PART I — FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarter ended December 31, 2020, prepared in accordance with GAAP [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of December 31, 2020, total assets increased to **$3.0 billion** from **$2.9 billion**, driven by cash and inventory, while equity significantly rose to **$98.9 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $537,644 | $514,151 | | Inventory | $895,984 | $814,503 | | Total current assets | $1,545,878 | $1,433,097 | | Total assets | $2,999,648 | $2,895,147 | | **Liabilities & Equity** | | | | Total current liabilities | $590,336 | $563,362 | | Long-term debt | $1,798,154 | $1,796,897 | | Total liabilities | $2,900,782 | $2,879,704 | | Total stockholders' equity | $98,866 | $15,443 | [Condensed Consolidated Statements of Earnings](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) For the three months ended December 31, 2020, net sales decreased to **$936.0 million**, yet operating earnings increased to **$104.3 million** and diluted EPS rose to **$0.50** Condensed Consolidated Statements of Earnings (in thousands, except per share data) | Metric | Q1 2021 (ended Dec 31, 2020) | Q1 2020 (ended Dec 31, 2019) | | :--- | :--- | :--- | | Net sales | $936,022 | $980,208 | | Gross profit | $470,724 | $474,848 | | Operating earnings | $104,322 | $94,387 | | Net earnings | $57,191 | $53,215 | | Diluted EPS | $0.50 | $0.45 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended December 31, 2020, operating cash flow decreased to **$39.0 million** due to inventory, while cash and cash equivalents increased to **$537.6 million** Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $38,986 | $62,325 | | Net cash used by investing activities | ($17,508) | ($42,819) | | Net cash used by financing activities | ($312) | ($24,421) | | Net increase (decrease) in cash | $23,493 | ($4,233) | | Cash and cash equivalents, end of period | $537,644 | $67,262 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed information on accounting policies, segment performance, debt, and the impact of COVID-19, including a subsequent debt repayment event - The company's operating results for the quarter may not be indicative of the full fiscal year due to uncertainty around the continuing effects of the **COVID-19 pandemic**[34](index=34&type=chunk) - As of December 31, 2020, the company was in compliance with all **debt covenants**[46](index=46&type=chunk) - On January 5, 2021, the company fully repaid **$213.2 million** of its term loan B, resulting in an approximate **$1 million loss** on debt extinguishment[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) Management discusses Q1 FY2021 financial results, covering COVID-19 impacts, key operating metrics, segment performance, and liquidity, noting improved operating margin despite a **4.5% sales decrease** - The **COVID-19 pandemic** continued to impact Q1 FY2021 results through temporary store closures, restricted capacity, and salon shut-downs[65](index=65&type=chunk)[67](index=67&type=chunk) Q1 FY2021 Financial Highlights vs. Q1 FY2020 | Metric | Q1 FY2021 | Change vs. Q1 FY2020 | | :--- | :--- | :--- | | Consolidated Net Sales | $936.0M | -4.5% | | Consolidated Same Store Sales | -3.7% | -340 bps | | Global E-commerce Sales | N/A | +48.0% | | Gross Margin | 50.3% | +190 bps | | Operating Margin | 11.1% | +150 bps | | Diluted EPS | $0.50 | +$0.05 | [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Consolidated net sales decreased by **4.5%** to **$936.0 million** due to COVID-19, but gross margin improved by **190 basis points**, and operating earnings increased by **10.5%** to **$104.3 million** Segment Net Sales and Operating Earnings (in thousands) | Segment | Net Sales (Q1'21) | % Change YoY | Operating Earnings (Q1'21) | % Change YoY | | :--- | :--- | :--- | :--- | :--- | | SBS | $547,670 | -3.8% | $95,128 | +28.2% | | BSG | $388,352 | -5.5% | $48,572 | -22.2% | - The decrease in SBS net sales was primarily due to lower unit volume from temporary store closures, partially offset by higher average unit prices and fewer promotions[71](index=71&type=chunk)[72](index=72&type=chunk) - The decrease in BSG net sales was driven by lower unit volume from store and salon closures, particularly impacting **distributor sales consultants**[73](index=73&type=chunk)[74](index=74&type=chunk) - Consolidated SG&A expenses decreased due to cost-saving initiatives, including lower compensation and advertising, partially offset by increased shipping costs from higher **e-commerce volume**[77](index=77&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$537.6 million** cash and **$461.0 million** ABL availability, despite a decrease in operating cash flow to **$39.0 million** due to inventory investments - The company believes existing cash, funds from operations, and ABL facility availability are sufficient to fund working capital, capital expenditures, and debt repayments over the next **12 months**[86](index=86&type=chunk) - No shares were repurchased in the quarter; approximately **$726.1 million** remains authorized under the 2017 Share Repurchase Program[88](index=88&type=chunk) - Net cash from operating activities decreased by **$23.3 million** year-over-year, mainly due to increased inventory purchases to improve stock levels[90](index=90&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risks, including foreign currency, interest rates, and government actions, since September 30, 2020 - There have been no material changes to the company's **market risks** since September 30, 2020[102](index=102&type=chunk) [Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20And%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal controls during the quarter - The **CEO and CFO** concluded that as of December 31, 2020, the company's **disclosure controls and procedures** are effective for timely and accurate reporting[107](index=107&type=chunk) - No changes in **internal control over financial reporting** occurred during the most recent fiscal quarter that materially affected these controls[108](index=108&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings but does not expect a material adverse impact on its financial position or operations - The company is involved in ordinary course claims and lawsuits but does not expect their resolution to have a **material adverse impact**[110](index=110&type=chunk) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Annual Report on Form 10-K for detailed risk factors, confirming no material changes since September 30, 2020 - There have been no material changes from the **risk factors** disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2020[112](index=112&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, subsidiary guarantors, and required CEO and CFO certifications - The report includes required **CEO and CFO certifications** under Rule 13a-14(a)/15d-14(a) and Section 1350[113](index=113&type=chunk)

Financial Data and Key Metrics Changes - Consolidated revenue for Q4 was $958 million, a decrease of less than 1% compared to the prior year, with same store sales increasing by 1.3% [33][34] - Adjusted EPS grew by 9% year-over-year, reaching $0.63, while GAAP diluted earnings per share increased by approximately 7% to $0.62 [41][42] - Consolidated gross margin for the quarter was 51.1%, the highest in at least eight years, representing a 150 basis point increase from the prior year [38][39] Business Line Data and Key Metrics Changes - Sally Beauty retail business in the U.S. and Canada achieved same store sales growth of 3.7%, with hair color sales up over 22% [12][13] - Global Sally Beauty segment revenue was $577 million, an increase of about 1% compared to the prior year, while the Beauty Systems Group segment saw net sales of $381 million, a decrease of 3.3% [43][48] - E-commerce sales for the quarter reached $63 million, representing a growth of 69% year-over-year, with U.S. and Canadian platforms growing over 113% [35][55] Market Data and Key Metrics Changes - The global e-commerce business showed strength with an 86% growth in the quarter, driven by U.S. and Canadian platforms [45] - The Beauty Systems Group faced challenges due to COVID-19, with salon closures impacting same store sales negatively [47][49] - Latin America experienced significant declines in same store sales due to store closures from COVID-19 [43] Company Strategy and Development Direction - The company is focused on digital transformation, enhancing customer experience through initiatives like Buy Online/Pickup In-Store [24][30] - Continued investment in partnerships with Black-Owned brands in the textured hair category is a priority for fiscal year 2021 [27] - The company aims to optimize its supply chain and improve inventory management through new platforms and distribution centers [28][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to navigate the ongoing impacts of COVID-19, expecting increased volatility in the first half of fiscal 2021 [18][19] - The company anticipates that sales in 2021 should exceed 2019 levels, despite fewer stores in operation [60] - Management highlighted the importance of maintaining strong liquidity and cash flow while preparing for potential market disruptions [66] Other Important Information - The company generated over $131 million in free cash flow during the quarter, a 67% increase compared to the prior year [51] - The company ended the quarter with a strong liquidity position, holding $514 million in cash and a zero balance on its revolving line of credit [54] - The company completed a small acquisition in Quebec, Canada, adding 10 stores and exclusive distribution rights to professional hair color brands [53] Q&A Session Summary Question: Can you provide context on category performance and the cadence of sales? - Management noted strong performance in hair color and nails, but weakness in other categories like cosmetics and hair extensions, with a barbell effect observed in sales throughout the quarter [71][72] Question: What are the expectations for e-commerce growth and its impact on retail? - The company aims for e-commerce penetration to reach 10%, with a shift in online consumer behavior towards higher-margin categories like color and care [75][76] Question: How is the company managing inventory levels and what are the expectations moving forward? - Management acknowledged that inventory levels were at a six-year low but are actively working to replenish stock, particularly in high-demand categories [78][79] Question: What is the outlook for salon demand and market share? - Management indicated that salon demand is down but not significantly, with expectations of gaining market share through new accounts and color conversions [104] Question: Can you elaborate on gross margin sustainability and future trends? - Management expressed confidence in the sustainability of gross margin improvements, attributing it to better inventory management and promotional strategies [101][110]

Sally Beauty Holdings, Inc. (NYSE:SBH) Q3 2020 Earnings Conference Call July 30, 2020 8:30 AM ET Company Participants Jeff Harkins - Vice President, Investor Relations Chris Brickman - President & Chief Executive Officer Aaron Alt - President of Sally Beauty Supply & Chief Financial Officer Conference Call Participants Rupesh Parikh - Oppenheimer Mark Altschwager - Baird Oliver Chen - Cowen Steph Wissink - Jefferies [Call starts abruptly] Operator [Operator Instructions] I would now like to turn the confere ...

Sally Beauty Holdings, Inc. (NYSE:SBH) Q2 2020 Earnings Conference Call May 6, 2020 8:30 AM ET Company Participants Jeff Harkins - Vice President, Investor Relations Chris Brickman - President and Chief Executive Officer Aaron Alt - President of Sally Beauty Supply and Chief Financial Officer Marlo Cormier - Senior Vice President of Finance and Chief Accounting Officer Conference Call Participants Mark Altschwager - Baird Rupesh Parikh - Oppenheimer Oliver Chen - Cowen Olivia Tong - Bank of America Merrill ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 was $980.2 million, down $9.2 million from the prior year, primarily due to fewer net stores and modestly lower same-store sales [39][40] - Consolidated gross margin decreased by 20 basis points to 48.4% compared to the prior year, with Beauty Systems Group and European operations seeing increases, while Sally Beauty US and Canada experienced declines [40][41] - GAAP diluted earnings per share were $0.45, a decrease of 17% from $0.54 in the prior year, driven by lower revenue and increased operating expenses [41][43] Business Line Data and Key Metrics Changes - Sally Beauty segment revenue was $569.1 million, a decrease of 2% compared to the prior year, with same-store sales down 1.1% [44][45] - Beauty Systems Group achieved net sales of $411.1 million, an increase of 0.5% year-over-year, with same-store sales up 1.2% [47][48] - E-commerce revenue for Sally Beauty grew by 31.8%, while Beauty Systems Group's e-commerce platform grew by 23.7% [45][47] Market Data and Key Metrics Changes - The US and Canada business represented 77% of the Sally Beauty segment sales for the quarter, with Europe contributing positively to same-store sales [44][45] - The global digital business grew 27.6%, with the US and Canada business growing the most at 37.8% [18][39] Company Strategy and Development Direction - The company is focused on completing its transformation plan and enhancing its digital capabilities, aiming to become a mobile-first digital retailer [10][22] - The strategy includes improving retail fundamentals, advancing digital commerce capabilities, and seeking cost savings to fund transformation efforts [22][51] - The company plans to launch new products and expand its brand portfolio, including the introduction of the Redken color brand in Europe [27][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in Q1 due to technology integration issues and a shortened holiday shopping season, but expressed confidence in the ongoing transformation efforts [19][21] - The company expects to see improvements in traffic trends and sales in the US and Canada since Christmas, maintaining guidance for positive comps for the year [38][68] - Management emphasized the importance of addressing technology risks and ensuring interdependencies are managed effectively [71] Other Important Information - The company has reduced its debt levels by over $200 million since the beginning of fiscal year 2019, with a leverage ratio of 2.68 times [43] - The company is in the process of consolidating its digital teams to enhance digital efforts across both Sally Beauty and Beauty Systems Group [16] Q&A Session Summary Question: Insights on Charlotte market remodels and learnings - Management highlighted positive results from remodels in Charlotte and Las Vegas, focusing on assortment and technology integration [55][56] Question: Professional brands and M&A considerations - Management is focused on acquiring regional distribution rights and has a robust pipeline for own brand development [57] Question: Investment plans for the rest of the year - Management indicated that investment profiles were heavier in Q2 and that they expect growth to be back-loaded [62] Question: Timing for positive comps in both segments - Management expects to see positive comps for the year and is confident in addressing issues that contributed to Q1 performance [68] Question: Technology investment evaluations post-Q1 - Management acknowledged risks around technology transformations but believes they are well-positioned to execute projects moving forward [71] Question: Impact of gross margin and inventory management - Management noted that while gross margin was impacted by pricing issues, they are actively managing inventory levels without sacrificing cash flow [78][79]

Sally Beauty Holdings, Inc. (NYSE:SBH) Q4 2019 Earnings Conference Call November 7, 2019 8:30 AM ET Company Participants Jeff Harkins – VP, IR and Strategic Planning Christian A. Brickman – President and CEO Aaron E. Alt – SVP and CFO Heather Plutino - Group VP, Finance Conference Call Participants Ross Collins - Cowen and Company Olivia Tong - Bank of America Merrill Lynch Rupesh Parikh - Oppenheimer Stephanie Wissink - Jefferies Mark Altschwager - Robert W. Baird Simeon Gutman - Morgan Stanley Linda Bolto ...

Sally Beauty Holdings, Inc. (NYSE:SBH) Q3 2019 Results Conference Call July 31, 2019 8:30 AM ET Company Participants Jeff Harkins – Vice President-Investor Relations and Strategic Planning Chris Brickman – President and Chief Executive Officer Aaron Alt – Chief Financial Officer and President | --- | --- | |-------------------------------------------------------------|-------| | | | | Conference Call Participants | | | Mark Altschwager – Baird | | | Rupesh Parikh – Oppenheimer Oliver Chen – Cowen and Compan ...

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 was $945.9 million, a decrease of 3% year-over-year, primarily due to 69 fewer stores and a 0.5% decline in same-store sales [53][54] - Consolidated gross margin was 49.5%, down 40 basis points compared to the prior year, with challenges in Europe and Beauty Systems Group offsetting improvements in the U.S. and Canadian business [56] - Adjusted operating earnings were $106.7 million, with an adjusted operating margin of 11.3%, compared to $117.9 million and 12.1% in the prior year [60] - Adjusted diluted earnings per share decreased by 5.6% to $0.51, driven by lower sales and gross margin [60] Business Line Data and Key Metrics Changes - Sally Beauty same-store sales decreased by 0.3%, with segment revenue of $565.6 million, a decrease of 2.5% year-over-year [64] - Beauty Systems Group same-store sales declined by 0.9%, with net sales of $380.2 million, down 3.8% compared to the prior year [67] - Owned and exclusive brands comprised approximately 45% of Sally Beauty Supply's revenue and 53% of Beauty Systems Group sales, indicating a strong focus on proprietary products [14] Market Data and Key Metrics Changes - The U.S. and Canadian retail business showed good momentum despite challenges in February, while the global e-commerce business grew over 30% year-over-year [54] - European operations faced headwinds due to Brexit uncertainties and civil protests in France, impacting sales negatively [54][56] Company Strategy and Development Direction - The company is focused on a transformation plan that includes launching a new mobile-first e-commerce platform, enhancing supply chain modernization, and reducing debt levels [9][10] - Investments are being made in technology, store experience, and loyalty programs to drive customer engagement and sales [21][22] - The company aims to improve retail fundamentals and customer experience through new store concepts and technology like the ColorView kiosk [24][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the retail environment but expressed confidence in the transformation efforts and expected improvements in the second half of the year [40][41] - The company is maintaining its full-year guidance, anticipating solid momentum from transformation initiatives and new brand launches [40][41] - Management is optimistic about the potential for margin improvement in the second half, driven by cost-saving initiatives and new product introductions [76][82] Other Important Information - The company initiated a debt tender offer, repurchasing approximately $60 million of senior notes, reducing the leverage ratio to 2.8 times [44] - The loyalty program has seen promising results, with over 14.5 million active members and a significant percentage of transactions tied to the program [23][92] Q&A Session Summary Question: Impact of February on Sales and European Business Outlook - Management did not quantify the specific impact of February but noted it was a challenging month for many retailers. They expect European operations to stabilize in the second half [74][75] Question: Margin Outlook for the Second Half - Management indicated that investments made in the first half would start to pay off in the second half, with a focus on improving pricing and promotional efficiency [76][82] Question: Full-Year Operating Earnings Guidance - Management expects operating earnings to decline slightly for the full year, with stronger performance anticipated in the second half due to new product launches and cost-saving measures [81][82] Question: Cash Flow Expectations - Management remains confident in cash generation capacity and plans to reduce inventory to improve cash flow [85][87] Question: Loyalty Program Performance - The loyalty program has transitioned smoothly, with accelerated sign-ups and expectations for improved store traffic in the second half [89][92] Question: Store Base Strategy - Management is assessing the store base and plans to invest in both digital and physical store experiences moving forward [94][96] Question: Brand Lifecycle Impact - Management acknowledged the need to refill the product pipeline and expects headwinds to subside in the coming quarters as new products are introduced [105][106]

Sally Beauty Holdings, Inc. (NYSE:SBH) Q1 2019 Earnings Conference Call February 5, 2019 8:30 AM ET Company Participants Jeff Harkins - IR Christian Brickman - President and CEO Aaron Alt - SVP, CFO and President of Sally Beauty Supply Brent Baxter - Group Vice President and Principal Accounting Officer Conference Call Participants Rupesh Parikh - Oppenheimer Mark Altschwager - Baird Oliver Chen - Cowen and Company Olivia Tong - Bank of America Joseph Altobello - Raymond James Lauren Frasch - Wells Fargo Wi ...