Sally Beauty Holdings Inc

Previous wording

Consolidated net sales for the three months ended December 31, 2023 decreased $25.8 million, or 2.7%, to $931.3 million, compared to the three months ended December 31, 2022. Consolidated net sales included a net positive impact from changes in foreign currency exchange rates of $8.6 million;

Current wording

Consolidated net sales for the three months ended March 31, 2024, decreased $10.4 million, or 1.1%, to $908.4 million, compared to the three months ended March 31, 2023. Consolidated net sales included a net favorable impact from changes in foreign currency exchange rates of $4.6 million;

Previous wording

Consolidated comparable sales decreased 0.8% for the three months ended December 31, 2023;

Current wording

Consolidated comparable sales decreased 1.5% for the three months ended March 31, 2024;

Previous wording

Consolidated gross profit for the three months ended December 31, 2023 decreased $21.4 million, or 4.4%, to $467.2 million, compared to the three months ended December 31, 2022. Consolidated gross margin decreased 80 bps to 50.2% for the three months ended December 31, 2023, compared to the three months ended December 31, 2022;

Current wording

Consolidated gross profit for the three months ended March 31, 2024, decreased $5.3 million, or 1.1%, to $463.1 million, compared to the three months ended March 31, 2023. Consolidated gross margin remained unchanged at 51.0% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023;

Previous wording

Consolidated operating earnings for the three months ended December 31, 2023 decreased $17.5 million, or 20.2%, to $69.1 million, compared to the three months ended December 31, 2022. Operating margin decreased 160 bps to 7.4% for the three months ended December 31, 2023, compared to the three months ended December 31, 2022;

Current wording

Consolidated operating earnings for the three months ended March 31, 2024, decreased $11.8 million, or 16.6%, to $59.6 million, compared to the three months ended March 31, 2023. Operating margin decreased 120 bps to 6.6% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023;

Previous wording

For the three months ended December 31, 2023, our consolidated net earnings decreased $11.9 million, or 23.7%, to $38.4 million, compared to the three months ended December 31, 2022;

Current wording

For the three months ended March 31, 2024, our consolidated net earnings decreased $11.6 million, or 28.4%, to $29.2 million, compared to the three months ended March 31, 2023;

Previous wording

For the three months ended December 31, 2023, our diluted earnings per share was $0.35 compared to $0.46 for the three months ended December 31, 2022; and

Current wording

For the three months ended March 31, 2024, our diluted earnings per share was $0.27 compared to $0.37 for the three months ended March 31, 2023;

Previous wording

Cash provided by operations was $51.0 million for the three months ended December 31, 2023, compared to $55.0 million for the three months ended December 31, 2022.

Current wording

Cash provided by operations was $36.9 million for the three months ended March 31, 2024, compared to $24.7 million for the three months ended March 31, 2023; and

Previous wording

Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings.

Current wording

Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings. Additionally, unallocated expenses include costs associated with our Fuel for Growth initiative.

Previous wording

SBS. SBS’s gross profit decreased for the three months ended December 31, 2023, as a result of a decrease in net sales and from lower gross margin on the units sold. SBS’s gross margin decline was driven primarily by an unfavorable sales mix shift from lower sales of higher margin Sally Beauty domestic sales and unfavorable fixed cost absorption partially offset by lower distribution and freight costs from supply chain efficiencies.

Current wording

SBS. SBS’s gross profit decreased for the three months ended March 31, 2024, as a result of a decrease in net sales, partially offset by a higher gross margin on units sold. SBS’s gross margin improvement was driven primarily by lower distribution and freight costs from supply chain efficiencies, partially offset by the impact of favorable adjustments to our expected obsolescence reserve related to the Plan in the prior year.

Previous wording

BSG. BSG’s selling, general and administrative expenses increased $0.5 million, or 0.5%, for the three months ended December 31, 2023. As a percentage of BSG net sales, selling, general and administrative expense for the three months ended December 31, 2023, was 28.4% compared to 28.3% for the three months ended December 31, 2022. The slight increase as a percentage of sales was driven primarily by higher wage and bonus expense, and higher depreciation and amortization expense, partially offset by lower delivery expense and cost savings from store closures in connection with the Plan.

Current wording

BSG. BSG’s selling, general and administrative expenses decreased $1.5 million, or 1.3%, for the three months ended March 31, 2024. As a percentage of BSG net sales, selling, general and administrative expense for the three months ended March 31, 2024, was 28.5% compared to 29.3% for the three months ended March 31, 2023. The decrease as a percentage of sales was primarily due to lower delivery expense.

Previous wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $1.4 million, or 2.7%, for the three months ended December 31, 2023, primarily due to higher consulting fees in connection with our Fuel for Growth initiative, partially offset by lower health insurance costs due to fewer claims.

Current wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $9.5 million, or 18.7%, for the three months ended March 31, 2024, primarily due to expenses in connection with our Fuel for Growth initiative in the current year and higher health insurance costs, partially offset by lower accrued bonus expense.

Previous wording

The decrease in restructuring was primarily due to the lapping of expenses incurred in connection with our Distribution Center Consolidation and Store Optimization Plan in the prior year for $10.4 million. See Note 11, Restructuring, in Item 1 of this quarterly report for more information on the Plan.

Current wording

The decrease in restructuring was primarily due to the lapping of expenses incurred in connection with our Distribution Center Consolidation and Store Optimization Plan in the prior year for $7.3 million. See Note 12, Restructuring, in Item 1 of this quarterly report for more information on the Plan.

Previous wording

The decrease in interest expense is primarily due to lower borrowings on our ABL facility, partially offset by higher interest rates on our variable rate debt. See Note 9, Derivative Instruments and Hedging Activities, in Item 1 of the quarterly report for more information on our interest rate swap that has helped mitigate some of the additional interest costs resulting from higher interest rates.

Current wording

The increase in interest expense is primarily due to higher interest rates on our variable rate debt and an increase in our losses on debt extinguishment, partially offset by lower average outstanding borrowings on our ABL facility during the current quarter. See Note 9, Short-term and Long-term Debt, and Note 10, Derivative Instruments and Hedging Activities, in Item 1 of this quarterly report for more information on our debt and interest rate swap that has helped mitigate some of the additional interest costs resulting from higher interest rates.

Previous wording

SBS's net sales decrease was primarily driven by the impact of store closures in connection with the Plan in an amount of approximately $23.3 million, partially offset by a significant portion of these sales being recaptured in other locations included within comparable sales and favorable impacts from foreign currency exchange rates. SBS’s comparable sales decline was a result of fewer transactions, partially offset by growth in our average unit retail, driven by inflationary impacts and pricing leverage, and the sales recaptured from closed stores.

Current wording

SBS's net sales decrease was primarily driven by the impact of lower comparable sales and store closures primarily in connection with the Plan in an amount of approximately $23.6 million, partially offset by a significant portion of these sales being recaptured in other locations included within comparable sales and a favorable impact from foreign currency exchange rates. SBS’s comparable sales decline was a result of fewer transactions, partially offset by growth in our average unit retail, driven by inflationary impacts and pricing leverage.

Previous wording

BSG's net sales were slightly higher due to an increase in comparable sales, reflecting expanded distribution, new brand innovation and improving salon demand trends, partially offset by the impact of store closures.

Current wording

BSG's net sales increase was primarily driven by an increase in comparable sales, reflecting expanded distribution, new brand innovation and improving salon demand trends, partially offset by the impact of store closures.

Previous wording

BSG. BSG’s gross profit decreased for the three months ended December 31, 2023, primarily as a result of a lower gross margin on the units sold. BSG’s gross margin decline was driven by unfavorable fixed cost absorption and shrink expense, partially offset by lower distribution and freight costs from supply chain efficiencies and higher product margin.

Current wording

BSG. BSG’s gross profit was flat for the six months ended March 31, 2024, as a result of a lower gross margin on units sold, offset by an increase in net sales. BSG’s gross margin decline was driven by unfavorable fixed cost absorption, shrink expense, and adjustments to our expected obsolescence reserve related to the Plan in the prior year, partially offset by lower distribution and freight costs from supply chain efficiencies and higher product margins primarily from higher take rate on promotions and brand mix.

Previous wording

SBS. SBS’s selling, general and administrative expenses increased $4.6 million, or 2.1%, for the three months ended December 31, 2023, and included an unfavorable impact from foreign exchange rates of $3.3 million. As a percentage of SBS net sales, selling, general and administrative expense for the three months ended December 31, 2023, was 43.8% compared to 40.8% for the three months ended December 31, 2022. The increase as a percentage of sales was due to higher labor costs, rent costs, and advertising expenses, partially offset by cost savings from store closures in connection with the Plan.

Current wording

SBS. SBS’s selling, general and administrative expenses increased $10.4 million, or 2.3%, for the six months ended March 31, 2024, and included an unfavorable impact from foreign exchange rates of $5.1 million and cost savings from store closures in connection with the Plan. As a percentage of SBS net sales, selling, general and administrative expense for the six months ended March 31, 2024, was 44.4% compared to 41.6% for the six months ended March 31, 2023. The increase as a percentage of sales was due to higher labor costs, rent costs, and advertising expenses.

Previous wording

Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payments. Additionally, under our share repurchase program, see below for more details, we will from time-to-time repurchase shares of our common stock on the open market to return value to our shareholders. At December 31, 2023, we had $603.6 million in our liquidity pool, which includes $482.6 million available for borrowing under our ABL facility and cash and cash equivalents of $121.0 million.

Current wording

Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payments. Additionally, under our share repurchase program (see below for more details) we will from time-to-time repurchase shares of our common stock on the open market to return value to our shareholders. At March 31, 2024, we had $517.8 million in our liquidity pool, which includes $420.6 million available for borrowing under our ABL facility and cash and cash equivalents of $97.2 million.

Previous wording

Our working capital (current assets less current liabilities) increased $41.1 million, to $689.8 million at December 31, 2023, compared to $648.7 million at September 30, 2023, driven by higher inventory, resulting from timing of purchases and $8.1 million from the impact of foreign exchange rates, and lower accrued liabilities, driven by the timing of interest and payroll payments. The increase was partially offset by the timing of income tax payments.

Current wording

Our working capital (current assets less current liabilities) decreased $12.1 million, to $636.6 million at March 31, 2024, compared to $648.7 million at September 30, 2023. The decrease was primarily driven by the impacts of our debt activity during the quarter, resulting in higher borrowings under our ABL facility and a decrease in cash and cash equivalents, and due to the timing of AP payments. These impacts were partially offset by an increase in inventory, as a result of expanded distribution rights in BSG, vendor price increases, the impact of foreign exchange rates of $4.7 million, and by fewer accrued liabilities, driven by the timing of interest and payroll payments.

Previous wording

The decrease in cash provided by operating activities was driven by lower revenues, partially offset by the timing in inventory purchases.

Current wording

The increase in cash provided by operating activities was driven by the timing of account payables payments and inventory purchases and lease contract termination and severance payments in connection with the Plan in the prior year, partially offset by the timing of cash receipts from customers.

Previous wording

The increase in cash used by financing activities was primarily due to shares repurchased in the current year under our share repurchases program and from lower net debt principal repayments in the current year.

Current wording

The increase in cash used by financing activities was primarily due to shares repurchased in the current year under our share repurchases program, partially offset by fewer reductions in our debt outstanding in the current year compared to the prior year.

Previous wording

At December 31, 2023, we had $1.1 billion in outstanding debt principal, excluding finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $7.5 million. Our debt consists of $680.0 million in 2025 Senior Notes outstanding and $397.0 million remaining on our term loan. There were no outstanding borrowings under our ABL facility.

Current wording

At March 31, 2024, we had $1.1 billion in outstanding debt principal, excluding finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $13.7 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, $396.0 million remaining on our term loan and $62.0 million in outstanding borrowings under our ABL facility.

Previous wording

We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the three months ended December 31, 2023, the weighted average interest rate on our borrowings under the ABL facility was 8.75%.

Current wording

We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the six months ended March 31, 2024, the weighted average interest rate on our borrowings under the ABL facility was 7.73%.

Previous wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for three months ended December 31, 2023 (in thousands):

Current wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for six months ended March 31, 2024 (in thousands):

Previous wording

Under our current share repurchase program, we may from time-to-time repurchase our common stock on the open market. During the three months ended December 31, 2023, we repurchased 1.9 million shares of our common stock for $20.0 million under our share repurchase program, excluding the impact of excise taxes. During the three months ended December 31, 2022, no shares were repurchased in connection with our share repurchase program. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.

Current wording

Under our current share repurchase program, we may from time-to-time repurchase our common stock on the open market. During the three and six months ended March 31, 2024, we repurchased 1.5 million and 3.5 million shares of our common stock for $20.0 million and $40.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. During the three and six months ended March 31, 2023, no shares were repurchased in connection with our share repurchase program. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.