Business Wire | Nov 11, 2021 06:45AM EST

Sally Beauty Holdings Reports Fourth Quarter and Full Year Fiscal 2021 Results; Provides Fiscal 2022 Outlook

Nov. 11, 2021

DENTON, Texas--(BUSINESS WIRE)--Nov. 11, 2021--Sally Beauty Holdings, Inc. (NYSE: SBH) ("the Company"), the leader in professional hair color, today announced financial results for its fourth quarter and full year ended September 30, 2021. The Company will hold a conference call today at 7:30 a.m. Central Time to discuss the results.

Fiscal 2021 Fourth Quarter Summary

* Consolidated net sales increased 3.4% to $990 million with a same store sales increase of 2.1%; * Global e-commerce sales were $71 million, representing 7.1% of net sales; * Gross margin of 50.6%, down 50 basis points compared to the prior year; * GAAP operating earnings of $111 million and GAAP operating margin of 11.2%, Adjusted Operating Earnings of $116 million and Adjusted Operating Margin of 11.7%; * Interest expense of $20 million compared to $28 million in the prior year, reflecting the Company's deleveraging efforts; * GAAP diluted net earnings per share of $0.59 and Adjusted Diluted Net Earnings Per Share of $0.64; and * Strong cash flow from operations of $164 million, primarily driven by strong earnings and timing of working capital requirements.

Fiscal 2021 Full Year Summary

* Consolidated net sales increased 10.3% to $3.87 billion, with a same store sales increase of 10.2%; * Global e-commerce sales were $281 million, representing 7.2% of net sales; * Gross margin expanded 160 basis points to 50.4% compared to the prior year; * GAAP operating earnings of $418 million and GAAP operating margin of 10.8%, Adjusted Operating Earnings of $461 million and Adjusted Operating Margin of 11.9%; * GAAP diluted net earnings per share of $2.10 and Adjusted Diluted Net Earnings Per Share of $2.40; * Strong cash flow from operations of $382 million; * Strong liquidity position, cash and cash equivalents of $401 million with no outstanding borrowings under the $500 million asset-based revolving line of credit at year end; and * Retired approximately $420 million of debt during the fiscal year.

"We are pleased to conclude the year with strong fourth quarter performance, highlighted by net sales growth of 3.4%, adjusted operating margin of 11.7% and operating cash flow of $164 million," said Denise Paulonis, president and chief executive officer. "In fiscal 2021, we successfully executed on our stated priorities to substantially complete the remaining elements of our transformation and leverage our new capabilities and tools in service of our mission to recruit and retain color customers. We rebounded strongly from last year's pandemic challenges, delivering net sales growth of 10.3% while generating strong profitability and cash flow and reducing our debt levels by over $400 million in fiscal 2021."

"Serving on the Board of Directors over the last four years, I have admired the tremendous work and dedication of our teams and associates as they prioritized the customer and transformed our business into a modern, dynamic beauty company. I am incredibly excited to join this management team and look forward to building upon our strong foundation of enhanced capabilities across CRM, loyalty, e-commerce, merchandising, technology and talent, as we pivot to a new era for SBH focused on customer centricity and the acceleration of long-term profitable growth."

Fiscal 2021 Fourth Quarter Operating Results

Fourth quarter consolidated net sales were $990.3 million, an increase of 3.4% compared to the prior year, with a same store sales increase of 2.1%. Foreign currency translation had a favorable impact of approximately 90 basis points on reported sales. The Company was operating 127 fewer stores at the end of the quarter compared to the prior year. Global e-commerce sales were $71 million or 7.1% of net sales for the quarter.

Consolidated gross profit for the fourth quarter was $501.0 million compared to $489.1 million in the prior year, an increase of 2.4%. Consolidated gross margin was 50.6%, a decrease of 50 basis points compared to 51.1% in the prior year, primarily reflecting a higher mix of Beauty Systems Group sales and a lower gross margin at Beauty Systems Group.

Selling, general and administrative (SG&A) expenses totaled $386.5 million, up $19.6 million compared to the prior year, driven primarily by increased labor and advertising costs, as previously planned. As a percentage of sales, SG&A expenses were 39.0% compared to 38.3% in the prior year.

GAAP operating earnings and operating margin in the fourth quarter were $111.2 million and 11.2%, compared to $119.7 million and 12.5%, in the prior year. Adjusted Operating Earnings and Operating Margin, excluding the Company's previously announced restructuring efforts and COVID-19 related income in both years, were $115.8 million and 11.7%, compared to $120.3 million and 12.6%, in the prior year.

GAAP net earnings in the fourth quarter were $68.1 million, or $0.59 per diluted share, compared to net earnings of $70.2 million, or $0.62 per diluted share in the prior year. Adjusted Net Earnings were $73.1 million, or $0.64 per diluted share, compared to Adjusted Net Earnings of $70.7 million, or $0.63 per diluted share in the prior year. Adjusted EBITDA in the fourth quarter was $143.4million, a decrease of 2% compared to the prior year, and Adjusted EBITDA Margin was 14.5%, a decrease of 80 basis points compared to the prior year.

Balance Sheet and Cash Flow

As of September 30, 2021, the Company had cash and cash equivalents of $401 million and no borrowings outstanding under its asset-based revolving line of credit. Fourth quarter cash flow from operations totaled $164.1million, capital expenditures totaled $28.8million and Operating Free Cash Flow totaled $135.4 million. For the full fiscal year, cash flow from operations totaled $381.9 million, capital expenditures totaled $73.7 million and Operating Free Cash Flow totaled $308.2 million.

In fiscal 2021, the Company reduced its debt levels by approximately $420 million. Additionally, the Company ended the year with a net debt leverage ratio of 1.69x.

Fiscal 2021 Fourth Quarter Segment Results

Sally Beauty Supply

* Segment net sales were $585.4 million in the quarter, an increase of 1.5% compared to the prior year. The segment had a favorable impact of 120 basis points from foreign currency translation on reported sales and operated 104 fewer stores at the end of the quarter compared to the prior year. Segment e-commerce sales were $29 million or 5.0% of segment net sales for the quarter. * Segment same store sales increased 2.3% in the fourth quarter. The Sally Beauty businesses in the U.S. and Canada represented 79% of segment net sales for the quarter and had a same store sales increase of 1.9%. * At the end of the quarter, net store count was 3,549, a decrease of 104 stores compared to the prior year. * Gross margin decreased by 10 basis points to 57.5%, with the Sally Beauty business in the U.S. and Canada delivering gross margin of 60.9%. Product margin was up slightly compared to the prior year, offset by higher distribution and freight costs. * GAAP operating earnings were $105.7 million compared to $103.9 million in the prior year, representing an increase of 1.7%. GAAP operating margin increased to 18.1% compared to 18.0% in the prior year.

Beauty Systems Group

* Segment net sales were $404.9 million in the quarter, an increase of 6.2% compared to the prior year. The segment had a favorable impact from foreign currency translation of approximately 60 basis points on reported sales and operated 23 fewer stores at the end of the quarter compared to the prior year. Segment e-commerce sales were $42 million or 10.3% of segment net sales for the quarter. * Segment same store sales increased 1.7% in the fourth quarter. * At the end of the quarter, net store count was 1,362, a decrease of 23 stores compared to the prior year. * Gross margin decreased 50 basis points to 40.7% in the quarter, driven primarily by a sales mix shift towards large volume/lower margin full service customers that continued to rebound from the COVID-19 impact in the prior year. * GAAP operating earnings were $53.4 million in the quarter, an increase of 5.4% compared to $50.6 million in the prior year. GAAP operating margin in the quarter was 13.2% compared to 13.3% in the prior year. * At the end of the quarter, there were 719 distributor sales consultants compared to 715 in the prior year.

Fiscal Year 2022 Guidance

The Company's full year guidance for fiscal year 2022 is outlined below and additional perspective will be provided during the earnings conference call.

* Net sales are expected to increase 3% to 4% compared to the prior year; * Net store count is expected to decrease by approximately 1% to 2% for the fiscal year, reflecting the Company's focus on optimizing its store portfolio; * Gross margin is expected to expand by 40 to 60 basis points compared to the prior year; * GAAP operating margin is expected to increase by approximately 90 to 110 basis points compared to fiscal year 2021; and * Adjusted Operating Margin is expected to be approximately flat compared to fiscal year 2021.

Update on Financial Disclosures

Beginning in fiscal 2022, the Company will be replacing the same store sales metric with comparable sales, which will include sales from the full service divisions and franchise operations, including any related e-commerce sales. In fiscal 2022, for each quarter the Company will disclose both current and prior year comparable sales under the new definition.

Conference Call and Where You Can Find Additional Information

The Company will hold a conference call and audio webcast today to discuss its financial results and its business at approximately 7:30 a.m. Central Time today, November 11, 2021. During the conference call, the Company may discuss and answer one or more questions concerning business and financial matters and trends affecting the Company. The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute material information that has not been previously disclosed. Simultaneous to the conference call, an audio webcast of the call will be available via a link on the Company's website, sallybeautyholdings.com/investor-relations. The conference call can be accessed by dialing (844) 291-4185 (International: (409) 207-6997) and referencing the access code 3661420#. The teleconference will be held in a "listen-only" mode for all participants other than the Company's current sell-side and buy-side investment professionals. In addition, a supplemental slide presentation may be viewed during the call at the following link SBH Q4 Earnings Presentation and entering the event passwordKe5Yd3Prgt8. A replay of the earnings conference call will be available starting at 10:30 a.m. Central Time, November 11, 2021, through November 25, 2021, by dialing (866) 207-1041 (International: (402) 970-0847) and referencing access code 5241224#. Also, a website replay will be available on sallybeautyholdings.com/investor-relations.

About Sally Beauty Holdings, Inc.

Sally Beauty Holdings, Inc. (NYSE: SBH), as the leader in professional hair color, sells and distributes professional beauty supplies globally through its Sally Beauty Supply and Beauty Systems Group businesses. Sally Beauty Supply stores offer up to 7,000 products for hair color, hair care, nails, and skin care through proprietary brands such as Ion(r), Generic Value Products(r), Beyond the Zone(r) and Silk Elements(r) as well as professional lines such as Wella(r), Clairol(r), OPI(r), Conair(r) and L'Oreal(r). Beauty Systems Group stores, branded as CosmoProf(r) or Armstrong McCall(r) stores, along with its outside sales consultants, sell up to 10,000 professionally branded products including Paul Mitchell(r), Wella(r), Matrix(r), Schwarzkopf(r), Kenra(r), Goldwell(r), Joico(r) and Olaplex(r), intended for use in salons and for resale by salons to retail consumers. For more information about Sally Beauty Holdings, Inc., please visit https://www.sallybeautyholdings.com/.

Cautionary Notice Regarding Forward-Looking Statements

Statements in this news release and the schedules 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. 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 Annual Report on Form 10-K for the year ended September 30, 2020. 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.

Use of Non-GAAP Financial Measures

This news release and the schedules hereto include the following 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: (1) Adjusted Gross Margin; (2) Adjusted Selling, General and Administrative Expenses; (3) Adjusted EBITDA and EBITDA Margin; (4) Adjusted Operating Earnings and Operating Margin; (5) Adjusted Net Earnings; (6) Adjusted Diluted Net Earnings Per Share; and (7) Operating Free Cash Flow. We have provided definitions below for these non-GAAP financial measures and have provided tables in the schedules hereto to reconcile these non-GAAP financial measures to the comparable GAAP financial measures.

Adjusted Gross Margin - We define the measure Adjusted Gross Margin as GAAP gross margin excluding the write-down of COVID-19 related personal protective equipment inventory for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Adjusted Selling, General and Administrative Expenses - We define the measure Adjusted Selling, General and Administrative Expenses as GAAP selling, general and administrative expenses excluding COVID-19 net expenses for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Adjusted EBITDA and EBITDA Margin - We define the measure Adjusted EBITDA as GAAP net earnings before depreciation and amortization, interest expense, income taxes, share-based compensation, costs related to the Company's previously announced restructuring plans, COVID-19 related net expenses, costs related to the non-cash write down of inventory, and impairment charges related to long-lived assets and operating lease assets not included in restructuring for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of net sales.

Adjusted Operating Earnings and Operating Margin - Adjusted operating earnings are GAAP operating earnings that exclude costs related to the Company's previously announced restructuring plans and net expenses related to COVID-19 for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted Operating Margin is Adjusted Operating Earnings as a percentage of net sales.

Adjusted Net Earnings - Adjusted net earnings is GAAP net earnings that exclude tax-effected costs related to the Company's previously announced restructuring plans and tax-effected net expenses related to COVID-19 for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Adjusted Diluted Net Earnings Per Share - Adjusted diluted net earnings per share is GAAP diluted earnings per share that exclude tax-effected costs related to the Company's previously announced restructuring plans and tax-effected net expenses related to COVID-19 for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Operating Free Cash Flow - We define the measure Operating Free Cash Flow as GAAP net cash provided by operating activities less payments for capital expenditures (net). We believe Operating Free Cash Flow is an important liquidity measure that provides useful information to investors about the amount of cash generated from operations after taking into account payments for capital expenditures (net).

We believe that these non-GAAP financial measures provide valuable information regarding our earnings and business trends by excluding specific items that we believe are not indicative of the ongoing operating results of our businesses; providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry.

We have provided these non-GAAP financial measures as supplemental information to our GAAP financial measures and believe these non-GAAP measures provide investors with additional meaningful financial information regarding our operating performance and cash flows. Our management and Board of Directors also use these non-GAAP measures as supplemental measures to evaluate our businesses and the performance of management, including the determination of performance-based compensation, to make operating and strategic decisions, and to allocate financial resources. We believe that these non-GAAP measures also provide meaningful information for investors and securities analysts to evaluate our historical and prospective financial performance. These non-GAAP measures should not be considered a substitute for or superior to GAAP results. Furthermore, the non-GAAP measures presented by us may not be comparable to similarly titled measures of other companies.

Supplemental Schedules

Segment Information 1

Non-GAAP Financial Measures Reconciliations 2-3

Non-GAAP Financial Measures Reconciliations; Adjusted EBITDA and

Operating Free Cash Flow 4

Store Count and Same Store Sales 5

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Earnings(In thousands, except per share data)(Unaudited)Three Months Ended September 30,Twelve Months Ended September 30,2021

2020

PercentageChange2021

2020

PercentageChangeNet sales$

990,260

$

957,812

3.4

%

$

3,874,997

$

3,514,330

10.3

%

Cost of products sold489,285

468,669

4.4

%

1,921,663

1,798,736

6.8

%

Gross profit500,975

489,143

2.4

%

1,953,334

1,715,594

13.9

%

Selling, general and administrative expenses386,542

366,982

5.3

%

1,530,280

1,442,809

6.1

%

Restructuring3,240

2,484

30.4

%

4,611

14,025

(67.1

)%

Operating earnings111,193

119,677

(7.1

)%

418,443

258,760

61.7

%

Interest expense20,196

28,310

(28.7

)%

93,509

98,793

(5.3

)%

Earnings before provision for income taxes90,997

91,367

(0.4

)%

324,934

159,967

103.1

%

Provision for income taxes22,848

21,179

7.9

%

85,076

46,722

82.1

%

Net earnings$

68,149

$

70,188

(2.9

)%

$

239,858

$

113,245

111.8

%

Earnings per share:Basic$

0.60

$

0.63

(4.8

)%

$

2.13

$

0.99

115.2

%

Diluted$

0.59

$

0.62

(4.8

)%

$

2.10

$

0.99

112.1

%

Weighted average shares:Basic112,797

112,296

112,653

113,881

Diluted114,565

113,090

114,212

114,680

Basis PointChangeBasis PointChangeComparison as a percentage of net salesConsolidated gross margin50.6

%

51.1

%

(50

)

50.4

%

48.8

%

160

Selling, general and administrative expenses39.0

%

38.3

%

70

39.5

%

41.1

%

(160

)

Consolidated operating margin11.2

%

12.5

%

(130

)

10.8

%

7.4

%

340

Effective tax rate25.1

%

23.2

%

190

26.2

%

29.2

%

(300

)

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESConsolidated Statements of Earnings(In thousands, except per share data)(Unaudited) Three Months Ended September 30, Twelve Months Ended September 30, 2021 2020 Percentage 2021 2020 Percentage Change Change Net sales $ 990,260 $ 957,812 3.4 % $ 3,874,997 $ 3,514,330 10.3 %

Cost of 489,285 468,669 4.4 % 1,921,663 1,798,736 6.8 %products soldGross profit 500,975 489,143 2.4 % 1,953,334 1,715,594 13.9 %

Selling,general and 386,542 366,982 5.3 % 1,530,280 1,442,809 6.1 %administrativeexpensesRestructuring 3,240 2,484 30.4 % 4,611 14,025 (67.1 )%

Operating 111,193 119,677 (7.1 )% 418,443 258,760 61.7 %earningsInterest 20,196 28,310 (28.7 )% 93,509 98,793 (5.3 )%expenseEarningsbefore 90,997 91,367 (0.4 )% 324,934 159,967 103.1 %provision forincome taxesProvision for 22,848 21,179 7.9 % 85,076 46,722 82.1 %income taxesNet earnings $ 68,149 $ 70,188 (2.9 )% $ 239,858 $ 113,245 111.8 %

Earnings pershare:Basic $ 0.60 $ 0.63 (4.8 )% $ 2.13 $ 0.99 115.2 %

Diluted $ 0.59 $ 0.62 (4.8 )% $ 2.10 $ 0.99 112.1 %

Weightedaverageshares:Basic 112,797 112,296 112,653 113,881

Diluted 114,565 113,090 114,212 114,680

Basis Basis Point Point Change ChangeComparison asa percentageof net salesConsolidated 50.6 % 51.1 % (50 ) 50.4 % 48.8 % 160 gross marginSelling,general and 39.0 % 38.3 % 70 39.5 % 41.1 % (160 )administrativeexpensesConsolidated 11.2 % 12.5 % (130 ) 10.8 % 7.4 % 340 operatingmargin Effective tax 25.1 % 23.2 % 190 26.2 % 29.2 % (300 )rate SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets(In thousands)(Unaudited)September 30,2021

2020

Cash and cash equivalents$

400,959

$

514,151

Trade and other accounts receivable66,581

56,429

Inventory871,349

814,503

Other current assets44,686

48,014

Total current assets1,383,575

1,433,097

Property and equipment, net307,377

315,029

Operating lease asset537,673

525,634

Goodwill and other intangible assets596,741

598,321

Other assets21,766

23,066

Total assets$

2,847,132

$

2,895,147

Current maturities of long-term debt$

194

$

180

Accounts payable291,632

236,333

Accrued liabilities206,155

170,665

Current operating lease liabilities156,234

153,267

Income taxes payable10,666

2,917

Total current liabilities664,881

563,362

Long-term debt1,382,530

1,796,897

Long-term operating lease liabilities404,147

394,375

Other liabilities29,056

32,976

Deferred income tax liabilities, net85,777

92,094

Total liabilities2,566,391

2,879,704

Total stockholders' equity280,741

15,443

Total liabilities and stockholders' equity$

2,847,132

$

2,895,147

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets(In thousands)(Unaudited) September 30, 2021 2020

Cash and cash equivalents $ 400,959 $ 514,151

Trade and other accounts receivable 66,581 56,429

Inventory 871,349 814,503

Other current assets 44,686 48,014

Total current assets 1,383,575 1,433,097

Property and equipment, net 307,377 315,029

Operating lease asset 537,673 525,634

Goodwill and other intangible assets 596,741 598,321

Other assets 21,766 23,066

Total assets $ 2,847,132 $ 2,895,147

Current maturities of long-term debt $ 194 $ 180

Accounts payable 291,632 236,333

Accrued liabilities 206,155 170,665

Current operating lease liabilities 156,234 153,267

Income taxes payable 10,666 2,917

Total current liabilities 664,881 563,362

Long-term debt 1,382,530 1,796,897

Long-term operating lease liabilities 404,147 394,375

Other liabilities 29,056 32,976

Deferred income tax liabilities, net 85,777 92,094

Total liabilities 2,566,391 2,879,704

Total stockholders' equity 280,741 15,443

Total liabilities and stockholders' equity $ 2,847,132 $ 2,895,147

Supplemental Schedule 1

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESSegment Information(In thousands)(Unaudited)Three Months Ended September 30,Twelve Months Ended September 30,2021

2020

Percentage Change

2021

2020

PercentageChangeNet sales:Sally Beauty Supply ("SBS")$

585,367

$

576,578

1.5

%

$

2,278,382

$

2,080,703

9.5

%

Beauty Systems Group ("BSG")404,893

381,234

6.2

%

1,596,615

1,433,627

11.4

%

Total net sales$

990,260

$

957,812

3.4

%

$

3,874,997

$

3,514,330

10.3

%

Operating earnings:SBS$

105,683

$

103,904

1.7

%

$

417,658

$

237,588

75.8

%

BSG53,398

50,649

5.4

%

205,078

194,206

5.6

%

Segment operating earnings159,081

154,553

2.9

%

622,736

431,794

44.2

%

Unallocated expenses (1)44,648

32,392

37.8

%

199,682

159,009

25.6

%

Restructuring3,240

2,484

30.4

%

4,611

14,025

(67.1

)%

Interest expense20,196

28,310

(28.7

)%

93,509

98,793

(5.3

)%

Earnings before provision for income taxes$

90,997

$

91,367

(0.4

)%

$

324,934

$

159,967

103.1

%

Segment gross margin:2021

2020

Basis PointChange2021

2020

Basis PointChangeSBS57.5

%

57.6

%

(10

)

57.9

%

54.4

%

350

BSG40.7

%

41.2

%

(50

)

39.8

%

40.7

%

(90

)

Segment operating margin:SBS18.1

%

18.0

%

10

18.3

%

11.4

%

690

BSG13.2

%

13.3

%

(10

)

12.8

%

13.5

%

(70

)

Consolidated operating margin11.2

%

12.5

%

(130

)

10.8

%

7.4

%

340

(1) Unallocated expenses, including share-based compensation expense, consist of corporate and shared costs and are included in selling, general and administrative expenses. Supplemental Schedule 1

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESSegment Information(In thousands)(Unaudited) Three Months Ended September 30, Twelve Months Ended September 30, 2021 2020 Percentage 2021 2020 Percentage Change Change

Net sales:Sally Beauty $ 585,367 $ 576,578 1.5 % $ 2,278,382 $ 2,080,703 9.5 %Supply("SBS")Beauty 404,893 381,234 6.2 % 1,596,615 1,433,627 11.4 %Systems Group("BSG")Total net $ 990,260 $ 957,812 3.4 % $ 3,874,997 $ 3,514,330 10.3 %sales Operatingearnings:SBS $ 105,683 $ 103,904 1.7 % $ 417,658 $ 237,588 75.8 %

BSG 53,398 50,649 5.4 % 205,078 194,206 5.6 %

Segment 159,081 154,553 2.9 % 622,736 431,794 44.2 %operatingearnings Unallocated 44,648 32,392 37.8 % 199,682 159,009 25.6 %expenses ^(1)Restructuring 3,240 2,484 30.4 % 4,611 14,025 (67.1 )%

Interest 20,196 28,310 (28.7 )% 93,509 98,793 (5.3 )%expenseEarningsbefore $ 90,997 $ 91,367 (0.4 )% $ 324,934 $ 159,967 103.1 %provision forincome taxes Segment gross 2021 2020 Basis 2021 2020 Basismargin: Point Point Change ChangeSBS 57.5 % 57.6 % (10 ) 57.9 % 54.4 % 350

BSG 40.7 % 41.2 % (50 ) 39.8 % 40.7 % (90 )

Segmentoperatingmargin:SBS 18.1 % 18.0 % 10 18.3 % 11.4 % 690

BSG 13.2 % 13.3 % (10 ) 12.8 % 13.5 % (70 )

Consolidated 11.2 % 12.5 % (130 ) 10.8 % 7.4 % 340 operatingmargin (1) Unallocated expenses, including share-based compensation expense, consistof corporate and shared costs and are included in selling, general andadministrative expenses. Supplemental Schedule 2SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESNon-GAAP Financial Measures Reconciliations(In thousands, except per share data)(Unaudited)Three Months Ended September 30, 2021As ReportedRestructuring (1)COVID-19 (2)As Adjusted(Non-GAAP)Cost of products sold$

489,285

$

(1,444

)

$

-

$

487,841

Consolidated gross margin50.6

%

50.7

%

Selling, general and administrative expenses386,542

-

86

386,628

SG&A expenses, as a percentage of sales39.0

%

39.0

%

Operating earnings111,193

4,684

(86

)

115,791

Operating margin11.2

%

11.7

%

Earnings before provision for income taxes90,997

4,684

(86

)

95,595

Provision for income taxes (3)22,848

376

(738

)

22,486

Net earnings$

68,149

$

4,308

$

652

$

73,109

Earnings per share:Basic$

0.60

$

0.04

$

0.01

$

0.65

Diluted$

0.59

$

0.04

$

0.01

$

0.64

Three Months Ended September 30, 2020As ReportedRestructuring (1)COVID-19 (2)As Adjusted(Non-GAAP)Cost of products sold$

468,669

$

-

$

-

$

468,669

Consolidated gross margin51.1

%

51.1

%

Selling, general and administrative expenses366,982

-

1,872

368,854

SG&A expenses, as a percentage of sales38.3

%

38.5

%

Operating earnings119,677

2,484

(1,872

)

120,289

Operating margin12.5

%

12.6

%

Earnings before provision for income taxes91,367

2,484

(1,872

)

91,979

Provision for income taxes (3)21,179

584

(502

)

21,261

Net earnings$

70,188

$

1,900

$

(1,370

)

$

70,718

Earnings per share:Basic$

0.63

$

0.02

$

(0.01

)

$

0.63

Diluted$

0.62

$

0.02

$

(0.01

)

$

0.63

(1) For the three months ended September 30, 2021, restructuring represents expenses incurred primarily in connection with the Transformation Plan, including $1.4 million related to inventory. For the three months ended September 30, 2020, restructuring represents expenses incurred primarily in connection with Project Surge and the Transformation Plan.(2) For the three months ended September 30, 2021, COVID-19 primarily represents a rent subsidy provided by the Canadian government and additional tax impact from the donation of personal-protective equipment. For the three months ended September 30, 2020, COVID-19 primarily represents a wage subsidy provided by the Canadian government under the Canada Emergency Wage Subsidy.(3) The provision for income taxes was calculated using the applicable tax rates for each country, while excluding the tax benefits for countries where the tax benefit is not currently deemed probable of being realized. Supplemental Schedule 2 SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESNon-GAAP Financial Measures Reconciliations(In thousands, except per share data)(Unaudited) Three Months Ended September 30, 2021 As Reported Restructuring COVID-19 ^ As Adjusted ^(1) (2) (Non-GAAP) Cost of products sold $ 489,285 $ (1,444 ) $ - $ 487,841

Consolidated gross margin 50.6 % 50.7 %

Selling, general and 386,542 - 86 386,628 administrative expensesSG&A expenses, as a percentage 39.0 % 39.0 %of salesOperating earnings 111,193 4,684 (86 ) 115,791

Operating margin 11.2 % 11.7 %

Earnings before provision for 90,997 4,684 (86 ) 95,595 income taxesProvision for income taxes ^(3) 22,848 376 (738 ) 22,486

Net earnings $ 68,149 $ 4,308 $ 652 $ 73,109

Earnings per share:Basic $ 0.60 $ 0.04 $ 0.01 $ 0.65

Diluted $ 0.59 $ 0.04 $ 0.01 $ 0.64

Three Months Ended September 30, 2020 As Reported Restructuring COVID-19 ^ As Adjusted ^(1) (2) (Non-GAAP) Cost of products sold $ 468,669 $ - $ - $ 468,669

Consolidated gross margin 51.1 % 51.1 %

Selling, general and 366,982 - 1,872 368,854 administrative expensesSG&A expenses, as a percentage 38.3 % 38.5 %of salesOperating earnings 119,677 2,484 (1,872 ) 120,289

Operating margin 12.5 % 12.6 %

Earnings before provision for 91,367 2,484 (1,872 ) 91,979 income taxesProvision for income taxes ^(3) 21,179 584 (502 ) 21,261

Net earnings $ 70,188 $ 1,900 $ (1,370 ) $ 70,718

Earnings per share:Basic $ 0.63 $ 0.02 $ (0.01 ) $ 0.63

Diluted $ 0.62 $ 0.02 $ (0.01 ) $ 0.63

(1) For the three months ended September 30, 2021, restructuring representsexpenses incurred primarily in connection with the Transformation Plan,including $1.4 million related to inventory. For the three months endedSeptember 30, 2020, restructuring represents expenses incurred primarily inconnection with Project Surge and the Transformation Plan. (2) For the three months ended September 30, 2021, COVID-19 primarilyrepresents a rent subsidy provided by the Canadian government and additionaltax impact from the donation of personal-protective equipment. For the threemonths ended September 30, 2020, COVID-19 primarily represents a wage subsidyprovided by the Canadian government under the Canada Emergency Wage Subsidy. (3) The provision for income taxes was calculated using the applicable taxrates for each country, while excluding the tax benefits for countries wherethe tax benefit is not currently deemed probable of being realized. Supplemental Schedule 3SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESNon-GAAP Financial Measures Reconciliations, Continued(In thousands, except per share data)(Unaudited)Twelve Months Ended September 30, 2021As ReportedRestructuring (1)COVID-19 (2)As Adjusted(Non-GAAP)Cost of products sold$

1,921,663

$

(1,444

)

$

(6,957

)

$

1,913,262

Consolidated gross margin50.4

%

50.6

%

Selling, general and administrative expenses1,530,280

-

(29,667

)

1,500,613

SG&A expenses, as a percentage of sales39.5

%

38.7

%

Operating earnings418,443

6,055

36,624

461,122

Operating margin10.8

%

11.9

%

Earnings before provision for income taxes324,934

6,055

36,624

367,613

Provision for income taxes (3)85,076

640

7,910

93,626

Net earnings$

239,858

$

5,415

$

28,714

$

273,987

Earnings per share:Basic$

2.13

$

0.05

$

0.25

$

2.43

Diluted$

2.10

$

0.05

$

0.25

$

2.40

Twelve Months Ended September 30, 2020As ReportedRestructuring (1)COVID-19 (2)As Adjusted(Non-GAAP)Cost of products sold$

1,798,736

$

-

$

-

$

1,798,736

Consolidated gross margin48.8

%

48.8

%

Selling, general and administrative expenses1,442,809

-

(21,578

)

1,421,231

SG&A expenses, as a percentage of sales41.1

%

40.4

%

Operating earnings258,760

14,025

21,578

294,363

Operating margin7.4

%

8.4

%

Earnings before provision for income taxes159,967

14,025

21,578

195,570

Provision for income taxes (3)46,722

3,551

5,183

55,456

Net earnings$

113,245

$

10,474

$

16,395

$

140,114

Earnings per share:Basic$

0.99

$

0.09

$

0.14

$

1.23

Diluted$

0.99

$

0.09

$

0.14

$

1.22

(1) For fiscal year 2021, restructuring represents expenses incurred primarily in connection with Project Surge and the Transformation Plan, including the write-down of inventory of $1.4 million in cost of products sold. For fiscal year 2020, restructuring represents expenses incurred primarily in connection with Project Surge and the Transformation Plan.(2) For fiscal year 2021, COVID-19 expenses primarily represents the write-down of personal-protective equipment inventory of $7.0 million in cost of products sold and donation expense related to the personal-protective equipment inventory of $33.0 million in selling, general, and administrative expenses, partially offset by wage and rent subsidies provided by the Canadian government of $3.4 million. For fiscal year 2020, COVID-19 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, or CARES Act, and the Canada Emergency Wage Subsidy provided by the Canadian government.(3) The provision for income taxes was calculated using the applicable tax rates for each country upon the recognition of expenses or gains, while excluding the tax benefits for countries where the tax benefit is not currently deemed probable of being realized. Supplemental Schedule 3 SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESNon-GAAP Financial Measures Reconciliations, Continued(In thousands, except per share data)(Unaudited) Twelve Months Ended September 30, 2021 As Reported Restructuring COVID-19 ^ As Adjusted ^(1) (2) (Non-GAAP) Cost of products sold $ 1,921,663 $ (1,444 ) $ (6,957 ) $ 1,913,262

Consolidated gross 50.4 % 50.6 %marginSelling, general and 1,530,280 - (29,667 ) 1,500,613 administrative expensesSG&A expenses, as a 39.5 % 38.7 %percentage of salesOperating earnings 418,443 6,055 36,624 461,122

Operating margin 10.8 % 11.9 %

Earnings before 324,934 6,055 36,624 367,613 provision for incometaxesProvision for income 85,076 640 7,910 93,626 taxes ^(3)Net earnings $ 239,858 $ 5,415 $ 28,714 $ 273,987

Earnings per share:Basic $ 2.13 $ 0.05 $ 0.25 $ 2.43

Diluted $ 2.10 $ 0.05 $ 0.25 $ 2.40

Twelve Months Ended September 30, 2020 As Reported Restructuring COVID-19 ^ As Adjusted ^(1) (2) (Non-GAAP) Cost of products sold $ 1,798,736 $ - $ - $ 1,798,736

Consolidated gross 48.8 % 48.8 %marginSelling, general and 1,442,809 - (21,578 ) 1,421,231 administrative expensesSG&A expenses, as a 41.1 % 40.4 %percentage of salesOperating earnings 258,760 14,025 21,578 294,363

Operating margin 7.4 % 8.4 %

Earnings before 159,967 14,025 21,578 195,570 provision for incometaxesProvision for income 46,722 3,551 5,183 55,456 taxes ^(3)Net earnings $ 113,245 $ 10,474 $ 16,395 $ 140,114

Earnings per share:Basic $ 0.99 $ 0.09 $ 0.14 $ 1.23

Diluted $ 0.99 $ 0.09 $ 0.14 $ 1.22

(1) For fiscal year 2021, restructuring represents expenses incurred primarilyin connection with Project Surge and the Transformation Plan, including thewrite-down of inventory of $1.4 million in cost of products sold. For fiscalyear 2020, restructuring represents expenses incurred primarily in connectionwith Project Surge and the Transformation Plan. (2) For fiscal year 2021, COVID-19 expenses primarily represents the write-downof personal-protective equipment inventory of $7.0 million in cost of productssold and donation expense related to the personal-protective equipmentinventory of $33.0 million in selling, general, and administrative expenses,partially offset by wage and rent subsidies provided by the Canadian governmentof $3.4 million. For fiscal year 2020, COVID-19 primarily represents costsassociated with disaster pay and furloughed employees in response to thecoronavirus pandemic. These cost were partially offset by an employee retentionpayroll tax credit provided by the U.S. Coronavirus Aid, Relief, and EconomicSecurity Act, or CARES Act, and the Canada Emergency Wage Subsidy provided bythe Canadian government. (3) The provision for income taxes was calculated using the applicable taxrates for each country upon the recognition of expenses or gains, whileexcluding the tax benefits for countries where the tax benefit is not currentlydeemed probable of being realized. Supplemental Schedule 4

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESNon-GAAP Financial Measures Reconciliations, Continued(In thousands)(Unaudited)Three Months Ended September 30,Twelve Months Ended September 30,Adjusted EBITDA:2021

2020

PercentageChange2021

2020

PercentageChangeNet earnings$

68,149

$

70,188

(2.9

)%

$

239,858

$

113,245

111.8

%

Add:Depreciation and amortization24,111

25,950

(7.1

)%

102,201

106,779

(4.3

)%

Interest expense20,196

28,310

(28.7

)%

93,509

98,793

(5.3

)%

Provision for income taxes22,848

21,179

7.9

%

85,076

46,722

82.1

%

EBITDA (non-GAAP)135,304

145,627

(7.1

)%

520,644

365,539

42.4

%

Inventory charges (1)-

-

-

-

27,054

(100.0

)%

COVID-19(86

)

(1,872

)

(95.4

)%

36,624

21,578

69.7

%

Restructuring4,684

2,484

88.6

%

6,055

14,025

(56.8

)%

Share-based compensation3,498

(668

)

(623.7

)%

11,656

8,426

38.3

%

Impairment (2)-

982

(100.0

)%

-

1,883

(100.0

)%

Adjusted EBITDA (non-GAAP)$

143,400

$

146,553

(2.2

)%

$

574,979

$

438,505

31.1

%

Basis PointChangeBasis PointChangeAdjusted EBITDA as a percentage of net salesAdjusted EBITDA margin14.5

%

15.3

%

(80

)

14.8

%

12.5

%

230

Operating Free Cash Flow:2021

2020

PercentageChange2021

2020

PercentageChangeNet cash provided by operating activities$

164,132

$

152,505

7.6

%

$

381,860

$

426,889

(10.5

)%

Less:Payments for property and equipment, net28,770

21,103

36.3

%

73,669

110,805

(33.5

)%

Operating free cash flow (non-GAAP)$

135,362

$

131,402

3.0

%

$

308,191

$

316,084

(2.5

)%

(1) Incremental, non-cash write down of inventory as part of aggressive tactical inventory clearance actions.(2) Impairment charges related to long-lived assets and operating lease assets outside of restructuring. Supplemental Schedule 4

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESNon-GAAP Financial Measures Reconciliations, Continued(In thousands)(Unaudited) Three Months Ended September 30, Twelve Months Ended September 30,Adjusted 2021 2020 Percentage 2021 2020 PercentageEBITDA: Change Change Net earnings $ 68,149 $ 70,188 (2.9 )% $ 239,858 $ 113,245 111.8 %

Add:

Depreciation 24,111 25,950 (7.1 )% 102,201 106,779 (4.3 )%andamortizationInterest 20,196 28,310 (28.7 )% 93,509 98,793 (5.3 )%expenseProvision for 22,848 21,179 7.9 % 85,076 46,722 82.1 %income taxesEBITDA 135,304 145,627 (7.1 )% 520,644 365,539 42.4 %(non-GAAP)Inventory - - - - 27,054 (100.0 )%charges ^(1)COVID-19 (86 ) (1,872 ) (95.4 )% 36,624 21,578 69.7 %

Restructuring 4,684 2,484 88.6 % 6,055 14,025 (56.8 )%

Share-based 3,498 (668 ) (623.7 )% 11,656 8,426 38.3 %compensationImpairment ^ - 982 (100.0 )% - 1,883 (100.0 )%(2)Adjusted $ 143,400 $ 146,553 (2.2 )% $ 574,979 $ 438,505 31.1 %EBITDA(non-GAAP) Basis Basis Point Point Change ChangeAdjustedEBITDA as apercentage ofnet salesAdjusted 14.5 % 15.3 % (80 ) 14.8 % 12.5 % 230 EBITDA margin Operating 2021 2020 Percentage 2021 2020 PercentageFree Cash Change ChangeFlow:Net cashprovided by $ 164,132 $ 152,505 7.6 % $ 381,860 $ 426,889 (10.5 )%operatingactivitiesLess:Payments forproperty and 28,770 21,103 36.3 % 73,669 110,805 (33.5 )%equipment,netOperatingfree cash $ 135,362 $ 131,402 3.0 % $ 308,191 $ 316,084 (2.5 )%flow(non-GAAP) (1) Incremental, non-cash write down of inventory as part of aggressivetactical inventory clearance actions.(2) Impairment charges related to long-lived assets and operating lease assetsoutside of restructuring. Supplemental Schedule 5SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESStore Count and Same Store Sales(Unaudited)As of September 30,2021

2020

ChangeNumber of stores:SBS:Company-operated stores3,547

3,644

(97

)

Franchise stores2

9

(7

)

Total SBS3,549

3,653

(104

)

BSG:Company-operated stores1,230

1,251

(21

)

Franchise stores132

134

(2

)

Total BSG1,362

1,385

(23

)

Total consolidated4,911

5,038

(127

)

Number of BSG distributor sales consultants719

715

4

BSG distributor sales consultants (DSC) include 194 and 183 sales consultants employed by our franchisees at September 30, 2021 and 2020, respectively. Supplemental Schedule 5 SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIESStore Count and Same Store Sales(Unaudited) As of September 30, 2021 2020 Change

Number of stores:SBS:Company-operated stores 3,547 3,644 (97 )

Franchise stores 2 9 (7 )

Total SBS 3,549 3,653 (104 )

BSG:Company-operated stores 1,230 1,251 (21 )

Franchise stores 132 134 (2 )

Total BSG 1,362 1,385 (23 )

Total consolidated 4,911 5,038 (127 )

Number of BSG distributor sales consultants 719 715 4

BSG distributor sales consultants (DSC) include 194 and 183 sales consultantsemployed by our franchisees at September 30, 2021 and 2020, respectively.Three Months Ended September 30,Twelve Months Ended September 30,2021

2020

Basis Point Change2021

2020

Basis Point ChangeSame store sales growth (decline):SBS2.3

%

1.7

%

60

9.7

%

(8.1

)%

1,780

BSG1.7

%

0.6

%

110

11.0

%

(8.3

)%

1,930

Consolidated2.1

%

1.3

%

80

10.2

%

(8.1

)%

1,830

For the purpose of calculating our same store sales metrics, we compare the current period sales for stores open for 14 months or longer as of the last day of a month with the sales for these stores for the comparable period in the prior fiscal year. Our same store sales are calculated in constant U.S. dollars and include e-commerce sales, but do not generally include the sales from stores relocated until 14 months after the relocation. The sales from stores acquired are excluded from our same store sales calculation until 14 months after the acquisition. View source version on businesswire.com: https://www.businesswire.com/news/home/20211111005461/en/

CONTACT: Jeff Harkins Investor Relations 940-297-3877 jharkins@sallybeauty.com