Sally Beauty(SBH) - 2024 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements for Q3 and nine months ended June 30, 2024, showing a slight quarterly revenue increase but decreased net earnings Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2024 ($ thousands) | September 30, 2023 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 1,262,564 | 1,227,997 | | Total Assets | 2,721,197 | 2,725,250 | | Total Current Liabilities | 594,925 | 579,257 | | Total Liabilities | 2,143,527 | 2,216,502 | | Total Stockholders' Equity | 577,670 | 508,748 | Condensed Consolidated Statement of Earnings Highlights (Unaudited) | Metric | Three Months Ended June 30, 2024 ($ thousands) | Three Months Ended June 30, 2023 ($ thousands) | Nine Months Ended June 30, 2024 ($ thousands) | Nine Months Ended June 30, 2023 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | 942,340 | 931,008 | 2,782,003 | 2,806,775 | | Gross Profit | 480,883 | 474,705 | 1,411,131 | 1,431,618 | | Operating Earnings | 71,770 | 90,125 | 200,467 | 248,121 | | Net Earnings | 37,724 | 50,821 | 105,358 | 142,019 | | Diluted EPS | $0.36 | $0.46 | $0.98 | $1.30 | Condensed Consolidated Statement of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Nine Months Ended June 30, 2024 ($ thousands) | Nine Months Ended June 30, 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 135,855 | 132,771 | | Net cash used by investing activities | (64,026) | (63,796) | | Net cash used by financing activities | (97,835) | (68,259) | | Net (decrease) increase in cash | (25,626) | 3,779 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q3 FY2024 financial performance, with sales up 1.2% to $942.3 million but operating earnings down 20.4% Results of Operations Q3 2024 consolidated net sales rose 1.2% YoY, but operating earnings declined 20.4% due to increased unallocated expenses Q3 2024 vs Q3 2023 Segment Net Sales | Segment | Q3 2024 Net Sales ($ thousands) | Q3 2023 Net Sales ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | SBS | 536,536 | 534,932 | 0.3% | | BSG | 405,804 | 396,076 | 2.5% | | Consolidated | 942,340 | 931,008 | 1.2% | Q3 2024 vs Q3 2023 Segment Operating Earnings | Segment | Q3 2024 Operating Earnings ($ thousands) | Q3 2023 Operating Earnings ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | SBS | 86,938 | 88,683 | (2.0)% | | BSG | 46,753 | 48,696 | (4.0)% | - Unallocated SG&A expenses increased by $14.7 million (31.3%) in Q3 2024, driven by 'Fuel for Growth' and higher labor costs[52] - Restructuring costs for the nine months ended June 30, 2024, significantly decreased to $0.4 million from $18.1 million in the prior year, as the consolidation plan is substantially complete[59] Liquidity and Capital Resources As of June 30, 2024, total liquidity was $535.0 million, supported by cash and ABL availability, post-debt refinancing - Total liquidity reached $535.0 million as of June 30, 2024, comprising $97.4 million in cash and $437.6 million available under the ABL facility[62] - The company issued $600.0 million in 6.75% Senior Notes due 2032 to repay $680.0 million of 5.625% Senior Notes due 2025, utilizing proceeds, cash, and ABL borrowings[32][64] - The company repurchased 4.3 million shares of common stock for $50.0 million during the nine months ended June 30, 2024[26][70] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risks, including foreign currency and interest rates, have occurred since September 30, 2023 - No material changes to the company's market risks have occurred since September 30, 2023[76] Item 4. Controls and Procedures Management, including CEO and CFO, concluded disclosure controls were effective as of June 30, 2024, with no material changes - Management, including the CEO and CFO, affirmed the effectiveness of the company's disclosure controls and procedures as of June 30, 2024[77] - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter[77] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, with management not anticipating a material adverse financial impact - The company is engaged in various ordinary course claims and lawsuits, with no anticipated material adverse impact on its consolidated financial position[78] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for FY2023 have occurred - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, have been identified[79] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company repurchased 875,975 common shares at $11.42 in Q3 FY2024, with $530.8 million remaining for repurchase Share Repurchases in Q3 Fiscal 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Apr 1 - Apr 30, 2024 | — | $— | | May 1 - May 31, 2024 | 581,972 | $11.16 | | Jun 1 - Jun 30, 2024 | 294,003 | $11.91 | | Total this quarter | 875,975 | $11.42 | - As of June 30, 2024, approximately $530.8 million remains available under the company's share repurchase program[80] Item 5. Other Information No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangements during Q3 FY2024 - No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the quarter ended June 30, 2024[81] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the Second Refinancing Amendment and CEO/CFO certifications - The report includes a list of filed exhibits, such as the Second Refinancing Amendment to the Credit Agreement and CEO/CFO certifications[82]