Sally Beauty Holdings, Inc.

Previous wording

This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information contained in our 2025 10-K, including the Risk Factors section therein, and the condensed consolidated interim financial statements and related notes included elsewhere in this Quarterly Report.

Previous wording

Financial Summary for the Three Months Ended March 31, 2026

Current wording

Financial Summary for the Three Months Ended June 30, 2026 (the “Quarter”)

Previous wording

Consolidated net sales for the three months ended March 31, 2026, increased $20.2 million, or 2.3%, to $903.4 million, compared to the three months ended March 31, 2025. Consolidated net sales included a positive impact from changes in foreign currency exchange rates of $12.8 million;

Current wording

•Consolidated net sales for the quarter increased $2.2 million, or 0.2%, to $935.5 million, compared to the three months ended June 30, 2025 (the “prior year quarter”). Consolidated net sales for the quarter included a $4.7 million favorable impact from changes in foreign currency exchange rates;

Previous wording

Consolidated comparable sales were 1.3% for the three months ended March 31, 2026;

Current wording

•Consolidated comparable sales were flat compared to the prior year quarter;

Previous wording

We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.

Current wording

We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales exclude the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers, as the calculation varies across the retail industry.

Previous wording

The following table sets forth, for the periods indicated, information concerning key measures on which we rely to evaluate our operating performance (dollars in thousands):

Current wording

The following table sets forth information concerning key measures on which we rely to evaluate our operating performance (dollars in thousands):

Previous wording

Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings. Additionally, unallocated expenses include certain costs associated with our Fuel for Growth initiative as well as the $26.6 million gain related to the sale of our corporate headquarters during the six months ended March 31, 2025. See Note 7, Property and Equipment, Net, for more information related to the sale of our corporate headquarters.

Current wording

(a)Unallocated expenses consist of corporate and shared costs and are included in SG&A expenses in our condensed consolidated statements of earnings. Additionally, unallocated expenses include certain costs associated with our “Fuel for Growth” initiative as well as the $26.6 million gain related to the sale of our corporate headquarters during the nine months ended June 30, 2025. See Note 7, Property and Equipment, Net, for more information related to the sale of our corporate headquarters.

Previous wording

Includes closed stores, net of stores opened for less than 14 months.

Current wording

(a)Includes closed stores, net of stores opened for less than 14 months.

Previous wording

Sally's net sales increase was primarily driven by an increase in comparable sales and positive impacts from foreign exchange rates, partially offset by net stores closed during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces, partially offset by softness in our hair care category and the strategic exit of the majority of our full service operations across Europe. Sally’s comparable sales reflect increases in our number of transactions and average unit retail.

Current wording

Sally's net sales increase was primarily driven by an increase in comparable sales and positive impacts from foreign exchange rates, partially offset by net store closures during the past twelve months. The increase in comparable sales was primarily driven by growth in hair color and digital marketplaces, partially offset by softness in our hair care category and the strategic exit of the majority of our full service operations across Europe. Sally’s comparable sales reflect increases in number of transactions and average unit retail.

Previous wording

Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.

Current wording

(a)Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.

Previous wording

BSG's net sales decrease was primarily from a decrease in comparable sales, partially offset by positive impacts from foreign exchange rates. The decrease in comparable sales was driven by external factors that impacted stylist purchasing behavior, partially offset by strong performance in our color category. BSG's comparable sales were slightly down with a decrease in the average number of units per transaction, offset by a higher average unit retail.

Current wording

BSG's net sales decrease was primarily driven by a decline in comparable sales. The decrease in comparable sales was primarily attributable to softness in the hair care category. BSG's comparable sales reflect a decrease in the number of transactions and a lower average number of units per transaction, partially offset by a higher average unit retail.

Previous wording

Sally. Sally’s gross profit increased for the three months ended March 31, 2026, as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins, resulting from benefits from our Fuel for Growth initiative, partially offset by impacts of the write-off of certain inventory related to the strategic exit of the majority of all our low-margin full service operations in Europe in connection with our Fuel for Growth initiative.

Current wording

Sally. Sally’s gross profit increased $10.1 million for the three months ended June 30, 2026 primarily as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins resulting from benefits associated with our Fuel for Growth initiative, partially offset by the write-off of certain inventory related to the strategic exit of the majority of our low-margin full-service operations in Europe.

Previous wording

Sally. Sally’s selling, general and administrative expenses increased $12.1 million, or 5.3%, for the three months ended March 31, 2026, and included an unfavorable impact from foreign exchange rates of $5.5 million. As a percentage of Sally net sales, selling, general and administrative expenses for the three months ended March 31, 2026, were 46.3%, compared to 45.8% for the three months ended March 31, 2025. The increase as a percentage of sales was primarily due to increased labor and other compensation-related expenses, higher commission costs from digital marketplaces, and higher rent and advertising expenses, partially offset by leveraging as a result of higher net sales, impacts of an impairment charge related to a trade name (non-cash expense of $1.8 million) in the prior year, and Fuel for Growth benefits.

Current wording

Sally. Sally’s selling, general and administrative (“SG&A”) expenses increased $4.0 million, or 1.7%, for the three months ended June 30, 2026, and included an unfavorable impact from foreign exchange rates of $2.1 million. As a percentage of Sally’s net sales, SG&A expenses for the three months ended June 30, 2026 were 44.9%, compared to 45.1% for the three months ended June 30, 2025. The decrease as a percentage of sales was primarily due to leveraging as a result of higher net sales, partially offset by increased labor and other compensation-related expenses and commission costs from digital marketplaces.

Previous wording

BSG. BSG’s selling, general and administrative expenses increased $0.6 million, or 0.5%, for the three months ended March 31, 2026. As a percentage of BSG net sales, selling, general and administrative expenses for the three months ended March 31, 2026, were 28.5% compared to 28.4% for the three months ended March 31, 2025. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses and rent expense, partially offset by lower depreciation and amortization expenses.

Current wording

BSG. BSG’s SG&A expenses increased $0.9 million, or 0.8%, for the three months ended June 30, 2026. As a percentage of BSG net sales, SG&A expenses for the three months ended June 30, 2026 were 27.8% compared to 26.9% for the three months ended June 30, 2025. The increase in BSG’s SG&A expenses was primarily due to increased labor and other compensation-related expenses and rent expense.

Previous wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $1.7 million, or 3.3%, for the three months ended March 31, 2026, primarily due to an increased labor and other compensation-related expenses, higher information technology expense, and higher facility expenses related to our new corporate headquarters, partially offset by lower expenses related to our Fuel for Growth initiative.

Current wording

Unallocated. Unallocated SG&A expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $3.9 million, or 6.9%, for the three months ended June 30, 2026 primarily due to lower labor and other compensation-related expenses and lower expenses in connection with our Fuel for Growth initiative, partially offset by higher facility expenses related to our new corporate headquarters.

Previous wording

The decrease in interest expense was primarily a result of a lower average outstanding principal balance on our Term Loan B. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

Current wording

Interest expense decreased due primarily to the lower average outstanding principal balance on our Term Loan B compared to the prior year quarter. See Note 10, Short-Term and Long-Term Debt, in Item 1 of this quarterly report for more details.

Previous wording

The effective tax rates were 25.9% and 26.3% for the six months ended March 31, 2026 and 2025, respectively. The decrease in the effective tax rate was primarily attributable to foreign operations and a more favorable tax impact of share‑based compensation in the current year, offset by higher federal tax credits in the prior year.

Current wording

The effective tax rates were 25.6% and 26.8% for the three months ended June 30, 2026 and 2025, respectively. The decrease in the effective tax rate was primarily attributable to the tax impact of the divestiture of the Spain operations in the prior-year quarter.

Previous wording

Sally's net sales increase was primarily driven by positive impacts from foreign exchange rates and an increase in comparable sales, partially offset by net stores closed during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces, partially offset by external factors that impacted consumer spending, including the U.S. government shutdown during the beginning of our fiscal year, softness in our hair care category, and the strategic exit of the majority of our full service operations across Europe. Sally’s comparable sales reflect increases in our average unit retail and number of transactions, partially offset by fewer average number of units per transaction.

Current wording

Sally's net sales increase was primarily driven by positive impacts from foreign exchange rates and an increase in comparable sales, partially offset by net store closures during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces. These increases were partially offset by softer consumer spending associated with the U.S. government shutdown early in the fiscal year, softness in the hair care category, and the impact of our strategic exit of the majority of our full-service operations across Europe. Sally’s comparable sales reflect increases in average unit retail and number of transactions.

Previous wording

Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.

Current wording

(a)Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.

Previous wording

BSG's net sales decrease was primarily from a decrease in comparable sales. The decrease in comparable sales was driven by external factors that impacted stylist purchasing behavior, including the U.S. government shutdown during the beginning of our fiscal year, partially offset by strong performance in our color category. BSG's comparable sales decrease was primarily a result of a decrease in the number of transactions and average number of units per transaction, partially offset by an increase in average unit retail.

Current wording

BSG's net sales decrease was primarily driven by a decline in comparable sales. Comparable sales reflect pressure on stylist spending associated with the government shutdown early in the fiscal year and softness in the hair care category, partially offset by strong performance in the color category. BSG's comparable sales reflect a decrease in the number of transactions and a lower average number of units per transaction, partially offset by a higher average unit retail.

Previous wording

Sally. Sally’s gross profit increased for the six months ended March 31, 2026, as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins, resulting from benefits from our Fuel for Growth initiative, partially offset by impacts of the write-off of certain inventory related to the strategic exit of the majority of our low-margin full service operations in Europe in connection with our Fuel for Growth initiative.

Current wording

Sally. Sally’s gross profit increased for the nine months ended June 30, 2026 as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins in the first half of the fiscal year, partially offset by the write-off of certain inventory related to the strategic exit of the majority of our low-margin full service operations in Europe, both as a result of our Fuel for Growth initiative.

Previous wording

BSG. BSG’s gross profit increased for the three months ended March 31, 2026, as a result of a higher gross margin on units sold, partially offset by a decrease in net sales. BSG’s gross margin improvement was driven by higher product margins, resulting from benefits from our Fuel for Growth initiative.

Current wording

BSG. BSG’s gross profit increased for the nine months ended June 30, 2026 as a result of a higher gross margin on units sold, partially offset by the impact from the lower sales volume. BSG’s gross margin improvement was driven by higher product margins resulting from benefits associated with our Fuel for Growth initiative.

Previous wording

Sally. Sally’s selling, general and administrative expenses increased $18.8 million, or 4.1%, for the six months ended March 31, 2026, and included an unfavorable impact from foreign exchange rates of $3.5 million. As a percentage of Sally net sales, selling, general and administrative expenses for the six months ended March 31, 2026, were 45.7%, compared to 45.1% for the six months ended March 31, 2025. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, higher commission costs from digital marketplaces, and higher rent and advertising expenses, partially offset by leveraging as a result of higher net sales, impacts of an impairment charge related to a trade name (non-cash expense of $1.8 million) in the prior year, and Fuel for Growth benefits.

Current wording

Sally. Sally’s SG&A expenses increased $22.8 million, or 3.3%, for the nine months ended June 30, 2026 and included an unfavorable impact from foreign exchange rates of $3.5 million. As a percentage of Sally’s net sales, SG&A expenses for the nine months ended June 30, 2026 were 45.4%, compared to 45.1% for the nine months ended June 30, 2025. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, rent, commission costs from digital marketplaces, and advertising.

Previous wording

BSG. BSG’s selling, general and administrative expenses decreased $1.1 million, or 0.5%, for the six months ended March 31, 2026. As a percentage of BSG net sales, selling, general and administrative expenses for the six months ended March 31, 2026, were 27.8% compared to 27.9% for the six months ended March 31, 2025. The decrease as a percentage of sales was primarily due to lower depreciation and amortization expenses, partially offset by higher labor and other compensation-related expenses and rent expense.

Current wording

BSG. BSG’s SG&A expenses decreased $0.3 million, or 0.1%, for the nine months ended June 30, 2026. As a percentage of BSG’s net sales, SG&A expenses for the nine months ended June 30, 2026 were 27.8% compared to 27.6% for the nine months ended June 30, 2025. The increase as a percentage of sales was primarily due to higher rent, partially offset by lower depreciation and amortization expenses.

Previous wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $27.6 million or 33.7%, for the six months ended March 31, 2026, primarily due to a $26.6 million gain on the sale of our corporate headquarters in the prior year, higher facility expenses related to our new corporate headquarters, higher labor and other compensation-related expenses, and an increase in information technology expenses, partially offset by lower costs in connection with our Fuel for Growth initiative.

Current wording

Unallocated. Unallocated SG&A expenses, which represent certain corporate costs that have not been allocated to our reporting segments, increased $23.7 million or 17.2%, for the nine months ended June 30, 2026 primarily due to a $26.6 million gain on the sale of our corporate headquarters in the prior year, higher facility expenses related to our new corporate headquarters, and an increase in information technology expenses, partially offset by lower costs in connection with our Fuel for Growth initiative.

Previous wording

The decrease in interest expense was primarily a result of a lower average outstanding principal balance on our Term Loan B. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

Current wording

Interest expense decreased primarily due to a lower average outstanding balance on our Term Loan B in 2026. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

Previous wording

Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL Facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payments. Additionally, under our share repurchase program (see below for more details) we will from time to time repurchase shares of our common stock on the open market to return value to our shareholders. At March 31, 2026, we had $639.7 million of available liquidity, which includes $482.3 million available for borrowing under our ABL Facility and cash and cash equivalents of $157.4 million.

Current wording

Our principal sources of liquidity are cash from operations, cash and cash equivalents, and borrowings under our ABL Facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, and payments of interest and principal on our debt. Additionally, under our share repurchase program (see below for more details) we may repurchase shares of our common stock on the open market to return value to our shareholders. At June 30, 2026, we had $655.5 million of available liquidity, which included $482.4 million available for borrowing under our ABL Facility and cash and cash equivalents of $173.1 million.

Previous wording

Our working capital (current assets less current liabilities) increased $13.8 million, to $739.3 million at March 31, 2026, compared to $725.5 million at September 30, 2025. The increase was primarily driven by the timing of accrued compensation and benefit expenses within accrued expenses and an increase in cash and cash equivalents, partially offset by the timing of landlord receivables related to our new corporate headquarters within accounts receivable, other.

Current wording

Our working capital (current assets less current liabilities) increased $31.8 million, to $757.3 million at June 30, 2026, compared to $725.5 million at September 30, 2025. The increase was primarily driven by the timing of accrued compensation and benefit expenses within accrued expenses and an increase in cash and cash equivalents, partially offset by the timing of landlord receivables related to our new corporate headquarters within accounts receivable, other and the timing of interest payments on our long-term debt.

Previous wording

The increase in cash provided by operating activities was primarily driven by the timing of accounts payable, an increase in cash receipts from customers, lower income taxes paid, and the receipt of landlord receivables related to our new corporate headquarters, partially offset by strategic reduction in slower moving inventory in the prior year while maintaining consistent inventory levels this year.

Current wording

The increase in cash provided by operating activities was primarily driven by the timing of the settlement of accounts payable, an increase in cash receipts from customers, lower income taxes paid, and the receipt of landlord receivables related to our new corporate headquarters, partially offset by a strategic reduction in slower-moving inventory in the prior year.

Previous wording

Net Cash (Used) Provided by Investing Activities

Current wording

Net Cash Used by Investing Activities

Previous wording

The change in our investing activities was a result of lapping the cash received of $44 million from the sale of our corporate headquarters in the prior year and higher capital expenditures in the current year, which includes the build out of our new corporate headquarters.

Current wording

Cash used in our investing activities was higher in the 2026 period primarily due to a $25 million increase in capital expenditures, which included the build out of our new corporate headquarters and investments in stores through our Sally Ignited initiative, and the impact of the lapping of the $44 million in cash proceeds received in 2025 from the sale of our former corporate headquarters.

Previous wording

At March 31, 2026, we had $835.0 million in outstanding debt principal, excluding unamortized debt issuance costs and debt discounts, in the aggregate, of $7.9 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $235.0 million remaining on our Term Loan B.

Current wording

At June 30, 2026, we had $815.0 million in outstanding debt principal, excluding unamortized debt issuance costs and debt discounts, in the aggregate, of $7.4 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $215.0 million remaining on our Term Loan B.

Previous wording

We utilize our ABL Facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL Facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL Facility are generally paid down with cash provided by our operating activities. During the six months ended March 31, 2026, there were no borrowings under the ABL Facility.

Current wording

We utilize our ABL Facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operating cash flow. In that regard, we may from time to time draw funds under the ABL Facility for general corporate purposes including funding of capital expenditures, acquisitions, debt repayments and share repurchases. Amounts drawn on our ABL Facility are generally paid down with cash provided by our operating activities. During the nine months ended June 30, 2026, there were no borrowings under the ABL Facility.

Previous wording

The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of March 31, 2026, and September 30, 2025:

Current wording

The following table presents the summarized balance sheet information for the Issuers and the Guarantors:

Previous wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the six months ended March 31, 2026 (in thousands):

Current wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the nine months ended June 30, 2026 (in thousands):

Previous wording

Under our current share repurchase program, we may from time to time repurchase our common stock on the open market. During the six months ended March 31, 2026 and 2025, we repurchased 3.0 million shares and 1.8 million shares of our common stock for $46.0 million and $20.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.

Current wording

Under our current share repurchase program, we may from time to time repurchase our common stock on the open market. During the nine months ended June 30, 2026 and 2025, we repurchased 4.9 million shares and 3.3 million shares of our common stock for $71.4 million and $33.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. See Note 5, Stockholders’ Equity.

Previous wording

Other than our debt, as discussed above, there have been no material changes outside the ordinary course of our business to our contractual obligations since September 30, 2025.

Current wording

Other than our voluntary debt repayments, as discussed above, there have been no material changes outside the ordinary course of our business to our contractual obligations since September 30, 2025.