Sally Beauty Holdings, Inc.

1. Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated interim financial statements of Sally Beauty Holdings, Inc. and its subsidiaries included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures included herein are adequate for the interim period presented. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 10-K”). In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and that are necessary to present fairly our consolidated financial position as of June 30, 2026 and September 30, 2025, our consolidated results of operations, consolidated comprehensive income, consolidated statements of stockholders’ equity for the three and nine months ended June 30, 2026 and 2025, and consolidated cash flows for the nine months ended June 30, 2026 and 2025.

Principles of Consolidation

The unaudited condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All amounts are presented in U.S. dollars.

Accounting Policies

We adhere to the same accounting policies in the preparation of our condensed consolidated interim financial statements as we do in the preparation of our full year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon our estimated annual effective income tax rate.

Use of Estimates

In order to present our unaudited condensed consolidated interim financial statements in conformity with GAAP, we are required to make certain estimates and assumptions that impact our interim financial statements and supplementary disclosures. These estimates may use forecasted financial information based on reasonable assumptions available at the time of preparation, however, actual results could differ due to changes in facts and circumstances. Significant estimates and assumptions are involved in the accounting for sales allowances, deferred revenue, valuation of inventory, amortization and depreciation, intangible assets and goodwill, and other reserves. We believe these estimates and assumptions are reasonable based on management’s knowledge of current events and anticipated further actions, and changes in facts and circumstances may result in revised estimates and impact actual results. Revisions to estimates are recognized in the period in which the facts that give rise to the change become known.

2. Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to expand disclosures in an entity’s income tax rate reconciliation table and the disaggregation of taxes paid in U.S. and foreign jurisdictions. The amendments in this update are effective for annual periods beginning after December 15, 2024, which for us is the fiscal year ending September 30, 2026. The new standard is not expected to have a material impact on our consolidated financial statements; however, we expect to provide additional detail and disclosures upon adoption.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40), which requires, among other things, more detailed disclosure about types of expenses in commonly presented expense captions such as cost of goods sold (“COGS”) and selling, general and administrative (“SG&A”) expenses. The update is intended to improve disclosures by providing amounts related to inventory purchases, employee compensation, depreciation, and amortization. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted, but we currently do not expect to adopt this standard early. We are currently evaluating the impact of this update to our consolidated financial statements and disclosures.

3. Revenue Recognition

Substantially all of our revenue is derived through the sale of merchandise at the point-of-sale in our stores or when products are shipped for e-commerce orders. Revenue is recognized net of estimated sales returns and sales taxes, when control of the merchandise is transferred to the customer. We estimate sales returns based on historical data.

Changes to our contract liabilities, which are included in accrued liabilities in our condensed consolidated balance sheets, were as follows (in thousands):

See Note 12, Segment Reporting, for additional information regarding the disaggregation of our sales revenue.

4. Fair Value Measurements

We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement, as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This valuation hierarchy is based upon the transparency of inputs used in the valuation of an asset or liability on the measurement date.

The three levels of that hierarchy are defined as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities;

Level 2 - Pricing inputs are other than quoted prices in active markets, included in Level 1, that are either directly or indirectly observable; and

Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own model with estimates and assumptions.

Financial Instruments Measured at Fair Value on Recurring Basis

Consistent with the fair value hierarchy, we categorized our financial assets and liabilities as follows:

The fair value of each asset and liability was determined using widely accepted valuation techniques, including discounted cash flow analyses and observable inputs, such as market interest rates and foreign exchange rates.

Other Fair Value Disclosures

The carrying amounts, if any, of cash equivalents, trade and other accounts receivable, accounts payable, and borrowings under our $500 million asset-based senior secured loan facility (the “ABL Facility”) approximate their respective fair values due to the short-term nature of these financial instruments. The carrying amounts and corresponding estimated fair values of our long-term debt, excluding debt issuance costs and original issue discounts, are as follows:

5. Stockholders’ Equity

Share Repurchase Program

We have a share repurchase program, as originally approved and authorized by our Board of Directors (the “Board”) in August 2017, with the term extended by the Board in May 2025 to September 30, 2029 to repurchase up to $1.0 billion of our common stock, subject to certain limitations governed by our debt agreements. Under the share repurchase program, we had remaining authorization to use $395.9 million to repurchase shares of our common stock as of June 30, 2026. During the three and nine months ended June 30, 2026, we repurchased 1.9 million shares and 4.9 million shares of our common stock at a total cost of $25.3 million and $71.4 million, respectively, excluding the impact of excise taxes. During the three and nine months ended June 30, 2025, we repurchased 1.5 million shares and 3.3 million shares of our common stock at a total cost of $13.0 million and $33.0 million, respectively, excluding the impact of excise taxes. Shares purchased under this program are cancelled after being repurchased.

Accumulated Other Comprehensive Loss

The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):

The tax impacts for the changes in other comprehensive income (loss) and the reclassifications to net earnings were not material.

6. Weighted-Average Shares

The following table presents a reconciliation of basic and diluted weighted-average shares (in thousands):

7. Property and Equipment, Net

In October 2024, we sold our former corporate headquarters located in Denton, Texas to Denton County, Texas for $45.5 million, excluding $1.5 million in closing costs. As a result of the sale, we recognized a gain of approximately $26.6 million within SG&A expenses in our condensed consolidated statements of earnings for the nine months ended June 30, 2025.

8. Goodwill and Intangible Assets

As of January 31, 2026, we completed our annual assessments for impairment of goodwill and indefinite-lived intangible assets. We performed a qualitative analysis for goodwill and determined there was no indication of impairment. We performed a quantitative analysis for indefinite-lived assets and determined that there was no impairment. Whileno impairment losses were recognized in 2025 in connection with our goodwill, we recognized a $1.8 million impairment loss in 2025 in SG&A expenses for a trade name within the Sally reporting segment.

Goodwill allocated to our Sally and BSG reporting units, which are also defined as our Sally and BSG segments, was $89.9 million and $448.5 million, respectively, as of June 30, 2026. For the nine months ended June 30, 2026, changes in goodwill reflected the effects of foreign currency exchange rates of $2.2 million.

The following table presents our amortization expense for the period (in thousands):

9. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

10. Short-Term and Long-Term Debt

At June 30, 2026, there wereno outstanding borrowings under our ABL Facility, and we had $482.4 million available for borrowing, including under our Canadian sub-facility, subject to a borrowing base limitation, as reduced by outstanding letters of credit.

During the three and nine months ended June 30, 2026, we voluntarily repaid $19.0 million and $57.0 million, respectively, of outstanding Term Loan B principal in addition to our mandatory quarterly payment. In connection with the voluntary repayments, we recognized a $0.1 million loss and a $0.4 million loss on debt extinguishment within interest expense for the write-off of related unamortized debt issuance costs for the three and nine months ended June 30, 2026, respectively.

11. Derivative Instruments and Hedging Activities

During the nine months ended June 30, 2026, we didnot purchase or hold any derivative instruments for trading or speculative purposes. See Note 4, Fair Value Measurements, for the classification and fair value of our derivative instruments.

Designated Cash Flow Hedges

Foreign Currency Forwards

We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on forecasted inventory purchases in U.S. dollars by our foreign subsidiaries. At June 30, 2026, we held forwards, which expire ratably through September 30, 2026, with notional amounts, based upon exchange rates at June 30, 2026, as follows (in thousands):

The changes in fair value related to these foreign currency forwards are recorded quarterly in AOCL. As the forwards are exercised, the realized gains or losses are recognized in COGS, based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended June 30, 2026 and 2025, we recognized a net loss of $0.2 million and a net gain of $0.6 million, respectively. For the nine months ended June 30, 2026 and 2025, we recognized a net loss of $0.7 million and a net gain of $0.7 million, respectively. Based on valuations and exchange rates as of June 30, 2026, we expect to reclassify net losses of approximately $0.7 million from AOCL to COGS over the next 12 months.

Interest Rate Swap

We had athree-year interest rate swap agreement with an initial notional amount of $200 million (the “Interest Rate Swap”) that matured in April 2026. The Interest Rate Swap was used to mitigate the exposure to higher interest rates in connection with our Term Loan B due in 2030. The Interest Rate Swap involved fixed monthly payments at the contract rate of 3.705% in exchange for a floating interest payment based on the one-month Adjusted Term SOFR Rate. The Interest Rate Swap was designated as a cash flow hedge. Changes in the fair value of the Interest Rate Swap were recorded quarterly, net of income tax, in AOCL.

During the term of the agreement, we recognized either income or expense, based on the position of the interest rates, in interest expense on our condensed consolidated statements of earnings related to the Interest Rate Swap. For the three months ended June 30, 2025, we recognized income of $0.2 million. For the nine months ended June 30, 2026 and 2025, we recognized income of $0.1 million and $1.1 million, respectively.

Non-Designated Derivative Instruments

We also use foreign exchange forward contracts to mitigate our exposure to exchange rate fluctuations related to certain intercompany balances that are not considered permanently invested. At June 30, 2026, we held forward contracts, which mature in July and October 2026, with notional amounts, based upon exchange rates at June 30, 2026, as follows (in thousands):

Changes in the fair value of the forward contracts, as well as realized gains or losses upon settlement, are recorded in SG&A expenses. For the three months ended June 30, 2026 and 2025, the effects of foreign exchange contracts on our condensed consolidated financial statements were net losses of $0.3 million and $1.3 million, respectively. For the nine months ended June 30, 2026 and 2025, the effects of foreign exchange contracts on our condensed consolidated financial statements were net losses of $0.2 million and $0.3 million, respectively.

12. Segment Reporting

Our business is organized intotwo reportable segments: (i) Sally, a domestic and international chain of retail stores and digital platforms that offers professional beauty supplies to both salon professionals and retail customers primarily in North America, including Puerto Rico, and parts of Europe and South America and, (ii) BSG, including its franchise-based business Armstrong McCall, a full service distributor of beauty products and supplies that offers professional beauty products directly to salons and salon professionals through its professional-only stores, its own sales force, and digital platforms in partially exclusive geographic territories in the U.S., including Puerto Rico, and Canada.

Our Chief Operating Decision Maker (“CODM”), whom we have determined to be our Chief Executive Officer, regularly evaluates the performance of our reportable segments by comparing current segment operating earnings to comparable prior periods and forecasted amounts. Included within segment operating earnings, the significant expense categories below are regularly provided to the CODM.

Segment Operating Performance

The following tables summarize our results for the three and nine months ended June 30, 2026 and 2025 (in thousands):

(a)There were no intersegment sales between our segments, nor did any single customer account for 10% or more of revenue.

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

Other Segment Disclosures

Disaggregation of net sales by segment

The following tables disaggregate our segment revenues by merchandise category.

The following tables disaggregate our segment revenue by sales channels: