Core Insights - Sally Beauty Holdings, Inc.'s digital channel is becoming a significant revenue driver, with global e-commerce sales reaching $99 million in Q3 of fiscal 2025, accounting for 10.6% of net sales, an increase from 9.7% year-over-year despite a 1% decline in overall sales [1][9] E-Commerce Performance - Sally Beauty Supply generated $43 million in e-commerce sales, representing 8.2% of segment revenues, while Beauty Systems Group achieved $56 million, or 13.7% of its revenues, indicating a positive trend in marketplace activity and direct site traffic [2] Growth Drivers - Growth is supported by strategic digital initiatives such as marketplace integration, enhanced fulfillment capabilities, and the Licensed Colorist OnDemand service, which promotes online engagement and increases basket size [3][5] - Targeted promotions and product innovation are attracting first-time customers to the e-commerce platform [3] Market Challenges - Sustaining growth may face challenges as consumers remain value-focused, leading to selective trade-down in certain categories; however, marketplace expansion and personalized experiences are expected to help e-commerce capture a larger share of total sales [4] Future Outlook - Continued investment in customer engagement and operational efficiency positions Sally Beauty's digital channel to drive growth in traffic, conversion rates, and market share [5]

Core Insights - The focus is on identifying strong stocks using the Zacks Rank system, which emphasizes earnings estimates and revisions [1] - Value investing remains a popular strategy, utilizing various valuation metrics to identify undervalued stocks [1] Company Analysis: Sally Beauty (SBH) - Sally Beauty currently holds a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential [3] - The stock has a P/E ratio of 6.4, significantly lower than the industry average of 18.81, suggesting it may be undervalued [3] - The Forward P/E ratio for SBH has fluctuated between 4.04 and 8.12 over the past year, with a median of 5.51 [3] - The P/S ratio for SBH is 0.31, compared to the industry average of 0.81, further indicating potential undervaluation [4] - Overall, the combination of these metrics suggests that SBH is likely undervalued and presents an impressive value opportunity at this time [5]

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Group 1 - The core focus of Quad 7 Capital is to provide investment opportunities through their BAD BEAT Investing platform, emphasizing both long and short trades [1] - The team consists of 7 analysts with diverse expertise in business, policy, economics, mathematics, game theory, and sciences, aiming to educate investors on proficient trading [1] - Since May 2020, the company has maintained an average position of 95% long and 5% short, showcasing a strategic approach to market conditions [1] Group 2 - BAD BEAT Investing offers various benefits, including weekly well-researched trade ideas, access to multiple chat rooms, and daily summaries of key analyst upgrades and downgrades [2] - The platform also provides education on basic options trading and extensive trading tools to enhance investor knowledge and skills [2]

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, earnings, comprehensive income, equity, and cash flows, with detailed accounting notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (In thousands) | (In thousands) | June 30, 2025 (Unaudited) | September 30, 2024 | | :------------------------- | :------------------------ | :------------------- | | **Assets** | | | | Cash and cash equivalents | $112,800 | $107,961 | | Total current assets | $1,261,644 | $1,305,314 | | Total assets | $2,744,100 | $2,792,899 | | **Liabilities** | | | | Total current liabilities | $523,842 | $592,669 | | Long-term debt | $882,383 | $978,255 | | Total liabilities | $1,981,191 | $2,164,364 | | **Stockholders' Equity** | | | | Total stockholders' equity | $762,909 | $628,535 | [Condensed Consolidated Statements of Earnings](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) This section presents the company's financial performance over specific periods, detailing net sales, profit, and earnings per share Condensed Consolidated Statements of Earnings (In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $933,307 | $942,340 | $2,754,348 | $2,782,003 | | Gross profit | $480,985 | $480,883 | $1,416,642 | $1,411,131 | | Operating earnings | $78,173 | $71,770 | $247,866 | $200,467 | | Net earnings | $45,724 | $37,724 | $145,947 | $105,358 | | Basic EPS | $0.46 | $0.37 | $1.44 | $1.01 | | Diluted EPS | $0.44 | $0.36 | $1.40 | $0.98 | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the company's total comprehensive income, including net earnings and other comprehensive income (loss) Condensed Consolidated Statements of Comprehensive Income (In thousands) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net earnings | $45,724 | $37,724 | $145,947 | $105,358 | | Other comprehensive income (loss), net of tax | $26,011 | $(5,022) | $11,833 | $910 | | Total comprehensive income | $71,735 | $32,702 | $157,780 | $106,268 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's equity, including common stock, accumulated earnings, and comprehensive loss Condensed Consolidated Statements of Stockholders' Equity (In thousands) | (In thousands) | Balance at September 30, 2024 | Balance at June 30, 2025 | | :------------- | :---------------------------- | :----------------------- | | Common Stock | $1,019 | $994 | | Accumulated Earnings | $740,685 | $863,251 | | Accumulated Other Comprehensive Loss | $(113,169) | $(101,336) | | Total Stockholders' Equity | $628,535 | $762,909 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | (In thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $153,952 | $135,855 | | Net cash used by investing activities | $(12,940) | $(64,026) | | Net cash used by financing activities | $(137,863) | $(97,835) | | Net increase (decrease) in cash and cash equivalents | $4,839 | $(25,626) | | Cash and cash equivalents, end of period | $112,800 | $97,375 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Significant Accounting Policies](index=9&type=section&id=1.%20Significant%20Accounting%20Policies) This section details the basis of presentation for interim financial statements, adhering to GAAP, SEC rules, and consolidation principles - The interim financial statements are prepared in accordance with GAAP and SEC rules, condensing information normally found in annual statements[24](index=24&type=chunk) - All accounts of Sally Beauty Holdings, Inc. and its wholly-owned subsidiaries are consolidated, with intercompany balances eliminated[25](index=25&type=chunk) - Significant estimates are involved in areas such as sales allowances, deferred revenue, inventory valuation, amortization, depreciation, intangible assets, goodwill, and other reserves[27](index=27&type=chunk) [2. Recent Accounting Pronouncements](index=9&type=section&id=2.%20Recent%20Accounting%20Pronouncements) This section details recent FASB ASUs on segment reporting, income tax, and expense disaggregation, with no material impact expected on financials - ASU No. 2023-07 (Segment Reporting) is effective for fiscal years beginning after December 15, 2023, and is not expected to materially impact consolidated financial statements, but will require additional disclosures[28](index=28&type=chunk) - ASU No. 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, and is not expected to impact consolidated results or financial position[29](index=29&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026, and the company is evaluating its impact, not currently expecting early adoption[30](index=30&type=chunk)[31](index=31&type=chunk) [3. Revenue Recognition](index=11&type=section&id=3.%20Revenue%20Recognition) Revenue is recognized from merchandise sales upon transfer of control, with contract liabilities from loyalty points and gift cards decreasing from **$11.493 million** to **$10.694 million** - Revenue is recognized from merchandise sales at the point-of-sale or shipment for e-commerce, net of estimated sales returns and taxes, when control transfers to the customer[32](index=32&type=chunk) Contract Liabilities (In thousands) | (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------- | :------------------------------ | :------------------------------ | | Beginning Balance (Contract Liabilities) | $11,493 | $14,038 | | Loyalty points and gift cards issued, net of estimated breakage | $5,904 | $9,266 | | Revenue recognized from beginning liability | $(6,703) | $(11,252) | | Ending Balance (Contract Liabilities) | $10,694 | $12,052 | [4. Fair Value Measurements](index=11&type=section&id=4.%20Fair%20Value%20Measurements) Fair value of financial instruments is measured using a three-level hierarchy, with total assets at **$812 thousand** and liabilities at **$1,957 thousand** - Fair value is defined as the exit price in an orderly transaction, using a three-level hierarchy based on input observability[34](index=34&type=chunk)[35](index=35&type=chunk) Fair Value of Financial Instruments (In thousands) | (in thousands) | June 30, 2025 | September 30, 2024 | | :------------- | :------------ | :----------------- | | **Financial Assets:** | | | | Foreign exchange contracts (Level 2) | $501 | $1,207 | | Interest rate swap (Level 2) | $311 | $0 | | Total assets | $812 | $1,207 | | **Financial Liabilities:** | | | | Foreign exchange contracts (Level 2) | $1,957 | $1,485 | | Interest rate swap (Level 2) | $0 | $635 | | Total liabilities | $1,957 | $2,120 | Fair Value of Long-Term Debt (In thousands) | (in thousands) | June 30, 2025 Carrying Value | June 30, 2025 Fair Value | September 30, 2024 Carrying Value | September 30, 2024 Fair Value | | :------------- | :--------------------------- | :----------------------- | :-------------------------------- | :---------------------------- | | 2032 Senior Notes (Level 2) | $600,000 | $614,250 | $600,000 | $615,000 | | Term Loan B (Level 2) | $296,000 | $295,260 | $394,000 | $393,508 | | Total long-term debt | $896,000 | $909,510 | $994,000 | $1,008,508 | [5. Stockholders' Equity](index=13&type=section&id=5.%20Stockholders'%20Equity) The share repurchase program was extended with **$487.8 million** remaining, and AOCL decreased due to foreign currency translation - The share repurchase program was extended to September 30, 2029, with **$487.8 million** remaining authorization as of June 30, 2025[38](index=38&type=chunk) Share Repurchases (In millions, excluding excise taxes) | Share Repurchases (excluding excise taxes) | Three Months Ended June 30, 2025 | Nine Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Shares repurchased (millions) | 1.5 | 3.3 | 0.9 | 4.3 | | Total cost (millions) | $13.0 | $33.0 | $10.0 | $50.0 | Accumulated Other Comprehensive Loss (In thousands) | (in thousands) | Balance at September 30, 2024 | Balance at June 30, 2025 | | :------------- | :---------------------------- | :----------------------- | | Accumulated Other Comprehensive Loss | $(113,169) | $(101,336) | | Change due to Other comprehensive income (loss) before reclassification, net of tax | N/A | $13,217 | | Change due to Reclassification to net earnings, net of tax | N/A | $(1,384) | [6. Weighted-Average Shares](index=14&type=section&id=6.%20Weighted-Average%20Shares) This section reconciles basic and diluted weighted-average shares outstanding, showing **100.463 million** basic and **103.239 million** diluted shares for Q3 2025 Weighted-Average Shares (In thousands) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Weighted-average basic shares | 100,463 | 103,190 | 101,367 | 104,477 | | Dilutive securities (stock option and award programs) | 2,776 | 2,707 | 2,820 | 2,709 | | Weighted-average diluted shares | 103,239 | 105,897 | 104,187 | 107,186 | | Anti-dilutive options excluded | 1,840 | 1,678 | 1,499 | 1,678 | [7. Property and Equipment, Net and Divesture of Subsidiary](index=14&type=section&id=7.%20Property%20and%20Equipment,%20Net%20and%20Divesture%20of%20Subsidiary) The company sold its corporate headquarters for **$45.5 million** and divested Pro-Duo Spain SL for **$3.2 million**, recognizing gains - Sold corporate headquarters for **$45.5 million**, recognizing a **$26.6 million** gain, and entered a 12-month leaseback[42](index=42&type=chunk) - Divested Pro-Duo Spain SL (19 stores) for **$3.2 million**, recognizing a **$0.8 million** gain, with no material impact expected on consolidated financials[43](index=43&type=chunk) [8. Goodwill and Intangible Assets](index=14&type=section&id=8.%20Goodwill%20and%20Intangible%20Assets) Annual impairment assessments found no goodwill impairment, but a **$1.8 million** trade name impairment loss was recognized in the SBS segment - No goodwill impairment was identified during the annual assessment, but a **$1.8 million** impairment loss was recognized for a trade name in the SBS segment[44](index=44&type=chunk) Goodwill Allocation (In thousands) | (in thousands) | June 30, 2025 | | :------------- | :------------ | | Goodwill (SBS) | $91,100 | | Goodwill (BSG) | $449,800 | Intangible Assets Amortization Expense (In thousands) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Intangible assets amortization expense | $851 | $764 | $2,550 | $2,415 | [9. Accrued Liabilities](index=15&type=section&id=9.%20Accrued%20Liabilities) Accrued liabilities increased to **$165.291 million**, primarily driven by compensation (**$61.481 million**), deferred revenue, and interest payable Accrued Liabilities (In thousands) | (in thousands) | June 30, 2025 | September 30, 2024 | | :------------- | :------------ | :----------------- | | Compensation and benefits | $61,481 | $76,649 | | Deferred revenue | $15,829 | $16,080 | | Interest payable | $14,034 | $4,108 | | Accrued freight | $11,064 | $8,240 | | Rental obligations | $10,676 | $11,039 | | Insurance reserves | $8,084 | $7,526 | | Operating accruals and other | $44,123 | $39,308 | | Total accrued liabilities | $165,291 | $162,950 | [10. Short-term and Long-term Debt](index=15&type=section&id=10.%20Short-term%20and%20Long-term%20Debt) ABL Facility maturity extended to 2029 with **$482.5 million** available, and **$95.0 million** of Term Loan B principal was repaid - ABL Facility maturity extended to December 11, 2029; **$482.5 million** available for borrowing with no outstanding borrowings at June 30, 2025[48](index=48&type=chunk) - Voluntarily repaid **$95.0 million** of Term Loan B principal during the nine months ended June 30, 2025, resulting in a **$0.9 million** loss on debt extinguishment[49](index=49&type=chunk) [11. Derivative Instruments and Hedging Activities](index=15&type=section&id=11.%20Derivative%20Instruments%20and%20Hedging%20Activities) The company uses foreign currency forwards and an interest rate swap for hedging, expecting reclassification of net losses/gains to COGS and interest expense - The company uses foreign currency forwards to hedge forecasted inventory purchases, expecting to reclassify approximately **$0.4 million** of net losses from AOCL into COGS over the next 12 months[51](index=51&type=chunk) - An interest rate swap hedges Term Loan B exposure, with expected net gains of **$0.3 million** to be reclassified from AOCL into interest expense over the next 12 months[52](index=52&type=chunk)[53](index=53&type=chunk) - Non-designated foreign exchange forward contracts for intercompany balances resulted in net losses of **$1.3 million** for the three months ended June 30, 2025, and **$0.3 million** for the nine months ended June 30, 2025[54](index=54&type=chunk) [12. Segment Reporting](index=16&type=section&id=12.%20Segment%20Reporting) The company operates in SBS and BSG segments; SBS net sales decreased by **1.8%**, while BSG net sales increased by **0.2%** for the quarter Segment Net Sales and Operating Earnings (In thousands) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | **Net sales:** | | | | | | SBS | $526,782 | $536,536 | $1,552,803 | $1,573,015 | | BSG | $406,525 | $405,804 | $1,201,545 | $1,208,988 | | Total | $933,307 | $942,340 | $2,754,348 | $2,782,003 | | **Segment operating earnings:** | | | | | | SBS | $83,305 | $86,938 | $240,484 | $241,387 | | BSG | $50,672 | $46,753 | $145,075 | $134,395 | | Total | $133,977 | $133,691 | $385,559 | $375,782 | SBS Merchandise Category Sales Mix | SBS Merchandise Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Hair color | 42.9% | 40.6% | 41.9% | 39.7% | | Hair care | 23.0% | 24.2% | 23.5% | 24.5% | | Styling tools and supplies | 16.2% | 16.2% | 16.9% | 17.1% | | Nail | 10.2% | 10.5% | 10.0% | 10.2% | | Skin and cosmetics | 7.5% | 8.1% | 7.5% | 8.0% | | Other beauty items | 0.2% | 0.4% | 0.2% | 0.5% | | Total | 100.0% | 100.0% | 100.0% | 100.0% | SBS Sales Channels Mix | SBS Sales Channels | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Company-operated stores | 91.8% | 93.0% | 91.9% | 93.2% | | E-commerce | 8.2% | 7.0% | 8.1% | 6.8% | | Total | 100.0% | 100.0% | 100.0% | 100.0% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, condition, and cash flows, highlighting key metrics, segment results, and liquidity [Financial Summary for the Three Months Ended June 30, 2025](index=19&type=section&id=Financial%20Summary%20for%20the%20Three%20Months%20Ended%20June%2030,%202025) This section summarizes key financial performance metrics for the three months ended June 30, 2025 - Consolidated net sales decreased **1.0%** to **$933.3 million**[62](index=62&type=chunk) - Consolidated comparable sales decreased **0.4%**[62](index=62&type=chunk) - Consolidated gross profit was flat at **$481.0 million**, with gross margin increasing **50 bps** to **51.5%**[62](index=62&type=chunk) - Consolidated operating earnings increased **8.9%** to **$78.2 million**, with operating margin increasing **80 bps** to **8.4%**[62](index=62&type=chunk) - Consolidated net earnings increased **21.2%** to **$45.7 million**[62](index=62&type=chunk) - Diluted EPS was **$0.44**, up from **$0.36**[62](index=62&type=chunk) - Cash provided by operations was **$69.4 million**, up from **$47.9 million**[62](index=62&type=chunk) [Overview (Key Operating Metrics)](index=20&type=section&id=Overview%20(Key%20Operating%20Metrics)) This section provides a comprehensive overview of key operating metrics for both the three and nine months ended June 30, 2025 Key Operating Metrics (Dollars in thousands) | Key Operating Metrics (dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Increase (Decrease) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Increase (Decrease) | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------------------ | :------------------------------ | :------------------------------ | :------------------ | | **Net sales:** | | | | | | | | SBS | $526,782 | $536,536 | $(9,754) (1.8%) | $1,552,803 | $1,573,015 | $(20,212) (1.3%) | | BSG | $406,525 | $405,804 | $721 (0.2%) | $1,201,545 | $1,208,988 | $(7,443) (0.6%) | | Consolidated | $933,307 | $942,340 | $(9,033) (1.0%) | $2,754,348 | $2,782,003 | $(27,655) (1.0%) | | **Gross profit:** | | | | | | | | SBS | $320,866 | $321,051 | $(185) (0.1%) | $940,519 | $935,189 | $5,330 (0.6%) | | BSG | $160,119 | $159,832 | $287 (0.2%) | $476,123 | $475,942 | $181 (0.0%) | | Consolidated | $480,985 | $480,883 | $102 (0.0%) | $1,416,642 | $1,411,131 | $5,511 (0.4%) | | **Segment gross margin:** | | | | | | | | SBS | 60.9% | 59.8% | 110 bps | 60.6% | 59.5% | 110 bps |\ | BSG | 39.4% | 39.4% | — bps | 39.6% | 39.4% | 20 bps | | Consolidated | 51.5% | 51.0% | 50 bps | 51.4% | 50.7% | 70 bps | | **Consolidated operating earnings** | $78,173 | $71,770 | $6,403 (8.9%) | $247,866 | $200,467 | $47,399 (23.6%) | | **Net earnings** | $45,724 | $37,724 | $8,000 (21.2%) | $145,947 | $105,358 | $40,589 (38.5%) | | **Comparable sales growth (decline):** | | | | | | | | SBS | (1.1)% | 0.7% | (180) bps | 0.1% | (1.7)% | 180 bps | | BSG | 0.5% | 2.6% | (210) bps | (0.2)% | 1.8% | (200) bps | | Consolidated | (0.4)% | 1.5% | (190) bps | — | (0.2)% | 20 bps | | **Number of stores at end-of-period:** | | | | | | | | SBS | 3,096 | 3,128 | (32) (1.0%) | | | | | BSG | 1,329 | 1,332 | (3) (0.2%) | | | | | Consolidated | 4,425 | 4,460 | (35) (0.8%) | | | | [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section compares operational results for the three and nine months, analyzing changes in sales, profit, expenses, and taxes across segments [The Three Months Ended June 30, 2025, compared to the Three Months Ended June 30, 2024](index=21&type=section&id=The%20Three%20Months%20Ended%20June%2030,%202025,%20compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202024) SBS net sales decreased by **$9.754 million** while BSG net sales increased by **$0.721 million**, with improved SBS gross margin and lower interest expense - SBS net sales decreased by **$9.754 million**, primarily due to a **1.1%** decline in comparable sales and net store closures, partially offset by foreign currency exchange[65](index=65&type=chunk)[66](index=66&type=chunk) - BSG net sales increased by **$0.721 million**, driven by a **0.5%** increase in comparable sales from expanded distribution and new brand innovation, partially offset by net store closures and foreign currency[66](index=66&type=chunk)[67](index=67&type=chunk) - SBS gross margin improved due to higher product margins from Fuel for Growth, lower distribution/freight costs, and lower shrink, partially offset by an inventory write-off[68](index=68&type=chunk) - BSG gross margin was flat, with lower distribution/freight costs offset by lower product margins from brand mix[69](index=69&type=chunk) - Unallocated SG&A expenses decreased by **$5.7 million**, or **9.3%**, primarily due to lower Fuel for Growth costs and savings, partially offset by higher IT and labor expenses[72](index=72&type=chunk) - Interest expense decreased due to a lower outstanding principal balance and interest rate on Term Loan B, fewer ABL facility borrowings, and lower debt extinguishment losses[73](index=73&type=chunk) - The effective tax rate increased to **26.8%** from **26.1%**, mainly due to the divestiture of Spain operations and associated unutilized net operating losses[74](index=74&type=chunk) [The Nine Months Ended June 30, 2025, compared to the Nine Months Ended June 30, 2024](index=22&type=section&id=The%20Nine%20Months%20Ended%20June%2030,%202025,%20compared%20to%20the%20Nine%20Months%20Ended%20June%2030,%202024) SBS net sales decreased by **$20.212 million** and BSG net sales by **$7.443 million**, with gross margin improvements and lower unallocated SG&A - SBS net sales decreased by **$20.212 million**, primarily due to negative foreign exchange rates and net store closures, partially offset by a **0.1%** increase in comparable sales[76](index=76&type=chunk)[77](index=77&type=chunk) - BSG net sales decreased by **$7.443 million**, reflecting negative comparable sales, foreign exchange impacts, and net store closures, partially offset by expanded distribution and new brand innovation[78](index=78&type=chunk)[79](index=79&type=chunk) - SBS gross margin improved due to lower distribution/freight costs and higher product margins from promotional strategies and Fuel for Growth, partially offset by an inventory write-off[80](index=80&type=chunk) - BSG gross margin improved due to lower distribution/freight costs from supply chain efficiencies, partially offset by lower product margins related to brand mix[81](index=81&type=chunk) - Unallocated SG&A expenses decreased by **$37.3 million**, or **21.3%**, primarily due to a **$26.6 million** gain on the sale of corporate headquarters and lower Fuel for Growth costs[85](index=85&type=chunk) - The effective tax rate increased to **26.4%** from **25.8%**, mainly due to foreign operations, including the Spain divestiture, and higher federal tax credits in the prior year[87](index=87&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is driven by cash from operations and the ABL Facility, with **$595.3 million** available and **$896.0 million** in outstanding debt [Overview](index=24&type=section&id=Overview) Primary liquidity sources are cash from operations and the ABL Facility, with **$595.3 million** available and increased working capital - Principal liquidity sources are cash from operations, cash and cash equivalents, and the ABL Facility[88](index=88&type=chunk) - As of June 30, 2025, available liquidity was **$595.3 million**, including **$482.5 million** from the ABL Facility and **$112.8 million** in cash and cash equivalents[88](index=88&type=chunk) - Working capital increased by **$25.2 million** to **$737.8 million** at June 30, 2025, primarily due to timing of accounts payable and income tax payments, partially offset by lower inventory[89](index=89&type=chunk) [Cash Flows](index=24&type=section&id=Cash%20Flows) Operating cash flow increased to **$153.952 million**, investing cash flow decreased, and financing cash flow increased due to debt paydown Cash Flow Summary (In thousands) | (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $153,952 | $135,855 | | Net cash used by investing activities | $(12,940) | $(64,026) | | Net cash used by financing activities | $(137,863) | $(97,835) | - Increase in cash from operating activities was driven by lower inventory purchases and lower interest paid, partially offset by timing of accounts payable and income tax payments[92](index=92&type=chunk) - Decrease in cash used by investing activities was due to **$43.6 million** from corporate headquarters sale, lower capital expenditures, and **$3.1 million** from Spain operations divestiture[93](index=93&type=chunk) - Increase in cash used by financing activities was primarily due to higher net paydown of long-term debt, partially offset by fewer share repurchases[94](index=94&type=chunk) [Debt and Guarantor Financial Information](index=25&type=section&id=Debt%20and%20Guarantor%20Financial%20Information) Outstanding debt principal was **$896.0 million**, with the company in compliance with all debt covenants - Outstanding debt principal was **$896.0 million** at June 30, 2025, comprising **$600.0 million** in 2032 Senior Notes and **$296.0 million** on Term Loan B[95](index=95&type=chunk) - The company is in compliance with all agreements and instruments governing its debt, including financial covenants[97](index=97&type=chunk) Issuers and Guarantors Financial Information (In thousands) | (in thousands) | June 30, 2025 | September 30, 2024 | | :------------- | :------------ | :----------------- | | Cash and cash equivalents | $41,923 | $32,817 | | Inventory | $745,712 | $781,512 | | Total assets | $2,048,655 | $2,085,179 | | Total liabilities | $1,785,679 | $1,951,874 | [Share Repurchase Programs](index=25&type=section&id=Share%20Repurchase%20Programs) The company repurchased **3.3 million** shares for **$33.0 million** during the nine months ended June 30, 2025 Share Repurchases (In millions, excluding excise taxes) | Share Repurchases (excluding excise taxes) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------ | :------------------------------ | | Shares repurchased (millions) | 3.3 | 4.3 | | Total cost (millions) | $33.0 | $50.0 | [Contractual Obligations](index=25&type=section&id=Contractual%20Obligations) No material changes to contractual obligations, excluding debt, have occurred since September 30, 2024 - No material changes to contractual obligations, excluding debt, since September 30, 2024[101](index=101&type=chunk) [Off-Balance Sheet Financing Arrangements](index=25&type=section&id=Off-Balance%20Sheet%20Financing%20Arrangements) No off-balance sheet financing arrangements exist, except for outstanding letters of credit for inventory and self-insurance - No off-balance sheet financing arrangements other than outstanding letters of credit for inventory purchases and self-insurance programs[102](index=102&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) No material changes to critical accounting estimates or assumptions have occurred since September 30, 2024 - No material changes to critical accounting estimates or assumptions since September 30, 2024[103](index=103&type=chunk) [Recent Accounting Pronouncements](index=26&type=section&id=Recent%20Accounting%20Pronouncements) Refer to Note 2 of the financial statements for details on recent accounting pronouncements - Refer to Note 2 for details on recent accounting pronouncements[104](index=104&type=chunk) [U.S. Income Tax Regulations](index=26&type=section&id=U.S.%20Income%20Tax%20Regulations) The company is evaluating the financial impact of "The One Big Beautiful Bill Act," signed into law on July 4, 2025 - The company is evaluating the impact of "The One Big Beautiful Bill Act," signed on July 4, 2025, on its financial statements[105](index=105&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency, interest rates, and government actions, with no material changes since FY2024 - The company is subject to market risks from foreign currency fluctuations, interest rates, and government actions[107](index=107&type=chunk) - No material changes to market risks have occurred since the fiscal year ended September 30, 2024[107](index=107&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[108](index=108&type=chunk)[112](index=112&type=chunk) - Disclosure controls provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[112](index=112&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[113](index=113&type=chunk) [PART II — OTHER INFORMATION](index=28&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings but expects no material financial impact, and is in compliance with regulations - The company is involved in various claims and lawsuits but does not expect a material adverse impact on its financial position, cash flows, or results of operations[115](index=115&type=chunk) - The company believes it is in material compliance with U.S. and foreign laws and regulations regarding product and sales methods[116](index=116&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) Readers should review risk factors from the FY2024 Annual Report on Form 10-K, as no material changes have occurred - Readers should consider risk factors from the Annual Report on Form 10-K for the fiscal year ended September 30, 2024[117](index=117&type=chunk) - No material changes to the disclosed risk factors have occurred[117](index=117&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company repurchased **1.46 million** shares for **$13.0 million** during the quarter, with **$487.77 million** remaining authorized Issuer Purchases of Equity Securities | Fiscal Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------ | :------------------------------- | :--------------------------- | | Apr 1 - Apr 30, 2025 | — | $— | | May 1 - May 31, 2025 | 610,460 | $9.00 | | Jun 1 - Jun 30, 2025 | 845,404 | $8.90 | | Total this quarter | 1,455,864 | $8.94 | - As of June 30, 2025, approximately **$487.77 million** remained authorized for share repurchases under the program, which was extended through September 30, 2029[118](index=118&type=chunk)[121](index=121&type=chunk) [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[119](index=119&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents and certifications - Exhibits include the Third Restated Certificate of Incorporation, Amended and Restated By-Laws, 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)

Core Insights - Sally Beauty Holdings, Inc. reported third-quarter fiscal 2025 results with adjusted earnings of 51 cents per share, exceeding the Zacks Consensus Estimate of 42 cents and up from 45 cents in the prior year [2][9] - Consolidated net sales were $933.3 million, matching the consensus estimate but reflecting a 1% decline year over year [2][9] - Comparable sales decreased by 0.4% year over year, influenced by macroeconomic uncertainties affecting consumer spending, although there was growth in hair color and digital marketplaces [3][9] Financial Performance - The consolidated gross profit was approximately $481 million, remaining flat year over year, while the adjusted gross margin improved by 100 basis points to 52% [4] - Adjusted selling, general and administrative expenses rose to $398.9 million, an increase of $2.1 million year over year, primarily due to higher labor and IT costs, partially offset by savings from growth initiatives [5] - Adjusted operating earnings increased to $86.1 million, with an adjusted operating margin of 9.2%, up 30 basis points from the previous year [6] Segment Performance - In the Sally Beauty Supply segment, net sales fell 1.8% year over year to $526.8 million, with comparable sales down 1.1% [7] - The Beauty Systems Group segment saw a slight increase in net sales of 0.2% year over year to $406.5 million, with comparable sales up 0.5% [8] Cash Flow and Debt - At the end of the fiscal third quarter, the company had cash and cash equivalents of $112.8 million and long-term debt of $882.4 million [10] - The company generated cash flow from operations of $69.4 million and operating free cash flow of $49.1 million during the quarter [10] Future Outlook - Management revised its fiscal 2025 comparable sales outlook to the high end of the previously issued range, now projecting flat comparable sales [12][13] - The adjusted operating margin expectation has been raised to a range of 8.6-8.7%, compared to the earlier guidance of 8-8.5% [13]

Financial Data and Key Metrics Changes - The company reported third quarter consolidated net sales of $933 million, a decrease of 1% compared to the previous year, with comparable sales declining less than half a point [21] - Adjusted operating margin increased to 9.2%, representing a 30 basis point improvement year-over-year [26] - Adjusted diluted earnings per share was $0.51, a 13% increase over the prior year [27] Business Line Data and Key Metrics Changes - In the Sally segment, net sales decreased by 1.8% to $527 million, with comparable sales down 1.1% [27] - The color category within Sally increased by 4%, while the care category declined by 7% [28] - BSG segment net sales were approximately flat at $407 million, with comparable sales increasing by half a point [29] Market Data and Key Metrics Changes - Global e-commerce sales increased by 8% to $99 million, representing 11% of total net sales [21] - E-commerce sales for Sally in the U.S. and Canada grew by 21%, primarily driven by the strength of the digital marketplace strategy [28] Company Strategy and Development Direction - The company is focused on enhancing customer centricity, growing high-margin owned brands, amplifying innovation, and increasing operational efficiency [19] - The "Fuel for Growth" initiative is expected to generate cumulative gross margin and SG&A benefits of approximately $70 million by the end of the fiscal year [7] - The company plans to refresh up to 1,500 stores, with 35 stores updated by the end of the fiscal year [17] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic factors impacted spending, but the company was able to navigate these challenges effectively [39] - The company raised its full-year adjusted operating margin guidance, reflecting confidence in its market positioning and growth potential [19] - Management expressed optimism about the performance of both the Sally and BSG segments moving forward [40] Other Important Information - The company repaid $21 million of debt and repurchased $13 million of shares during the quarter [5] - Inventory levels were approximately $1 billion, down 2% from the previous year [30] Q&A Session Summary Question: Thoughts on macros impacting Sally Beauty versus BSG - Management indicated that macro factors were less impactful than anticipated, with strength in the color side of the business [39] Question: Why not move faster on store refreshes? - Management stated that they are in the early days of the refresh and need time to understand the lift from the initial stores [41] Question: Key catalysts for color going forward? - Management highlighted strength in brand partnerships and performance marketing as key drivers for color growth [45] Question: How to drive engagement in the care category? - Management is focusing on performance marketing and promotions to improve engagement in the care category [75] Question: Plans for store closures and performance of renovated stores? - Management clarified that recent closures were tied to the European business and that renovated stores are performing well [53][55] Question: Consumer behavior regarding DIY and salon visits? - Management noted that consumers are becoming more choiceful and are exploring DIY options, which is beneficial for the business [57] Question: Impact of tariffs on pricing strategy? - Management indicated limited exposure to tariffs and plans to maintain healthy gross margins while potentially implementing modest price increases [85][87]

Exhibit 99.1 Contact: Jeff Harkins Investor Relations 940-297-3877 jharkins@sallybeauty.com Third quarter consolidated net sales were $933.3 million, a decrease of 1.0% compared to the prior year. The Company was operating 35 fewer stores at the end of the quarter compared to the prior year and foreign currency translation had no impact on consolidated net sales for the quarter. Global e-commerce sales were $99 million, or 10.6% of consolidated net sales, for the quarter. Consolidated comparable sales decre ...

Company Overview - Sally Beauty Holdings Inc has $3.7 billion in net sales[7] - The company's gross margin is 50.9%[7] - Adjusted EBITDA is $442 million[7] - Approximately 34% of sales are from owned brands[7] - Around 53% of sales are from brands under exclusive/limited distribution agreements[8] Financial Performance & Strategy - Fuel for Growth initiative delivered $28 million benefit in FY24 and is expected to deliver $40+ million benefit in FY25[39] - The company refinanced senior secured notes in February 2024, reducing principal from $680 million to $600 million and extending maturity to FY2032[52] - The company's long-term debt totals $994 million, with $394 million in term loans and $600 million in senior notes[49] - The company aims to increase Sally's owned brand penetration from 34% to over 50%[32]

Industry Overview - The beauty and cosmetics industry has evolved into a multi-billion-dollar global market, driven by changing consumer preferences, cultural influences, and technological advancements [2] - Skincare has become a significant focus, with increased demand for products featuring natural ingredients and dermatologist-approved solutions, influenced by K-beauty and J-beauty trends [3] - Sustainability is shaping the future of the industry, with consumers prioritizing eco-friendly practices and transparency in ingredient sourcing [4] Technological Innovations - Technology is revolutionizing consumer interactions with beauty products through AI diagnostics, augmented reality try-ons, and biotech formulations [5] - The rise of dermocosmetics combines pharmaceutical-grade research with skincare, offering clinically proven results [5] Company Highlights Coty Inc. - Coty is strategically transforming its operations to enhance innovation and consumer-centric growth, focusing on prestige fragrances and skincare [7] - The company is expanding its fragrance offerings and targeting demographics like Gen Z and multicultural consumers, with a strong pipeline for fiscal 2026 [8] - E-commerce now represents nearly 20% of Coty's total sales, supported by partnerships with Amazon and initiatives on platforms like TikTok Shop [9] Ulta Beauty - Ulta Beauty leads the U.S. market through brand curation, digital innovation, and experiential retail, focusing on enhancing core operations and customer experiences [10] - The company is experiencing strong performance across fragrance, skincare, and wellness categories, with notable product launches and a growing interest in K-beauty [11] - Ulta's loyalty program and digital capabilities drive customer engagement, with over 45 million active loyalty members [12] Sally Beauty - Sally Beauty is adapting to market challenges through innovation and digital expansion, focusing on product innovation and omnichannel retail [13] - The company is enhancing its e-commerce presence through partnerships with major delivery services and offering virtual consultations [14] - Product innovation remains central to Sally Beauty's strategy, with new launches and revamped store formats to meet modern beauty trends [15]