WELCOME TO THE NEW SALLY. NEW L LOOK. K. N NEW E EXPER ERIEN ENCE. E. Sally Beauty Holdings, Inc. Fis iscal l 2020 2020 S Second Qu Quar arter Ear arnin ings C Call all May 6, 6, 2020 2020
Forward-Looking Statements and Non-GAAP Financial Measures Statements in this presentation 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, 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 most recent Annual Report on Form 10-K for the year ended September 30, 2019, and our Current Report on Form 8-K dated as of April, 20, 2020, each as filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this presentation are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward-looking statements. This presentation includes certain 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. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. A reconciliation of GAAP to non-GAAP measures is provided in the appendix of this presentation. Sally Beauty Holdings, Inc.
Significant Progress Made on Transformation Plan Launched National Re-Brand Campaign at Sally Beauty 1 Added New Leaders to our Digital Product and E-commerce Platforms 2 Fixed the First Quarter Technology Issues 3 Launched sallybeauty.ca and Ship-From-Store Capabilities in Canada 4 Launched Same-Day Delivery in BSG in One Territory 5
Q2 FY20 Same Store Sales Performance Prior to March 12 (Pre-COVID) Q2 with COVID Impact Sally Beauty Holdings 4.7% (7.1%) Sally Beauty Supply 4.8% (7.0%) Beauty Systems Group 4.5% (7.4%)
WELCOME TO THE NEW SALLY. NEW L LOOK. K. N NEW E EXPER ERIEN ENCE. E. Sally Beauty Holdings, Inc.
Accelerating E-commerce Performance Q2 March April Sally Beauty Holdings 52% 353% 28% Sally Beauty Supply 56% 118% 872% *U.S. & Canada Only Beauty Systems Group 10% 12% 129%
SBH U.S. & Canada Store Status Over 50% of stores are open to public Over 50% of stores are ship-from-store/same- day delivery/curbside but not open to public Majority of state/province is hard closed
What Makes Sally Beauty Holdings Different Post-COVID High Demand Categories in Hair Color/Hair Care/PPE 1 Natural Hedge Between Sally Beauty and Beauty Systems Group 2 We Do Not Face the Overhang of Mall Stores or Fear of Traffic (Mall Crowds) 3 Building Strong Digital Platforms – Ship-From-Store & Same-Day Delivery 4 Restart of Store Networks with Emphasis on Safety 5
WELCOME TO THE NEW SALLY. NEW L LOOK. K. N NEW E EXPER ERIEN ENCE. E. Sally Beauty Holdings, Inc.
Q2 Financial Recap Gross Adjusted SSS SG&A% Margin EPS (7.1%) 44.0% 49.3% $0.23 (1) Compared to PY: Prior to Mar 12 Down 20 bps Up 580 bps Decrease of 54.9% Up 4.7% (1) Adjusted EPS is a non-GAAP measure. See Appendix for a reconciliation of this non-GAAP measure. Sally Beauty Holdings, Inc.
WELCOME TO THE NEW SALLY. NEW L LOOK. K. N NEW E EXPER ERIEN ENCE. E. Sally Beauty Holdings, Inc.
Liquidity Actions Expense Management Cash Management/Capital Markets Negotiated with Landlords for rent Borrowed $340 million on revolving line of 1 1 abatements credit to hold as cash on balance sheet Partnered with merchandise vendors to Increased revolving line of credit capacity 2 2 lower inventory and extend payment from $500 million to $620 million terms Reduced capital spend except for 3 3 Sold $300 million of senior secured notes E-commerce related capital investments Furloughed approximately 70% of our field 4 staff, 60% of our Corporate staff and reduced executive compensation Reduced marketing, non-personnel field 5 and shared services back office spend
WELCOME TO THE NEW SALLY. NEW L LOOK. K. N NEW E EXPER ERIEN ENCE. E. Sally Beauty Holdings, Inc.
Supplemental Schedule 2 Appendix SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures Reconciliations (In thousands, except per share data) (Unaudited) Three Months Ended March 31, 2020 COVID-19 As Reported As Adjusted Restructuring (1) Expenses, net (2) (GAAP) (Non-GAAP) Selling, general and administrative expenses $ 383,299 $ - $ (14,697) $ 368,602 SG&A expenses, as a percentage of sales 44.0% 42.3% Operating earnings 43,265 3,193 14,697 61,155 Operating margin 5.0% 7.0% Earnings before provision for income taxes 21,621 3,193 14,697 39,511 Provision for income taxes (3) 8,253 853 3,438 12,544 Net earnings $ 13,368 $ 2,340 $ 11,259 $ 26,967 Earnings per share: Basic $ 0.12 $ 0.02 $ 0.10 $ 0.23 Diluted $ 0.12 $ 0.02 $ 0.10 $ 0.23 Three Months Ended March 31, 2019 As Reported As Adjusted Restructuring (1) (GAAP) (Non-GAAP) Selling, general and administrative expenses $ 361,626 $ - $ 361,626 SG&A expenses, as a percentage of sales 38.2% 38.2% Operating earnings 112,512 (5,814) 106,698 Operating margin 11.9% 11.3% Earnings before provision for income taxes 88,691 (5,814) 82,877 Provision for income taxes (3) 22,966 (1,494) 21,472 Net earnings $ 65,725 $ (4,320) $ 61,405 Earnings per share: Basic $ 0.55 $ (0.04) $ 0.51 Diluted $ 0.54 $ (0.04) $ 0.51 (1) For the three months ended March 31, 2020, restructuring represents costs and expenses incurred primarily in connection with the Project Surge and the Transformation Plan. For the three months ended March 31, 2019, restructuring represents costs and expenses incurred in connection with the 2018 Restructuring Plan. (2) For the three months ended March 31, 2020, COVID-19 expenses primarily represents costs associated with disaster pay and furloughed employees in response to the coronavirus pandemic. These cost were partially offset by an employee retention payroll tax credit provided by the U.S. Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). (3) The income tax provision associated with restructuring for the three months ended March 31, 2020 and 2019, was calculated using a 26.7% and 25.7% tax rate, respectively, since realization of a tax benefit for portions of these expenses are currently not deemed probable. Sally Beauty Holdings, Inc. The income tax provision associated with the COVID-19 expenses for the three months ended March 31, 2020, was calculated using a 23.4% tax rate.
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