Sally Beauty Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to the Sally Beauty Holden's conference call to discuss the company's fiscal 2022 first quarter results. As participants, all participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Additional instructions will be given at that time. As a reminder, today's conference call is being recorded. Now I would like to turn the call over to Jeff Harkins, Vice President of Investor Relations and Treasurer for Sally Beauty Holdings.

Thank you. Good morning, everyone, and thank you for joining us. With me on the call today are Denise Polonis, President and Chief Executive Officer, and Marlo Cormier, Chief Financial Officer. Before we begin, I want to remind everyone that we have made a presentation available for today's call that can be viewed from the link provided on our investor site, at sallybdholies.com forward slash investor relations. I would also like to remind you that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. including those discussed in the risk factor section of our most recent annual report on Form 10-K and other filings with the SEC. Any forward-looking statements made in this call represent our views only as of today, and we undertake no obligations to update them. The company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website. Now I'd like to turn the call over to Denise to begin the formal remarks.

Thank you, Jeff, and good morning, everyone. We are pleased to begin the new fiscal year with solid financial results, which reflect strong demand for our core categories of color and care among both DIY enthusiasts and professional stylists. Our first quarter performance also reflects our ability to navigate and effectively manage macro headwinds from inventory and supply chain challenges. which has enabled us to maintain a healthy level in stocks. I'm proud of our team for continuing to prioritize our customers and remaining focused on delivering a superior experience at every turn, and believe we are well positioned to capitalize on the ongoing demand for our products and services. Notably, we're managing through the current Omicron cycle, which is having various impacts globally due to restrictions and closures in certain countries. As this latest variant gained traction in the final weeks of the quarter, we continued to prioritize the health and safety of our teams and our customers. I am proud of how our teams rose to the challenge to serve our customers while navigating a number of mitigation actions around staffing, store hours, and fulfillment. In the first quarter of fiscal 2022, comparable sales grew 6.1%, net sales grew 4.7%, Gross margin increased to 51%. And adjusted EPS was up 26% year-over-year. With this strong start to the year and favorable industry dynamics supporting our roadmap for 2022, we remain on track to achieve our full-year guidance. When we spoke to you last quarter, I'd been on the ground for just over one month. With another 12 weeks at the company, I've had the opportunity to dive deeper into the organization and have found the customer-first culture, talent, and capabilities here at Sallie to be remarkable. We're just beginning to leverage the infrastructure and extensive resources that were put in place over the past four years as we execute against our four strategic growth pillars. As a reminder, these include leveraging our digital platform, driving loyalty and personalization, delivering product innovation, and advancing our supply chain. I'm going to spend some time updating you on progress within each pillar. On the digital front, we're creating a robust omnichannel platform for our DIY enthusiasts and stylists. Our Sally and BSG customers are utilizing our full suite of services across ordering and delivery, which allows them to get product how and when they want it in as little as two hours. During the first quarter, We completed the work to connect our Cosmoprof app to our BSG store network to further enhance our fulfillment options of both this and two-hour delivery for our stylish communities. Additionally, we are seeing increased engagement on the education section of the refreshed BSG website, as well as improved customer satisfaction rates around functionality and ease of use. On the Sally side, We launched another convenience for our customers, a virtual color consultant currently being piloted in approximately 35 Sally stores in the Dallas-Fort Worth area. By way of a live video call conducted on site, this new service provides an incrementally higher level of touch and expertise for our Sally customers seeking color and care advice and education. Initial response has been positive and further strengthens our position as the leading expert in professional color. Overall, we're continuing to increase our digital velocity. This quarter, e-commerce sales increased 22% versus a year ago, driven mainly by BSG's refreshed e-commerce platform, and represented 8.3% of total sales in Q1. During the most recent quarter, our SALI US and Canada stores fulfilled 35% of e-commerce sales, as both of this comprised 19%, rapid two-hour delivery represented 10%, and ship from store accounted for 6%. As we continue to scale and optimize a full suite of omnichannel services for both our SALI and BSG customers, we believe e-commerce can reach 15% or more of sales in the coming years. Moving to our second growth pillar, loyalty and personalization. In the first quarter, approximately 75% of sales at Sally US and Canada came from our loyalty program. In fact, active member count continues to climb and stood at an all-time high at the quarter end. Additionally, approximately 9% of our BSG sales in Q1 came from our nascent and rapidly growing rewards credit card, as compared to 8% in the previous quarter. This represents yet another way we are becoming increasingly engaged with our stylist community who look to us as the go-to resource for helping them profitably run their business. There's no question that our customers are our biggest asset, and we have the luxury of knowing who our customers are. This advantage, coupled with our growing data and customer insights capabilities, will fuel more efficient marketing and position us to deliver increased personalization and create stronger connections with our customers. all of which support accelerating revenue and increased customer lifetime value. On the marketing front, we'll be investing further in digital marketing and social media campaigns to drive traffic and sales in fiscal 2022. As we aim to expand consideration and acquisition of new customers into the Sally Beauty funnel, we plan to broaden our footprint in three key areas that represent critical touch points to beauty discovery. First, we're investing in brand ambassadors who are viewed as authoritative voices on Instagram and TikTok that drive brand awareness and create content for their followers. Beginning in Q3, we'll also be building our own Sally community of DIY micro-influencers. This is a grassroots, organic, community-building initiative that will incorporate smaller influencers who receive samples, new products, and invitations to events. Lastly, we're creating a DIY 2.0 education platform for YouTube that is expected to launch in the third quarter. Turning now to our third growth pillar, product innovation. The pipeline of innovation slated for fiscal 2022 is rich, and we expect this to be a significant driver of growth throughout the year. A few noteworthy call-outs. At Sally, our new vivid color line, Strawberry Leopard, continues to gain traction both in stores and online on our dedicated Strawberry Leopard website. Additionally, in the first quarter, we launched Dashing Diva Glaze, an at-home gel manicure, as well as the Ion Lux TurboCharge dryer, a high-end hair dryer that goes head-to-head with the best in tech brands at a more affordable price point. We have more innovation coming in higher-end appliances in the second half of the year And we'll also be introducing Strawberry Leopard hair care products to supplement the recent color launch. At VSG, the Q1 launch of the new 4P Toning Shampoo was among the best new product launches we've seen from the Olaplex brand. Another key partner to us is Wella, which represents VSG's largest color brand. This month, we'll see an exciting launch from their sub-brand, Shinefinity, which adds glossing to color. This is expected to be the biggest launch for BSG in 2022. Overall, a great deal of excitement around innovation and much more to come during the year. With the customer at the forefront of our strategy, our fourth and final growth pillar is supply chain. Our mission is to be in stock, in color and care, every time, and we've made great progress towards building a highly automated, integrated supply chain network that will take us well into the future and allow us to meet growing demand. We're in the final phase of JDA implementation, and as of this week, the system will be up and running in all SALI and DSG locations. The remaining step is fully integrating with our next north Texas D.C., Once completed, we'll be positioned to leverage and scale our new capabilities across inventory forecasting, localized assortment, pricing and promotions, as well as shorten ship-to-me fulfillment times for 15% to 20% of our customers. As we look ahead, even with the uncertainties that COVID creates, we continue to have a great deal of confidence in fiscal 2022 and believe we are well-positioned to continue driving top-line growth at structurally higher operating margins in the years to come. We're reiterating our financial outlook for fiscal 2022 and expect the business to generate strong cash flow and provide meaningful capital allocation optionality moving forward. In addition to the four growth pillars I discussed, we're focusing on building out additional opportunities that will fuel our business and create meaningful shareholder value over the long term. I'd like to express my thanks to our talented and passionate team who are committed to delighting our customers and drive our confidence in the future. With that, I'll turn the call over to Marla to discuss the financials, and then we'll look forward to taking your questions.