false 0001368458 0001368458 2024-11-14 2024-11-14

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: November 14, 2024

(Date of earliest event reported)

 

 

SALLY BEAUTY HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   1-33145   36-2257936

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

3001 Colorado Boulevard,

Denton, Texas

     76210
(Address of Principal Executive Offices)     (Zip Code)

Registrant’s Telephone Number, Including Area Code: (940) 898-7500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading

Symbol(s)

  

Name of each exchange

on which registered

Common Stock, $0.01 par value   SBH   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 2.02.

Results of Operations and Financial Condition

On November 14, 2024, Sally Beauty Holdings, Inc. (the “Company”) issued the news release attached hereto as Exhibit 99.1 reporting the financial results of the Company for the fourth quarter ended September 30, 2024 (the “Earnings Release”).

 

Item 7.01

Regulation FD Disclosure

The Earnings Release also provides an update on the Company’s strategy and business outlook.

 

Item 9.01

Financial Statement and Exhibits

(d)

 

Exhibit

   

Description

99.1    News release reporting financial results for the fourth quarter ended September 30, 2024, issued by Sally Beauty Holdings, Inc. on November 14, 2024.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).

All of the information furnished in Items 2.02 and 7.01 of this report and the accompanying exhibit shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, unless expressly incorporated by reference therein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    SALLY BEAUTY HOLDINGS, INC.
November 14, 2024     By:  

/s/ Denise Paulonis

    Name:   Denise Paulonis
    Title:   President and Chief Executive Officer

Exhibit 99.1

 

LOGO      

Contact: Jeff Harkins

Investor Relations

940-297-3877

jharkins@sallybeauty.com

Sally Beauty Holdings Reports Fourth Quarter and Full Year Fiscal 2024 Results

 

  •  

Q4 Consolidated Net Sales Increased 1.5% and Consolidated Comparable Sales Increased 2.0%

 

  •  

Q4 GAAP Operating Margin Expanded 50 Basis Points to 8.8%, and Adjusted Operating Margin Expanded 80 Basis Points to 9.4%

 

  •  

Strong Q4 Cash Flow from Operations of $111 Million Utilized to Repay Outstanding Balance of $45 Million on ABL Credit Facility and Fund $10 Million in Share Repurchases

 

  •  

Beauty Systems Group Acquires Professional Beauty Distributor in Florida

 

  •  

Company Provides Fiscal 2025 Guidance

DENTON, Texas, November 14, 2024 – 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, 2024. The Company will hold a conference call today at 7:30 a.m. Central Time to discuss these results and its business.

Fiscal 2024 Fourth Quarter Summary

 

  •  

Consolidated net sales of $935 million, an increase of 1.5% compared to the prior year;

 

  •  

Consolidated comparable sales increase of 2.0%;

 

  •  

Global e-commerce sales of $91 million, representing 9.8% of net sales;

 

  •  

GAAP gross margin expanded 60 basis points to 51.2%;

 

  •  

GAAP operating earnings of $82 million and GAAP operating margin of 8.8%; Adjusted Operating Earnings of $88 million and Adjusted Operating Margin of 9.4%;

 

  •  

GAAP diluted net earnings per share of $0.46 and Adjusted Diluted Net Earnings Per Share of $0.50; and

 

  •  

Cash flow from operations of $111 million and Operating Free Cash Flow of $73 million.

Fiscal 2024 Full Year Summary

 

  •  

Consolidated net sales of $3.72 billion, a decrease of 0.3% compared to the prior year;

 

  •  

Consolidated comparable sales increase of 0.3%;

 

  •  

Global e-commerce sales of $364 million, representing 9.8% of net sales;

 

  •  

GAAP gross margin of 50.9%, flat to the prior year, and Adjusted Gross Margin increased to 50.9% compared to 50.8% in the prior year;

 

  •  

GAAP operating earnings of $283 million and GAAP operating margin of 7.6%, Adjusted Operating Earnings of $315 million and Adjusted Operating Margin of 8.5%;

 

  •  

GAAP diluted net earnings per share of $1.43 and Adjusted Diluted Net Earnings Per Share of $1.69; and

 

  •  

Cash flow from operations of $247 million and Operating Free Cash Flow of $145 million.

“We are pleased to conclude our fiscal year with strong fourth quarter results, reflecting continued momentum across both our Sally Beauty and Beauty Systems Group segments,” said Denise Paulonis, president and chief executive officer. “We delivered a second consecutive quarter of positive comparable sales across both business units in combination with healthy gross margins, which resulted in adjusted operating margin expansion of 80 basis points to 9.4%. Additionally, we generated strong cash flow from operations, which was deployed to complete another strategic acquisition for Beauty Systems Group, invest in our strategic initiatives, further reduce our debt levels, and return value to shareholders through our share repurchase program.”

“We are carrying this operating and financial strength into fiscal 2025, remaining focused on driving consistent profitable growth and delivering value to shareholders. Our teams are continuing to advance our strategic initiatives related to enhancing our customer centricity, growing our high margin own brands and amplifying innovation, and increasing the efficiency of our operations.”

Beauty Systems Group Announces Strategic Acquisition of Exclusive Beauty Supplies

In the fourth quarter of fiscal 2024, Beauty Systems Group acquired certain assets of Exclusive Beauty Supplies of Florida, a leading professional beauty distributor. The acquisition adds three stores and seven direct sales consultants, as well as distribution rights for major brands, including Moroccanoil®, Olaplex®, Rusk® and Verb®, which also apply to our 75 Cosmo Prof stores in the state of Florida.

Fiscal 2024 Fourth Quarter Operating Results

Fourth quarter consolidated net sales were $935.0 million, an increase of 1.5% compared to the prior year. Foreign currency translation had an unfavorable impact of 30 basis points on consolidated net sales for the quarter. The Company was operating 26 fewer stores at the end of the quarter compared to the prior year. At constant currency, global e-commerce sales were $91 million, or 9.8% of consolidated net sales, for the quarter.

Consolidated comparable sales increased 2.0%, driven primarily by an improvement in new and reactivated customer trends at Sally Beauty as key strategic initiatives continue to mature and the continued momentum at Beauty Systems Group driven by expanded brand and territory distribution.

Consolidated gross profit for the fourth quarter was $479.2 million compared to $466.6 million in the prior year, an increase of 2.7%. Consolidated GAAP gross margin was 51.2%, an increase of 60 basis points compared to 50.6% in the prior year, driven primarily by lower distribution and freight costs from supply chain efficiencies.

GAAP selling, general and administrative (SG&A) expenses totaled $397.4 million, an increase of $6.8 million compared to the prior year. As a percentage of sales, SG&A expenses were 42.5% compared to 42.4% in the prior year. Adjusted Selling, General and Administrative Expenses, excluding the costs related to the Company’s fuel for growth initiative, COVID-19-related net expenses from the prior year, restructuring efforts and other expenses, totaled $391.2 million, an increase of $3.9 million compared to the prior year. The increase was driven primarily by higher labor and other compensation-related expenses, and increased advertising expenses, partially offset by $5.5 million in savings from our fuel for growth initiative. As a percentage of sales, Adjusted SG&A expenses were 41.8% compared to 42.0% in the prior year.

GAAP operating earnings and operating margin in the fourth quarter were $82.3 million and 8.8%, compared to $76.9 million and 8.3%, in the prior year. Adjusted Operating Earnings and Operating Margin, excluding the costs related to the Company’s fuel for growth initiative, COVID-19-related net expenses from the prior year, restructuring efforts and other expenses, were $88.0 million and 9.4%, compared to $79.3 million and 8.6%, in the prior year.

GAAP net earnings in the fourth quarter were $48.1 million, or $0.46 per diluted share, compared to GAAP net earnings of $42.6 million, or $0.39 per diluted share, in the prior year. Adjusted Net Earnings, excluding the costs related to the Company’s fuel for growth initiative, COVID-19-related net expenses and the loss on debt extinguishment from the prior year, restructuring efforts and other expenses, were $52.3 million, or $0.50 per diluted share, compared to Adjusted Net Earnings of $45.7 million, or $0.42 per diluted share, in the prior year. Adjusted EBITDA in the fourth quarter was $118.1 million, an increase of 8.1% compared to the prior year, and Adjusted EBITDA Margin was 12.6%, an increase of 70 basis points compared to the prior year.

Balance Sheet and Cash Flow

As of September 30, 2024, the Company had cash and cash equivalents of $108 million and no outstanding borrowings under its asset-based revolving line of credit. At the end of the quarter, inventory was $1.04 billion, up 6.3% versus a year ago. The Company ended the quarter with a net debt leverage ratio of 2.0x.

Fourth quarter cash flow from operations was $110.7 million. Capital expenditures in the quarter totaled $37.4 million. During the quarter, the Company utilized its strong cash flow to acquire assets from Exclusive Beauty Supplies in Florida for $7.5 million, repay the remaining $45 million outstanding balance under its asset-based revolving line of credit, and repurchase 0.8 million shares under its share repurchase program at an aggregate cost of $10 million.

Fiscal 2024 Fourth Quarter Segment Results

Sally Beauty Supply

 

  •  

Segment net sales were $534.1 million in the quarter, an increase of 1.8% compared to the prior year. The segment had an unfavorable impact of 50 basis points from foreign currency translation on reported sales and operated 19 fewer stores at the end of the quarter compared to the prior year. At constant currency, segment e-commerce sales were $38 million, or 7.1% of segment net sales, for the quarter.

 

  •  

Segment comparable sales increased 2.6% in the fourth quarter, primarily reflecting an improvement in new and reactivated customer trends as key strategic initiatives continue to mature.

 

  •  

At the end of the quarter, segment store count was 3,129.

 

  •  

GAAP gross margin increased by 120 basis points to 60.4% compared to the prior year. The increase was driven primarily by higher product margin resulting from enhanced promotional strategies and lower distribution and freight costs from supply chain efficiencies.

 

  •  

GAAP operating earnings were $92.9 million compared to $78.5 million in the prior year, representing an increase of 18.4%. GAAP operating margin increased to 17.4% compared to 15.0% in the prior year.

Beauty Systems Group

 

  •  

Segment net sales were $401.0 million in the quarter, an increase of 1.0% compared to the prior year. The segment had an unfavorable impact of 10 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 were $53 million, or 13.3% of segment net sales, for the quarter.

 

  •  

Segment comparable sales increased 1.3% in the fourth quarter, primarily reflecting the continued momentum at Beauty Systems Group from expanded brand and territory distribution.

 

  •  

At the end of the quarter, segment store count was 1,331.

 

  •  

GAAP gross margin decreased 30 basis points to 39.0% in the quarter compared to the prior year, driven primarily by lower product margin related to brand mix, partially offset by lower distribution and freight costs from supply chain efficiencies.

 

  •  

GAAP operating earnings were $44.0 million in the quarter, a decrease of 3.6% compared to $45.7 million in the prior year. GAAP operating margin in the quarter was 11.0% compared to 11.5% in the prior year.

 

  •  

At the end of the quarter, there were 652 distributor sales consultants compared to 670 in the prior year.

Fiscal Year 2025 Guidance*

The Company is providing the following guidance for fiscal year 2025:

First Quarter

 

  •  

Consolidated net sales and comparable sales are expected to be flat to up 2% compared to the prior year

 

  •  

Adjusted Operating Margin is expected to be in the range of 8.0% to 8.4%

Full Year

 

  •  

Consolidated net sales and comparable sales are expected to be flat to up 2% compared to the prior year

 

  •  

Adjusted Operating Margin is expected to be in the range of 8.5% to 9.0%

 

*

The Company does not provide a reconciliation for forward-looking non-GAAP financial measures where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the occurrence and the financial impact of various items that have not yet occurred, are out of the Company’s control or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

Conference Call and Where You Can Find Additional Information

The Company will hold a conference call and audio webcast at approximately 7:30 a.m. Central Time today, November 14, 2024, to discuss its financial results and its business. 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 3549572#. 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 10:30 a.m. Central Time, November 14, 2024, through November 28, 2024, by dialing (866) 207-1041 (International: (402) 970-0847) and referencing access code 1471652#. A website replay will also 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®, Bondbar®, Strawberry Leopard®, Generic Value Products®, Inspired by Nature® and Silk Elements® as well as professional lines such as Wella®, Clairol®, OPI®, L’Oreal®, Wahl® and Babyliss Pro®. Beauty Systems Group stores, branded as Cosmo Prof® 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®, Amika® and Moroccanoil®, 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, 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, 2024. 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, (“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 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 costs related to the Company’s fuel for growth initiative, costs related to the Company’s restructuring plans, COVID-19-related net expenses and other 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 fuel for growth initiative, 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 fuel for growth initiative, costs related to the Company’s restructuring plans, net expenses related to COVID-19 and other expenses 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 fuel for growth initiative, 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 other tax-effected expenses 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 fuel for growth initiative, tax-effected 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 other tax-effected expenses 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

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended September 30,     Twelve Months Ended September 30,  
     2024     2023     Percentage
Change		     2024     2023     Percentage
Change		  

Net sales

    $ 935,028     $ 921,356       1.5 %    $ 3,717,031     $ 3,728,131       (0.3 )% 

Cost of products sold

      455,827       454,794       0.2 %      1,826,699       1,829,951       (0.2 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      479,201       466,562       2.7 %      1,890,332       1,898,180       (0.4 )% 

Selling, general and administrative expenses

      397,371       390,526       1.8 %      1,607,674       1,555,946       3.3 % 

Restructuring

      (436 )      (872 )      50.0 %      (75 )      17,205       (100.4 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating earnings

      82,266       76,908       7.0 %      282,733       325,029       (13.0 )% 

Interest expense

      17,864       19,717       (9.4 )%      76,408       72,979       4.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings before provision for income taxes

      64,402       57,191       12.6 %      206,325       252,050       (18.1 )% 

Provision for income taxes

      16,346       14,610       11.9 %      52,911       67,450       (21.6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings

    $ 48,056     $ 42,581       12.9 %    $ 153,414     $ 184,600       (16.9 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per share:

             

Basic

    $ 0.47     $ 0.40       17.5 %    $ 1.48     $ 1.72       (14.0 )% 

Diluted

    $ 0.46     $ 0.39       17.9 %    $ 1.43     $ 1.69       (15.4 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average shares:

             

Basic

      102,336       107,181         103,939       107,332    

Diluted

      105,346       109,098         106,933       109,336    
  

 

 

    

 

 

      

 

 

    

 

 

    
                 Basis Point
Change		                 Basis Point
Change		  

Comparison as a percentage of net sales

             

Consolidated gross margin

      51.2 %      50.6 %      60       50.9 %      50.9 %      0  

Selling, general and administrative expenses

      42.5 %      42.4 %      10       43.3 %      41.7 %      160  

Consolidated operating margin

      8.8 %      8.3 %      50       7.6 %      8.7 %      (110 ) 

Effective tax rate

      25.4 %      25.5 %      (10 )      25.6 %      26.8 %      (120 ) 

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     September 30,  
     2024      2023  

Cash and cash equivalents

    $ 107,961      $ 123,001  

Trade and other accounts receivable

      92,188        75,875  

Inventory

      1,036,624        975,218  

Other current assets

      68,541        53,903  
  

 

 

     

 

 

  

Total current assets

      1,305,314        1,227,997  

Property and equipment, net

      269,872        297,779  

Operating lease assets

      582,573        570,657  

Goodwill and other intangible assets

      598,226        588,252  

Other assets

      36,914        40,565  
  

 

 

     

 

 

  

Total assets

    $ 2,792,899      $ 2,725,250  
  

 

 

     

 

 

  

Current maturities of long-term debt

    $ 4,127      $ 4,173  

Accounts payable

      269,424        258,884  

Accrued liabilities

      162,950        163,366  

Current operating lease liabilities

      136,068        150,479  

Income taxes payable

      20,100        2,355  
  

 

 

     

 

 

  

Total current liabilities

      592,669        579,257  

Long-term debt, including capital leases

      978,255        1,065,811  

Long-term operating lease liabilities

      479,616        455,071  

Other liabilities

      22,066        23,139  

Deferred income tax liabilities, net

      91,758        93,224  
  

 

 

     

 

 

  

Total liabilities

      2,164,364        2,216,502  

Total stockholders’ equity

      628,535        508,748  
  

 

 

     

 

 

  

Total liabilities and stockholders’ equity

    $ 2,792,899      $ 2,725,250  
  

 

 

     

 

 

  

Supplemental Schedule 1

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Segment Information

(In thousands)

(Unaudited)

 

     Three Months Ended September 30,     Twelve Months Ended September 30,  
     2024     2023     Percentage
Change		     2024     2023     Percentage
Change		  

Net sales:

             

Sally Beauty Supply (“SBS”)

    $ 534,074     $ 524,556       1.8 %    $ 2,107,089     $ 2,139,206       (1.5 )% 

Beauty Systems Group (“BSG”)

      400,954       396,800       1.0 %      1,609,942       1,588,925       1.3 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net sales

    $ 935,028     $ 921,356       1.5 %    $ 3,717,031     $ 3,728,131       (0.3 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating earnings:

             

SBS

    $ 92,932     $ 78,483       18.4 %    $ 334,319     $ 358,474       (6.7 )% 

BSG

      44,025       45,672       (3.6 )%      178,420       181,275       (1.6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Segment operating earnings

      136,957       124,155       10.3 %      512,739       539,749       (5.0 )% 

Unallocated expenses (1)

     55,127       48,119       14.6 %      230,081       197,515       16.5 % 

Restructuring

      (436 )      (872 )      50.0 %      (75 )      17,205       (100.4 )% 

Interest expense

      17,864       19,717       (9.4 )%      76,408       72,979       4.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings before provision for income taxes

    $ 64,402     $ 57,191       12.6 %    $ 206,325     $ 252,050       (18.1 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
Segment gross margin:    2024     2023     Basis
Point
Change		     2024     2023     Basis
Point
Change		  

SBS

      60.4 %      59.2 %      120     59.7 %      59.2 %      50

BSG

      39.0 %      39.3 %      (30 )      39.3 %      39.8 %      (50 ) 

Segment operating margin:

             

SBS

      17.4 %      15.0 %      240     15.9 %      16.8 %      (90 ) 

BSG

      11.0 %      11.5 %      (50 )      11.1 %      11.4 %      (30 ) 

Consolidated operating margin

      8.8 %      8.3 %      50     7.6 %      8.7 %      (110 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)

Unallocated expenses, including share-based compensation expense, consist of corporate and shared costs and are included in selling, general and administrative expenses. Additionally, unallocated expenses include costs associated with our Fuel for Growth initiative.

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, 2024  
     As
Reported
(GAAP)		     Restructuring (1)     Fuel for
Growth and
Other (2)		           As Adjusted
(Non-GAAP)		  

Cost of products sold

    $ 455,827     $ —      $ —        $ 455,827  

Consolidated gross margin

      51.2 %            51.2 % 

Selling, general and administrative expenses

      397,371       —        (6,191 )        391,180  

SG&A expenses, as a percentage of sales

      42.5 %            41.8 % 

Restructuring

      (436 )      436       —          —   

Operating earnings

      82,266       (436 )      6,191         88,021  

Operating margin

      8.8 %            9.4 % 

Interest expense

      17,864       —        —          17,864  

Earnings before provision for income taxes

      64,402       (436 )      6,191         70,157  

Provision for income taxes (4)

      16,346       (113 )      1,592       17,825  
  

 

 

    

 

 

    

 

 

      

 

 

  

Net earnings

    $ 48,056     $ (323 )    $ 4,599       $ 52,332  
  

 

 

    

 

 

    

 

 

      

 

 

  

Earnings per share: (5)

           

Basic

    $ 0.47     $ (0.00 )    $ 0.05       $ 0.51  

Diluted

    $ 0.46     $ (0.00 )    $ 0.04       $ 0.50  
  

 

 

    

 

 

    

 

 

      

 

 

  
     Three Months Ended September 30, 2023  
     As
Reported
(GAAP)		     Restructuring (1)     COVID
and
Other (2)		     Loss on Debt
Extinguishment (3)		     As Adjusted
(Non-GAAP)		  

Cost of products sold

    $ 454,794     $ —      $ —      $ —      $ 454,794  

Consolidated gross margin

      50.6 %            50.6 % 

Selling, general and administrative expenses

      390,526       (606 )      (2,649 )      —        387,271  

SG&A expenses, as a percentage of sales

      42.4 %            42.0 % 

Restructuring

      (872 )      872       —        —        —   

Operating earnings

      76,908       (266 )      2,649       —        79,291  

Operating margin

      8.3 %            8.6 % 

Interest expense

      19,717       —        —        (1,793 )      17,924

Earnings before provision for income taxes

      57,191       (266 )      2,649       1,793       61,367  

Provision for income taxes (4)

      14,610       (181 )      779       461       15,669  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings

    $ 42,581     $ (85 )    $ 1,870     $ 1,332     $ 45,698  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per share: (5)

           

Basic

    $ 0.40     $ (0.00 )    $ 0.02     $ 0.01     $ 0.43  

Diluted

    $ 0.39     $ (0.00 )    $ 0.02     $ 0.01     $ 0.42  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

(1)

For the three months ended September 30, 2024 and 2023, restructuring represents expenses and adjustments incurred primarily in connection with our Distribution Center Consolidation and Store Optimization Plan.

(2)

For the three months ended September 30, 2024, Fuel for Growth and other represents expenses related to consulting services and severance expenses. For the three months ended September 30, 2023, COVID and other relates primarily to obsolete personal-protective equipment (“PPE”) related to store supplies in selling, general and administrative expense.

(3)

Loss on debt extinguishment relates to the repricing of our Term Loan B due 2030, which included a the write-off of unamortized deferred financing costs of $1.8 million.

(4)

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.

(5)

The sum of the earnings per share may not equal the full amount due to rounding of the calculated amounts

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, 2024  
     As Reported
(GAAP)		     Restructuring (1)     Fuel for
Growth and
Other (2)		     Loss on Debt
Extinguishment (3)		     As Adjusted
(Non-GAAP)		  

Cost of products sold

    $ 1,826,699     $ —      $ —      $ —      $ 1,826,699  

Consolidated gross margin

      50.9 %            50.9 % 

Selling, general and administrative expenses

      1,607,674     —        (31,951 )      —        1,575,723

SG&A expenses, as a percentage of sales

      43.3 %            42.4 % 

Restructuring

      (75 )      75     —        —        —   

Operating earnings

      282,733     (75 )      31,951     —        314,609

Operating margin

      7.6 %            8.5 % 

Interest expense

      76,408       —        —        (4,261 )      72,147  

Earnings before provision for income taxes

      206,325       (75 )      31,951       4,261     242,462  

Provision for income taxes (4)

      52,911       (20 )      8,210       1,095     62,196  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings

    $ 153,414     $ (55 )    $ 23,741     $ 3,166     $ 180,266  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per share: (5)

           

Basic

    $ 1.48     $ (0.00 )    $ 0.23     $ 0.03     $ 1.73  

Diluted

    $ 1.43     $ (0.00 )    $ 0.22     $ 0.03     $ 1.69  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     Twelve Months Ended September 30, 2023  
     As Reported
(GAAP)		     Restructuring (1)     COVID-19
and
Other (2)		     Loss on Debt
Extinguishment (3)		     As Adjusted
(Non-GAAP)		  

Cost of products sold

    $ 1,829,951     $ 5,789     $ —      $ —      $ 1,835,740  

Consolidated gross margin

      50.9 %            50.8 % 

Selling, general and administrative expenses

      1,555,946       (606 )      (3,701 )      —        1,551,639  

SG&A expenses, as a percentage of sales

      41.7 %            41.6 % 

Restructuring

      17,205       (17,205 )      —        —        —   

Operating earnings

      325,029       12,022       3,701       —        340,752  

Operating margin

      8.7 %            9.1 % 

Interest expense

      72,979       —        —        (1,793 )      71,186

Earnings before provision for income taxes

      252,050       12,022       3,701       1,793       269,566  

Provision for income taxes (4)

      67,450       2,928       (1,651 )      461       69,188  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net earnings

    $ 184,600     $ 9,094     $ 5,352     $ 1,332     $ 200,378  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings per share: (5)

           

Basic

    $ 1.72     $ 0.08     $ 0.05     $ 0.01     $ 1.87  

Diluted

    $ 1.69     $ 0.08     $ 0.05     $ 0.01     $ 1.83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)

For fiscal years 2024 and 2023, restructuring represents expenses and adjustments incurred primarily in connection with our Distribution Center Consolidation and Store Optimization Plan, including $5.8 million in cost of products sold related to adjustments to our expected obsolescence reserve during fiscal year 2023.

(2)

For fiscal year 2024, Fuel for Growth and other represents expenses related to consulting services and severance expenses. For fiscal year 2023, COVID-19 and other primarily relates obsolete PPE related to store supplies in selling, general and administrative expenses and to use taxes around the donation of personal protection merchandise.

(3)

For fiscal year 2024, loss on debt extinguishment relates to the repayment of our 5.625% Senior Notes due 2025 and the repricing of our Term Loan B due 2030. In connection with the repayment of our senior notes, we recognized a write-off of $2.0 million in unamortized deferred financing costs and $0.5 million in overlapping interest, net of interest earned on short-term cash equivalents,

  on such senior notes after February 27, 2024 and until their redemption. These pro-forma adjustments assume the redeemed senior notes were repaid on February 27, 2024 at the time of closing on our 6.75% Senior Notes due 2032. In connection with the repricing of our Term Loan B, we recognized a write-off of unamortized deferred financing costs of $1.7 million. For fiscal year 2023, loss on debt extinguishment relates to the repricing of our Term Loan B, which resulted in the write-off of unamortized deferred financing costs of $1.8 million.
(4)

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. Additionally, for fiscal year 2023, provision for income taxes, within COVID-19 and other, includes additional $2.7 million in taxes and interest for the one-time transition tax on unrepatriated foreign earnings (“Repatriation Tax”). The Repatriation Tax in the prior year has been reclassified, from loss on extinguishment to COVID-19 and other, to reflect current year presentation.

(5)

The sum of the earnings per share may not equal the full amount due to rounding of the calculated amounts

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:    2024     2023     Percentage
Change		     2024     2023     Percentage
Change		  

Net earnings

    $ 48,056     $ 42,581       12.9 %    $ 153,414     $ 184,600       (16.9 )% 

Add:

             

Depreciation and amortization

      26,205       26,639       (1.6 )%      109,738       102,412       7.2 % 

Interest expense

      17,864       19,717       (9.4 )%      76,408       72,979       4.7 % 

Provision for income taxes

      16,346       14,610       11.9 %      52,911       67,450       (21.6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA (non-GAAP)

      108,471       103,547       4.8 %      392,471       427,441       (8.2 )% 

Share-based compensation

      3,912       3,339       17.2 %      17,172       15,862       8.3 % 

Restructuring

      (436 )      (266 )      (63.9 )%      (75 )      12,022       (100.6 )% 

Fuel for Growth and Other

      6,191       —        100.0 %      31,951       —        100.0 % 

COVID-19

      —        2,649     (100.0 )%      —        3,701       (100.0 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA (non-GAAP)

    $ 118,138     $ 109,269       8.1 %    $ 441,519     $ 459,026       (3.8 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                 Basis
Point
Change		                 Basis
Point
Change		  
Adjusted EBITDA as a percentage of net sales                                     

Adjusted EBITDA margin

      12.6 %      11.9 %      70       11.9 %      12.3 %      (40 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     2024     2023     Percentage
Change		     2024     2023     Percentage
Change		  

Operating Free Cash Flow:

             

Net cash provided by operating activities

    $ 110,673     $ 116,540       (5.0 )%    $ 246,528     $ 249,311       (1.1 )% 

Less:

             

Payments for property and equipment, net

      37,357       26,946       38.6 %      101,165       90,742       11.5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating free cash flow (non-GAAP)

    $ 73,316     $ 89,594       (18.2 )%    $ 145,363     $ 158,569       (8.3 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Supplemental Schedule 5

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Store Count and Comparable Sales

(Unaudited)

 

     As of September 30,  
     2024      2023      Change  

Number of stores:

         

SBS stores

      3,129        3,148        (19 ) 

BSG:

         

Company-operated stores

      1,200        1,206        (6 ) 

Franchise stores

      131        132        (1 ) 
  

 

 

     

 

 

     

 

 

  

Total BSG

      1,331        1,338        (7 ) 
  

 

 

     

 

 

     

 

 

  

Total consolidated

      4,460        4,486        (26 ) 
  

 

 

     

 

 

     

 

 

  

Number of BSG distributor sales consultants (1)

      652        670        (18 ) 
  

 

 

     

 

 

     

 

 

  

 

(1)

BSG distributor sales consultants (DSC) include 190 and 193 sales consultants employed by our franchisees at September 30, 2024 and 2023, respectively.

 

     Three Months Ended September 30,      Twelve Months Ended September 30,  
     2024     2023     Basis
Point
Change		      2024     2023     Basis
Point
Change		  

Comparable sales growth (decline):

              

SBS

      2.6 %      (1.2 )%      380        (0.7 )%      3.4 %      (410 ) 

BSG

      1.3 %      (2.3 )%      360        1.6 %      (1.3 )%      290  

Consolidated

      2.0 %      (1.6 )%      360        0.3 %      1.4 %      (110 ) 

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 amounts exclude the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition.

v3.24.3
Document and Entity Information
Nov. 14, 2024
Cover [Abstract]  
Amendment Flag false
Entity Central Index Key 0001368458
Document Type 8-K
Document Period End Date Nov. 14, 2024
Entity Registrant Name SALLY BEAUTY HOLDINGS, INC.
Entity Incorporation State Country Code DE
Entity File Number 1-33145
Entity Tax Identification Number 36-2257936
Entity Address, Address Line One 3001 Colorado Boulevard
Entity Address, City or Town Denton
Entity Address, State or Province TX
Entity Address, Postal Zip Code 76210
City Area Code (940)
Local Phone Number 898-7500
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Common Stock, $0.01 par value
Trading Symbol SBH
Security Exchange Name NYSE
Entity Emerging Growth Company false
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