Sally Beauty Holdings Inc

Previous 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;

Current wording

Consolidated net sales for the three months ended June 30, 2024, increased $11.3 million, or 1.2%, to $942.3 million, compared to the three months ended June 30, 2023. Consolidated net sales included a net negative impact from changes in foreign currency exchange rates of $1.0 million;

Previous wording

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

Current wording

Consolidated comparable sales increased 1.5% for the three months ended June 30, 2024;

Previous 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;

Current wording

Consolidated gross profit for the three months ended June 30, 2024, increased $6.2 million, or 1.3%, to $480.9 million, compared to the three months ended June 30, 2023. Consolidated gross margin remained unchanged at 51.0% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023;

Previous 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;

Current wording

Consolidated operating earnings for the three months ended June 30, 2024, decreased $18.4 million, or 20.4%, to $71.8 million, compared to the three months ended June 30, 2023. Operating margin decreased 210 bps to 7.6% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023;

Previous 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;

Current wording

For the three months ended June 30, 2024, our consolidated net earnings decreased $13.1 million, or 25.8%, to $37.7 million, compared to the three months ended June 30, 2023;

Previous 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;

Current wording

For the three months ended June 30, 2024, our diluted earnings per share was $0.36 compared to $0.46 for the three months ended June 30, 2023; and

Previous 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

Current wording

Cash provided by operations was $47.9 million for the three months ended June 30, 2024, compared to $53.1 million for the three months ended June 30, 2023.

Previous wording

The following table sets forth, for the periods indicated, information concerning key measures we rely on to evaluate our operating performance (dollars in thousands):

Current wording

The following table sets forth, for the periods indicated, information concerning key measures on which we rely to evaluate our operating performance (dollars in thousands):

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. Additionally, unallocated expenses include costs associated with our Fuel for Growth initiative.

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. Restructuring costs included in this line are related to our Distribution Center Consolidation and Store Optimization Plan. See Note 12 for more information.

Previous wording

SBS. The decrease in net sales for SBS was primarily driven by the following (in thousands):

Current wording

SBS. The increase in net sales for SBS was primarily driven by the following (in thousands):

Previous wording

Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months.

Current wording

Includes closed stores, net of stores opened for less than 14 months.

Previous 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.

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 unfavorable impacts of foreign currency exchange rates.

Previous wording

BSG. BSG’s gross profit increased for the three months ended March 31, 2024, as a result of an increase in net sales and a higher gross margin on units sold. BSG’s gross margin improvement was driven by lower distribution and freight costs from supply chain efficiencies, partially offset by lower product margins primarily from higher take rate on promotions and brand mix.

Current wording

BSG. BSG’s gross profit was flat for the three months ended June 30, 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 an unfavorable fixed cost absorption and lower product margins, primarily from higher take rate on promotions and brand mix, partially offset by lower distribution and freight costs from supply chain efficiencies.

Previous wording

SBS. SBS’s selling, general and administrative expenses increased $5.8 million, or 2.6%, for the three months ended March 31, 2024, and included an unfavorable impact from foreign exchange rates of $1.8 million. As a percentage of SBS net sales, selling, general and administrative expense for the three months ended March 31, 2024, was 45.0% compared to 42.4% for the three months ended March 31, 2023. The increase as a percentage of sales was primarily due to higher labor and rent costs.

Current wording

SBS. SBS’s selling, general and administrative expenses increased $8.3 million, or 3.7%, for the three months ended June 30, 2024. As a percentage of SBS net sales, selling, general and administrative expense for the three months ended June 30, 2024, was 43.6%, compared to 42.2% for the three months ended June 30, 2023. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, depreciation expense, and advertising expense.

Previous 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.

Current wording

BSG. BSG’s selling, general and administrative expenses increased $1.5 million, or 1.4%, for the three months ended June 30, 2024. As a percentage of BSG net sales, selling, general and administrative expense for the three months ended June 30, 2024, was 27.9% compared to 28.2% for the three months ended June 30, 2023. The decrease as a percentage of sales was primarily due to higher net sales, partially offset by higher depreciation 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 $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.

Current wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $14.7 million, or 31.3%, for the three months ended June 30, 2024, primarily due to expenses in connection with our Fuel for Growth initiative and higher labor and other compensation-related expenses.

Previous 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.

Current wording

SBS’s net sales decrease was primarily driven by fewer comparable sales and the impact of store closures, which includes $23.8 million resulting from the Plan, of which, a significant portion was recaptured in other locations that are included within comparable sales. These decreases were partially offset by 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 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.

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 and the unfavorable impact from foreign currency exchange rates.

Previous 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.

Current wording

SBS. SBS’s gross profit decreased for the nine months ended June 30, 2024, as a result of a decrease in net sales, partially offset by higher gross margin on units sold. SBS’s gross margin improvement was primarily due to lower distribution and freight costs from supply chain efficiencies and higher product margins, partially offset by unfavorable fixed cost absorption.

Previous 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.

Current wording

BSG. BSG’s gross profit was flat for the nine months ended June 30, 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 primarily 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.

Previous 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.

Current wording

SBS. SBS’s selling, general and administrative expenses increased $18.7 million, or 2.8%, for the nine months ended June 30, 2024, and included an unfavorable impact from foreign exchange rates of $4.8 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 nine months ended June 30, 2024, was 44.1% compared to 41.8% for the nine months ended June 30, 2023. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, rent expense, depreciation expense, and advertising expense.

Previous wording

BSG. BSG’s selling, general and administrative expenses decreased $0.9 million, or 0.4%, for the six months ended March 31, 2024. As a percentage of BSG net sales, selling, general and administrative expense for the six months ended March 31, 2024, was 28.4% compared to 28.8% for the six months ended March 31, 2023. The decrease as a percentage of sales was driven primarily by lower delivery expense.

Current wording

BSG. BSG’s selling, general and administrative expenses decreased $0.6 million, or 0.2%, for the nine months ended June 30, 2024. As a percentage of BSG net sales, selling, general and administrative expense for the nine months ended June 30, 2024, was 28.3% compared to 28.6% for the nine months ended June 30, 2023. The decrease as a percentage of sales was driven primarily by higher net sales and 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 $10.9 million, or 10.6%, for the six months ended March 31, 2024, primarily due to expenses in connection with our Fuel for Growth initiative in the current year, partially offset by lower accrued bonus expense.

Current wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $25.6 million, or 17.1%, for the nine months ended June 30, 2024, primarily due to expenses in connection with our Fuel for Growth initiative in the current year.

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 $7.3 million. See Note 12, 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 the Plan in the prior year for $18.1 million. See Note 12, Restructuring, in Item 1 of this quarterly report for more information on the Plan.

Previous 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 year. 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.

Current wording

The increase in interest expense is primarily due to the impacts of higher interest rates and debt extinguishment, partially offset by lower average outstanding borrowings on our ABL facility during the current year. 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

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.

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 June 30, 2024, we had $535.0 million in our liquidity pool, which includes $437.6 million available for borrowing under our ABL facility and cash and cash equivalents of $97.4 million.

Previous 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.

Current wording

Our working capital (current assets less current liabilities) increased $18.9 million, to $667.6 million at June 30, 2024, compared to $648.7 million at September 30, 2023. The increase was primarily driven by an increase in inventory, as a result of expanded distribution rights in BSG and vendor price increases, and the timing of account payables and lease renewals. These impacts were partially offset by higher borrowings under our ABL facility and a decrease in cash and cash equivalents.

Previous 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.

Current wording

The increase in cash provided by operating activities was primarily driven by the timing of interest and tax payments and the impact of lease contract termination and severance payments in connection with the Plan in the prior year, partially offset by fewer cash receipts from customers, higher inventory purchases and the timing of vendor and manufacturing allowances.

Previous wording

The increase in cash used by investing activities was driven by higher capital expenditures related to store improvements.

Current wording

Cash used by investing activities was relatively unchanged. Our capital expenditures related primarily to store improvements and system upgrades.

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, partially offset by fewer reductions in our debt outstanding in the current year compared to the prior year.

Current wording

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

Previous wording

During the three months ending March 31, 2024, we issued $600.0 million in 2032 Senior Notes and used the proceeds, together with cash on hand and borrowings under our ABL facility, to repay in full our 2025 Senior Notes. See Note 9, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on the issuance and repayment of debt.

Current wording

During the current fiscal year, we issued $600.0 million in 2032 Senior Notes and used the proceeds, together with cash on hand and borrowings under our ABL facility, to repay in full our 2025 Senior Notes. See Note 9, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

Previous 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.

Current wording

At June 30, 2024, we had $1.0 billion in outstanding debt principal, excluding finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $12.1 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, $395.0 million remaining on our term loan and $45.0 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 six months ended March 31, 2024, the weighted average interest rate on our borrowings under the ABL facility was 7.73%.

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 nine months ended June 30, 2024, the weighted average interest rate on our borrowings under the ABL facility was 7.3%.

Previous wording

Our 2032 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.

Current wording

Our 2032 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (together, the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.

Previous wording

The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.

Current wording

The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities have been eliminated.

Previous 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):

Current wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the nine months ended June 30, 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 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.

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 nine months ended June 30, 2024, we repurchased 0.9 million and 4.3 million shares of our common stock for $10.0 million and $50.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. During the three and nine months ended June 30, 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.