actions. (2) Fiscal
year 2021 relates to personal-protective equipment inventory
write-down and donation expenses, partially offset by wage and rent
subsidies. Fiscal year 2020 relates to costs associated with
disaster pay and furloughed employees, partially offset by an
employee retention payroll tax credit. (3) Impairment
charges related to long-lived assets and operating lease assets not
included in restructuring.
Supplemental Schedule 5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Store
Count and Same Store Sales (Unaudited)
As of June 30,
2021
2020
Change
Number of stores: SBS: Company-operated stores
3,603
3,678
(75
)
Franchise stores
8
13
(5
)
Total SBS
3,611
3,691
(80
)
BSG: Company-operated stores
1,234
1,226
8
Franchise stores
133
145
(12
)
Total BSG
1,367
1,371
(4
)
Total consolidated
4,978
5,062
(84
)
Number of BSG distributor sales consultants
724
651
73
BSG distributor sales consultants (DSC) include 191 and 197
sales consultants employed by our franchisees at June 30, 2021 and
2020, respectively.
Three Months Ended June
30,
Nine Months Ended June
30,
2021
2020
Basis Point Change
2021
2020
Basis Point Change
Same store sales growth (decline): SBS
43.3
%
(25.9
)%
6,920
12.6
%
(11.3
)%
2,390
BSG
47.8
%
(27.9
)%
7,570
14.5
%
(11.2
)%
2,570
Consolidated
44.7
%
(26.6
)%
7,130
13.2
%
(11.3
)%
2,450
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/20210729005145/en/
Jeff Harkins Investor Relations 940-297-3877
jharkins@sallybeauty.com
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