- Strategic Transformation Milestones
Reached; Transformation Plan on Track
- Consolidated Same Store Sales
Decreased 0.5%
- Global E-Commerce Sales Increased by
30.3% versus Prior Year
- GAAP Diluted EPS of $0.54; Growth of
10.2% versus Prior Year
- Adjusted Diluted EPS of $0.51;
Decrease of 5.6% versus Prior Year
- Strong Cash Flow from Operations
Used to Reduce Indebtedness; Repurchased $60 Million of Senior
Notes
- Fiscal Year 2019 Guidance
Maintained
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”) today
announced financial results for its second quarter ended March 31,
2019. The Company will hold a conference call today at 7:30 a.m.
Central Time to discuss these results.
Fiscal 2019 Second Quarter Overview
Consolidated same store sales decreased 0.5% in the quarter.
Consolidated net sales were $945.9 million in the second quarter, a
decrease of 3.0% compared to the prior year, partially driven by 69
fewer stores as compared to the prior year. Foreign currency
translation had an unfavorable impact of approximately 110 basis
points on reported sales.
GAAP diluted earnings per share in the second quarter were $0.54
compared to $0.49 in the prior year, an increase of 10.2%, driven
primarily by reduced selling, general and administrative expenses,
the gain recorded on the sale of the secondary headquarters and
fulfillment center in Texas and a reduced share count. Adjusted
diluted earnings per share, excluding charges related to the
Company’s transformation efforts in both years, the gain from the
sale of the headquarters and fulfillment center and the loss on
extinguishment of debt from the prior year, were $0.51 in the
second quarter compared to $0.54 in the prior year, a decrease of
5.6%.
“During the quarter, we made solid progress on our
transformation plan as we completed the launch of Sally Beauty’s
new mobile-first e-commerce platform, launched new brands, had
success against our supply chain modernization plans and reduced
our debt levels, all as promised,” said Chris Brickman, president
and chief executive officer.
“We continued to see good momentum in our largest business,
Sally Beauty Supply’s U.S. and Canadian retail business, which is
on the leading edge of many of our transformation efforts. While
the second quarter was impacted by an Easter calendar shift and
cautious retail consumers in February, we are still on track with
our transformation plan for the year and are maintaining our
full-year guidance based on the performance of recent brand
launches and our expectation of improved vendor supply chain
execution compared to the prior year,” Brickman concluded.
Update on Transformation Plan
During the second quarter and so far this quarter, we
have:
- Deployed the new sallybeauty.com
mobile-first e-commerce platform;
- Enabled sales transactions on the
refreshed Beauty Systems Group app in advance of an e-commerce
platform relaunch later this year;
- Completed the testing and triggered the
national rollout of the new Oracle based point-of-sale systems at
both Sally Beauty Supply and Beauty Systems Group;
- Launched the first four modules of the
JDA merchandising and supply chain platform, which includes SKU
setup, space planning, EDI, and demand planning;
- Repurchased $60 million of senior notes
through the Company’s debt tender offer;
- Sold our second Denton, Texas
headquarters and fulfillment center and used the proceeds to fund
part of our debt repurchase;
- Enhanced assortment differentiation
with the launch of further exclusive brands, such as Maria Nila
within Beauty Systems Group, and developed additional
influencer-partner brands such as MoKnowsHair within Sally Beauty
Supply; and
- Completed the build-out of our ‘new
concept stores’ in Las Vegas for Sally Beauty Supply and initiated
the build-out for CosmoProf with most stores in that city remodeled
to reflect better technology, and improved focus and customer
experience, supported by better retail fundamentals.
As we move into the second half of fiscal year 2019, we will
continue our transformation efforts by:
- Launching the Sally Beauty integrated
app nationwide;
- Launching new e-commerce and mobile
commerce capabilities for Beauty Systems Group;
- Launching a new order management system
in connection with our e-commerce efforts to facilitate ‘buy
online, pick up in store’ and ‘ship from store’ capabilities to
better leverage our inventory positions;
- Continuing to build momentum and
awareness of successful launches of key brands like Pravana, Maria
Nila and Arctic Fox while adding new, innovative brands to the
pipeline;
- Accelerating the national rollout of
the new Oracle based point-of-sale systems at both Sally Beauty
Supply and Beauty Systems Group to exceed 1,400 stores by the end
of the fiscal year; and
- Expanding distribution rights for
existing and new brands within Beauty Systems Group.
Fiscal 2019 Second Quarter Financial Detail
Gross margin for the second quarter was 49.5%, a decrease of 40
basis points compared to the prior year, with increases in the
North American business of Sally Beauty Supply offset by challenges
in Europe and within Beauty Systems Group. Selling, general and
administrative expenses, after adjusting for restructuring charges
in both years and the gain from the sale of the secondary
headquarters and fulfillment center in the current year, dropped by
$6.8 million, resulting in 38.2% as a percentage of sales, with the
increase of 40 basis points driven by the deleveraging impact of
lower sales, notwithstanding the lower absolute expense.
GAAP operating earnings and operating margin in the second
quarter were $112.5 million and 11.9%, respectively, compared to
$111.1 million and 11.4%, respectively, in the prior year. Adjusted
operating earnings and operating margin (excluding charges related
to the Company’s transformation efforts in both years and the gain
from the sale of the secondary headquarters and fulfillment center)
were $106.7 million and 11.3%, respectively, compared to $117.9
million and 12.1%, respectively, in the prior year.
GAAP net earnings in the second quarter were $65.7 million, an
increase of $4.4 million, or 7.1%, from the prior year. Adjusted
EBITDA in the second quarter was $136.0 million, a decrease of
$11.5 million, or 7.8%, from the prior year, and adjusted EBITDA
margin was 14.4%, a decline of approximately 70 basis points from
the prior year.
At the end of the quarter, inventory was $953.0 million, up 1.9%
from the prior year. The increase was driven primarily by the
impact of new product launches, the expansion of distribution
rights for Beauty Systems Group, and safety stock to deal with
vendor conversions, partially offset by a stronger U.S. dollar on
reported inventory levels.
Capital expenditures in the quarter, excluding the proceeds from
the sale of the secondary headquarters and fulfillment center in
Texas, totaled $22.7 million, primarily for information technology
projects related to the launch of the new Sally Beauty e-commerce
platform, the new Oracle based point-of-sale system and the JDA
merchandising and supply chain platform as well as store remodels
and maintenance.
As a result of the Company’s tender offer for a portion of its
senior notes, which was completed in March, the outstanding
principal amount of the senior notes declined by approximately $60
million. At the end of the quarter, the outstanding balance on the
asset-based revolving line of credit remained at zero and the
Company’s leverage ratio was 2.8.
Fiscal 2019 Second Quarter Segment Results
Sally Beauty Supply
- Same store sales decreased by 0.3% for
the quarter. Net sales were $565.6 million in the quarter, a
decrease of 2.5% compared to the prior year, driven primarily by 64
fewer stores as compared to the prior year, Europe’s continued
uncertainty surrounding Brexit and civil protests, an Easter shift
into the third quarter of the fiscal year and the North American
retail business experiencing a challenging February related in part
to delayed tax refunds and store closures from extreme weather.
Foreign currency translation had an unfavorable impact on the
segment’s revenue growth in the quarter by approximately 150 basis
points.
- At the end of the quarter, net store
count was 3,718, a decrease of 64 from the prior year.
- Gross margin was flat at 55.6% in the
quarter, with significant improvements in the U.S. and Canada
offset by weakness in Europe.
- GAAP operating earnings were $86.7
million in the quarter, a decrease of 4.0% versus the prior year.
GAAP operating margin was 15.3% versus 15.6% in the year
prior.
Beauty Systems Group
- Same store sales declined 0.9%. Net
sales were $380.2 million in the quarter, a decrease of 3.8%
compared to the prior year, driven primarily by the continued
impact of brand life-cycle transition impacting the full service
business. Foreign currency translation decreased the segment’s
revenue growth in the quarter by approximately 40 basis
points.
- At the end of the quarter, net store
count was 1,388, a decrease of 5 from the prior year.
- Gross margin decreased 100 basis points
to 40.4% in the quarter, driven primarily by continued challenges
attributed to the ongoing merchandising transformation.
- GAAP operating earnings were $56.5
million in the quarter, a decrease of 5.7% versus the prior year.
GAAP operating margin in the quarter was 14.9% versus 15.2% in the
prior year.
- At the end of the quarter, total
distributor sales consultants were 798 compared to 859 in the prior
year.
Fiscal Year 2019 Guidance
The Company remains on track with its transformation plan for
the remainder of the fiscal year and is maintaining its full-year
financial guidance.
Conference Call and Where You Can Find Additional
Information
The Company will hold a conference call and audio webcast today
to discuss its financial results and its business at approximately
7:30 a.m. Central Time. During the conference call, the Company may
discuss and answer one or more questions concerning business and
financial matters and trends affecting the Company. The Company’s
responses to these questions, as well as other matters discussed
during the conference call, may contain or constitute material
information that has not been previously disclosed. Simultaneous to
the conference call, an audio webcast of the call will be available
via a link on the Company’s website,
investor.sallybeautyholdings.com. The conference call can be
accessed by dialing (800) 230-1059 (International: (612) 288-0329).
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. A replay of the earnings
conference call will be available starting at 9:30 a.m. Central
Time, May 1, 2019, through May 8, 2019, by dialing (800) 475-6701
or if international, dial (320) 365-3844 and reference the
conference ID number 465851. Also, a website replay will be
available on investor.sallybeautyholdings.com
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH) is an international
specialty retailer and distributor of professional beauty supplies
with revenues of approximately $3.9 billion annually. Through the
Sally Beauty Supply and Beauty Systems Group businesses, the
Company sells and distributes through 5,106 stores, including 180
franchised units, and has operations throughout the United States,
Puerto Rico, Canada, Mexico, Chile, Peru, the United Kingdom,
Ireland, Belgium, France, the Netherlands, Spain and Germany. Sally
Beauty Supply stores offer up to 8,000 products for hair color,
hair care, skin care, and nails through proprietary brands such as
Ion®, Generic Value Products®, Beyond the Zone® and Silk Elements®
as well as professional lines such as Wella®, Clairol®, OPI®,
Conair® and Hot Shot Tools®. Beauty Systems Group stores, branded
as CosmoProf or Armstrong McCall stores, along with its outside
sales consultants, sell up to 10,500 professionally branded
products including Paul Mitchell®, Wella®, Matrix®, Schwarzkopf®,
Kenra®, Goldwell®, Joico® and CHI®, intended for use in salons and
for resale by salons to retail consumers. For more information
about Sally Beauty Holdings, Inc., please visit
sallybeautyholdings.com.
Cautionary Notice Regarding Forward-Looking
Statements
Statements in this news release and the schedules hereto which
are not purely historical facts or which depend upon future events
may be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995, can be identified by the use of
forward-looking terminology such as “believes,” “projects,”
“expects,” “can,” “may,” “estimates,” “should,” “plans,” “targets,”
“intends,” “could,” “will,” “would,” “anticipates,” “potential,”
“confident,” “optimistic,” or the negative thereof, or other
variations thereon, or comparable terminology, or by discussions of
strategy, objectives, estimates, guidance, expectations and future
plans. Forward-looking statements can also be identified by the
fact these statements do not relate strictly to historical or
current matters.
Readers are cautioned not to place undue reliance on
forward-looking statements as such statements speak only as of the
date they were made. Any forward-looking statements involve risks
and uncertainties that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements, including, but not limited to, the
risks and uncertainties described in our filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2018,
as filed with the Securities and Exchange Commission. Consequently,
all forward-looking statements in this release are qualified by the
factors, risks and uncertainties contained therein. We assume no
obligation to publicly update or revise any forward-looking
statements.
Use of Non-GAAP Financial Measures
This news release and the schedules hereto include the following
financial measures that have not been calculated in accordance with
accounting principles generally accepted in the United States, or
GAAP, and are therefore referred to as non-GAAP financial measures:
(1) Adjusted EBITDA and EBITDA Margin; (2) Adjusted Operating
Earnings and Operating Margin; (3) Adjusted Diluted Net Earnings
Per Share; and (4) Operating Free Cash Flow. We have provided
definitions below for these non-GAAP financial measures and have
provided tables in the schedules hereto to reconcile these non-GAAP
financial measures to the comparable GAAP financial measures.
Adjusted EBITDA and EBITDA Margin - We define the measure
Adjusted EBITDA as GAAP net earnings before depreciation and
amortization, interest expense, income taxes, share-based
compensation and costs related to the Company’s previously
announced restructuring plans 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
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 the loss on extinguishment of debt for the
relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures.
Operating Free Cash Flow – We define the measure Operating Free
Cash Flow as GAAP net cash provided by operating activities less
payments for capital expenditures (net). We believe Operating Free
Cash Flow is an important liquidity measure that provides useful
information to investors about the amount of cash generated from
operations after taking into account payments for capital
expenditures (net).
We believe that these non-GAAP financial measures provide
valuable information regarding our earnings and business trends by
excluding specific items that we believe are not indicative of the
ongoing operating results of our businesses; providing a useful way
for investors to make a comparison of our performance over time and
against other companies in our industry.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance and cash flows. Our management and Board of Directors
also use these non-GAAP measures as supplemental measures to
evaluate our businesses and the performance of management,
including the determination of performance-based compensation, to
make operating and strategic decisions, and to allocate financial
resources. We believe that these non-GAAP measures also provide
meaningful information for investors and securities analysts to
evaluate our historical and prospective financial performance.
These non-GAAP measures should not be considered a substitute for
or superior to GAAP results. Furthermore, the non-GAAP measures
presented by us may not be comparable to similarly titled measures
of other companies.
Supplemental Schedules
Segment Information 1 Non-GAAP Financial Measures
Reconciliations 2-3 Non-GAAP Financial Measures Reconciliations;
Adjusted EBITDA and Operating Free Cash Flow 4 Store Count and Same
Store Sales 5
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Condensed Consolidated Statements of Earnings (In
thousands, except per share data) (Unaudited)
Three Months Ended March 31, Six Months
Ended March 31, Percentage
Percentage 2019
2018
Change 2019
2018 Change
Net sales
$ 945,852 $ 975,321 -3.0 % $ 1,935,305 $ 1,970,286 -1.8 % Cost of
products sold 477,528 488,999
-2.3 % 986,275
997,335 -1.1 % Gross profit 468,324
486,322 -3.7 % 949,030 972,951 -2.5 % Selling, general and
administrative expenses 361,626 368,461 -1.9 % 728,614 739,748 -1.5
% Restructuring (5,814 ) 6,759
-186.0 % (1,834 ) 11,969
-115.3 % Operating earnings 112,512 111,102
1.3 % 222,250 221,234 0.5 % Interest expense 23,821
25,262 -5.7 %
48,310 49,277 -2.0
% Earnings before provision for income taxes 88,691 85,840 3.3 %
173,940 171,957 1.2 % Provision for income taxes 22,966
24,469 -6.1 %
42,488 27,322
55.5 % Net earnings $ 65,725 $ 61,371
7.1 % $ 131,452 $ 144,635
-9.1 % Earnings per share: Basic $ 0.55
$ 0.49 12.2 % $ 1.10 $ 1.15 -4.3 % Diluted $ 0.54
$ 0.49 10.2 % $ 1.09
$ 1.14 -4.4 % Weighted average
shares: Basic 120,077 124,270 120,033 126,046 Diluted
120,991 125,057 120,949
126,834
Basis Point
Basis Point Change Change
Comparison as a
percentage of net sales:
Consolidated gross margin 49.5 % 49.9 % (40 ) 49.0 % 49.4 % (40 )
Selling, general and administrative expenses 38.2 % 37.8 % 40 37.6
% 37.5 % 10 Consolidated operating margin 11.9 % 11.4 % 50 11.5 %
11.2 % 30
Effective tax
rate
25.9 % 28.5 % (260 )
24.4 % 15.9 % 850
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
March 31, September
30, 2019 2018 Cash and cash equivalents $
89,777 $ 77,295 Trade and other accounts receivable 91,427 90,490
Inventory 953,043 944,338 Other current assets 39,895
42,960 Total current assets 1,174,142 1,155,083
Property and equipment, net 297,124 308,357 Goodwill and other
intangible assets 601,936 608,623 Other assets 19,412
25,351 Total assets $ 2,092,614 $ 2,097,414
Current maturities of long-term debt $ 5,503 $ 5,501
Accounts payable 252,470 303,241 Accrued liabilities 156,490
180,287 Income taxes payable 6,280 2,144
Total current liabilities 420,743 491,173 Long-term debt,
including capital leases 1,708,421 1,768,808 Other liabilities
25,917 30,022 Deferred income tax liabilities 82,608
75,967 Total liabilities 2,237,689 2,365,970 Total
stockholders' deficit (145,075 ) (268,556 ) Total
liabilities and stockholders' deficit $ 2,092,614 $
2,097,414 Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three Months Ended March 31, Six Months
Ended March 31, Percentage
Percentage 2019
2018
Change 2019
2018 Change Net sales: Sally
Beauty Supply ("SBS") $ 565,604 $ 580,114 -2.5 % $ 1,146,213 $
1,165,689 -1.7 % Beauty Systems Group ("BSG") 380,248
395,207 -3.8 %
789,092 804,597
-1.9 % Total net sales $ 945,852 $ 975,321
-3.0 % $ 1,935,305 $
1,970,286 -1.8 % Operating earnings:
SBS $ 86,715 $ 90,328 -4.0 % $ 176,706 $ 176,922 -0.1 % BSG
56,518 59,949 -5.7
% 118,849 124,514
-4.5 % Segment operating earnings 143,233 150,277 -4.7 %
295,555 301,436 -2.0 % Unallocated expenses (1) (36,535 )
(32,416 ) 12.7 % (75,139 ) (68,233 ) 10.1 % Restructuring 5,814
(6,759 ) -186.0 % 1,834 (11,969 ) -115.3 % Interest expense
(23,821 ) (25,262 ) -5.7 %
(48,310 ) (49,277 ) -2.0
% Earnings before provision for income taxes $ 88,691
$ 85,840 3.3 % $ 173,940
$ 171,957 1.2 % Segment gross
margin:
Basis Point Basis Point 2019
2018
Change 2019
2018 Change SBS 55.6 % 55.6 % —
55.1 % 55.1 % — BSG 40.4 % 41.4 % (100 ) 40.2 % 41.1 % (90 )
Segment operating margin: SBS 15.3 % 15.6 % (30 ) 15.4 % 15.2 % 20
BSG 14.9 % 15.2 % (30 ) 15.1 % 15.5 % (40 ) Consolidated operating
margin 11.9 % 11.4 % 50
11.5 % 11.2 % 30
(1) Unallocated expenses, including share-based
compensation expense, consist of corporate and shared costs and are
included in selling, general and administrative expenses.
Supplemental Schedule 2
SALLY BEAUTY HOLDINGS,
INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
2019 As Reported As
Adjusted (GAAP)
Restructuring (1)
(Non-GAAP) Operating
earnings $ 112,512 $ (5,814 ) $ 106,698 Operating margin 11.9 %
11.3 % Earnings before provision for income taxes 88,691 (5,814 )
82,877 Provision for income taxes (3) 22,966
(1,494 )
21,472 Net earnings $ 65,725 $ (4,320 )
$ 61,405 Earnings
per share: Basic $ 0.55 $ (0.04 ) $ 0.51 Diluted $ 0.54
$ (0.04 ) $ 0.51
Three Months Ended March 31, 2018 Loss on As
Reported Extinguishment of As Adjusted (GAAP)
Restructuring (1)
Debt (2)
(Non-GAAP) Operating earnings $ 111,102 $
6,759 $ - $ 117,861 Operating margin 11.4 % 12.1 % Earnings before
provision for income taxes 85,840 6,759 876 93,475 Provision for
income taxes (3) 24,469 1,555
254 26,278
Net earnings $ 61,371 $ 5,204
$ 622 $ 67,197 Earnings per
share: Basic $ 0.49 $ 0.04 $ 0.01 $ 0.54 Diluted $ 0.49
$ 0.04 $ 0.00 $
0.54 (1) For the three months ended March 31, 2019,
restructuring represents a $6.6 million gain from the sale of our
secondary headquarters and fulfillment center and expenses incurred
in connection with the supply chain modernization plan. For the
three months ended March 31, 2018, restructuring represents costs
and expenses incurred in connection with the 2018 Restructuring
Plan. (2) For the three months ended March 31, 2018,
interest expense reflects a loss on extinguishment of debt in
connection with a repricing of the variable-rate tranche of our
term loan B, resulting in a lower effective interest rate.
(3) The income tax provision associated with restructuring for the
three months ended March 31, 2019 and 2018, was calculated using a
25.7% and 23.0% tax rate, respectively. The income tax provision
associated with other charges for the three months ended March 31,
2018 was calculated using a 29.0% tax rate.
Supplemental Schedule 3
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Non-GAAP Financial Measures Reconciliations,
Continued (In thousands, except per share data) (Unaudited)
Six Months Ended March 31, 2019 As Reported
As Adjusted
(GAAP)
Restructuring (1)
(Non-GAAP)
Operating earnings $ 222,250 $ (1,834 ) $ 220,416 Operating
margin 11.5 % 11.4 % Earnings before provision for income taxes
173,940 (1,834 ) 172,106 Provision for income taxes (4)
42,488 (765 )
41,723 Net
earnings $ 131,452 $ (1,069 )
$ 130,383
Earnings per share: Basic $ 1.10 $ (0.01 ) $ 1.09 Diluted $ 1.09
$ (0.01 )
$ 1.08
Six Months Ended March
31, 2018 Loss on As Reported Extinguishment of As Adjusted
(GAAP)
Restructuring (1)
Debt (2)
U.S. Tax Reform (3)
(Non-GAAP) Operating earnings $ 221,234 $
11,969 $ - $ - $ 233,203 Operating margin 11.2 % 11.8 % Earnings
before provision for income taxes 171,957 11,969 876 - 184,802
Provision for income taxes (4) 27,322
2,346 254
22,202 52,124 Net earnings $
144,635 $ 9,623 $ 622
$ (22,202 ) $ 132,678
Earnings per share: Basic $ 1.15 $ 0.08 $ 0.00 $ (0.18 ) $ 1.05
Diluted $ 1.14 $ 0.08 $
0.00 $ (0.18 ) $ 1.05 (1)
For the six months ended March 31, 2019, restructuring represents a
$6.6 million gain from the sale of our secondary headquarters and
fulfillment center and expenses incurred in connection with the
supply chain modernization plan, and costs and expenses in
connection with the 2018 Restructuring Plan. For the six months
ended March 31, 2018, restructuring represents costs and expenses
incurred in connection with the 2018 Restructuring Plan. (2)
For the six months ended March 31, 2018, interest expense reflects
a loss on extinguishment of debt in connection with a repricing of
the variable-rate tranche of our term loan B, resulting in a lower
effective interest rate. (3) U.S. tax reform represents the
revaluation of deferred income taxes and a deemed repatriation tax
on previously undistributed foreign earnings resulting from changes
to U.S. federal tax law in December 2017. (4) The income tax
provision associated with restructuring for the six months ended
March 31, 2019 and 2018, was calculated using a 41.7% and 19.6% tax
rate, respectively. The income tax provision associated with the
loss on extinguishment of debt for the six months ended March 31,
2018 was calculated using a 29.0% tax rate.
Supplemental Schedule 4
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Non-GAAP Financial Measures Reconciliations,
Continued (In thousands) (Unaudited)
Three
Months Ended March 31, Six Months Ended March
31, Adjusted EBITDA:
Percentage Percentage
2019 2018
Change 2019
2018 Change Net
earnings $ 65,725 $ 61,371 7.1 % $ 131,452 $ 144,635 -9.1 % Add:
Depreciation and amortization 26,769 26,919 -0.6 % 53,275 54,009
-1.4 % Interest expense 23,821 25,262 -5.7 % 48,310 49,277 -2.0 %
Provision for income taxes 22,966
24,469 -6.1 % 42,488
27,322 55.5 % EBITDA
(non-GAAP) 139,281 138,021 0.9 % 275,525 275,243 0.1 % Share-based
compensation 2,516 2,738 -8.1 % 5,871 5,850 0.4 % Restructuring
(5,814 ) 6,759
-186.0 % (1,834 ) 11,969
-115.3 % Adjusted EBITDA (non-GAAP) $ 135,983
$ 147,518 -7.8 % $ 279,562
$ 293,062 -4.6 %
Basis
Point Basis Point Change Change
Adjusted EBITDA as a percentage of net sales Adjusted
EBITDA margin 14.4 % 15.1 %
(70 ) 14.4 % 14.9 %
(50 )
Operating Free Cash Flow:
Percentage Percentage 2019
2018 Change
2019 2018
Change Net cash provided by operating
activities $ 59,854 $ 75,246 -20.5 % $ 110,110 $ 179,450 -38.6 %
Less: Payments for capital expenditures, net (1) (10,678 )
(16,180 ) -34.0 % (34,388
) (38,679 ) -11.1 % Operating
free cash flow (non-GAAP) $ 49,176 $ 59,066
-16.7 % $ 75,722 $
140,771 -46.2 % (1) For the three and
six months ended March 31, 2019, payments for capital expenditures,
net includes cash proceeds of $12.0 million from the sale of our
secondary headquarters and fulfillment center in connection with
the supply chain modernization plan. Supplemental
Schedule 5
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Store Count and Same Store Sales (Unaudited)
As of March 31, 2019
2018 Change
Number of stores: SBS: Company-operated stores 3,703 3,765
(62 ) Franchise stores 15 17 (2 ) Total SBS 3,718 3,782 (64 ) BSG:
Company-operated stores 1,223 1,228 (5 ) Franchise stores 165 165 -
Total BSG 1,388 1,393 (5 ) Total consolidated 5,106 5,175
(69 ) Number of BSG distributor sales consultants 798 859
(61 ) BSG distributor sales consultants (DSC) include 251 and 263
sales consultants employed by our franchisees at March 31, 2019 and
2018, respectively.
Three
Months Ended March 31, Six Months Ended March 31,
Basis Point
Basis Point 2019 2018
Change 2019 2018
Change Same store sales growth (decline): SBS -0.3 %
-1.6 % 130 0.2 % -2.1 % 230 BSG -0.9 % -1.2 % 30 -0.7 % -1.2 % 50
Consolidated -0.5 % -1.4 % 90 -0.1 % -1.8 % 170 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/20190501005220/en/
Jeff HarkinsInvestor Relations940-297-3877
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