Sally Magnificence Holdings Reviews Fourth Quarter and Full Yr Fiscal 2022 Outcomes

DENTON, Texas–(BUSINESS WIRE)–Sally Magnificence Holdings, Inc. (NYSE: SBH) (“the Firm”), the chief in skilled hair colour, at the moment introduced monetary outcomes for its fourth quarter and full 12 months ended September 30, 2022. The Firm will maintain a convention name at the moment at 7:30 a.m. Central Time to debate these outcomes and its enterprise.

Fiscal 2022 Fourth Quarter Abstract

• Consolidated web gross sales of $962 million, a lower of two.8%, with comparable gross sales flat to the prior 12 months;
• International e-commerce gross sales of $90 million, representing 9.3% of web gross sales;
• GAAP gross margin decreased 240 foundation factors to 48.2%, pushed primarily by a non-cash stock write-down of $19.4 million associated to the distribution middle consolidation and retailer optimization plan; Adjusted Gross Margin decreased 60 foundation factors to 50.1%;
• GAAP working earnings of $39 million and GAAP working margin of 4.1%, Adjusted Working Earnings of $84 million and Adjusted Working Margin of 8.7%; and
• GAAP diluted web earnings per share of $0.20 and Adjusted Diluted Web Earnings Per Share of $0.50.

Fiscal 2022 Full Yr Abstract

• Consolidated web gross sales of $3.82 billion, a lower of 1.5%, with a comparable gross sales enhance of 0.6%;
• International e-commerce gross sales had been $333 million, representing 8.7% of web gross sales;
• GAAP gross margin decreased 10 foundation factors to 50.3% and Adjusted Gross Margin expanded 30 foundation factors to 50.9%;
• GAAP working earnings of $338 million and GAAP working margin of 8.8%, Adjusted Working Earnings of $391 million and Adjusted Working Margin of 10.3%;
• GAAP diluted web earnings per share of $1.66 and Adjusted Diluted Web Earnings Per Share of $2.16; and
• Repurchased 6.8 million shares at an mixture value of $130.3 million and accomplished full reimbursement of $300 million of 8.75% senior secured notes.

“In fiscal 2022, we delivered web gross sales of $3.8 billion, gross margins above 50% and adjusted EBITDA of greater than $500 million amidst a extremely dynamic and difficult macro setting,” mentioned Denise Paulonis, president and chief government officer. “Our groups executed properly, navigating inflationary pressures and provide chain headwinds, whereas remaining targeted on serving our prospects.”

“As we flip to fiscal 2023, the groups will proceed to leverage the omni-channel capabilities and trendy retail infrastructure we have now constructed. Moreover, we shall be executing in opposition to three strategic initiatives that may function the inspiration for us to encourage a extra colourful, assured and welcoming world. We’ll improve our buyer centricity, together with an expanded providers ecosystem to help our skilled stylists and elevated schooling and experience to encourage and help all prospects; develop our Sally portfolio of excessive margin owned manufacturers and amplify innovation; and enhance the effectivity of our operations. Furthermore, we may even advance our ESG and our variety, inclusion and belonging commitments. These strategic initiatives are designed to construct upon our core strengths in hair colour and care, and drive long-term monetary efficiency and shareholder worth.”

Distribution Heart Consolidation and Retailer Optimization Plan

Over the past a number of quarters, the Firm has been piloting retailer closures in varied markets with the objective of maximizing the worth of its massive retailer portfolio and offering a seamless omni-channel expertise to its prospects. Primarily based on optimistic gross sales recapture charges and improved profitability inside these markets, the Firm is accelerating its retailer optimization plan, together with the closure of roughly 350 shops with the bulk closing in December 2022. Many of the retailer closings shall be Sally Magnificence places within the U.S. As well as, the Firm may even be optimizing its provide chain by closing two small distribution facilities in Oregon and Pennsylvania and transferring the volumes to bigger distribution facilities, efficient in December 2022. As a part of this optimization plan, the Firm incurred a $45.5 million cost within the fourth quarter of 2022, which features a $19.4 million non-cash stock write-down. The expense financial savings from this optimization plan is anticipated to be roughly $50 million with an anticipated profit of roughly $10 million to adjusted working earnings for fiscal 12 months 2023.

Lengthy-Time period Strategic Initiatives and Outlook

Starting in fiscal 2023, the Firm shall be leveraging the trendy retail infrastructure it has constructed lately, and specializing in three key strategic initiatives to drive development and profitability:

• Improve our buyer centricity, together with an expanded providers ecosystem that helps skilled stylists, and elevated schooling and experience to encourage and help all prospects;
• Develop excessive margin owned manufacturers at Sally Magnificence and amplify innovation; and
• Enhance the effectivity of operations and optimize our capabilities.

The Firm believes these initiatives will help a long-term development algorithm of low- to mid-single-digit web gross sales development, gross margins above 50% and low double-digit working margins.

Fiscal 2022 Fourth Quarter Working Outcomes

Fourth quarter consolidated web gross sales had been $962.5 million, a lower of two.8% in comparison with the prior 12 months. Comparable gross sales had been flat to the prior 12 months, and had been unfavorably impacted by inflationary pressures that continued to impression client habits and provide chain challenges at Magnificence Programs Group. The Firm was working 117 fewer shops on the finish of the quarter in comparison with the prior 12 months. Overseas forex translation had an unfavorable impression of 170 foundation factors on consolidated web gross sales for the quarter. At fixed forex, world e-commerce gross sales elevated 30% in comparison with the prior 12 months to $90 million or 9.3% of consolidated web gross sales for the quarter.

Consolidated gross revenue for the fourth quarter was $463.5 million in comparison with $501.0 million within the prior 12 months, a lower of seven.5%. Consolidated GAAP gross margin was 48.2%, a lower of 240 foundation factors in comparison with 50.6% within the prior 12 months, pushed primarily by a non-cash stock write-down of $19.4 million on account of the Firm’s distribution middle consolidation and retailer optimization plan. Excluding the stock write-down, Adjusted Gross Margin was 50.1%, a lower of 60 foundation factors in comparison with 50.7% within the prior 12 months, as greater product margin from pricing leverage at Sally Magnificence was greater than offset by a gross sales combine shift between Sally Magnificence and Magnificence Programs Group and better distribution and freight prices in each segments.

Promoting, common and administrative (SG&A) bills totaled $397.9 million, up $11.3 million in comparison with the prior 12 months, pushed primarily by elevated labor prices, partially offset by decrease bonus expense. As a share of gross sales, SG&A bills had been 41.3% in comparison with 39.0% within the prior 12 months.

GAAP working earnings and working margin within the fourth quarter had been $39.2 million and 4.1%, in comparison with $111.2 million and 11.2%, within the prior 12 months. Adjusted Working Earnings and Working Margin, excluding the Firm’s restructuring efforts and COVID-19 associated web bills, had been $83.9 million and eight.7%, in comparison with $115.8 million and 11.7%, within the prior 12 months.

GAAP web earnings within the fourth quarter had been $21.3 million, or $0.20 per diluted share, in comparison with GAAP web earnings of $68.1 million, or $0.59 per diluted share within the prior 12 months. Adjusted Web Earnings, excluding the Firm’s restructuring efforts and COVID-19 associated web bills, had been $54.4 million, or $0.50 per diluted share, in comparison with Adjusted Web Earnings of $73.1 million, or $0.64 per diluted share within the prior 12 months. Adjusted EBITDA within the fourth quarter was $112.4 million, a lower of 21.6% in comparison with the prior 12 months, and Adjusted EBITDA Margin was 11.7%, a lower of 280 foundation factors in comparison with the prior 12 months.

Steadiness Sheet and Money Stream

As of September 30, 2022, the Firm had money and money equivalents of $71 million and an impressive steadiness of $69 million underneath its asset-based revolving line of credit score. On the finish of the quarter, stock was $936.4 million, up 7.5% versus a 12 months in the past. Fourth quarter money circulate from operations was $107.3 million. Capital expenditures within the quarter totaled $32.0 million.

The Firm ended the quarter with a web debt leverage ratio of two.2x.

Fiscal 2022 Fourth Quarter Section Outcomes

Sally Magnificence Provide

• Section web gross sales had been $554.0 million within the quarter, a lower of 5.4% in comparison with the prior 12 months. The section had an unfavorable impression of 270 foundation factors from international forex translation on reported gross sales and operated 110 fewer shops on the finish of the quarter in comparison with the prior 12 months. At fixed forex, section e-commerce gross sales elevated 20% to $33 million or 6.0% of section web gross sales for the quarter.
• Section comparable gross sales decreased 1.1% within the fourth quarter. The Sally Magnificence companies within the U.S. and Canada represented 80% of section web gross sales for the quarter and had a comparable gross sales lower of two.0%, primarily reflecting inflationary pressures that impacted client habits.
• On the finish of the quarter, web retailer rely was 3,439.
• GAAP gross margin decreased by 90 foundation factors to 56.6% in comparison with the prior 12 months. The lower was primarily pushed by the stock write-down associated to the Firm’s retailer optimization plan. Excluding the stock write-down, Adjusted Gross Margin elevated 60 foundation factors to 58.3% in comparison with the prior 12 months. The rise was primarily pushed by pricing leverage, partially offset by greater distribution and freight prices.
• GAAP working earnings had been $80.5 million in comparison with $105.7 million within the prior 12 months, representing a lower of 23.8%. GAAP working margin decreased to 14.5% in comparison with 18.1% within the prior 12 months.

Magnificence Programs Group

• Section web gross sales had been $408.5 million within the quarter, a rise of 0.9% in comparison with the prior 12 months. The section had an unfavorable impression of 30 foundation factors on reported gross sales from international forex translation and operated 7 fewer shops on the finish of the quarter in comparison with the prior 12 months. At fixed forex, section e-commerce gross sales elevated 37% to $57 million or 13.9% of section web gross sales for the quarter.
• Section comparable gross sales elevated 1.5% within the fourth quarter, however continued inflationary pressures that impacted salon prospects and provide chain challenges.
• On the finish of the quarter, web retailer rely was 1,355.
• GAAP gross margin decreased 400 foundation factors to 36.7% within the quarter in comparison with the prior 12 months, pushed primarily by the stock write-down associated to the Firm’s distribution middle consolidation and retailer optimization plan, decrease product margin from a gross sales combine shift between shops and full service, and better distribution and freight prices. Excluding the stock write-down, Adjusted Gross Margin decreased 180 foundation factors to 38.9% in comparison with the prior 12 months.
• GAAP working earnings had been $32.8 million within the quarter, a lower of 38.6% in comparison with $53.4 million within the prior 12 months. GAAP working margin within the quarter was 8.0% in comparison with 13.2% within the prior 12 months.
• On the finish of the quarter, there have been 718 distributor gross sales consultants in comparison with 719 within the prior 12 months.

Fiscal Yr 2023 Steerage

We stay inspired by the rebuilt basis of the enterprise and are excited in regards to the potential of our new strategic initiatives. As we leverage these strengths, we additionally anticipate that the exterior setting will stay difficult within the nearer time period, most notably the inflationary stress that’s negatively impacting client buying habits and likewise driving elevated labor prices.

Factoring within the present macro setting and the impression from the Firm’s distribution middle consolidation and retailer optimization plan, the Firm is offering the next steerage for the complete fiscal 12 months 2023:

• Comparable gross sales, however a notable change in client habits, are anticipated to extend by low single digits in comparison with the prior 12 months, pushed by development in key classes, gross sales switch from retailer closures, our expanded Regis distribution and new strategic initiatives;
• Web gross sales are anticipated to say no by low-single digits in comparison with the prior 12 months. This displays roughly 150 to 200 foundation factors of web unfavorable impression on account of retailer closures and anticipated gross sales recapture charges from our optimization efforts, and roughly 150 foundation factors of anticipated impression from international alternate headwinds;
• Gross Margin is anticipated to stay above 50%; and
• Adjusted Working Margin is anticipated to be within the vary of 8.5% and 9.5%, inclusive of funding in our retailer labor as we lean in to elevating the experience of our associates to drive our development within the coming years.

Convention Name and The place You Can Discover Extra Data

The Firm will maintain a convention name and audio webcast at the moment to debate its monetary outcomes and its enterprise at roughly 7:30 a.m. Central Time at the moment, November 10, 2022. Throughout the convention name, the Firm might focus on and reply a number of questions regarding enterprise and monetary issues and traits affecting the Firm. The Firm’s responses to those questions, in addition to different issues mentioned through the convention name, might include or represent materials data that has not been beforehand disclosed. Simultaneous to the convention name, an audio webcast of the decision shall be accessible through a hyperlink on the Firm’s web site, sallybeautyholdings.com/investor-relations. The convention name may be accessed by dialing (844) 867-6169 (Worldwide: (409) 207-6975) and referencing the entry code 875677#. The teleconference shall be held in a “listen-only” mode for all members apart from the Firm’s present sell-side and buy-side funding professionals. As well as, a supplemental slide presentation could also be considered through the name on the following hyperlink SBH Q4 Earnings Presentation and getting into the occasion password 2HFpGjMpV94. A replay of the earnings convention name shall be accessible beginning at 10:30 a.m. Central Time, November 10, 2022, by means of November 24, 2022, by dialing (866) 207-1041 (Worldwide: (402) 970-0847) and referencing entry code 7597535#. Additionally, a web site replay shall be accessible on sallybeautyholdings.com/investor-relations.

About Sally Magnificence Holdings, Inc.

Sally Magnificence Holdings, Inc. (NYSE: SBH), because the chief in skilled hair colour, sells and distributes skilled magnificence provides globally by means of its Sally Magnificence Provide and Magnificence Programs Group companies. Sally Magnificence Provide shops supply as much as 7,000 merchandise for hair colour, hair care, nails, and skincare by means of proprietary manufacturers reminiscent of Ion®, Strawberry Leopard®, Generic Worth Merchandise®, Past the Zone® and Silk Parts® in addition to skilled traces reminiscent of Wella®, Clairol®, OPI®, Conair® and L’Oreal®. Magnificence Programs Group shops, branded as CosmoProf® or Armstrong McCall® shops, together with its outdoors gross sales consultants, promote as much as 8,000 professionally branded merchandise together with Paul Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico® and Olaplex®, supposed to be used in salons and for resale by salons to retail customers. For extra details about Sally Magnificence Holdings, Inc., please go to https://www.sallybeautyholdings.com/.

Cautionary Discover Relating to Ahead-Wanting Statements

Statements on this information launch and the schedules hereto which aren’t purely historic info or which rely upon future occasions could also be forward-looking statements throughout the that means of Part 27A of the Securities Act of 1933, as amended, and Part 21E of the Securities Alternate Act of 1934, as amended. Ahead-looking statements, as that time period is outlined within the Non-public Securities Litigation Reform Act of 1995, may be recognized by way of forward-looking terminology reminiscent of “believes,” “tasks,” “expects,” “can,” “might,” “estimates,” “ought to,” “plans,” “targets,” “intends,” “may,” “will,” “would,” “anticipates,” “potential,” “assured,” “optimistic,” or the detrimental thereof, or different variations thereon, or comparable terminology, or by discussions of technique, aims, estimates, steerage, expectations and future plans. Ahead-looking statements can be recognized by the truth that these statements don’t relate strictly to historic or present issues.

Readers are cautioned to not place undue reliance on forward-looking statements as such statements converse solely as of the date they had been made. Any forward-looking statements contain dangers and uncertainties that would trigger precise occasions or outcomes to vary materially from the occasions or outcomes described within the forward-looking statements, together with, however not restricted to, the dangers and uncertainties associated to COVID-19, and its persevering with impression on the financial system and people described in our filings with the Securities and Alternate Fee, together with our Annual Report on Type 10-Okay for the 12 months ended September 30, 2021. Consequently, all forward-looking statements on this launch are certified by the components, dangers and uncertainties contained therein. We assume no obligation to publicly replace or revise any forward-looking statements.

Use of Non-GAAP Monetary Measures

This information launch and the schedules hereto embrace the next monetary measures that haven’t been calculated in accordance with accounting ideas typically accepted in america, or GAAP, and are subsequently known as non-GAAP monetary measures: (1) Adjusted Gross Margin; (2) Adjusted Promoting, Common and Administrative Bills; (3) Adjusted EBITDA and EBITDA Margin; (4) Adjusted Working Earnings and Working Margin; (5) Adjusted Web Earnings; (6) Adjusted Diluted Web Earnings Per Share; and (7) Working Free Money Stream. We’ve supplied definitions beneath for these non-GAAP monetary measures and have supplied tables within the schedules hereto to reconcile these non-GAAP monetary measures to the comparable GAAP monetary measures.

Adjusted Gross Margin – We outline the measure Adjusted Gross Margin as GAAP gross margin excluding the write-down of COVID-19 associated private protecting gear stock and the write-down of stock associated to the Firm’s distribution middle consolidation and retailer optimization plan for the related time durations as indicated within the accompanying non-GAAP reconciliations to the comparable GAAP monetary measures.

Adjusted Promoting, Common and Administrative Bills – We outline the measure Adjusted Promoting, Common and Administrative Bills as GAAP promoting, common and administrative bills excluding COVID-19 web bills and different changes for the related time durations as indicated within the accompanying non-GAAP reconciliations to the comparable GAAP monetary measures.

Adjusted EBITDA and EBITDA Margin – We outline the measure Adjusted EBITDA as GAAP web earnings earlier than depreciation and amortization, curiosity expense, revenue taxes, share-based compensation, prices associated to the Firm’s restructuring plans, COVID-19 associated web bills and different changes for the related time durations as indicated within the accompanying non-GAAP reconciliations to the comparable GAAP monetary measures. Adjusted EBITDA Margin is Adjusted EBITDA as a share of web gross sales.

Adjusted Working Earnings and Working Margin – Adjusted working earnings are GAAP working earnings that exclude prices associated to the Firm’s restructuring plans, web bills associated to COVID-19 and different changes for the related time durations as indicated within the accompanying non-GAAP reconciliations to the comparable GAAP monetary measures. Adjusted Working Margin is Adjusted Working Earnings as a share of web gross sales.

Adjusted Web Earnings – Adjusted web earnings is GAAP web earnings that exclude tax-effected prices associated to the Firm’s restructuring plans, tax-effected web bills associated to COVID-19, tax-effected bills associated to the loss on debt extinguishment, and tax-effected different changes for the related time durations as indicated within the accompanying non-GAAP reconciliations to the comparable GAAP monetary measures.

Adjusted Diluted Web Earnings Per Share – Adjusted diluted web earnings per share is GAAP diluted earnings per share that exclude tax-effected prices associated to the Firm’s restructuring plans, tax-effected web bills associated to COVID-19, tax-effected bills associated to the loss on debt extinguishment and tax-effected different changes for the related time durations as indicated within the accompanying non-GAAP reconciliations to the comparable GAAP monetary measures.

Working Free Money Stream – We outline the measure Working Free Money Stream as GAAP web money supplied by working actions much less funds for capital expenditures (web). We imagine Working Free Money Stream is a crucial liquidity measure that gives helpful data to buyers about the amount of money generated from operations after considering funds for capital expenditures (web).

We imagine that these non-GAAP monetary measures present helpful data concerning our earnings and enterprise traits by excluding particular objects that we imagine aren’t indicative of the continued working outcomes of our companies; offering a helpful method for buyers to make a comparability of our efficiency over time and in opposition to different firms in our trade.

We’ve supplied these non-GAAP monetary measures as supplemental data to our GAAP monetary measures and imagine these non-GAAP measures present buyers with further significant monetary data concerning our working efficiency and money flows. Our administration and Board of Administrators additionally use these non-GAAP measures as supplemental measures to judge our companies and the efficiency of administration, together with the willpower of performance-based compensation, to make working and strategic selections, and to allocate monetary sources. We imagine that these non-GAAP measures additionally present significant data for buyers and securities analysts to judge our historic and potential monetary efficiency. These non-GAAP measures shouldn’t be thought-about an alternative choice to or superior to GAAP outcomes. Moreover, the non-GAAP measures offered by us will not be corresponding to equally titled measures of different firms.