Sally Beauty Holdings, Inc.

And good morning, everyone, and welcome to Sally Beauty Holdings conference call to discuss the company's fourth quarter and full-year fiscal 2024 results. All participants have been placed in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Additional instructions will be given at that time. 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 would like to remind everyone 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. We're pleased to conclude our fiscal year with strong results in our fourth quarter, which met our expectations on the top line and exceeded our expectations on the bottom line. The results reflect our fourth consecutive quarter of positive comp sales in our BSG segment and our second consecutive quarter of positive comp sales at Sally Beauty. This is a testament to our team, who have been navigating a dynamic environment with agility while meaningfully advancing our strategic pillars. As we anticipated, our business strengthened in the second half of the year as our initiatives continued to mature and gain traction, contributing more than 250 basis points to our comparable sales in the fourth quarter on top of a 250 basis point contribution in the third quarter. In addition to this top line momentum, Q4 represented another quarter of strong gross margins, effective cost control, and improved profitability, with adjusted operating margin expansion of 80 basis points over the prior year to 9.4%. It is clear that our actions around performance marketing, product innovation, digital marketplaces, expanded distribution, and new services are driving operating and financial improvement across the business. Touching on the financial highlights of the fiscal year, we delivered consolidated net sales of $3.7 billion, strong gross margins of 51%, and adjusted operating income of $315 million, enabling us to generate $247 million of cash flow from operations. We significantly strengthened our balance sheet with the refinancing of our senior notes and the repayment of our outstanding ABL balance, while also returning value to shareholders through $60 million of share repurchases throughout the year. There are also a number of operating successes to highlight. We built new and lasting relationships with customers through effective engagement, education, and marketing initiatives. In fiscal year 2024, Sally US and Canada generated 78% of sales from our 16 million loyalty customers. We delivered product innovation in both segments across third party and own brands, driving growth and customer engagement. We successfully expanded our marketplace initiative that is fueling digital sales growth and attracting new customers to the Sally brand through our partnerships with high visibility platforms, including Amazon, DoorDash, Instacart, and Walmart. And lastly, in the fourth quarter, DSG completed the strategic acquisition of Exclusive Beauty Supplies of Florida, a highly regarded professional beauty distributor. The acquisition adds three store locations and seven direct sales consultants to our existing presence in this important market. We'll also bring several key brands, such as Moroccan Oil, Olaplex, Rusk, and Verve, to our 75 cost and profit locations throughout Florida. It is evident that our commitment to our core pillars is working, enabling us to enter fiscal 2025 with strong operating and financial momentum. The business has returned to positive top line performance, and we're continuing to drive increased efficiency through our Fuel for Growth program, which is helping us improve profitability. By the end of fiscal 2025, We expect to capture cumulative gross margin and SG&A benefits of approximately $70 million, building on $28 million in benefit in fiscal 2024, and positioning us to generate up to $120 million of cumulative run rate benefits by the end of fiscal 2026. With a strengthened foundation in place, the business is on the path to our long-term low double-digit operating margin target. As we enter a new fiscal year, our priorities are clear. We'll be focusing on several initiatives under our strategic pillars of enhancing our customer centricity, growing our high margin own brands, and amplifying innovation, and increasing the efficiency of our operations. One of the initiatives we're particularly excited about is a Sally Beauty brand refresh, designed to move us from a trusted beauty supplier to a more dynamic beauty powerhouse. It's clear to us we have significant opportunity to leverage our rich heritage, brand equity, and loyal customer base to evolve Sally Beauty into a go-to destination for brand and product discovery. Our work will include an updated brand expression that is modern, sophisticated, and scalable that will begin rolling out across all our brand media touch points, in-store marketing, and digital assets, in the second half of fiscal 2025. At the same time, we'll be piloting a store refresh that incorporates key takeaways from our Studio by Sally initiative, which was our first foray into changing the perception of our stores. We've made the decision not to move forward with the services component of Studio, but rather take the highest and best learning to reimagine our Sally stores, creating a new shopping experience that inspires our customers to find joy in their beauty journey from discovery to results. We'll be starting with the Orlando market, bringing our customers a significantly enhanced shopping experience that reflects our newly modernized branding, expanded assortment, new floor plans and fixtures, and moments for discovery. We will evaluate the results of our Orlando initiative with a view towards potentially refreshing up to two-thirds of our Sally fleet in the U.S. With this commitment to refreshing the Sally Brandman experience, we are continuing to build for the long term, making strategic investments that build on our core strengths, deepen our connection to our customers, and extend our reach to new consumers. Another important initiative that continues to gain momentum is Licensed Colorist on Demand. which provides our customers with high touch service and professional consultation, ensuring they're set up for success throughout their hair color journey. We're incredibly pleased with how this offer is scaling. With over 60 licensed colorists on the platform, we're providing inspiration to our DIY customers and attracting new customers to the Sally brand while driving higher average ticket value, larger baskets, recurring color purchases, and more frequent visits. In Q4, the percentage of customers new to the brand eclipsed 45%. The average order was 33% higher than non-LCOD customers, and the number of consultations continued to build rapidly, averaging more than 4,000 per week, up 20% from Q3. Looking at our marketplace initiative, we're incredibly pleased with the level of success we've had in fiscal 2024, and look forward to accelerating growth in 2025 and beyond. We are currently partnered with Amazon, DoorDash, Instacart, and Walmart. This strategy is bringing new customers to Sally, while the ability to utilize in-store fulfillment is driving more profitable sales growth. Turning now to product innovation, which has proven to be a significant driver of growth and provides a meaningful competitive advantage to both Sally and BSG. In fiscal 2024, we delivered a consistent pipeline of innovation across our own and third-party brands, and we have plans to further accelerate this in the new fiscal year. At DSG, we're expanding our presence with major brands. For example, Amica, which was already fully rolled out to all Casa Prof stores, just recently expanded to all of our full-service direct sales consultants in October. Additionally, Moroccan Oil recently expanded into California and Nevada, and ColorWow is now available in all of our stores in New York, New Jersey, and Pennsylvania, as well as to our full-service team in North and South Carolina. Solid Beauty will also see innovation across color, bonding, nails, and appliances. Some of the key highlights include an expanded partnership with Boss Beauty coming in Q2, and a new ION 8-in-1 Air Styler that launched November 1st. Looking at Happy Beauty Co., we are continuing to build this concept and will have our next tranche of 10 pilot stores open before Black Friday. Strategically located in strip centers and mall locations, this next group of stores in the Dallas and Cenex markets is expected to provide an expanded data set and key learnings related to location, format, and demographics, that we will integrate into future planning. As we approach the holidays, we are prepared for a strong gifting season, supported by creative marketing and traffic driving strategies, including social media, grassroots initiatives, and in-store events. From a high-level perspective, we feel good about the results of the pilot program in its first year, and we'll continue to take a test and learn approach as we consider a more broad-based, long-term rollout. We're pleased to be entering fiscal 2025 with a position of strength. Sally has regained momentum, driving customer reactivation and new customer acquisition as performance marketing, education, product innovation, and virtual services are scaling, while also providing customers with an enhanced level of convenience through our marketplace offering. At BSG, we have a strong foundation from which to continue growing. fueled by a robust pipeline of product innovation, expanded distribution, and healthy underlying purchasing patterns among our professional stylist community. We have confidence that our industry leadership position, talented teams, and strong cash flow will continue to thrive with the flexibility to define our future and return value to shareholders over the long term. We are grateful for the hard work of our associates throughout the organization who bring an enthusiastic, customer-centric mindset to work every day. And we appreciate the support of our shareholders and look forward to updating you on our continued progress in fiscal 2025. Now I'll turn the call over to Marla to discuss the financials.