Sally Beauty(SBH) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, highlighting decreases in assets and liabilities, alongside increased net earnings and diluted EPS for the quarter Condensed Consolidated Balance Sheets Total assets decreased to $2.71 billion, total liabilities to $2.01 billion, while stockholders' equity increased to $699.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | September 30, 2024 | | :--- | :--- | :--- | | Total current assets | $1,239,113 | $1,305,314 | | Inventory | $1,006,604 | $1,036,624 | | Total assets | $2,705,873 | $2,792,899 | | Total current liabilities | $533,291 | $592,669 | | Long-term debt | $902,794 | $978,255 | | Total liabilities | $2,006,057 | $2,164,364 | | Total stockholders' equity | $699,816 | $628,535 | Condensed Consolidated Statements of Earnings Net sales decreased by 2.8% for the quarter, yet operating earnings rose 16.4% and net earnings increased 34.1% Key Earnings Data (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $883,146 | $908,361 | (2.8)% | | Gross profit | $458,817 | $463,072 | (0.9)% | | Operating earnings | $69,373 | $59,574 | 16.4% | | Net earnings | $39,210 | $29,244 | 34.1% | | Diluted EPS | $0.38 | $0.27 | 40.7% | | Metric | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | Change (%) | | Net sales | $1,821,041 | $1,839,663 | (1.0)% | | Net earnings | $100,223 | $67,634 | 48.2% | Condensed Consolidated Statements of Cash Flows Operating cash flow slightly decreased, investing activities turned positive due to asset sale, and financing cash use increased Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $84,521 | $87,960 | | Net cash provided (used) by investing activities | $4,232 | $(44,877) | | Net cash used by financing activities | $(103,659) | $(68,932) | | Net decrease in cash and cash equivalents | $(15,787) | $(25,827) | - Investing activities were positively impacted by $43.6 million in proceeds from the sale of property and equipment, which included the company's corporate headquarters[22][39] Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, debt, and segment performance, highlighting a $26.6 million gain from asset sale, debt repayments, and ABL facility extension - In the six months ended March 31, 2025, the company sold its corporate headquarters for $45.5 million, recognizing a gain of approximately $26.6 million[39] - During the six months ended March 31, 2025, the company voluntarily repaid $75.0 million of its outstanding Term Loan B principal ($40.0 million in Q1 and $35.0 million in Q2)[45] - For the six months ended March 31, 2025, the company repurchased 1.8 million shares of its common stock for a total cost of $20.0 million[36] Segment Net Sales (in thousands) | Segment | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | SBS | $500,575 | $513,241 | $1,026,021 | $1,036,479 | | BSG | $382,571 | $395,120 | $795,020 | $803,184 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 2.8% sales decrease, 100 basis point gross margin improvement, 16.4% operating earnings increase, and strong liquidity - Consolidated comparable sales decreased by 1.3% for the three months ended March 31, 2025[59] - Consolidated gross margin increased by 100 basis points to 52.0% for the quarter, driven by lower distribution/freight costs and enhanced promotional strategies[59][65] - Unallocated selling, general and administrative expenses for the six-month period decreased by $31.5 million, primarily due to a $26.6 million gain on the sale of the corporate headquarters[80] - At March 31, 2025, the company had $574.9 million of available liquidity, comprising $92.2 million in cash and $482.7 million available under its ABL facility[83] Results of Operations Both SBS and BSG segments experienced sales declines but improved gross margins, while unallocated corporate expenses decreased, boosting operating earnings Q2 2025 vs Q2 2024 Segment Performance | Segment | Net Sales Change | Comparable Sales Change | Gross Margin Change | | :--- | :--- | :--- | :--- | | SBS | (2.5)% | (0.3)% | +130 bps | | BSG | (3.2)% | (2.7)% | +40 bps | - The decrease in SBS net sales was driven by negative foreign currency exchange impact of $7.8 million and net store closures, with comparable sales slightly down by 0.3%[62][63] - The decrease in BSG net sales was primarily due to a 2.7% decline in comparable sales, reflecting external factors impacting stylist purchasing behavior[63][64] - Unallocated corporate expenses decreased by $8.3 million (13.8%) in Q2 2025, driven by lower professional fees and savings from the 'Fuel for Growth' initiative[68] Liquidity and Capital Resources The company maintains $574.9 million in liquidity, with working capital slightly down, and has repaid debt and repurchased shares - Total outstanding debt principal was $917.0 million at March 31, 2025, consisting of $600.0 million in Senior Notes and $317.0 million on the Term Loan B[90] - In December 2024, the ABL facility was amended, extending the maturity date to December 11, 2029[44] - During the six months ended March 31, 2025, the company repurchased 1.1 million shares for $10.0 million under its share repurchase program[95] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is subject to market risks, with no material changes reported since the prior fiscal year's 10-K filing - There have been no material changes to the company's market risks since the fiscal year ended September 30, 2024[100] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal controls - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures are effective at a reasonable assurance level[105] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[106] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings, not expected to materially impact its financial position or operations - The company does not expect ongoing legal proceedings to have a material adverse impact on its consolidated financial position, cash flows, or results of operations[108] Item 1A. Risk Factors No material changes have occurred to the company's risk factors since the prior fiscal year's 10-K filing - No material changes have occurred to the risk factors disclosed in the company's most recent Annual Report on Form 10-K[110] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company repurchased 1.1 million shares for $10.0 million, with $500.8 million remaining under the program extended to September 2025 Issuer Purchases of Equity Securities (Quarter Ended March 31, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Value of Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2025 | — | $ — | $510,792,456 | | Feb 1 - Feb 28, 2025 | 426,613 | $9.32 | $506,816,515 | | Mar 1 - Mar 31, 2025 | 661,549 | $9.11 | $500,792,460 | | Total this quarter | 1,088,162 | $9.19 | $500,792,460 | - The share repurchase program, authorizing up to $1.0 billion in repurchases, was extended to September 30, 2025[36][113] Item 5. Other Information No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[112] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report, including corporate documents, certifications, and financial statements