Sally Beauty Holdings, Inc.

Now I would like to turn the call over to Jeff Harkins, Vice President of Investor Relations and Treasurer for Sally Beauty Holdings.

Jeff Harkins 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 sallybeautyholdings.com. I'd 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 on 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. I'm pleased to be here today to share our quarterly results and how we are managing through some interesting and challenging macro dynamics. As we anticipated, disruption from the Omicron surge began to recede in early February. In subsequent weeks, global inflationary pressures and supply chain challenges intensified. These factors, in addition to the lapping of stimulus benefits in January and March of 2021, muted our sales performance. That said, we see these as point-in-time challenges and remain confident that our strong competitive positioning, loyal customer base, and strategic growth initiatives position us well to drive profitable growth over the longer term. For the full quarter, we posted slightly positive comparable sales and a net sales decline of 1.6% as we operated 142 fewer stores than last year. Despite industry-wide increases in distribution and freight costs, we maintained our strong gross margin profit profile with adjusted gross margins coming in above 51%. Let me share a bit more detail on the sales performance of our two largest businesses, Sally US and Canada, and BSG. In our Sally business, both inflation and supply chain challenges impacted purchasing behavior among our core Sally customers. First, inflation. Both our internal and third party data indicate that discretionary spending is under pressure due to elevated fuel and grocery prices and higher inflation generally. We know this creates tough decision making for our lower income Sally customer, and we saw her reduce trips as she stretched her time between coloring her hair. While her basket was up sequentially in Q2 from Q1, It was down on a year-over-year basis as she shifted her basket mix to lower-priced core categories, including color and care, and away from higher-priced categories, such as styling tools, that performed well during last year's stimulus period. This category mix shift was further reinforced by softness in stock levels and styling tools due to supply chain challenges. It's important to note that we expect in-stocks in secondary categories, such as appliances and tools, to begin to improve later this fiscal year. In our BSG segment, demand was strong and we were chasing it all quarter as supply chain disruptions resulted in a shortage of raw materials for some of our vendors, negatively impacting stock levels of some of our top performing SKUs. At this point in time, we expect this pressure to begin to alleviate in our fiscal fourth quarter with a more pronounced improvement in our stock levels in fiscal 2023. As I mentioned a moment ago, our loyal customer base is stronger than ever. When we look at key factors such as Sally US and Canada's net promoter score of 83 and 17 million loyalty members comprising 76% of sales in Q2, we know our core customer is highly engaged. In our BSG segment, our stylists are engaged, demand is strong, and we are confident in the underlying health of the business. We have data on 100% of our BSG customers, and we are continuing to gain traction on our rewards credit card that was launched just 18 months ago, with 9% of our BSG sales coming from the card in the first half of this year. We believe our ability to leverage our loyal customer base through personalization, education, and highly targeted marketing initiatives at both SALI and BSG will be instrumental to helping us navigate the challenging environment in the second half of 2022 and beyond. More on this shortly. As we look to the second half of the year, we're evaluating macro forces and making adjustments as needed. A revised full year outlook for fiscal 2022 assumes that current macro issues, including inflation and supply chain disruptions, will persist to varying degrees for the foreseeable future. During this time, our teams are remaining nimble and continue to be laser focused on delighting and engaging the customer through our four strategic growth pillars. These include leveraging our digital platform, driving loyalty and personalization, delivering product innovation, and advancing our supply chain. I'll briefly provide an update on each one. First, from a digital perspective, We're continuing to focus on leveraging the robust omni-channel platform we built over the last four years. E-commerce sales penetration continues to increase, reaching 8.9% of sales in Q2 of this year, driven by BSG's e-commerce sales growth of 37%. During the quarter, our Sally US and Canada stores fulfilled 37% of e-commerce sales, as both of us comprised 16% Rapid two-hour delivery represented 14%, and ship-from-store accounted for 7%. We're seeing greater adoption of two-hour delivery, including lower cancel rates driven by improved supply chain efficiency, as well as increases in average ticket and conversion. Additionally, we're expanding our partnership with DoorDash for both Sally and BSG, and recently added two-hour delivery to the Sally mobile app, which provides another convenience to our Sally customer, 80% of them engage with us using a mobile device. Response to our new virtual color expert at Sally has been strong with the store pilot program currently at 35 stores in the Dallas, Fort Worth, and Northeast markets. We're planning on expanding the pilot program to another 20 stores in the second half of this year, and we'll evaluate further as we look to scale in fiscal year 2023. At BSG, we're expanding our distribution partnership with Regus by taking over servicing of the remaining 2,500 salon accounts from a competitor beginning in the fourth quarter. To that end, we're implementing a new Regus portal to streamline the ordering process for those salons, which also gives us a great ecosystem for the future growth of our large chain accounts. Moving on to our second growth pillar, loyalty and personalization. As I mentioned earlier, in the second quarter, approximately 76% of sales at Sally U.S. and Canada came from our loyalty program. Active member count continues to climb and stood at an all-time high at quarter end. In fact, we're particularly proud to note that Newsweek recently reported that Sally's loyalty program ranked in the top 10 out of 238 programs overall, and ranked number two in the food, health, and beauty category. We have a number of initiatives underway in personalization, encompassing product suggestions, imagery, and educational content. We recently rolled out individualized journeys and personalized website views based on historical search and purchasing behavior. For the majority of our Sally customers, the view on our site will be unique to her when she logs in via her browser or her mobile device. Next up, we'll be expanding our customized communication to SMS, social media, and direct mail. This will begin rolling out during the second half of this year with full implementation in the fiscal 2023. Additionally, in the second quarter, we implemented marketing mix modeling, a new data science tool that enables us to measure ROI in our marketing investments. In recent years, we brought in new marketing leadership and built a robust team. now layering on an important finance tool that will allow us to more effectively balance and optimize spend going forward. Turning now to our third pillar, product innovation. We are continuing to deliver a rich pipeline of innovation that is expected to fuel long-term growth. At SALI, we saw positive response to our launches in color, care, tools, and extensions. Supporting the personalization trend, we recently launched Urban Alchemy's new customizable hair care line at Sally. And in Q3, we have more exciting hair care roll-ups planned from brands like Wella and our own Strawberry Leopard. The innovation pipeline is equally robust at BSG. We saw positive response to our Q2 launches across color care and nails, including Wella's new Shinefinity line. our most significant BSG launch of fiscal 2022. On deck for Q3, we have exciting innovation coming in color, care, and tools, including Olaplex No. 9, Goldwell's gloss tones, and the new Urban Alchemy line. In the nails category, we're rolling out a reset of this category in both Sally and BSG during the second half, bringing in new fixturing with more visible in-store placement. This will be complemented by the recent launch of Kiera Sky Nails at BSG and forthcoming innovation at Sally in our own fiscal Q4. Moving to our final and fourth pillar, supply chain. At a high level, we're leveraging the important investments made in our systems, processes, and teams over the past several years to build a best-in-class merchandising and supply chain platform for the future. Outside of the macro supply chain issues that are affecting us right now, we continue to make progress in being in stock in color and care every time. Additionally, our teams are continuing the work of transforming our transportation network to full distribution, which is expected to increase our speed to market, improve reliability, and reduce costs. We're also piloting overnight deliveries in several markets in order to minimize disruptions during operating hours. Looking ahead, we are leaning into our strong competitive positioning, loyal and growing customer base, and trusted vendor partners, and we remain confident in our key growth pillars. We believe these attributes will enable us to drive growth and shareholder value in the coming years. I greatly appreciate the dedication of our teams as they keep our customers at the forefront of everything we do and their ongoing commitment to the journey ahead. With that, I'll turn the call over to Marlo to discuss financials, and then we'll open the call to questions.