☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2022 -OR- ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Commission File No. 1-33145 SALLY BEAUTY HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 36-2257936 (State or other jurisdiction of incorporation or organization) (I. ...

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2022 financials reflect YoY growth in sales and net earnings, offset by a significant decrease in operating cash flow due to inventory investment [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets were $2.86 billion as of December 31, 2021, with a notable increase in inventory and a decrease in cash Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $298,140 | $400,959 | | Inventory | $1,005,838 | $871,349 | | Total current assets | $1,415,530 | $1,383,575 | | Total assets | $2,855,942 | $2,847,132 | | **Liabilities & Equity** | | | | Total current liabilities | $681,752 | $664,881 | | Long-term debt | $1,381,926 | $1,382,530 | | Total liabilities | $2,574,921 | $2,566,391 | | Total stockholders' equity | $281,021 | $280,741 | [Condensed Consolidated Statements of Earnings](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Net sales for Q1 2022 grew 4.7% YoY to $980.3 million, with net earnings increasing 20.4% to $68.8 million Statement of Earnings Summary (in thousands, except per share data) | Metric | Q1 FY2022 (ended Dec 31, 2021) | Q1 FY2021 (ended Dec 31, 2020) | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $980,251 | $936,022 | +4.7% | | Gross profit | $500,129 | $470,724 | +6.2% | | Operating earnings | $112,780 | $104,322 | +8.1% | | Net earnings | $68,838 | $57,191 | +20.4% | | Diluted EPS | $0.60 | $0.50 | +20.0% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used by operations was $5.7 million in Q1 2022, a significant decline from the prior year, driven by inventory increases and share repurchases Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash (used) provided by operating activities | $(5,685) | $38,986 | | Net cash used by investing activities | $(26,709) | $(17,508) | | Net cash used by financing activities | $(70,185) | $(312) | | **Net (decrease) increase in cash** | **$(102,819)** | **$23,493** | - The primary driver for the decrease in operating cash flow was a significant investment in inventory, which **increased by $137.3 million** during the quarter[27](index=27&type=chunk) - The company used **$75.0 million for common stock repurchases** during the quarter, compared to none in the prior-year period[27](index=27&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the performance of the two operating segments, SBS and BSG, both of which reported sales and earnings growth - The company operates through two segments: **Sally Beauty Supply (SBS)**, which targets retail consumers and professionals, and **Beauty Systems Group (BSG)**, which targets salons and professionals[29](index=29&type=chunk) - During the three months ended December 31, 2021, the company repurchased **3.675 million shares for a total cost of $75.0 million**[40](index=40&type=chunk) Segment Performance (in thousands) | Segment | Net Sales (Q1 2022) | Net Sales (Q1 2021) | Segment Operating Earnings (Q1 2022) | Segment Operating Earnings (Q1 2021) | | :--- | :--- | :--- | :--- | :--- | | Sally Beauty Supply (SBS) | $561,530 | $547,670 | $100,623 | $95,128 | | Beauty Systems Group (BSG) | $418,721 | $388,352 | $58,546 | $48,572 | | **Total** | **$980,251** | **$936,022** | **$159,169** | **$143,700** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=15&type=section&id=Item%202.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) Management discusses strong Q1 2022 performance, driven by comparable sales growth, and strategies for managing supply chain challenges [Executive Overview and Highlights](index=15&type=section&id=Executive%20Overview%20and%20Highlights) Q1 2022 performance was strong, driven by growth in hair color and care categories and execution of strategic pillars Q1 FY2022 Financial Highlights (YoY) | Metric | Value/Change | | :--- | :--- | | Consolidated Net Sales | +4.7% to $980.3M | | Consolidated Comparable Sales | +6.1% | | Gross Margin | +70 bps to 51.0% | | Operating Margin | +40 bps to 11.5% | | Net Earnings | +20.4% to $68.8M | | Diluted EPS | $0.60 (vs. $0.50) | [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Consolidated net sales increased 4.7% in Q1 2022, with gross margin improving to 51.0% and operating earnings growing 8.1% - SBS net sales increased by **$13.9 million (2.5%)**, driven by a **4.4% increase in comparable sales** reflecting strong customer demand and higher average unit prices, particularly in color categories[64](index=64&type=chunk)[66](index=66&type=chunk) - BSG net sales increased by **$30.4 million (7.8%)**, driven by an **8.6% increase in comparable sales**, due to higher unit prices, salons operating at full capacity, and strong e-commerce growth[64](index=64&type=chunk)[67](index=67&type=chunk) - Consolidated gross margin **increased by 70 basis points**, attributed to pricing leverage in both segments, partially offset by higher distribution and freight costs[64](index=64&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - Interest expense **decreased by 22.1%** due to lower outstanding debt principal following paydowns in fiscal year 2021[74](index=74&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through cash and its ABL facility while executing a $75.0 million share repurchase - Working capital increased by **$15.1 million to $733.8 million** at Dec 31, 2021, primarily due to increased inventory levels to meet demand and mitigate supply chain risks[76](index=76&type=chunk) - As of December 31, 2021, the company had **$481.1 million available for borrowing** under its ABL facility[78](index=78&type=chunk) - During the quarter, **3.7 million shares were repurchased for $75.0 million**, with approximately **$651.1 million remaining** under the share repurchase authorization[79](index=79&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no material changes to the company's market risks, including foreign currency and interest rates, since September 30, 2021 - There have been **no material changes** to the company's market risks from September 30, 2021[93](index=93&type=chunk) [Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20And%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls - Based on an evaluation as of December 31, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures are **effective in providing reasonable assurance**[98](index=98&type=chunk) - **No changes in internal control over financial reporting** occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[99](index=99&type=chunk) [PART II — OTHER INFORMATION](index=22&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing legal matters are not expected to have a material adverse impact on the company's financial position or results - The company does not expect that the resolution of its ordinary-course legal proceedings will have a **material adverse impact** on its consolidated financial position[102](index=102&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors disclosed in the company's most recent Annual Report on Form 10-K - **No material changes** have occurred regarding the risk factors disclosed in the company's Annual Report for the fiscal year ended September 30, 2021[104](index=104&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.Unregistered%20Sales%20Of%20Equity%20Securities%20And%20Use%20Of%20Proceeds) The company repurchased 3.7 million shares for $75.0 million in Q1 2022, with $651.1 million remaining under its authorization Issuer Purchases of Equity Securities (Q1 FY2022) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Oct 2021 | - | - | $726,120,621 | | Nov 2021 | 1,495,824 | $20.85 | $694,938,779 | | Dec 2021 | 2,179,273 | $20.11 | $651,120,625 | | **Total** | **3,675,097** | **$20.41** | **$651,120,625** | - The share repurchase program, authorizing up to **$1.0 billion in repurchases**, was extended in July 2021 and expires on September 30, 2025[106](index=106&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required CEO/CFO certifications and iXBRL data - Exhibits filed with the report include **CEO and CFO certifications** under Rule 13a-14(a)/15d-14(a) and Section 1350, as well as iXBRL financial statements[108](index=108&type=chunk)

Sally Beauty Holdings, Inc. (NYSE:SBH) Q1 2022 Earnings Conference Call February 2, 2022 8:30 AM ET Company Participants Denise Paulonis – President and Chief Executive Officer Jeff Harkins – Vice President of Investor Relations Marlo Cormier – Chief Financial Officer Conference Call Participants Rupesh Parikh – Oppenheimer Stephanie Wissink – Jefferies Oliver Chen – Cowen Simeon Gutman – Morgan Stanley Olivia Tong – Raymond James William Reuter – Bank of America Jenna Giannelli – Goldman Sachs Operator Goo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 2021 -OR- ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to __________________ Commission File No. 1-33145 SALLY BEAUTY HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 36-2257936 ( ...

Sally Beauty Holdings, Inc. (NYSE:SBH) Q4 2021 Earnings Conference Call November 11, 2021 8:30 AM ET Company Participants Jeff Harkins - Vice President of Investor Relations Denise Paulonis - President and Chief Executive Officer Marlo Cormier - Chief Financial Officer Conference Call Participants Katy Hallberg - Cowen Rupesh Parikh - Oppenheimer Mark Altschwager - Baird Steph Wissink – Jefferies Simeon Gutman - Morgan Stanley Olivia Tong - Raymond James William Reuter - Bank of America Operator Good mornin ...

Financial Data and Key Metrics Changes - The company reported net sales exceeding $1 billion, reflecting a year-over-year increase of 45% [7][29] - Same-store sales came in at 44.7%, with gross margin at 50.3%, up 470 basis points from the previous year [29][31] - Adjusted operating margin was 12.6%, with adjusted EBITDA more than doubling to $157 million, representing a margin of 15.3% [34] Business Line Data and Key Metrics Changes - Sally Beauty segment saw same-store sales increase of 43.3%, with e-commerce sales totaling $34 million [35] - BSG segment reported same-store sales growth of 47.8%, with e-commerce sales totaling $37 million [37] - The color category increased by 36%, with vivid colors growing by 52% in Sally U.S. and Canada [13][14] Market Data and Key Metrics Changes - Global e-commerce sales were $71 million, representing approximately 7% of total net sales [30][17] - E-commerce sales fulfillment by stores was 43% in Sally U.S. and Canada, with BOPIS comprising 22% of e-commerce sales [17][30] Company Strategy and Development Direction - The company is focused on recruiting and retaining color customers, driving operational excellence, and enhancing omni-channel experiences [15][25] - A new partnership with Regis will position the company as a primary distributor, optimizing the store portfolio for a superior customer experience [19] - The company aims to grow e-commerce sales to 15% of total sales in the coming years [16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding macro uncertainties, including supply chain disruptions and pandemic variants impacting consumer sentiment [23][42] - The company anticipates Q4 net sales to be flat to up 2% compared to the previous year, reflecting normalization of comparisons [24][42] - Management remains optimistic about long-term growth, targeting low-single digit same-store sales beginning in fiscal 2022 [24][78] Other Important Information - The company reduced debt levels by over $200 million in Q3, bringing the leverage ratio below 2.5 times [23][40] - Cash flow from operations was $86 million, with capital expenditures totaling $18 million, resulting in free cash flow of $68 million [39] Q&A Session Summary Question: Can you provide more color on Q4 given COVID risks and supply chain disruptions? - Management noted that comparisons are challenging due to a strong Q4 last year, with uncertainty around supply chain disruptions and pandemic impacts [46][48] Question: Are you seeing any noticeable impact from the Delta variant? - Management indicated that the impact is more pronounced in August and September than in July [51] Question: What are your thoughts on gross margins and expenses for Q4? - Management expects gross margins to remain above 50% and anticipates an increase in SG&A expenses due to wage inflation and marketing investments [53][54] Question: How do you see the evolution of the color category and its sustainability? - Management believes the trend towards vivid colors is driven by self-expression, with significant growth potential among Gen Z consumers [62][94] Question: What are your priorities regarding shareholder returns and debt pay down? - The company remains focused on liquidity and will prioritize growth investments and debt pay down before considering shareholder returns [120]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2021 -OR- ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-33145 SALLY BEAUTY HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 36-2257936 (State or other jurisdiction of incorporation or organization) (I.R ...

Financial Data and Key Metrics Changes - Net sales increased by 6.3% year-over-year, with same-store sales up 6.5% [30][29] - Adjusted operating margin expanded by 510 basis points to 12.1%, and adjusted EBITDA increased by 55% to $141 million [36][29] - Adjusted diluted EPS more than doubled to $0.57 [36] Business Line Data and Key Metrics Changes - Sally Beauty same-store sales increased by 4.9%, with e-commerce sales up 46% year-over-year [37] - BSG segment same-store sales increased by 9.9%, with e-commerce growth at 68% year-over-year [38] - Hair color category saw a 27% increase in Sally U.S. and Canada, with vivid colors growing by 53% [13][14] Market Data and Key Metrics Changes - Strong consumer demand driven by improving consumer confidence and government stimulus actions [29][8] - E-commerce sales for Sally U.S. and Canada increased by 56% year-over-year [30][14] - The company ended Q2 with $408 million in cash and zero balance on its $600 million ABL credit facility [11][39] Company Strategy and Development Direction - The company is focused on three major priorities for fiscal 2021: completing transformation elements, leveraging new capabilities to recruit and retain color customers, and reducing debt leverage ratio to 2.5 times [18] - Key initiatives include expanding delivery services, replatforming the BSG digital storefront, enhancing loyalty and CRM programs, and continuing the rollout of JDA [19][22][23][24] - The company aims to be a leader in color with a focus on customer centricity, executing a full reset of color offerings in all Sally U.S. stores [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of fiscal 2021, expecting net sales growth in the high double-digits for Q3 [26] - The company is cautious about ongoing store closures in international markets and salon capacity restrictions in the U.S. [26] - Management highlighted the importance of ESG initiatives and their role in long-term performance and value creation [27] Other Important Information - The company plans to test approximately 90 store closures to analyze sales transfer and purchasing patterns [17] - The balance sheet remains strong, with a net debt leverage ratio of 2.34x, and the company aims to bring it closer to 2.5 times [41] Q&A Session Summary Question: What are you seeing in terms of the cosmetic side? - Cosmetics is a small percentage of the business, continuing to decline, while larger categories like color and care are significantly up [48][49] Question: Do you think the headwinds were more than a tailwind? - Sally U.S. was up 13.9%, but international shutdowns lowered overall segment results by 900 basis points [52][53] Question: Do you believe you gained market share? - Sally is outgrowing the color category, and BSG's color growth of 17% indicates strong competitive positioning [54][56] Question: Can you talk about your CRM and new customer acquisition? - The CRM program is improving, with a significant portion of customers returning, and new technology allows for personalized customer journeys [60][61] Question: What cost pressures are you seeing? - The company is experiencing wage inflation and product cost inflation but remains confident in maintaining 50% margin targets [65][66] Question: How did the Texas storms impact your business? - The storms caused significant disruptions, with around 1,000 stores closed for multiple days in February [91] Question: Is Q3 expected to be the biggest of the year? - The company expects net sales growth of 35% to 40% in Q3, but the environment remains dynamic [92][93] Question: Are the operating margins sustainable? - The company believes it can maintain low-single-digit same-store sales growth and leverage SG&A in a stabilized environment [98][99]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Condensed consolidated financial statements and notes are presented, highlighting significant improvements in net earnings and operating cash flow [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2021 (Unaudited) | September 30, 2020 | | :----------------------------- | :-------------------------- | :------------------- | | Cash and cash equivalents | $408,321 | $514,151 | | Inventory | $949,695 | $814,503 | | Total current assets | $1,466,450 | $1,433,097 | | Total assets | $2,909,572 | $2,895,147 | | Current maturities of long-term debt | $197,596 | $180 | | Long-term debt | $1,389,545 | $1,796,897 | | Total liabilities | $2,774,739 | $2,879,704 | | Total stockholders' equity | $134,833 | $15,443 | - Total stockholders' equity significantly increased from **$15.4 million** at September 30, 2020, to **$134.8 million** at March 31, 2021[19](index=19&type=chunk) - Current maturities of long-term debt increased substantially from **$180 thousand** to **$197.6 million**, while long-term debt decreased from **$1.80 billion** to **$1.39 billion**[19](index=19&type=chunk) [Condensed Consolidated Statements of Earnings](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Condensed Consolidated Statements of Earnings (in thousands) | Metric (in thousands) | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | 6 Months Ended Mar 31, 2021 | 6 Months Ended Mar 31, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $926,328 | $871,023 | $1,862,350 | $1,851,231 | | Gross profit | $467,229 | $429,757 | $937,953 | $904,605 | | Operating earnings | $75,511 | $43,265 | $179,833 | $137,652 | | Net earnings | $38,312 | $13,368 | $95,503 | $66,583 | | Basic EPS | $0.34 | $0.12 | $0.85 | $0.58 | | Diluted EPS | $0.34 | $0.12 | $0.84 | $0.57 | - Net earnings for the three months ended March 31, 2021, increased by **186.6%** to **$38.3 million** from **$13.4 million** in the prior year[22](index=22&type=chunk) - Diluted EPS for the three months ended March 31, 2021, rose to **$0.34** from **$0.12** in the same period last year[22](index=22&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | 6 Months Ended Mar 31, 2021 | 6 Months Ended Mar 31, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net earnings | $38,312 | $13,368 | $95,503 | $66,583 | | Other comprehensive income (loss), net of tax | $(7,316) | $(21,826) | $16,272 | $(6,956) | | Total comprehensive income (loss) | $30,996 | $(8,458) | $111,775 | $59,627 | - Total comprehensive income for the three months ended March 31, 2021, was **$31.0 million**, a significant improvement from a loss of **$8.5 million** in the prior year[25](index=25&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) | Metric (in thousands) | Balance at Sep 30, 2020 | Balance at Mar 31, 2021 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock Amount | $1,124 | $1,127 | | Additional Paid-in Capital | $1,913 | $9,525 | | Accumulated Earnings | $117,109 | $212,612 | | Accumulated Other Comprehensive Loss | $(104,703) | $(88,431) | | Total Stockholders' Equity | $15,443 | $134,833 | - Total stockholders' equity increased from **$15.4 million** at September 30, 2020, to **$134.8 million** at March 31, 2021, primarily driven by net earnings and other comprehensive income[28](index=28&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | 6 Months Ended Mar 31, 2021 | 6 Months Ended Mar 31, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $131,556 | $76,131 | | Net cash used by investing activities | $(29,340) | $(73,904) | | Net cash (used) provided by financing activities | $(211,198) | $291,529 | | Net (decrease) increase in cash and cash equivalents | $(105,830) | $292,919 | | Cash and cash equivalents, end of period | $408,321 | $364,414 | - Net cash provided by operating activities increased by **$55.4 million** to **$131.6 million** for the six months ended March 31, 2021, compared to the prior year[31](index=31&type=chunk)[97](index=97&type=chunk) - Net cash used by investing activities decreased by **$44.6 million** to **$29.3 million**, reflecting a focus on reduced capital expenditures[31](index=31&type=chunk)[98](index=98&type=chunk) - Net cash used by financing activities was **$211.2 million**, primarily due to the paydown of term loan B fixed tranche, contrasting with cash provided by financing activities in the prior year[31](index=31&type=chunk)[99](index=99&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The condensed consolidated interim financial statements are prepared in accordance with GAAP and SEC rules, with certain information condensed or omitted[33](index=33&type=chunk) - The company is evaluating ASU No. 2019-12 for income taxes but does not expect a material impact on results or financial position[36](index=36&type=chunk) - Goodwill increased by **$4.6 million** during the six months ended March 31, 2021, primarily due to foreign currency exchange rates[42](index=42&type=chunk) - The company paid the remaining **$213.2 million** of its term loan B fixed tranche during the three months ended March 31, 2021, recognizing a **$1.4 million** loss on extinguishment of debt[44](index=44&type=chunk) - The company was in compliance with all debt covenants as of March 31, 2021[45](index=45&type=chunk) - Effective tax rates were **25.8%** and **26.5%** for the three and six months ended March 31, 2021, respectively, a decrease from the prior year primarily due to a valuation allowance in a foreign subsidiary in the prior year[52](index=52&type=chunk)[53](index=53&type=chunk) - On April 1, 2021, the company called the entire outstanding balance of **$197.4 million** on its **5.50%** senior notes due 2023, incurring **$2.8 million** in losses on extinguishment of debt[54](index=54&type=chunk) [Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) Management discusses financial performance, highlighting significant increases in net sales, gross profit, and net earnings, driven by improved market conditions and strategic initiatives - Consolidated net sales for the three months ended March 31, 2021, increased by **$55.3 million**, or **6.3%**, to **$926.3 million**[60](index=60&type=chunk) - Consolidated same store sales increased **6.5%** for the three months ended March 31, 2021, and global e-commerce sales increased **56%**[60](index=60&type=chunk) - Consolidated net earnings for the three months ended March 31, 2021, increased by **$24.9 million**, or **186.6%**, to **$38.3 million**[60](index=60&type=chunk) - Cash provided by operations was **$92.6 million** for the three months ended March 31, 2021, up from **$13.8 million** in the prior year[60](index=60&type=chunk) - The company continues to make progress on key business initiatives, including leveraging digital capabilities, growing customer engagement, and completing its transformation journey by year-end[59](index=59&type=chunk) [Overview](index=18&type=section&id=Overview) Overview (in thousands) | Metric (in thousands) | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | Change ($) | Change (%) | 6 Months Ended Mar 31, 2021 | 6 Months Ended Mar 31, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | **Net Sales:** | | | | | | | | | | SBS | $542,664 | $519,509 | $23,155 | 4.5% | $1,090,334 | $1,088,657 | $1,677 | 0.2% | | BSG | $383,664 | $351,514 | $32,150 | 9.1% | $772,016 | $762,574 | $9,442 | 1.2% | | Consolidated | $926,328 | $871,023 | $55,305 | 6.3% | $1,862,350 | $1,851,231 | $11,119 | 0.6% | | **Gross Profit:** | | | | | | | | | | SBS | $317,161 | $289,067 | $28,094 | 9.7% | $632,973 | $598,057 | $34,916 | 5.8% | | BSG | $150,068 | $140,690 | $9,378 | 6.7% | $304,980 | $306,548 | $(1,568) | (0.5)% | | Consolidated | $467,229 | $429,757 | $37,472 | 8.7% | $937,953 | $904,605 | $33,348 | 3.7% | | **Segment Gross Margin:** | | | | | | | | | | SBS | 58.4% | 55.6% | 280 bps | | 58.1% | 54.9% | 320 bps | | | BSG | 39.1% | 40.0% | (90) bps | | 39.5% | 40.2% | (70) bps | | | Consolidated | 50.4% | 49.3% | 110 bps | | 50.4% | 48.9% | 150 bps | | | **Net Earnings:** | | | | | | | | | | Consolidated Operating Earnings | $75,511 | $43,265 | $32,246 | 74.5% | $179,833 | $137,652 | $42,181 | 30.6% | | Net Earnings | $38,312 | $13,368 | $24,944 | 186.6% | $95,503 | $66,583 | $28,920 | 43.4% | | **Same Store Sales Growth (Decline):** | | | | | | | | | | SBS | 4.9% | (7.0)% | 1,190 bps | | 0.7% | (4.0)% | 470 bps | | | BSG | 9.9% | (7.4)% | 1,730 bps | | 2.1% | (3.0)% | 510 bps | | | Consolidated | 6.5% | (7.1)% | 1,360 bps | | 1.2% | (3.6)% | 480 bps | | [Results of Operations](index=19&type=section&id=Results%20of%20Operations) - SBS net sales increased by **$23.2 million** (**4.5%**) for the three months ended March 31, 2021, driven by same store sales growth of **$24.3 million** and a positive foreign currency exchange impact of **$5.6 million**[63](index=63&type=chunk) - BSG net sales increased by **$32.2 million** (**9.1%**) for the three months ended March 31, 2021, primarily due to same store sales growth of **$23.8 million** and increased distributor sales consultants[65](index=65&type=chunk) - Consolidated gross profit increased by **$37.5 million** (**8.7%**) for the three months ended March 31, 2021, with gross margin increasing by **110 basis points** to **50.4%**[60](index=60&type=chunk)[67](index=67&type=chunk) - SBS's gross margin increased due to fewer promotions, partially offset by personal-protective equipment inventory write-downs[68](index=68&type=chunk) - Consolidated selling, general and administrative expenses, as a percentage of net sales, decreased **180 basis points** to **42.2%** for the three months ended March 31, 2021[70](index=70&type=chunk) - Unallocated SG&A expenses increased by **$20.8 million** (**40.8%**) for the three months, mainly due to **$31.2 million** in COVID-19 related donation expenses for personal-protective equipment inventory[74](index=74&type=chunk) - Interest expense increased primarily from incremental interest on senior notes issued in April 2020, partially offset by lower interest rates on term loan B and its repayment[76](index=76&type=chunk)[90](index=90&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital decreased by **$278.3 million** to **$591.4 million** at March 31, 2021, primarily due to the reclassification of 2023 Senior Notes to current maturities of long-term debt[92](index=92&type=chunk) - Cash and cash equivalents were **$408.3 million** at March 31, 2021[93](index=93&type=chunk) - The company had **$496.9 million** available for borrowing under its ABL facility as of March 31, 2021, with no outstanding borrowings[94](index=94&type=chunk) - No common stock was repurchased during the six months ended March 31, 2021, with **$726.1 million** remaining under the 2017 Share Repurchase Program authorization[95](index=95&type=chunk) - At March 31, 2021, total debt was **$1.60 billion**, consisting of **$1.18 billion** in senior notes and a **$422.6 million** term loan[100](index=100&type=chunk) Summarized Balance Sheet (in thousands) | Summarized Balance Sheet (in thousands) | March 31, 2021 | September 30, 2020 | | :-------------------------------------- | :------------- | :----------------- | | Inventory | $736,497 | $615,092 | | Intercompany receivable | $72,845 | $75,892 | | Current assets | $1,177,328 | $1,166,250 | | Total assets | $2,272,374 | $2,281,896 | | Current liabilities | $438,933 | $325,380 | | Total liabilities | $2,550,861 | $2,657,033 | Summarized Statement of Income (in thousands) | Summarized Statement of Income (in thousands) | Six Months Ended March 31, 2021 | | :-------------------------------------------- | :------------------------------ | | Net sales | $1,553,633 | | Gross profit | $787,895 | | Earnings before provision for income taxes | $114,872 | | Net earnings | $85,546 | [Item 3. Quantitative And Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks including foreign currency fluctuations, interest rates, and government actions, with no material changes since September 30, 2020 - The company is subject to market risks from foreign currency fluctuations, interest rates, and government actions[109](index=109&type=chunk) - No material changes to market risks have occurred since September 30, 2020[109](index=109&type=chunk) [Item 4. Controls And Procedures](index=23&type=section&id=Item%204.%20Controls%20And%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, concluding they are effective with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2021, providing reasonable assurance for timely and accurate information disclosure[110](index=110&type=chunk)[115](index=115&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[116](index=116&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal claims and lawsuits, but does not anticipate a material adverse impact on its financial position, cash flows, or results of operations, and believes it is in material compliance with applicable laws - The company is involved in various routine legal claims and lawsuits[119](index=119&type=chunk) - The ultimate resolution of these matters is not expected to have a material adverse impact on the company's financial position, cash flows, or results of operations[119](index=119&type=chunk) - The company believes it is in material compliance with relevant U.S. and international laws and regulations[120](index=120&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2020[121](index=121&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including corporate organizational documents, certifications from the CEO and CFO, and financial information formatted in iXBRL - Exhibits include the Third Restated Certificate of Incorporation, Amended and Restated Bylaws, List of Subsidiary Guarantors, CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), and financial information in iXBRL format[122](index=122&type=chunk)

Financial Data and Key Metrics Changes - For Q1 2021, the company reported a consolidated same-store sales decline of 3.7% due to COVID-related disruptions, with approximately 45% of stores under capacity restrictions or closures by the end of the quarter [8][25][21] - Adjusted EPS for the quarter was $0.50, reflecting a 6% year-on-year increase, while adjusted operating margin improved by 130 basis points to 11.2% [12][31] - Gross margin for Q1 was 50.3%, up 190 basis points from the previous year, driven by strong performance in the Sally segment [27][31] Business Line Data and Key Metrics Changes - In the Sally Beauty segment, same-store sales declined by 3.3%, with e-commerce sales up 46% year-on-year [32] - The BSG segment experienced a 4.6% decline in same-store sales, but e-commerce grew by 51% compared to the prior year [33] - Hair color sales increased by 19% in the US and Canada, with vivid colors up approximately 50% year-on-year, accounting for 25% of total color sales [10][11] Market Data and Key Metrics Changes - The company noted that traffic in open locations declined year-on-year, but average ticket size and units per transaction increased [25] - E-commerce sales represented about 7% of total sales, with expectations for significant growth as digital capabilities are optimized [85] Company Strategy and Development Direction - The company is focusing on three major priorities for fiscal 2021: completing transformation initiatives, leveraging new capabilities to recruit and retain color customers, and reducing debt leverage ratio closer to 2.5 [14][20] - Key initiatives include expanding delivery service models, replatforming the BSG digital storefront, and enhancing loyalty programs [15][19][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's competitive positioning and the strong foundation built during the transformation journey, despite ongoing pandemic-related challenges [22][23] - The outlook for Q2 indicates a continued decline in net sales due to ongoing store closures and restrictions, with expectations for a moderate softening from Q1 levels [21][37] Other Important Information - The company ended Q1 with $538 million in cash and a zero balance on its $600 million revolving line of credit, with inventories down 10% year-on-year [34][36] - The leverage ratio stood at 2.78, with plans to further reduce debt levels using excess cash [36] Q&A Session Summary Question: What is driving the softer Q2 outlook? - Management indicated that the decline is primarily due to store restrictions and closures, particularly in Europe and Canada, which are expected to last longer than anticipated [42] Question: How is the company managing promotions and gross margins? - Management noted that promotions are being used selectively to drive traffic and basket additions, rather than to recruit new color customers [45][46] Question: What is the outlook for vivid color trends post-pandemic? - Management believes that the trend for vivid colors is sustainable, as it has been growing prior to the pandemic and aligns with consumer desires for self-expression [52] Question: How is the company addressing shipping expenses? - Management highlighted that initiatives like buy online, pickup in store (BOPIS) are expected to help reduce shipping expenses over time [55] Question: How does the company view the competitive landscape with new retail partnerships? - Management sees these partnerships as not directly competitive, as they focus more on cosmetics rather than the core color category [95]