[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]

Financial Performance - Consolidated net sales for Q3 2025 were $933 million, a decrease of 1.0% year-over-year[4] - GAAP diluted net earnings per share increased by 22% to $0.44 compared to the prior year[10] - Cash flow from operations was $69 million, with operating free cash flow totaling $49 million[12] - Consolidated comparable sales decreased by 0.4%, impacted by macroeconomic uncertainty[6] - Net earnings for the three months ended June 30, 2025, were $45,724, reflecting a 21.2% increase from $37,724 in 2024[38] - Basic earnings per share rose to $0.46 for the three months ended June 30, 2025, up 24.3% from $0.37 in 2024[38] - Operating earnings increased by 8.9% to $78,173 for the three months ended June 30, 2025, compared to $71,770 in 2024[38] - Adjusted EBITDA for the three months ended June 30, 2025, was $115,293, a slight decrease of 1.3% compared to $116,780 in the same period of 2024[50] Margins and Expenses - Adjusted operating margin expanded for the fourth consecutive quarter, reaching 9.2%[4] - Full year adjusted operating margin guidance raised to a range of 8.6% to 8.7%[22] - GAAP gross margin expanded by 50 basis points to 51.5%[7] - Consolidated gross margin for the three months ended June 30, 2025, was 51.5%, slightly up from 51.0% in the prior year[48] - SG&A expenses for the three months ended June 30, 2025, were $402,812, representing 43.2% of sales, down from 43.4% in the same period of 2024[48] - Interest expense decreased by 24.1% to $15,709 for the three months ended June 30, 2025, down from $20,707 in 2024[42] Sales Performance by Segment - Segment net sales for Sally Beauty Supply decreased by 1.8% to $526.8 million, while Beauty Systems Group saw a slight increase of 0.2% to $406.5 million[16] - SBS comparable sales declined by 1.1% for the three months ended June 30, 2025, compared to a growth of 0.7% in the same period of 2024, a change of 180 basis points[53] - BSG comparable sales growth decreased to 0.5% for the three months ended June 30, 2025, down from 2.6% in 2024, a decline of 210 basis points[53] - For the nine months ended June 30, 2025, SBS comparable sales showed a slight growth of 0.1%, recovering from a decline of 1.7% in the same period of 2024, a change of 180 basis points[53] Assets and Liabilities - The total current assets decreased to $1,261,644 as of June 30, 2025, from $1,305,314 as of September 30, 2024[40] - Total liabilities decreased to $1,981,191 as of June 30, 2025, compared to $2,164,364 as of September 30, 2024[40] Operational Changes - The company repaid $21 million in term loan debt and repurchased $13 million in shares during the quarter[12] - The total number of consolidated stores decreased to 4,425 from 4,460, a decline of 35 stores[52] - The number of BSG distributor sales consultants fell to 611 in June 30, 2025, down from 659, a decrease of 48 consultants[52] - The total number of BSG company-operated stores remained relatively stable, with a slight decrease from 1,200 in 2024 to 1,198 in 2025, a change of 2 stores[52] - Franchise stores in BSG decreased from 132 in 2024 to 131 in 2025, a decline of 1 store[52] - The number of BSG distributor sales consultants employed by franchisees was 191 as of June 30, 2025[52] Tax and Other Provisions - The provision for income taxes for the three months ended June 30, 2025, was $16,740, an increase of 25.5% from $13,339 in the same period of 2024[50]

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]

Core Insights - Sally Beauty is enhancing its focus on nail innovation, accessibility, and self-expression to attract the next generation of beauty shoppers [2][3] - The company is expanding its nail product assortment to over 1,400 items, including various types of nail products, in response to growing consumer demand [1][3] Product Expansion - The expanded product lineup includes launches from popular brands such as Nailboo, KISS, Dashing Diva, and ASP, with a particular emphasis on gel and press-on nails [4][7] - Sally Beauty is implementing promotional offers during National Nail Week, including a "Buy 2 Get 1 Free" deal on select gel nails [6] Consumer Engagement - The retailer is leveraging expert-driven content to engage consumers, featuring tips and trends from its nail expert across digital channels [6] - Sally Beauty is enhancing the shopping experience with options like Buy Online, Pick Up In-Store, and two-hour delivery to meet consumer needs [5] Market Position - The nail category has become a significant entry point for new customers, indicating its growing importance in Sally Beauty's long-term strategy [3][4] - Sally Beauty Holdings, Inc. is recognized as a leader in professional beauty supplies, offering a wide range of products through its various brands [8]

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 with a proven track record of success [1] - The team consists of 7 analysts with diverse expertise in business, policy, economics, mathematics, game theory, and sciences, allowing for comprehensive market analysis [1] - Since May 2020, the company has maintained an average position of 95% long and 5% short, showcasing their strategic investment approach [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 educational resources for learning basic options trading and extensive trading tools to enhance investor proficiency [2] - The goal of BAD BEAT Investing is to save time for investors by delivering high-quality research with clear entry and exit targets [1][2]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, highlighting decreases in assets and liabilities, alongside increased net earnings and diluted EPS for the quarter [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $2.71 billion, total liabilities to $2.01 billion, while stockholders' equity increased to $699.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | September 30, 2024 | | :--- | :--- | :--- | | **Total current assets** | $1,239,113 | $1,305,314 | | Inventory | $1,006,604 | $1,036,624 | | **Total assets** | **$2,705,873** | **$2,792,899** | | **Total current liabilities** | $533,291 | $592,669 | | Long-term debt | $902,794 | $978,255 | | **Total liabilities** | **$2,006,057** | **$2,164,364** | | **Total stockholders' equity** | **$699,816** | **$628,535** | [Condensed Consolidated Statements of Earnings](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Net sales decreased by 2.8% for the quarter, yet operating earnings rose 16.4% and net earnings increased 34.1% Key Earnings Data (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $883,146 | $908,361 | (2.8)% | | Gross profit | $458,817 | $463,072 | (0.9)% | | Operating earnings | $69,373 | $59,574 | 16.4% | | Net earnings | $39,210 | $29,244 | 34.1% | | Diluted EPS | $0.38 | $0.27 | 40.7% | | **Metric** | **Six Months Ended Mar 31, 2025** | **Six Months Ended Mar 31, 2024** | **Change (%)** | | Net sales | $1,821,041 | $1,839,663 | (1.0)% | | Net earnings | $100,223 | $67,634 | 48.2% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow slightly decreased, investing activities turned positive due to asset sale, and financing cash use increased Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $84,521 | $87,960 | | Net cash provided (used) by investing activities | $4,232 | $(44,877) | | Net cash used by financing activities | $(103,659) | $(68,932) | | **Net decrease in cash and cash equivalents** | **$(15,787)** | **$(25,827)** | - Investing activities were positively impacted by **$43.6 million** in proceeds from the sale of property and equipment, which included the company's corporate headquarters[22](index=22&type=chunk)[39](index=39&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes detail accounting policies, debt, and segment performance, highlighting a **$26.6 million** gain from asset sale, debt repayments, and ABL facility extension - In the six months ended March 31, 2025, the company sold its corporate headquarters for **$45.5 million**, recognizing a gain of approximately **$26.6 million**[39](index=39&type=chunk) - During the six months ended March 31, 2025, the company voluntarily repaid **$75.0 million** of its outstanding Term Loan B principal (**$40.0 million** in Q1 and **$35.0 million** in Q2)[45](index=45&type=chunk) - For the six months ended March 31, 2025, the company repurchased **1.8 million shares** of its common stock for a total cost of **$20.0 million**[36](index=36&type=chunk) Segment Net Sales (in thousands) | Segment | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | SBS | $500,575 | $513,241 | $1,026,021 | $1,036,479 | | BSG | $382,571 | $395,120 | $795,020 | $803,184 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 2.8% sales decrease, 100 basis point gross margin improvement, 16.4% operating earnings increase, and strong liquidity - Consolidated comparable sales decreased by **1.3%** for the three months ended March 31, 2025[59](index=59&type=chunk) - Consolidated gross margin increased by **100 basis points** to **52.0%** for the quarter, driven by lower distribution/freight costs and enhanced promotional strategies[59](index=59&type=chunk)[65](index=65&type=chunk) - Unallocated selling, general and administrative expenses for the six-month period decreased by **$31.5 million**, primarily due to a **$26.6 million** gain on the sale of the corporate headquarters[80](index=80&type=chunk) - At March 31, 2025, the company had **$574.9 million** of available liquidity, comprising **$92.2 million** in cash and **$482.7 million** available under its ABL facility[83](index=83&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Both SBS and BSG segments experienced sales declines but improved gross margins, while unallocated corporate expenses decreased, boosting operating earnings Q2 2025 vs Q2 2024 Segment Performance | Segment | Net Sales Change | Comparable Sales Change | Gross Margin Change | | :--- | :--- | :--- | :--- | | SBS | (2.5)% | (0.3)% | +130 bps | | BSG | (3.2)% | (2.7)% | +40 bps | - The decrease in SBS net sales was driven by negative foreign currency exchange impact of **$7.8 million** and net store closures, with comparable sales slightly down by **0.3%**[62](index=62&type=chunk)[63](index=63&type=chunk) - The decrease in BSG net sales was primarily due to a **2.7%** decline in comparable sales, reflecting external factors impacting stylist purchasing behavior[63](index=63&type=chunk)[64](index=64&type=chunk) - Unallocated corporate expenses decreased by **$8.3 million** (**13.8%**) in Q2 2025, driven by lower professional fees and savings from the 'Fuel for Growth' initiative[68](index=68&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains **$574.9 million** in liquidity, with working capital slightly down, and has repaid debt and repurchased shares - Total outstanding debt principal was **$917.0 million** at March 31, 2025, consisting of **$600.0 million** in Senior Notes and **$317.0 million** on the Term Loan B[90](index=90&type=chunk) - In December 2024, the ABL facility was amended, extending the maturity date to **December 11, 2029**[44](index=44&type=chunk) - During the six months ended March 31, 2025, the company repurchased **1.1 million shares** for **$10.0 million** under its share repurchase program[95](index=95&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 is subject to market risks, with no material changes reported since the prior fiscal year's 10-K filing - There have been no material changes to the company's market risks since the fiscal year ended September 30, 2024[100](index=100&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal controls - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures are effective at a reasonable assurance level[105](index=105&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[106](index=106&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, not expected to materially impact its financial position or operations - The company does not expect ongoing legal proceedings to have a material adverse impact on its consolidated financial position, cash flows, or results of operations[108](index=108&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the company's risk factors since the prior fiscal year's 10-K filing - No material changes have occurred to the risk factors disclosed in the company's most recent Annual Report on Form 10-K[110](index=110&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%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company repurchased **1.1 million shares** for **$10.0 million**, with **$500.8 million** remaining under the program extended to September 2025 Issuer Purchases of Equity Securities (Quarter Ended March 31, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Value of Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2025 | — | $ — | $510,792,456 | | Feb 1 - Feb 28, 2025 | 426,613 | $9.32 | $506,816,515 | | Mar 1 - Mar 31, 2025 | 661,549 | $9.11 | $500,792,460 | | **Total this quarter** | **1,088,162** | **$9.19** | **$500,792,460** | - The share repurchase program, authorizing up to **$1.0 billion** in repurchases, was extended to **September 30, 2025**[36](index=36&type=chunk)[113](index=113&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 trading arrangements during the quarter - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter[112](index=112&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report, including corporate documents, certifications, and financial statements

Core Viewpoint - Sally Beauty Holdings, Inc. reported mixed results for Q2 of fiscal 2025, with earnings exceeding estimates but revenues declining due to macroeconomic challenges, prompting management to lower its full-year outlook [1][15]. Financial Performance - Adjusted earnings were 42 cents per share, surpassing the Zacks Consensus Estimate of 39 cents, and increased from 35 cents in the prior year [2]. - Consolidated net sales totaled $883.1 million, missing the consensus estimate of $901.1 million, and fell 2.8% year over year [2]. - Consolidated gross profit was $458.8 million, down 0.9% from $463.1 million in the prior year, while gross margin improved to 52%, up 100 basis points [5]. - Adjusted operating earnings rose to $75.2 million from $68.6 million in the previous year, with an adjusted operating margin expanding to 8.5% from 7.6% [7]. Sales Insights - Consolidated comparable sales declined 1.3%, influenced by external factors such as weather and macroeconomic uncertainty, although hair color products and digital marketplace growth provided some offset [3]. - Sally Beauty Supply segment net sales decreased 2.5% year over year to $500.6 million, while Beauty Systems Group net sales fell 3.2% to $382.6 million [8][9]. Cost Management - Adjusted SG&A expenses totaled $383.7 million, reflecting a $10.8 million decrease year over year, maintaining a flat percentage of sales at 43.4% [6]. - Adjusted EBITDA was $104.8 million, representing a 5.3% increase from the previous year, with an adjusted EBITDA margin of 11.9%, up 90 basis points [7]. Financial Health - The company ended the quarter with cash and cash equivalents of $92.2 million, long-term debt of $902.8 million, and total stockholders' equity of $699.8 million [11]. - Cash flow from operations was $51 million, with operating free cash flow at $32 million [11]. Future Outlook - For fiscal 2025, comparable sales are projected to range from flat to a 1% decline, with consolidated net sales expected to be nearly 75 basis points lower than comparable sales due to foreign exchange impacts [16]. - The adjusted operating margin is anticipated to be between 8% and 8.5% for fiscal 2025, revised down from earlier expectations [16].