WELCOME TO THE NEW SALLY. NEW L LOOK. K. N NEW E EXPER ERIEN ENCE. E. Sally Beauty Holdings, Inc. Fisc scal 2019 2019 Fourth Qu Quar arter Ear arnin ings C Call all Novem ember er 7 7, 2019 2019
Sally Beauty Holdings, Inc.
Financial Highlights of the Quarter Strong EPS SBH, SBS Gross Growth and and BSG Margin Lower SG&A Consensus Positive SSS Expansion Beat Sally Beauty Holdings, Inc.
Our Transformation Reflects the Industry Sally Beauty Holdings’ Playbook Changing Retail and Beauty Sector Playing to win with Increased competition our customers: Hair in the retail beauty Color & Care space Increased investment Improving our in stores and retail technology fundamentals Transformation Plan Customers desire for Advancing our more convenient digital commerce omni-channel capabilities shopping experience Continuing to drive Rising labor costs and costs out of the tighter job market business
Playing to Win in Color & Care: Building on Product Maria Nila My Black Is Beautiful BlondMe Good Dye Young Olaplex No. 6 & No. 7 All About Curls Sally Beauty Holdings, Inc.
Retail Fundamentals Progressing Sally Beauty Rewards Loyalty Program JDA Merchandising and New Oracle POS System Supply Chain Platform Implemented Store Fulfillment Module Rollout Complete in Over 2,000 stores 16M+ Active Members & Began Full Testing in Select BSG Stores Sally Beauty Holdings, Inc.
Digital Commerce Implementations Refreshed BSG E-commerce Site Launch of the New Sally Mobile App
ColorView -- “Color Before You Commit” ColorView Technology via the Sally Mobile App ColorView Kiosk Technology in Stores
Our Transformation Priorities Build Based on Priorities Bric icks & Mo Mortar t to O Omnic nichann nnel R el Retaile iler 19 22 18 20 21 Segr gregated, d, S Slow D w Distribu ibutio ion N Node des t to F Flex exible ible R Reple plenis nishm hment 18 19 20 21 22 Core e Retail O il Oper eratio ions ns F From B Brut ute F e Force Ma Manua nual P l Process t to T Tec echn hnolo logy-Ena nable bled 18 20 21 22 19 Old S d Scho hool “ l “Sup upply ply” Ma ” Market etin ing t to Reset et D Digit ital C l Conf nfid iden ence B Brand nding ing 18 19 20 22 21 Produ duct Designe igner t to P Produc uct B Brand nd B Build ilder er 19 20 21 22 18 Unde derinv invested ed S Store E Exper perien ience t to R Refreshe hed S d Store E e Expe perie ienc nce 20 21 19 22 18 Sally Beauty Holdings, Inc.
Q4 Financial Highlights Gross Adjusted SSS SG&A% Margin EPS +1.1% 37.7% 49.6% $0.58 (1) Up for SBH, SBS Compared to PY: Increased 10 bps Down 20 bps Increase of 13.7% and BSG (1) Adjusted EPS is a non-GAAP measure. See Appendix for a reconciliation of this non-GAAP measure. Sally Beauty Holdings, Inc.
FY19 Financial Highlights Gross Adjusted Adjusted SSS Margin SG&A% EPS +0.3% 49.3% 37.5% (1) $2.26 (2) Guidance for the Full-Year: Approximately Flat Approximately Flat Up Slightly Up Mid-Single Digits (1) Adjusted SG&A is a non-GAAP measure. See Appendix for a reconciliation of this non-GAAP measure. Sally Beauty Holdings, Inc. (2) Adjusted EPS is a non-GAAP measure. See Appendix for a reconciliation of this non-GAAP measure.
Scaled, Focused Experts, Not “All Things to All People” Differentiated industry position: 1 Equal Share with All Grocery; Just Below All Drug hair color and hair care Strong owned and exclusive brand 44% Owned/Exclusive Brand (SBS) 2 penetration 53% Owned/Exclusive Brand (BSG) 5,000+ Locations; 12 Countries; Close to Consumer 3 North American and Global Reach 12,000+ Trained Cosmetologists or “Advanced Team members are “Color 4 Color” Certified by SBH Experts” Strong cash flow generation >$200M Free Cash Flow Each Year (1) 5 60% salon pros; 40% specialty retail Proven resilience in recessions 6 (1) Free Cash Flow is a non-GAAP measure. See Appendix for a reconciliation of this non-GAAP measure.
Our Transformation Reflects the Industry Sally Beauty Holdings’ Playbook Changing Retail and Beauty Sector Playing to win with Increased competition our customers: Hair in the retail beauty Color & Care space Increased investment Improving our in stores and retail technology fundamentals Transformation Plan Customers desire for Advancing our more convenient digital commerce omni-channel capabilities shopping experience Continuing to drive Rising labor costs and costs out of the tighter job market business
Transformation Initiatives Completed in FY19 Continues in FY20 New in FY20 Filled innovation pipeline with new brands • Rollout Private Label Credit Card Program • • Expand innovation pipeline with clean, vegan color/care brands and men’s barbering Launched box color/pro color kits • North Texas investments including: • • Expand new store concepts to other territories for Launched Sally Beauty Rewards Loyalty Program • Remodeled Sally stores • both Sally and BSG Implemented “Fewer, Bigger, Deeper” • New 500,000 square foot distribution • • Complete the rollout of the Oracle POS to all Sally promotional strategy center and BSG stores Deployed the new sallybeauty.com mobile-first • Adding new talent and capabilities in • • Expand testing of JDA Merchandising/Supply e-commerce site digital commerce, brand Chain Platform marketing/strategy and global sourcing Enabled sales transactions on the BSG mobile • • Continue to optimize our supply chain network App • Project Surge to reinvigorate Europe Closed four distribution nodes • Launch of new Sally Beauty brand campaign • “Unleash Your (Pro)tential” Tested new store concepts in Las Vegas • • Testing Pro brands within Sally Beauty Launched Sally Beauty integrated App • • Leverage our Order Management System to Refreshed BSG’s e-commerce site • support “Buy Online / Ship From Store and Same- Launched “ColorView/Color Before You • Day Delivery” Commit” hair color technology • Acquisition opportunities for BSG to expand Integrated our Mexico and South America • distribution rights operations into one LATAM team Launched a digital workforce management • solution Added new talent across the organization • Reduced our leverage ratio to 2.63x by paying • off over $185 million in debt
FY20 Full-Year Financial Guidance Total Gross Revenue Up EPS & Adj. SG&A Capital @ Margin 1%-2%; EPS Up Increase $120M Increase SSS Up LSD - MSD Modestly Modestly 0.5%-1.5% Sally Beauty Holdings, Inc.
Appendix SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures Reconciliations, Continued (In thousands, except per share data) (Unaudited) Three Months Ended September 30, 2019 As Reported As Adjusted Restructuring (1) (GAAP) (Non-GAAP) Selling, general and administrative expenses $ 363,955 $ - $ 363,955 SG&A expenses, as a percentage of sales 37.7% 37.7% Operating earnings 116,092 (756) 115,336 Operating margin 12.0% 11.9% Earnings before provision for income taxes 93,875 (756) 93,119 Provision for income taxes (3) 24,868 (277) 24,591 Net earnings $ 69,007 $ (479) $ 68,528 Earnings per share: Basic $ 0.58 $ (0.00) $ 0.58 Diluted $ 0.58 $ (0.00) $ 0.58 Three Months Ended September 30, 2018 U.S. Tax Reform As Reported As Adjusted Restructuring (1) (2) (GAAP) (Non-GAAP) Selling, general and administrative expenses $ 365,864 $ - $ - $ 365,864 SG&A expenses, as a percentage of sales 37.9% 37.9% Operating earnings 103,126 9,102 - 112,228 Operating margin 10.7% 11.6% Earnings before provision for income taxes 78,743 9,102 - 87,845 Provision for income taxes (3) 23,557 1,884 1,039 26,480 Net earnings $ 55,186 $ 7,218 $ (1,039) $ 61,365 Earnings per share: Basic $ 0.46 $ 0.06 $ (0.01) $ 0.51 Diluted $ 0.46 $ 0.06 $ (0.01) $ 0.51 (1) For the three months ended September 30, 2019, restructuring represents costs and expenses incurred in connection with the supply chain modernization plan, including a $1.8 million gain from the sale our Marinette fullfillment center. For the three months ended September 30, 2018, restructuring represents costs and expenses incurred in connection with the 2018 Restructuring Plan. (2) U.S. tax reform represents adjustments to the revaluation of deferred income taxes and a deemed repatriation tax on previously undistributed foreign earnings resulting from changes to U.S. federal tax law in December 2017. (3) The income tax provision associated with restructuring for the three months ended September 30, 2019 and 2018, was calculated using a 36.6% and 20.7% tax rate, respectively, since realization of a tax benefit for portions of these Sally Beauty Holdings, Inc. expenses are currently not deemed probable.
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