Sally Beauty Holdings Company Overview Company Highlights Sally - - PowerPoint PPT Presentation
Sally Beauty Holdings Company Overview Company Highlights Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty products Annual consolidated sales of over $3.8 billion Strong cash
Company Highlights
Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty products
Annual consolidated sales of over $3.8 billion
Strong cash flow generation
Over 5,070 stores located in 13 countries (1)
Industry leading position with ~33% channel share
Proven resilience in recessionary cycles
Well-positioned for long-term growth
Two distinct business segments
(1) As of June 30, 2016, fiscal 2016 third quarter.
Company Highlights Consolidated Fiscal 2015 Results
Net Sales Gross Margin
Segments Customers
chair/suite rentals
sized salons
(1) The impact from unfavorable foreign currency exchange in the 2015 fiscal year was $87.3 million, or 2.3% (2) See Addendum for a reconciliation of this non‐GAAP financial measure.
Sales SSS growth EBIT EBIT margin
Segment Distribution Channel Customers FY2015 Financials
$2.3b 1.7% $412m 17.7%
Company Highlights
(1) As of June 30, 2016, fiscal 2016 third quarter.
Sales SSS growth EBIT EBIT margin
Segment Distribution Channel Customers FY2015 Financials
$1.5b 5.7% $231m 15.4%
Company Highlights
(1) As of June 30, 2016, fiscal 2016 third quarter.
Company Highlights
Open‐Line Retail Exclusive / Full‐Service 3,750 stores 1,322 stores 947 consultants
Professional stylists
`
Retail Consumers $$$ High-end $ Value
Customers: Distribution:
SBH plays an important role in the supply chain Salons
(1) As of June 30, 2016, fiscal 2016 third quarter.
Industry Growth
$1.6 $1.7 $1.8 $2.0 $2.1 $2.2 $2.3 $2.4 $2.6 $2.7 $2.9 $2.9 $3.0 $3.1 $3.3 $3.4 $3.5 $3.7 $3.8 $3.8 $4.0 $4.2 $4.5 $4.6 $4.8 $4.9
$‐ $1.0 $2.0 $3.0 $4.0 $5.0 $6.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
($ in billions)
(at wholesale $’s)
Growth
Recession Resistant Industry
Source: Professional Consultants & Resources, 2015 Study. (1) Professional beauty supply channel size based upon a 2015 study of manufacturer‐level sales conducted by Professional Consultants & Resources.
Sally Company Highlights
Sally Beauty global footprint
3,750(1) stores worldwide 2,902 stores in U.S. (including Puerto Rico)
848 stores in Canada, UK, Ireland, Belgium,
Netherlands, France, Germany, Spain, Chile, Colombia, Peru & Mexico
Average store size 1,700 sq. ft., 90% selling
space
Professional open-line business - merchandise
assortment not available through mass retailers
Destination for professional quality haircare
and solutions with a love it or return it guarantee
Sally Beauty U.S. Store
(1) As of June 30, 2016, fiscal 2016 third quarter.
Sally Beauty: Marketing Initiatives
Sally Beauty: Marketing Initiatives
In In Store Solution Guide Store Solution Guide Direct Direct Mail Mail Ext Exterior Sign
Pro Flyer Pro Flyer Targete Targeted Digital Ads Digital Ads Email Email Social Media Social Media Sall Sallyb ybeaut eauty.com y.com Access Hollywood Access Hollywood TV Morning TV Morning Shows Shows Blog Blogger Networ Network Digital Digital Vide Video Beauty Box Beauty Box Auto-R Auto-Repl eplenish CRM sh CRM Text Text
2.7% 3.8% 2.4% 2.4% 2.7% 1.2% 2.1% 4.1% 6.3% 6.5%
1.3% 1.7% 2.0%
0.0% 2.0% 4.0% 6.0% 8.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16 $1,208 $1,296 $1,359 $1,419 $1,567 $1,673 $1,696 $1,835 $2,012 $2,199 $2,230 $2,309 $2,330 $1,781 $0 $400 $800 $1,200 $1,600 $2,000 $2,400 $2,800 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16
Sally Beauty Net Sales Sally Beauty Same Store Sales
Growth
Sally Beauty Financials
(1) The unfavorable impact of foreign currency exchange on sales for the first nine months of fiscal 2016 was $33.9 million.
7% 8% 14% 9% 16% 25% 22%
Hair Care Hair Color Skin and Nail Care Electrical Appliances Brushes, Cutlery and Accessories Other Beauty Items
We offer a diversified mix of beauty products
Ethnic Products
47% of Sales from Hair Care & Color
*Fiscal year 2015
Sally Beauty Product Mix
Expand store base organically and through acquisitions; domestic and international
Plan is to grow net store base approximately 3 percent in FY2016
Increase customer traffic through loyalty programs and customer relationship management (CRM) Further enhance e-commerce platform
Growth Initiatives
2,511 2,694 2,844 2,923 3,032 3,158 3,424 3,563 3,309 1,000 2,000 3,000 4,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Worldwide Sally Beauty Stores Sally Beauty Store Economics US
Capital Required $70k Average Inventory $85k Positive Contribution Margin 4 Months Cash Payback on Investment 2 Years
Growth 3,673
7% 6% 3% 4% 4% 5% 4% 3% 4% 3%
Sally Beauty Store Economics
848 Sally Beauty stores located in 13 countries
Stores located in Canada, the UK, Republic of Ireland, Belgium, France, the Netherlands, Germany, Spain, Chile, Colombia, Peru & Mexico
24% of Sally Beauty sales from international Sales mix differs from U.S./Canada
UK/Europe
~80-85% professional ~15-20% retail
Mexico and South America almost 100% retail
Existing International Platform Long‐Term Store Growth Potential
(Canada)
~250
(Mexico)
211 ~250
(UK / Ireland)
261 ~300
(Belgium, France, Germany, Spain, Netherlands)
194 600‐800
(Chile)
41 ~45 Potential Current 118
(Colombia)
6
Total
848 ~1,500+
(Peru)
~40 17 ~50
Sally Beauty Growth Initiatives
(1) As of June 30, 2016, fiscal 2016 third quarter.
U.S. Chile, S.A. United Kingdom Peru, S.A.
Sally Beauty: Growth Initiatives
Beauty Systems Group – 1,322(1) (professional
stores & 944 professional distributor sales consultants 1,157 company-operated / 165 franchised stores (Armstrong McCall) 947 professional distributor sales consultants
Average store size 2,700 sq. ft. Sells to salons and salon professionals Professional exclusive / full-service business –
includes merchandise assortment of premium brands sold through salons and not available in mass retail or Sally Beauty stores
LoxaBeauty.com, the online retail solution for
salon/stylists
BSG Company Highlights
(1) As of June 30, 2016, fiscal 2016 third quarter.
$616 $802 $895 $954 $945 $975 $941 $1,081 $1,257 $1,325 $1,392 $1,445 $1,505 $1,196 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16
BSG Net Sales
4.6% 8.5% (0.6%) 4.1% 10.1% 6.9% 1.0% 6.2% 5.5% 6.1% 4.2% 3.5% 5.7% 6.8% (4.0%) 0.0% 4.0% 8.0% 12.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16
BSG Same Store Sales Growth
Growth
BSG Financials
(1) The unfavorable impact of foreign currency exchange on sales for nine months of fiscal 2016 was $9.8 million, or 0.8%.
We offer a diversified mix of beauty products not carried in Sally stores or mass retail
8% 5% 10% 11% 33% 35% Hair Care Skin and Nail Care Electrical Appliances Promotional Items Other Beauty Items Hair Color
*Fiscal year 2015
BSG Product Mix
828 874 929 991 1,027 1,151 1,190 1,245 400 800 1,200 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Expand store base organically
Further penetrate existing geographies Enter new territories Exclusive distribution
Expand gross margins as sales
shift to the stores Fold-in acquisition opportunities
Capital Required $80k Average Inventory $150k Positive Contribution Margin 4 Months Cash Payback on Investment 2 Years
Growth Initiatives BSG Store Economics
Growth
1,265
Organic Acquisition
Store Growth
Store Growth
1,294
6 46 44 16 36 39 39 43 20 22 11 46 85 12 7 6% 6% 7% 4% 12% 3% 5% 2% 2%
BSG Store Economics
Long‐term debt (as of 6/2016)
$850 $200 $750
$‐ $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
No near-term maturities In November 2015, refinanced entire
$750 million of 6.875% Senior Notes due 2019 with $750 million of 5.625% Senior Notes due 2025
Targeted consolidated pro forma
leverage ratio (Net Debt/EBITDA) of approximately 2.75x
Ample liquidity
Strong cash flow $500 million asset-based revolving credit facility
Committed through July 2018
Long‐term debt maturities ($ millions)
Consolidated Debt
AMOUNT ($MM) % OF TOTAL DEBT REVOLVING ABL FACILITY $0.0 0.0% 5.750% SENIOR NOTES (FY2022) $850.0 47.4% 5.625% SENIOR NOTES (FY2026) $750.0 41.5% 5.500% SENIOR NOTES (FY2024) $200.0 11.1% TOTAL DEBT $1,800.00 100.0%
$0.33 $0.44 $0.52 $0.77 $1.07 $1.42 $1.48 $1.53 $1.53 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 2007 2008 2009 2010 2011 2012 2013 2014 2015
Flat YoY
$2,514 $2,648 $2,637 $2,916 $3,269 $3,524 $3,622 $3,754 $3,834
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500
2007 2008 2009 2010 2011 2012 2013 2014 2015
Sales
EPS (adjusted)
2.2% YoY
(1)
(1) FY15 includes $87.3 million, or 230 points of growth, of unfavorable F(X) exchange rates
Consolidated Financials
Adjusted EBITDA FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Net Earnings (GAAP) 44.5 $ 77.7 $ 99.1 $ 143.8 $ 213.7 $ 233.1 $ 261.2 $ 246.0 $ 235.1 $ Interest expense, net of interest income 146.0 159.1 132.0 113.0 112.5 138.4 107.7 116.3 116.8 Provision for income taxes 38.0 46.2 65.7 84.1 122.2 127.9 151.5 144.7 143.4 Depreciation and amortization 42.6 48.5 47.1 51.1 59.7 64.7 72.2 79.7 89.4 Share‐based compensation 13.1 10.2 8.6 12.8 15.6 16.9 19.2 22.1 16.8 Transaction expenses (1) 21.5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Sales‐based service fee charged by Alberto‐Culver 3.8 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Expenses from data security incidents ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2.5 5.6 Germany restructure ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 5.3 Litigation settlement and non‐recurring charges ‐ ‐ ‐ ‐ (21.3) 10.2 ‐ ‐ ‐ Adjusted EBITDA 309.5 $ 341.7 $ 352.5 $ 404.8 $ 502.5 $ 591.1 $ 611.8 $ 611.3 $ 612.4 $ Adjusted net earnings and adjusted diluted earnings per share Net Earnings (GAAP) 44.5 $ 77.7 $ 99.1 $ 143.8 $ 213.7 $ 233.1 $ 261.2 $ 246.0 $ 235.1 $ Marked‐tomarket adjustment for certain interest rate swaps 3.0 4.6 ‐ (2.4) ‐ ‐ ‐ ‐ ‐ Expenses associated with the spin‐off from Alverto Culver 13.4 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Loss on extinguishment of debt ‐ ‐ (5.3) ‐ ‐ 37.8 ‐ ‐ ‐ Interest expense on redeemed debt ‐ ‐ ‐ ‐ ‐ 5.1 ‐ ‐ ‐ Amortization of deferred financing costs ‐ ‐ ‐ ‐ ‐ 0.2 ‐ ‐ ‐ Litigation settlement and non‐recurring items, net (2) ‐ ‐ ‐ ‐ (21.3) 10.2 ‐ ‐ ‐ Loss from securiy breach incidents ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2.5 5.6 Management transition costs ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3.5 ‐ Germany restructure ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 5.3 Tax provision for the adjustments to net earnings (1.4) (1.7) 2.1 0.9 7.9 (19.2) ‐ (2.3) (4.0) Adjusted net earnings 59.5 $ 80.6 $ 95.9 $ 142.3 $ 200.3 $ 267.2 $ 261.2 $ 249.7 $ 241.9 $ Diluted adjusted net earnings per share (non‐GAAP): 0.33 $ 0.44 $ 0.52 $ 0.77 $ 1.07 $ 1.42 $ 1.48 $ 1.53 $ 1.15 $ Diluted GAAP net earnings per share: 0.24 $ 0.42 $ 0.54 $ 0.78 $ 1.14 $ 1.24 $ 1.48 $ 1.51 $ 1.13 $ (1) Transaction expenses of $21.5 for separation of the Company from Alberto‐Culver in November 2006.
(2) Results for the nine months ended June 30, 2011, reflect a $27.0 million benefit of a litigation settlement and non‐recurring charges of $5.7 million.
Addendum: Non‐GAAP Reconciliations
Cautionary Notice Regarding Forward‐Looking Statements
Statements in this presentation hereto 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. 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. Readers are cautioned not to place undue reliance on forward‐looking statements as such statements speak only as of the date they were
events or results described in the forward‐looking statements, including, but not limited to, risks and uncertainties related to: the highly competitive nature of, and the increasing consolidation of, the beauty products distribution industry; anticipating and effectively responding to changes in consumer preferences and buying trends in a timely manner; potential fluctuation in our same store sales and quarterly financial performance; our dependence upon manufacturers who may be unwilling or unable to continue to supply products to us; the possibility of material interruptions in the supply of products by our third‐party manufacturers or distributors; products sold by us being found to be defective in labeling or content; compliance with current laws and regulations or becoming subject to additional or more stringent laws and regulations; the success of our e‐commerce businesses; product diversion to mass retailers or other unauthorized resellers; the operational and financial performance of our franchise‐based business; successfully identifying acquisition candidates and successfully completing desirable acquisitions; integrating acquired businesses; opening and operating new stores profitably; the impact of the health of the economy upon our business; the success of our cost control plans; protecting our intellectual property rights, particularly our trademarks; the risk that our products may infringe
United States; disruption in our information technology systems; a significant data security breach, including misappropriation of our customers’
investigate and remediate a data security breach; the ultimate determination of the extent or scope of the potential liabilities relating to our 2015 data security incident; our ability to attract or retain highly skilled management and other personnel; severe weather, natural disasters or acts of violence or terrorism; the preparedness of our accounting and other management systems to meet financial reporting and other requirements and the upgrade of our existing financial reporting system; being a holding company, with no operations of our own, and depending on our subsidiaries for cash; our ability to execute and implement our common stock repurchase program; our substantial indebtedness; the possibility that we may incur substantial additional debt, including secured debt, in the future; restrictions and limitations in the agreements and instruments governing our debt; generating the significant amount of cash needed to service all of our debt and refinancing all or a portion of our indebtedness or obtaining additional financing; changes in interest rates increasing the cost of servicing our debt; the potential impact on us if the financial institutions we deal with become impaired; and the costs and effects of litigation. Additional factors that could cause actual events or results to differ materially from the events or results described in the forward‐looking statements can be found 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, 2015, as filed with the Securities and Exchange Commission. Consequently, all forward‐looking statements in this release are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward‐ looking statements.
Cautionary Notice Regarding Forward‐Looking Statements