Sally Beauty Holdings Reports Third Quarter Fiscal 2025 Results

• Fuel for Growth Program Yields Fourth Consecutive Quarter of Operating Margin Expansion and Double-Digit EPS Growth
• Strengthens Balance Sheet
• Adjusts Full Year Comparable Sales Outlook to High End of Prior Range
• Raises Full Year Adjusted Operating Margin Guidance

Sally Beauty Holdings, Inc. (NYSE:SBH) (the "Company"), the leader in professional hair color, today announced financial results for its third quarter ended June 30, 2025. The Company will hold a conference call today at 7:30 a.m. Central Time to discuss these results and its business.

Fiscal 2025 Third Quarter Summary

• Consolidated net sales of $933 million, a decrease of 1.0% compared to the prior year;
• Consolidated comparable sales decrease of 0.4%;
• Global e-commerce sales of $99 million, represents 10.6% of net sales;
• GAAP gross margin expands 50 basis points to 51.5%;
• Adjusted Gross Margin expands 100 basis points to 52.0%;
• GAAP operating earnings of $78 million and GAAP operating margin expands 80 basis points to 8.4%;
• Adjusted Operating Earnings of $86 million and Adjusted Operating Margin expands 30 basis points to 9.2%;
• GAAP diluted net earnings per share of $0.44, increases 22% over the prior year;
• Adjusted Diluted Net Earnings Per Share of $0.51, increases 13% over the prior year;
• Cash flow from operations of $69 million and Operating Free Cash Flow of $49 million; and
• Completes $21 million in term loan repayment and $13 million in share repurchases.

"Our third quarter results, including improved topline trends and solid year-over-year growth in operating profit, showcase the resilience of our business and the customer service focus of our team," said Denise Paulonis, president and chief executive officer. "Ongoing financial rigor, coupled with our fuel for growth initiative, drove double-digit earnings per share growth and a fourth consecutive quarter of adjusted operating margin expansion. Importantly, our talented teams are continuing to advance our strategic pillars against a complex macro backdrop. Given the strength of our third quarter, we are raising our adjusted operating margin guidance for full year fiscal 2025."

Fiscal 2025 Third Quarter Operating Results

Third quarter consolidated net sales were $933.3 million, a decrease of 1.0% compared to the prior year. The Company was operating 35 fewer stores at the end of the quarter compared to the prior year and foreign currency translation had no impact on consolidated net sales for the quarter. Global e-commerce sales were $99 million, or 10.6% of consolidated net sales, for the quarter.

Consolidated comparable sales decreased 0.4%, primarily reflecting macro uncertainty, which impacted consumer spending at Sally Beauty, partially offset by strong growth in hair color and digital marketplaces at Sally Beauty as well as continued momentum at Beauty Systems Group from expanded distribution and new brand innovation.

Consolidated gross profit for the third quarter was essentially flat at $481.0 million compared to $480.9 million in the prior year. Consolidated GAAP gross margin was 51.5%, an increase of 50 basis points compared to 51.0% in the prior year. Consolidated Adjusted Gross Margin, excluding the inventory write-off from the Company's European operations in connection with the fuel for growth initiative, was 52.0%, an increase of 100 basis points compared 51.0% in the prior year. The increase was driven primarily by the Sally Beauty segment, which delivered higher product margin resulting from benefits from the Company's fuel for growth initiative, lower distribution and freight costs, and lower shrink expense.

GAAP selling, general and administrative (SG&A) expenses totaled $402.8 million, a decrease of $5.9 million compared to the prior year. As a percentage of sales, SG&A expenses were 43.2% compared to 43.4% in the prior year. Adjusted Selling, General and Administrative Expenses, excluding the Company's costs related to the fuel for growth initiative, expenses related to the sale of the Company's corporate headquarters, and other non-recurring expenses, totaled $398.9 million, an increase of $2.1 million compared to the prior year. The increase was driven primarily by higher labor and other compensation-related expenses, and higher information technology costs, partially offset by $6.4 million in savings from the Company's fuel for growth initiative and lower depreciation expense. As a percentage of sales, Adjusted SG&A expenses were 42.7% compared to 42.1% in the prior year.

GAAP operating earnings and operating margin in the third quarter were $78.2 million and 8.4%, respectively, compared to $71.8 million and 7.6%, in the prior year. Adjusted Operating Earnings and Operating Margin, excluding the Company's costs related to the fuel for growth initiative, expenses related to the sale of the Company's corporate headquarters, costs related to restructuring efforts, and other non-recurring expenses, were $86.1 million and 9.2%, respectively, compared to $84.1 million and 8.9%, in the prior year.

GAAP net earnings in the third quarter were $45.7 million, or $0.44 per diluted share, compared to GAAP net earnings of $37.7 million, or $0.36 per diluted share, in the prior year. Adjusted Net Earnings, excluding the Company's costs related to the fuel for growth initiative, expenses related to the sale of the Company's corporate headquarters, costs related to restructuring efforts, the loss on debt extinguishment, and other non-recurring expenses, were $52.4 million, or $0.51 per diluted share, compared to Adjusted Net Earnings of $48.1 million, or $0.45 per diluted share, in the prior year. Adjusted EBITDA in the third quarter was $115.3 million, a decrease of 1.3% compared to the prior year, and Adjusted EBITDA Margin was 12.4%, flat to the prior year.

Balance Sheet and Cash Flow

As of June 30, 2025, the Company had cash and cash equivalents of $113 million and no outstanding borrowings under its asset-based revolving line of credit. At the end of the quarter, inventory was $1.01 billion, down 1.7% versus a year ago.

Third quarter cash flow from operations was $69.4 million and Operating Free Cash Flow totaled $49.1 million. During the quarter, the Company utilized its cash flow to repay $21 million of term loan B debt and repurchase 1.5 million shares under its share repurchase program at an aggregate cost of $13 million. The Company ended the quarter with a net debt leverage ratio of 1.7x.

Fiscal 2025 Third Quarter Segment Results

Sally Beauty Supply

• Segment net sales were $526.8 million in the quarter, a decrease of 1.8% compared to the prior year with a 1.1% decrease in segment comparable sales. The segment operated 32 fewer stores at the end of the quarter compared to the prior year and had a favorable impact of 10 basis points from foreign currency translation on reported sales. Segment e-commerce sales were $43 million, or 8.2% of segment net sales, for the quarter.
• GAAP gross margin increased by 110 basis points to 60.9% compared to the prior year.
• GAAP operating earnings were $83.3 million compared to $86.9 million in the prior year, representing a decrease of 4.2%. GAAP operating margin decreased to 15.8% compared to 16.2% in the prior year.

Beauty Systems Group

• Segment net sales were $406.5 million in the quarter, an increase of 0.2% compared to the prior year with a 0.5% increase in segment comparable sales. The segment had an unfavorable impact of 10 basis points on reported sales from foreign currency translation and operated 3 fewer stores at the end of the quarter compared to the prior year. Segment e-commerce sales were $56 million, or 13.7% of segment net sales, for the quarter.
• GAAP gross margin was flat to the prior year at 39.4%.
• GAAP operating earnings were $50.7 million compared to $46.8 million in the prior year, representing an increase of 8.4%. GAAP operating margin in the quarter was 12.5% compared to 11.5% in the prior year.

Fiscal Year 2025 Guidance*

The Company is updating its full year comparable sales outlook to the high end of the prior range and raising its full year Adjusted Operating Margin guidance to reflect current business trends.

Full Year

• Comparable sales are expected to be approximately flat (previously flat to down 1%)
• Consolidated net sales are expected to be approximately 75 basis points lower than comparable sales due to the expected unfavorable impact from foreign exchange rates on full year net sales and operating approximately 30 fewer stores compared to the prior year
• Adjusted Operating Margin is expected to be in the range of 8.6% to 8.7% (previously 8.0% to 8.5%)

Conference Call and Where You Can Find Additional Information

The Company will hold a conference call and live webcast at approximately 7:30 a.m. Central Time today, August 5, 2025, to discuss its financial results and its business. During the conference call, the Company may discuss and answer one or more questions concerning business and financial matters and trends affecting the Company. The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute material information that has not been previously disclosed.

Participants can listen to the live webcast of the conference call by accessing the investor relations section of the Company's website at sallybeautyholdings.com/investor-relations/events-and-presentations/events-calendar, or through our third-party host at SBH Q3 Earnings Webcast. To join the conference call, participants can pre-register to receive a dial-in number and unique PIN using the following link: Pre-register SBH Q3 Earnings Call. Pre-registration can be completed at any time up to and following the call start time.

A replay will be available on the Company's investor relations website after 10:00 a.m. Central Time on August 5, 2025, through August 5, 2026.

About Sally Beauty Holdings, Inc.

Sally Beauty Holdings, Inc. (NYSE:SBH), as the leader in professional hair color, sells and distributes professional beauty supplies globally through its Sally Beauty Supply and Beauty Systems Group segments. Sally Beauty Supply stores offer up to 7,000 products for hair color, hair care, nails, and skin care through proprietary brands such as Ion®, Bondbar®, Strawberry Leopard®, Generic Value Products®, Inspired by Nature® and Silk Elements® as well as professional lines such as Wella®, Clairol®, OPI®, L'Oreal®, Wahl® and Babyliss Pro®. Beauty Systems Group stores, branded as Cosmo Prof® or Armstrong McCall® stores, along with its outside sales consultants, sell up to 8,000 professionally branded products including Paul Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®, Amika® and Moroccanoil®, intended for use in salons and for resale by salons to retail consumers. For more information about Sally Beauty Holdings, Inc., please visit sallybeautyholdings.com/investor-relations.

Cautionary Notice Regarding Forward-Looking Statements

Statements in this news release and the schedules hereto that are not purely historical facts or that depend upon future events may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of words such as "believes," "projects," "expects," "can," "may," "estimates," "should," "plans," "targets," "intends," "could," "will," "would," "anticipates," "potential," "confident," "optimistic," or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact that these statements do not relate strictly to historical or current matters.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including the "Risk Factors" described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, and other filings with the U.S. Securities and Exchange Commission. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward-looking statements.

Use of Non-GAAP Financial Measures

This news release and the schedules hereto include the following financial measures that have not been calculated in accordance with accounting principles generally accepted in the United States, ("GAAP"), and are therefore referred to as non-GAAP financial measures: (1) Adjusted Gross Margin; (2) Adjusted Selling, General and Administrative Expenses; (3) Adjusted EBITDA and EBITDA Margin; (4) Adjusted Operating Earnings and Operating Margin; (5) Adjusted Net Earnings; (6) Adjusted Diluted Net Earnings Per Share; and (7) Operating Free Cash Flow. We have provided definitions below for these non-GAAP financial measures and have provided tables in the schedules hereto to reconcile these non-GAAP financial measures to the comparable GAAP financial measures.

Adjusted Gross Margin – We define the measure Adjusted Gross Margin as GAAP gross margin excluding the inventory write-off from the Company's European operations in connection with the fuel for growth initiative for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Adjusted Selling, General and Administrative Expenses – We define the measure Adjusted Selling, General and Administrative Expenses as GAAP selling, general and administrative expenses excluding the costs related to the Company's fuel for growth initiative, expenses related to the sale of the Company's corporate headquarters, and other non-recurring expenses for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Adjusted EBITDA and EBITDA Margin – We define the measure Adjusted EBITDA as GAAP net earnings before depreciation and amortization, interest expense, income taxes, share-based compensation, costs related to the Company's fuel for growth initiative, expenses related to the sale of the Company's corporate headquarters and other non-recurring expenses for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of net sales.

Adjusted Operating Earnings and Operating Margin – Adjusted operating earnings are GAAP operating earnings that exclude the costs related to the Company's fuel for growth initiative, expenses related to the sale of the Company's corporate headquarters, costs related to restructuring efforts, and other non-recurring expenses for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted Operating Margin is Adjusted Operating Earnings as a percentage of net sales.

Adjusted Net Earnings – Adjusted net earnings is GAAP net earnings that exclude the tax-effected the costs related to the Company's fuel for growth initiative, tax-effected expenses related to the sale of the Company's corporate headquarters, tax-effected costs from the loss on debt extinguishment, tax-effected costs related to restructuring efforts, and tax-effected other non-recurring expenses for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Adjusted Diluted Net Earnings Per Share – Adjusted diluted net earnings per share is GAAP diluted earnings per share that exclude the tax-effected costs related to the Company's fuel for growth initiative, tax-effected expenses related to the sale of the Company's corporate headquarters, tax-effected costs from the loss on debt extinguishment, tax-effected costs related to restructuring efforts, and tax-effected other non-recurring expenses for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures.

Operating Free Cash Flow – We define the measure Operating Free Cash Flow as GAAP net cash provided by operating activities less payments for capital expenditures (net). We believe Operating Free Cash Flow is an important liquidity measure that provides useful information to investors about the amount of cash generated from operations after taking into account payments for capital expenditures (net).

We believe that these non-GAAP financial measures provide valuable information regarding our earnings and business trends by excluding specific items that we believe are not indicative of the ongoing operating results of our businesses, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry.

We have provided these non-GAAP financial measures as supplemental information to our GAAP financial measures and believe these non-GAAP measures provide investors with additional meaningful financial information regarding our operating performance and cash flows. Our management and Board of Directors also use these non-GAAP measures as supplemental measures to evaluate our businesses and the performance of management, including the determination of performance-based compensation, to make operating and strategic decisions, and to allocate financial resources. We believe that these non-GAAP measures also provide meaningful information for investors and securities analysts to evaluate our historical and prospective financial performance. These non-GAAP measures should not be considered a substitute for or superior to GAAP results. Furthermore, the non-GAAP measures presented by us may not be comparable to similarly titled measures of other companies.

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Jeff Harkins

Investor Relations

940-297-3877

[email protected]