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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sally Beauty Holdings Inc | NYSE:SBH | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.20 | 1.89% | 10.78 | 10.85 | 10.78 | 10.81 | 19,943 | 14:35:13 |
GAAP Diluted EPS of $0.50; Adjusted Diluted EPS of $0.50
GAAP Operating Margin of 11.1%; Adjusted Operating Margin of 11.2%
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”), the leader in professional hair color, today announced financial results for its first quarter ended December 31, 2020. The Company will hold a conference call today at 7:30 a.m. Central Time to discuss the results.
Fiscal 2021 First Quarter Summary
“Our teams executed well both operationally and financially in a particularly challenging topline environment,” said Chris Brickman, president and chief executive officer. “Despite the disruption to sales from store closures and capacity restrictions globally and salon shut-downs in California and parts of Canada, we delivered strong gross margins above 50%, closely managed expenses and generated a 6% increase in adjusted diluted earnings per share.”
“At the same time, we made continued progress against our key initiatives, which included commercializing new digital capabilities such as BOPIS, growing customer engagement and loyalty, and executing against the remaining steps in our successful transformation journey, which is expected to be completed by the end of the year. Through our strategic investments and repositioning over the past few years, we now have a solid infrastructure and robust set of capabilities that we believe will extend our leadership position in hair color and fuel a new leg of growth for SBH post-pandemic.”
COVID-19 Update
The table below includes the operating status of corporate-owned stores at the end of each month during the first quarter, reflecting the disruption caused by COVID-19 on global stores operations and customer traffic.
October
November
December
TerritoryHard
Closed
Reduced
Capacity
Fully
Open
Hard
Closed
Reduced
Capacity
Fully
Open
Hard
Closed
Reduced
Capacity
Fully
Open
Sally US/CAN0%
0%
100%
0%
24%
76%
0%
38%
62%
Sally Europe2%
4%
94%
43%
33%
24%
62%
2%
36%
Sally LATAM1%
53%
46%
2%
76%
22%
25%
60%
15%
BSG US/CAN0%
7%
93%
0%
28%
72%
2%
43%
55%
SBH Total *0%
5%
95%
4%
29%
67%
8%
37%
55%
*Includes corporate stores only (excludes franchises)Fiscal 2021 First Quarter Operating Results
First quarter consolidated same store sales decreased 3.7% and consolidated net sales decreased 4.5% to $936.0 million, primarily due to the impact of the COVID-19 pandemic (including temporary store closures in international markets, restricted capacity in certain markets and salon shut-downs in California and parts of Canada for a portion of the quarter) and operating 43 fewer stores compared to the prior year. Foreign currency translation had a favorable impact of approximately 40 basis points on reported sales. Global e-commerce sales increased 48%, partially offsetting the decline.
Consolidated gross profit for the first quarter was $470.7 million compared to $474.8 million in the prior year. Consolidated gross margin was 50.3%, an increase of 190 basis points versus 48.4% in the prior year, driven primarily by fewer promotions in the Sally segment.
Selling, general and administrative (SG&A) expenses totaled $366.2 million, down $11.8 million versus the prior year, driven primarily by lower labor costs and advertising expenses. As a percentage of sales, SG&A was 39.1% compared to 38.6% in the prior year, driven primarily by lower sales volume compared to the prior year.
GAAP operating earnings and operating margin in the first quarter were $104.3 million and 11.1%, respectively, compared to $94.4 million and 9.6%, respectively, in the prior year. Adjusted operating earnings and operating margin increased to $104.5 million and 11.2%, respectively, compared to $96.9 million and 9.9%, respectively, in the prior year.
GAAP net earnings in the first quarter were $57.2 million, or $0.50 per diluted share, compared to $53.2 million, or $0.45 per diluted share in the prior year. Adjusted net earnings were $57.4 million, an increase of 4% versus $55.2 million in the prior year and adjusted earnings per diluted share increased 6% to $0.50. Adjusted EBITDA in the first quarter was $133.8 million, an increase of 5.0%, compared to the prior year, and adjusted EBITDA margin was 14.3%, an increase of 130 basis points compared to the prior year.
Balance Sheet and Cash Flow
As of December 31, 2020, the Company had cash on the balance sheet of $538 million and a zero balance outstanding under its $600 million asset-based revolving line of credit. The Company ended the quarter with a leverage ratio of 2.78x, reflecting our significant cash balance. For comparison purposes, the leverage ratio, as defined in our loan agreements where the impact of balance sheet cash is capped at $100 million for net debt calculation purposes, was 3.73x.
First quarter fiscal 2021 cash flow from operations totaled $39.0 million. Capital expenditures totaled $15.5 million. Operating free cash flow totaled $23.5 million. The Company did not repurchase any shares during the quarter. Subsequent to quarter end, the Company utilized excess cash to repay the remaining $213 million on its 4.5% fixed-rate term loan.
Fiscal 2021 First Quarter Segment Results
Sally Beauty Supply
Beauty Systems Group
Fiscal Year 2021 Outlook
The Company will provide perspective on its outlook for the second quarter during its earnings conference call. The Company will not be providing formal guidance at this time.
Conference Call and Where You Can Find Additional Information
The Company will hold a conference call and audio webcast today to discuss its financial results and its business at approximately 7:30 a.m. Central Time today, February 4 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 7453604#. 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 Q1 Earnings Presentation. A replay of the earnings conference call will be available starting at 10:30 a.m. Central Time, February 4, 2021, through February 11, 2021, by dialing (866) 207-1041 (International: (402) 970-0847) and reference access code 9328373#. 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 more than 5,000 stores, including 142 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 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 EBITDA and EBITDA Margin; (2) Adjusted Operating Earnings and Operating Margin; (3) Adjusted Net Earnings; (4) Adjusted Diluted Net Earnings Per Share; and (5) Operating Free Cash Flow. We have provided definitions below for these non-GAAP financial measures and have provided tables in the schedules hereto to reconcile these non-GAAP financial measures to the comparable GAAP financial measures.
Adjusted EBITDA and EBITDA Margin – We define the measure Adjusted EBITDA as GAAP net earnings before depreciation and amortization, interest expense, income taxes, share-based compensation, costs related to the Company’s previously announced restructuring plans and COVID-19 related income 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 income 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 income 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 income 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
Non-GAAP Financial Measures Reconciliations; Adjusted EBITDA and Operating Free Cash Flow
3
Store Count and Same Store Sales
4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
2020
2019
Percentage
Change
Net sales$
936,022
$
980,208
(4.5
)%
Cost of products sold
465,298
505,360
(7.9
)%
Gross profit
470,724
474,848
(0.9
)%
Selling, general and administrative expenses
366,170
377,930
(3.1
)%
Restructuring
232
2,531
(90.8
)%
Operating earnings
104,322
94,387
10.5
%
Interest expense
25,978
21,541
20.6
%
Earnings before provision for income taxes
78,344
72,846
7.5
%
Provision for income taxes
21,153
19,631
7.8
%
Net earnings$
57,191
$
53,215
7.5
%
Earnings per share: Basic$
0.51
$
0.46
10.9
%
Diluted$
0.50
$
0.45
11.1
%
Weighted average shares: Basic
112,475
116,125
Diluted
113,828
117,154
Basis Point
Change
Comparison as a percentage of net sales Consolidated gross margin
50.3
%
48.4
%
190
Selling, general and administrative expenses
39.1
%
38.6
%
50
Consolidated operating margin
11.1
%
9.6
%
150
Effective tax rate
27.0
%
26.9
%
10
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31,
2020
September 30,
2020
Cash and cash equivalents$
537,644
$
514,151
Trade and other accounts receivable
67,950
56,429
Inventory
895,984
814,503
Other current assets
44,300
48,014
Total current assets
1,545,878
1,433,097
Property and equipment, net
305,225
315,029
Operating lease assets
519,985
525,634
Goodwill and other intangible assets
604,846
598,321
Other assets
23,714
23,066
Total assets$
2,999,648
$
2,895,147
Current maturities of long-term debt$
186
$
180
Accounts payable
285,636
236,333
Accrued liabilities
133,328
170,665
Current operating lease liabilities
154,090
153,267
Income taxes payable
17,096
2,917
Total current liabilities
590,336
563,362
Long-term debt, including capital leases
1,798,154
1,796,897
Long-term operating lease liabilities
390,873
394,375
Other liabilities
29,406
32,976
Deferred income tax liabilities, net
92,013
92,094
Total liabilities
2,900,782
2,879,704
Total stockholders’ equity
98,866
15,443
Total liabilities and stockholders’ equity$
2,999,648
$
2,895,147
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Segment Information
(In thousands)
(Unaudited)
Three Months Ended December 31,
2020
2019
Percentage
Change
Net sales: Sally Beauty Supply ("SBS")$
547,670
$
569,147
(3.8
)%
Beauty Systems Group ("BSG")
388,352
411,061
(5.5
)%
Total net sales$
936,022
$
980,208
(4.5
)%
Operating earnings: SBS$
95,128
$
74,225
28.2
%
BSG
48,572
62,434
(22.2
)%
Segment operating earnings
143,700
136,659
5.2
%
Unallocated expenses (1)
39,146
39,741
(1.5
)%
Restructuring
232
2,531
(90.8
)%
Interest expense
25,978
21,541
20.6
%
Earnings before provision for income taxes$
78,344
$
72,846
7.5
%
Segment gross margin:2020
2019
Basis Point
Change
SBS
57.7
%
54.3
%
340
BSG
39.9
%
40.3
%
(40
)
Segment operating margin: SBS
17.4
%
13.0
%
440
BSG
12.5
%
15.2
%
(270
)
Consolidated operating margin
11.1
%
9.6
%
150
(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 December 31, 2020
As Reported
(GAAP)
Restructuring (1)
COVID-19
Expenses, net (2)
As Adjusted
(Non-GAAP)
Selling, general and administrative expenses$
366,170
$
-
$
45
$
366,215
SG&A expenses, as a percentage of sales
39.1
%
39.1
%
Operating earnings
104,322
232
(45
)
104,509
Operating margin
11.1
%
11.2
%
Earnings before provision for income taxes
78,344
232
(45
)
78,531
Provision for income taxes (3)
21,153
34
(12
)
21,175
Net earnings
$
57,191
$
198
$
(33
)
$
57,356
Earnings per share: Basic
$
0.51
$
0.00
$
(0.00
)
$
0.51
Diluted
$
0.50
$
0.00
$
(0.00
)
$
0.50
Three Months Ended December 31, 2019
As Reported
(GAAP)
Restructuring (1)
As Adjusted
(Non-GAAP)
Selling, general and administrative expenses$
377,930
$
-
$
377,930
SG&A expenses, as a percentage of sales
38.6
%
38.6
%
Operating earnings
94,387
2,531
96,918
Operating margin
9.6
%
9.9
%
Earnings before provision for income taxes
72,846
2,531
75,377
Provision for income taxes (3)
19,631
581
20,212
Net earnings
$
53,215
$
1,950
$
55,165
Earnings per share: Basic
$
0.46
$
0.02
$
0.48
Diluted
$
0.45
$
0.02
$
0.47
(1) For the three months ended December 31, 2020 and 2019, restructuring represents costs and expenses incurred primarily in connection with Project Surge and the Transformation Plan. (2) For the three months ended December 31, 2020, COVID-19 expenses represents an adjustment to an employee retention payroll tax credit. (3) The provision for income taxes was calculated using the applicable tax rates for each country, while excluding the tax benefits for countries where the tax benefit is not currently deemed probable of being realized.
Supplemental Schedule 3
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures Reconciliations, Continued
(In thousands)
(Unaudited)
Three Months Ended December 31,
Adjusted EBITDA:2020
2019
Percentage
Change
Net earnings$
57,191
$
53,215
7.5
%
Add: Depreciation and amortization
26,386
27,076
(2.5
)%
Interest expense
25,978
21,541
20.6
%
Provision for income taxes
21,153
19,631
7.8
%
EBITDA (non-GAAP)
130,708
121,463
7.6
%
Share-based compensation
2,893
3,473
(16.7
)%
Restructuring
232
2,531
(90.8
)%
COVID-19
(45
)
-
100.0
%
Adjusted EBITDA (non-GAAP)$
133,788
$
127,467
5.0
%
Basis Point
Change
Adjusted EBITDA as a percentage of net sales Adjusted EBITDA margin
14.3
%
13.0
%
130
Operating Free Cash Flow:
2020
2019
Percentage
Change
Net cash provided by operating activities$
38,986
$
62,325
(37.4
)%
Less: Payments for property and equipment, net
15,483
40,875
(62.1
)%
Operating free cash flow (non-GAAP)$
23,503
$
21,450
9.6
%
Supplemental Schedule 4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Store Count and Same Store Sales
(Unaudited)
As of December 31,
2020
2019
Change
Number of stores:
SBS:
Company-operated stores
3,637
3,690
(53
)
Franchise stores
8
13
(5
)
Total SBS
3,645
3,703
(58
)
BSG:
Company-operated stores
1,250
1,225
25
Franchise stores
134
144
(10
)
Total BSG
1,384
1,369
15
Total consolidated
5,029
5,072
(43
)
Number of BSG distributor sales consultants
702
740
(38
)
BSG distributor sales consultants (DSC) include 180 and 199 sales consultants employed by our franchisees at December 31, 2020 and 2019, respectively.Three Months Ended December 31,
2020
2019
Basis Point
Change
Same store sales growth (decline): SBS(3.3
)%
(1.1
)%
(220
)
BSG(4.6
)%
1.2
%
(580
)
Consolidated(3.7
)%
(0.3
)%
(340
)
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/20210204005238/en/
Jeff Harkins Investor Relations 940-297-3877
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