SALLY BEAUTY HOLDINGS, INC

As of June 30, 2021
Sally Beauty Holdings, Inc.
Forward-Looking Statements and Non-GAAP Financial Measures
Statements in this presentation 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 most recent Annual Report on Form 10-K for the year ended September 30, 2020. Consequently, all forward-looking statements in this presentation are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward-looking statements.
This presentation includes certain 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. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. A reconciliation of GAAP to non-GAAP measures is provided in the appendix of this presentation.
SBH Mission
To Recruit and Retain Color Customers by….
…Being the Undisputed Expert and Leader in Professional Color/Care for the DIY Consumer and Professional
SEGMENTS
$3.5B Net Sales1
12.5% Adjusted EBITDA
41% of FY2020 sales
5,000+ Stores Globally E-Commerce Sites Direct Sales Consultants
1 Fiscal 2020 results; Adjusted EBITDA margin and free cash flow are non-GAAP measures – see Appendix for reconciliation.
44% owned and exclusive brands
51% owned and exclusive brands
We Successfully Transformed Our Business
Re-Focused the Business on Owning Professional Hair Color and Care for Both the DIY Enthusiast and Professional Stylist
Improved Our Retail Fundamentals
Modernized Our Supply Chain
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• Re-focused and enhanced our product assortment around our differentiated categories of professional color/care
• Expanded innovation pipeline with new color lines, clean/vegan care brands and men’s barbering
• Expanded our assortment of vivid colors in attracting younger customers
• Shifted hair color to the front of the Sally stores
• Expanded our educational content around techniques for coloring your hair
• Launched “ColorView/Color Before You Commit” hair color technology
• Launched box color/pro color kits
• Launched Sally Beauty Rewards Loyalty Program
• Completed the rollout of the Oracle-based POS to all Sally and BSG stores
• Implemented “Fewer, Bigger, Deeper” promotional strategy
• Completed rollout of private label rewards credit card program
• Optimized our supply chain network
• Launched new Sally Beauty brand campaign “Unleash Your (Pro)tential”
• Initiated Project Surge to reinvigorate Europe
• Added new talent and capabilities in digital commerce, brand marketing/strategy and global sourcing
Advanced Our Digital Capabilities
• Launched Sally Beauty integrated mobile app
• Re-platformed the BSG e-commerce site
• Enabled sales transactions on the BSG mobile app
• Launched a digital workforce management solution
• Leveraged our Order Management System to support Buy Online/Pickup In-Store, Ship From Store and Same-Day Delivery
• Expanded the rollout of JDA merchandising/supply chain platform
Re-Focused On Our Differentiated Core Improved Our Retail Fundamentals
Powerful Platform In Place to Drive Growth and Scale
What Makes Us Different
Expert in Education and Content
Leader in Market Share for the Professional Distribution Channel
Cosmetologists and Trained Color Experts in Stores
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Professional stylists
the core of color/care
some third party brands
E-commerce E-commerce
Professional open-line business – merchandise assortment focused on owned and exclusive brands not available through mass retail
Sally Beauty global footprint (1)
3,611 stores worldwide 2,728 U.S. stores / 883 international stores
Loyalty members account for 73% of sales in US/Canada (1)
Growing Gen Z customer base through inspiration, digital educational content and vast assortment of vivid colors Sally Beauty U.S. Store
Sally Beauty Highlights
19%
33%
14%
13%
8%
Other Beauty Items
We offer a diversified mix of beauty products with a focus on pro hair color and care
*Fiscal year 2020
Textured Hair
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
Beauty Systems Group – 1,367 professional-only stores & 724 professional distributor sales consultants (1)
Launched its first loyalty program in Fall 2020 (private label rewards credit card); sales from loyalty members surpassed 8% in Q3 FY21
(1) As of June 30, 2021
35%
41%
6%
7%
Beauty Systems Group Product Mix
We offer a diversified mix of beauty products not carried in Sally stores or mass retail
Hair Care
Complete the
Fiscal 2021 Priorities
Executing on Tactical Initiatives for FY2021
Optimizing our Investments in Systems, Tools and Teams
Re-platforming the BSG Digital Storefront
Completing the Rollout of JDA Across our DC Network and Increasing the Functionality of Our North Texas Distribution Center
Optimizing our CRM Capabilities and Loyalty Program to Drive Traffic/Sales
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Sally Beauty Holdings, Inc. https://www.sallybeautyholdings.com/investor-relations/esg-information/documents
Our ESG strategy focuses primarily on the areas where we believe we can have a meaningful impact:
Product Development and Sourcing
Operating Margin
(1) See Addendum for a reconciliation of this non-GAAP financial measure.
Consolidated Fiscal 2020 Results
Gross Margin 54.4% 40.7%
% OF TOTAL DEBT
TERM LOAN B (FY24) $414.4 29.7% 8.750% SR SECURED NOTES (FY25) $300.0 21.5% 5.625% SR NOTES (FY26) $680.0 48.8% TOTAL DEBT $1,394.4 100.0%
Long-Term Capital Structure
$270 million of cash and cash equivalents on balance sheet(1)
Zero balance outstanding on $500 million asset-based revolving credit facility(1)
Net debt leverage ratio of 1.90x(1)
No long-term debt maturing until FY2024
Long-Term Debt Maturities ($ millions)
$414 $300
Amount
($mm)
% of
$300.0
21.5%
$226 $239
$194 $202
49% 40% 72%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 EBITDA
41% $316
Gross Margin 50%+
Resilient Business Model
Growing Profitable Business
Return Value to Shareholders
Reduce Our Debt Levels
John Goss
Transformation Officer
Olivier Badezet
Pamela Kohn
Mark Spinks
Allocation
Positioned to Drive Scale
APPENDIX
EBITDA & FCF Reconciliation
Adjusted EBITDA FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Net Earnings (GAAP) 261.2$ 246.0$ 235.1$ 222.9$ 215.1$ 258.0$ 271.6$ 113.2$
Interest expense, net of interest income 107.7 116.3 116.8 144.2 132.9 98.2 96.3 98.8 Provision for income taxes 151.5 144.7 143.4 131.1 130.6 70.4 90.5 46.7 Depreciation and amortization 72.2 79.7 89.4 99.7 112.3 108.8 107.7 106.8 Share-based compensation 19.2 22.1 16.8 12.6 10.5 10.5 9.2 8.4 COVID-19 expenses - - - - - - - 21.6 Inventory charges - - - - - - - 27.1 Impairment charges - - - - - - - 1.9 Expenses from data security incidents - 2.5 5.6 14.6 - 7.9 - - Restructuring charges - - 5.3 - 22.7 33.6 (0.7) 14.0 Litigation settlement and non-recurring items, net - - - 2.6 - - - -
Adjusted EBITDA 611.8$ 611.3$ 612.4$ 627.7$ 624.1$ 587.4$ 574.6$ 438.5$
Cash Flow Reconciliation 2013 2014 2015 2016 2017 2018 2019 2020
Cash Flow from Operations 310.5$ 316.0$ 300.8$ 351.0$ 343.3$ 372.7$ 320.4$ 426.9$ Less: Capital Expenditures 84.9$ 76.8$ 106.5$ 148.7$ 89.6$ 86.1$ 92.4$ 110.8$ Free Cash Flow 225.6$ 239.2$ 194.3$ 202.3$ 253.7$ 286.5$ 228.0$ 316.1$
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SALLY BEAUTY HOLDINGS, INC