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WELCOME TO THE NEW SALLY.NEW LOOK. NEW EXPERIENCE.
As of December 31, 2019
Sally Beauty Holdings, Inc.
2
Company Highlights
Differentiated industry position: hair color and hair care
Strong owned and exclusive brand penetration
North American and Global Reach
Team members are “Color Experts”
Strong cash flow generation
Proven resilience in recessions
Equal Share with All Grocery; Just Below All Drug
44% Owned/Exclusive Brand (SBS)51% Owned/Exclusive Brand (BSG) (1)
5,000+ Locations; 12 Countries; Close to Consumer
12,000+ Trained Cosmetologists or “Advanced Color” Certified by SBH
>$200M Free Cash Flow Each Year (2)
60% salon pros; 40% specialty retail(1) As of December 31, 2019(2) Free Cash Flow is a non-GAAP measure. See Appendix for a reconciliation of this non-GAAP measure.
1
2
3
4
5
6
Segments
Net Sales Gross Margin
% of SegmentOperatingEarnings
(1) See Addendum for a reconciliation of this non-GAAP financial measure.
Consolidated Fiscal 2019 Results
% of Sales 59.2% 40.8%
60.5% 39.5%
3
Open-Line Retail Exclusive / Full-Service
3,703 stores 1,369 stores 740 consultants
Professional stylists
`
Consumers:
DistributionChannel (1)
Salons
Retail Consumers $$$ High-end$ Value
Suppliers/Vendors:
Distributors:
Go To Market
Exclusive, third party professional-only brands
Third party and owned brands not available in mass retail
(1) As of December 31, 2019 4
Retail stores and e-commerce
Retail consumers ~ 70% of sales
Professional stylists ~ 30% of sales
SalesSSSEBITEBIT margin
Segment
DistributionChannel
Customers
FY2019Financials
$2.3b0.4%$366m16.0%
Business Segment Highlights
5
SalesSSSEBITEBIT margin
Segment
DistributionChannel
Customers
FY2019Financials
Stores and e-commerce for licensed professionalsDirect sales consultants and e-commerce for salons
Professional stylists (chair/suite renters)
Salons (via BSG’s direct sales consultants)
$1.6b0.2%$240m15.1%
Business Segment Highlights
6
Our Transformation Reflects the Industry
Improving ourretail
fundamentals
Advancing ourdigital commerce
capabilities
Continuing to drive costs out of the
business
Sally Beauty Holdings’ Playbook
Increased competition in the retail beauty
space
Customers desire for more convenient
omni-channel shopping experience
Increased investment in stores and technology
Rising labor costs and tighter job market
Changing Retail and Beauty Sector
Transformation Plan
Playing to win with our customers: Hair
Color & Care
8
Transformation Plan
OVERALL STRATEGY
Be the undisputed expert and leader in hair color and hair care for the consumer and the professional
Play to win with our customers
Improve ourretail
fundamentals
Advance ourdigital commerce
capabilities
Drive costs out of the business
Focus marketing and merchandising efforts in our differentiated core – Hair Color and Hair Care
• Build brands jointly with influencers
• Expand distribution rights of important color and care brands, and pursue additional new and exclusive brands, bringing new customers to Beauty Systems Group
• Enter a multi-billion dollar category by launching box color across Sally Beauty Supply
Targeted investment in people, processes, technology and our stores
• Leverage data via Loyalty programs to enhance our understanding of our business and customers
• Complete point-of-sale system and JDA implementation for both Sally Beauty and BSG
• Expanding the roll-out of our new store concepts to refresh/rebuild our store experience
• Modernize our supply chain
• Hire the best talent and leverage the Power of One
• Grow digital commerce capabilities and enhance online and mobile customer experience
• Further leverage commerce-based apps and other omni-channel capabilities to satisfy rapidly evolving customer expectations while showcasing key product categories
• Develop dynamic inventory delivery options including ship from store, buy online/pickup at store and split shipment
• Through continuous improvement efforts, achieve additional selling, general and administrative expense savings to offset inflation and wage pressure
19 2018 21 22
Bricks & Mortar to Omnichannel Retailer
19 2018 21 22
Core Retail Operations From Brute Force Manual Process to Technology-Enabled
19 2018 21 22
Product Designer to Product Brand Builder
19 2018 21 22
Old School “Supply” Marketing to Reset Digital Confidence Branding
18 222119
Segregated, Slow Distribution Nodes to Flexible Replenishment
20
18 222119
Underinvested Store Experience to Refreshed Store Experience
20
Our Transformation Plan is Built Based on Priorities
Sally Beauty Holdings, Inc.
Business Segment Review10
Sally Beauty global footprint (1)
3,703 stores worldwide 2,794 stores in U.S. (including Puerto Rico)
909 stores in Canada, Mexico, Chile, Peru, UK, Ireland, Belgium, Netherlands, France, Germany, and Spain
Average store size 1,700 sq. ft., 90% selling space
Professional open-line business - merchandise assortment not available through mass retailers
Launched mobile-first e-commerce platform in March of 2019 and Sally app in June of 2019
44% of sales are owned-brand and exclusive products (1)
Sally Beauty U.S. Store
Sally Beauty Highlights
(1) As of December 31, 2019 11
20%
29%
15%
14%
7%
7%
8%
Sally Beauty Product Mix
Hair Care
Hair Color
Skin and Nail Care
Styling Tools
Salon Supplies andAccessories
Other BeautyItems
We offer a diversified mix of beauty products with a focus on hair color and care
*Fiscal year 2019
~50% ofSales areHair ColorHair Care
MulticulturalProducts
12
Sally International
909 Sally stores located in 11 countries
Stores located in Canada, Mexico, Chile, Peru, UK, Ireland, Belgium, France, the Netherlands, Germany, and Spain
~25% of Sally sales from international
Sales mix differs from U.S./Canada
UK/Europe
o ~80-85% professionalo ~15-20% retail
Mexico and South America almost 100% retail
Existing International Platform Store Count by Geography (1)
249
203(Belgium, France,
139
37
263
Total 909
18
(Canada)
(Mexico)
(UK / Ireland)
Germany, Spain, Netherlands)
(Chile)
(Peru)
(1) As of December 31, 2019 13
2.1%
4.1%
6.3% 6.5%
-0.6%
1.3% 1.7% 1.7%
-1.6% -1.5%
0.4%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$1,696 $1,835 $2,012
$2,199 $2,230 $2,309 $2,330 $2,365 $2,345 $2,334 $2,293
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sally Beauty Net Sales (1)
Sally Beauty Same Store Sales
(1) The unfavorable impact of foreign currency exchange on net sales for the fiscal year 2019 was $27.4 million, or 1.2% of net sales
Sally Beauty Historical Sales
14
Beauty Systems Group Highlights
Beauty Systems Group – 1,369(1) professional-only stores & professional distributor sales consultants
1,225 company-operated / 144 franchised stores (Armstrong McCall)
740 professional distributor sales consultants
Average store size 2,600 sq. ft.
Sells exclusively to salons and salon professionals
Professional exclusive / full-service business –includes merchandise assortment of premium brands sold through salons and generally not available in mass retail or Sally Beauty stores
51% of sales are exclusive and owned-brand products (1)
(1) As of December 31, 201915
35%
40%
3%
8%
8%6%
Beauty Systems Group Product Mix
We offer a diversified mix of beauty products not carried in Sally stores or mass retail
Hair Care
Skin and Nail Care
Styling Tools
PromotionalItems
Other BeautyItems
Hair Color
~75% of Sales areHair ColorHair Care
*Fiscal year 2019 16
Beauty Systems Group Historical Sales
$941 $1,081
$1,257 $1,325 $1,392 $1,445 $1,505 $1,588 $1,593 $1,599 $1,583
$0$200$400$600$800
$1,000$1,200$1,400$1,600$1,800
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
BSG Net Sales (1)
1.0%
6.2%5.5% 6.1%
4.2%3.5%
5.7% 5.5%
1.3%
(1.5%)
0.2%
(4.0%)
0.0%
4.0%
8.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
BSG Same Store Sales Growth
(1) The unfavorable impact of foreign currency exchange on net sales for the fiscal year 2019 was $4.5 million, or 0.3% of net sales 17
18
Consolidated Financials
$0.52
$0.77
$1.07
$1.42$1.48 $1.53 $1.53
$1.72$1.80
$2.16$2.26
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Consolidated Sales and Adj. EPS
Consolidated Sales (1) EPS (adjusted) (2)
(1) The impact from unfavorable foreign currency exchange in the 2019 fiscal year was $31.9 million, or 0.8%(2) See Addendum for a reconciliation of this non-GAAP financial measure. 19
$2,637
$2,916
$3,269
$3,524 $3,622 $3,754 $3,834
$3,953 $3,938 $3,933 $3,876
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Q1 FY20 Financial Results
Q1 FY20 Financial Results
20
• Net sales of $980m, decrease of 0.9% vs. prior year Consolidated same store sales (0.3%)
Beauty Systems Group same store sales +1.2% Third consecutive quarter of positive same store sales Segment revenue reached all-time quarterly high
Sally Beauty Supply same store sales (1.1%) Europe turned positive US and Canada impacted by technology disruptions, shortened holiday calendar
and lapping of prior year non-recurring benefits Unfavorable foreign exchange (10 bps) 57 fewer stores versus prior year
• GAAP EPS of $0.45, decrease of $0.09 or 16.7% vs. prior year• Adjusted EPS of $0.47, decrease of $0.10 or 17.5% vs. prior year
• Cash flow from operations of $62.3m• Capital Expenditures of $40.9m• Operating free cash flow of $21.4m
• Reduced debt levels by $16.2m and repurchased 0.8m shares at aggregate cost of $11.4m
21
Steady Cash Flow Generation
SBH Free Cash Flow ($m) (1)
$225.6$239.2
$194.3 $202.3
$253.7
$286.5
$228.0
2013A 2014A 2015A 2016A 2017A 2018A 2019A
49% 40%37% 39% 32% 32%
Cash conversion (%) (2)
(1) Free Cash Flow defined as cash flow from operations minus capital expenditures; See Addendum for reconciliation of this non-GAAP financial measure(2) Cash conversion defined as FCF/Adjusted EBITDANote: Free Cash Flow for 2015 and 2016 reflects increased capital expenditures primarily related to store openings and ongoing information technology upgrades
in both business segments, store remodels and upgrades to certain distribution centers
41%
Long-Term Capital Structure
No near-term maturities
Targeted consolidated leverage ratio (Net Debt/EBITDA) of 2.5x to 3.0x
Leverage 2.68x at December 31
Ample liquidity
Strong cash flow
$500 million asset-based revolving credit facility
Long-Term Debt Maturities ($ millions)
Capital Structure
22
AMOUNT ($MM)
% OF TOTAL DEBT
TERM LOAN B (FY2024) $707.8 44.4% 5.500% SENIOR NOTES (FY2024) $197.4 12.4% 5.625% SENIOR NOTES (FY2026) $687.9 43.2% TOTAL DEBT $1,593.1 100.0%
$905.2
$687.9
$-
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
2018 2019 2020 2021 2022 2023 2024 2025 2026
Capital Structure
$327
$228 $209
$346
$166
$47
2014 2015 2016 2017 2018 2019
Cash used per year to acquire stock(in millions)
Over past six years, $1.3 billion of capital allocated to share repurchases
In August 2017, launched a new share repurchase program to repurchase up to $1.0 billion, at the discretion of the Board of Directors, of common stock through the end of fiscal year 2021
23
24
APPENDIX
EBITDA and EPS Reconciliation
25
Adjusted EBITDA FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19Net Earnings (GAAP) 99.1$ 143.8$ 213.7$ 233.1$ 261.2$ 246.0$ 235.1$ 222.9$ 215.1$ 258.0$ 271.6$
Interest expense, net of interest income 132.0 113.0 112.5 138.4 107.7 116.3 116.8 144.2 132.9 98.2 96.3Provision for income taxes 65.7 84.1 122.2 127.9 151.5 144.7 143.4 131.1 130.6 70.4 90.5Depreciation and amortization 47.1 51.1 59.7 64.7 72.2 79.7 89.4 99.7 112.3 108.8 107.7Share-based compensation 8.6 12.8 15.6 16.9 19.2 22.1 16.8 12.6 10.5 10.5 9.2Transaction expenses - - - - - - - - - - - Sales-based service fee charged by Alberto-Culver - - - - - - - - - - - Expenses from data security incidents - - - - - 2.5 5.6 14.6 - 7.9 - Restructuring charges - - - - - - 5.3 - 22.7 33.6 (0.7) Litigation settlement and non-recurring items, net (1) - - (21.3) 10.2 - - - 2.6 - - -
Adjusted EBITDA 352.5$ 404.8$ 502.5$ 591.1$ 611.8$ 611.3$ 612.4$ 627.7$ 624.1$ 587.4$ 574.6$
Adjusted net earnings and adjusted diluted earnings per shareNet Earnings (GAAP) 99.1$ 143.8$ 213.7$ 233.1$ 261.2$ 246.0$ 235.1$ 222.9$ 215.1$ 258.0$ 271.6
Marked-to-market adjustment for certain interest rate swaps - (2.4) - - - - - - - - - Expenses associated with the spin-off from Alverto Culver - - - - - - - - - - - Loss on extinguishment of debt (5.3) - - 37.8 - - - 33.3 28.0 0.9 - Interest expense on redeemed debt - - - 5.1 - - - 2.1 - - - Amortization of deferred financing costs - - - 0.2 - - - - - - - Litigation settlement and non-recurring items, net (1) - - (21.3) 10.2 - - - - - - - Loss from securiy breach incidents - - - - - 2.5 5.6 14.7 - 7.9 - Management transition costs - - - - - 3.5 - 2.0 - - - Restructuring charges - - - - - - 5.3 - 22.7 33.6 (0.7) One-time benefits from U.S. tax reform - - - - - - - - - (23.2) - Other - - - - - - - 0.6 - - - Tax provision for the adjustments to net earnings 2.1 0.9 7.9 (19.2) - (2.3) (4.0) (20.1) (17.6) (10.1) 0.6
Adjusted net earnings 95.9$ 142.3$ 200.3$ 267.2$ 261.2$ 249.7$ 241.9$ 255.6$ 248.2$ 267.1$ 271.5$ Diluted adjusted net earnings per share (non-GAAP): 0.52$ 0.77$ 1.07$ 1.42$ 1.48$ 1.53$ 1.53$ 1.72$ 1.80$ 2.16$ 2.26$ Diluted GAAP net earnings per share: 0.54$ 0.78$ 1.14$ 1.24$ 1.48$ 1.51$ 1.49$ 1.50$ 1.56$ 2.08$ 2.26$
(1) Results for fiscal year 2011, reflect a $27.0 million benefit of a litigation settlement and non-recurring charges of $5.7 million.
Free Cash Flow
26
Cash Flow Reconciliation2013 2014 2015 2016 2017 2018 2019
Cash Flow from Operations 310.5$ 316.0$ 300.8$ 351.0$ 343.3$ 372.7$ 320.4$ Less: Capital Expenditures 84.9$ 76.8$ 106.5$ 148.7$ 89.6$ 86.1$ 92.4$ Free Cash Flow 225.6$ 239.2$ 194.3$ 202.3$ 253.7$ 286.5$ 228.0$