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]

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]