Sally Beauty Holdings, Inc. [SBH] Filings

10-Q 1 sbh-10q_20220630.htm 10-Q sbh-10q_20220630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2022

-OR-


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-33145

SALLY BEAUTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		36-2257936
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3001 Colorado Boulevard
Denton, Texas		76210
(Address of principal executive offices)		(Zip Code)

(940) 898-7500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report): N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on which registered

Common Stock, $0.01 par valueSBHThe New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 29, 2022, there were 107,016,939 shares of the issuer’s common stock outstanding.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements	4

Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Earnings	5
Condensed Consolidated Statements of Comprehensive Income	6
Condensed Consolidated Statements of Stockholders’ Equity	7
Condensed Consolidated Statements of Cash Flows	8
Notes to Condensed Consolidated Financial Statements	9

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	15
Item 3. Quantitative And Qualitative Disclosures About Market Risk	22
Item 4. Controls And Procedures	22

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	23
Item 1A. Risk Factors	23
Item 6. Exhibits	24

In this Quarterly Report, references to “the Company,” “Sally Beauty,” “our company,” “we,” “our,” “ours” and “us” refer to Sally Beauty Holdings, Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

cautionary notice regarding forward-looking statements

Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute 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, which we refer to as the Exchange Act. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions may also identify such forward-looking statements. Forward-looking statements may relate to, among other things, the impact on our business, operations and financial results of the novel coronavirus (“COVID-19”) pandemic.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and 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. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except par value data)

	June 30, 2022			September 30, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	101,318		$	400,959
Trade accounts receivable, net		31,462			32,623
Accounts receivable, other		35,911			33,958
Inventory		1,014,622			871,349
Other current assets		59,806			44,686
Total current assets		1,243,119			1,383,575
Property and equipment, net of accumulated depreciation of $808,298 at June 30, 2022, and $767,403 at September 30, 2021		289,814			307,377
Operating lease assets		549,493			537,673
Goodwill		533,147			541,209
Intangible assets, excluding goodwill, net of accumulated amortization of $40,336 at June 30, 2022, and $38,957 at September 30, 2021		50,386			55,532
Other assets		19,907			21,766
Total assets	$	2,685,866		$	2,847,132
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	167,169		$	194
Accounts payable		279,359			291,632
Accrued liabilities		165,996			206,155
Current operating lease liabilities		159,452			156,234
Income taxes payable		2,985			10,666
Total current liabilities		774,961			664,881
Long-term debt		1,083,924			1,382,530
Long-term operating lease liabilities		421,072			404,147
Other liabilities		16,781			29,056
Deferred income tax liabilities, net		93,257			85,777
Total liabilities		2,389,995			2,566,391
Stockholders’ equity:
Common stock, $0.01 par value. Authorized 500,000 shares; 107,017 and 113,138 shares issued and 106,963 and 112,913 shares outstanding at June 30, 2022, and September 30, 2021, respectively		1,070			1,129
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued		—			—
Additional paid-in capital		2,339			17,286
Accumulated earnings		418,832			356,967
Accumulated other comprehensive loss, net of tax		(126,370	)		(94,641	)
Total stockholders’ equity		295,871			280,741
Total liabilities and stockholders’ equity	$	2,685,866		$	2,847,132

The accompanying notes are an integral part of these condensed consolidated financial statements.

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net sales	$	961,467	$	1,022,387	$	2,853,105	$	2,884,737
Cost of goods sold		471,259		507,981		1,397,436		1,432,378
Gross profit		490,208		514,406		1,455,669		1,452,359
Selling, general and administrative expenses		390,961		386,481		1,156,082		1,143,738
Restructuring		44		508		1,143		1,371
Operating earnings		99,203		127,417		298,444		307,250
Interest expense		35,977		23,452		76,113		73,313
Earnings before provision for income taxes		63,226		103,965		222,331		233,937
Provision for income taxes		16,659		27,759		60,117		62,228
Net earnings	$	46,567	$	76,206	$	162,214	$	171,709
Earnings per share:
Basic	$	0.44	$	0.68	$	1.48	$	1.52
Diluted	$	0.43	$	0.66	$	1.46	$	1.50
Weighted-average shares:
Basic		106,940		112,739		109,238		112,605
Diluted		108,526		114,927		110,907		114,274

The accompanying notes are an integral part of these condensed consolidated financial statements.

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net earnings	$	46,567		$	76,206		$	162,214		$	171,709
Other comprehensive (loss) income:
Foreign currency translation adjustments		(27,384	)		6,617			(34,645	)		23,734
Interest rate caps, net of tax		2,050			471			2,328			646
Foreign exchange contracts, net of tax		432			(191	)		588			(1,211	)
Other comprehensive (loss) income, net of tax		(24,902	)		6,897			(31,729	)		23,169
Total comprehensive income	$	21,665		$	83,103		$	130,485		$	194,878

The accompanying notes are an integral part of these condensed consolidated financial statements.

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Capital			Earnings			Loss			Equity
Balance at September 30, 2021		112,913		$	1,129		$	17,286		$	356,967		$	(94,641	)	$	280,741
Net earnings		—			—			—			68,838			—			68,838
Other comprehensive loss		—			—			—			—			(3,751	)		(3,751	)
Share-based compensation		—			—			3,958			—			—			3,958
Stock issued for equity awards		795			8			7,364			—			—			7,372
Employee withholding taxes paid related to net share settlement		(56	)		(1	)		(1,136	)		—			—			(1,137	)
Repurchases and cancellations of common stock		(3,675	)		(36	)		(27,472	)		(47,492	)		—			(75,000	)
Balance at December 31, 2021		109,977		$	1,100		$	—		$	378,313		$	(98,392	)	$	281,021
Net earnings		—			—			—			46,808			—			46,808
Other comprehensive loss		—			—			—			—			(3,076	)		(3,076	)
Share-based compensation		—			—			2,032			—			—			2,032
Stock issued for equity awards		111			1			423			—			—			424
Employee withholding taxes paid related to net share settlement		(1	)		—			(15	)		—			—			(15	)
Repurchases and cancellations of common stock		(3,157	)		(32	)		(2,440	)		(52,856	)		—			(55,328	)
Balance at March 31, 2022		106,930		$	1,069		$	—		$	372,265		$	(101,468	)	$	271,866
Net earnings		—			—			—			46,567			—			46,567
Other comprehensive loss		—			—			—			—			(24,902	)		(24,902	)
Share-based compensation		—			—			2,113			—			—			2,113
Stock issued for equity awards		35			1			253			—			—			254
Employee withholding taxes paid related to net share settlement		(2	)		—			(27	)		—			—			(27	)
Balance at June 30, 2022		106,963		$	1,070		$	2,339		$	418,832		$	(126,370	)	$	295,871

												Accumulated
							Additional					Other			Total
	Common Stock						Paid-in			Accumulated		Comprehensive			Stockholders’
	Shares			Amount			Capital			Earnings		Loss			Equity
Balance at September 30, 2020		112,405		$	1,124		$	1,913		$	117,109	$	(104,703	)	$	15,443
Net earnings		—			—			—			57,191		—			57,191
Other comprehensive income		—			—			—			—		23,588			23,588
Share-based compensation		—			—			2,893			—		—			2,893
Stock issued for equity awards		158			2			(2	)		—		—			—
Employee withholding taxes paid related to net share settlement		(25	)		(1	)		(248	)		—		—			(249	)
Balance at December 31, 2020		112,538		$	1,125		$	4,556		$	174,300	$	(81,115	)	$	98,866
Net earnings		—			—			—			38,312		—			38,312
Other comprehensive loss		—			—			—			—		(7,316	)		(7,316	)
Share-based compensation		—			—			2,648			—		—