Sally Beauty Holdings, Inc.

Good morning, everyone, and welcome to Sally Beauty Holdings' conference call to discuss the company's third quarter fiscal 2025 results. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a -and-answer session. Additional instructions will be given at that time. Now I'd 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'd 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 factors section of our most recent report and report on Form 10-K and other files with the SEC. Any forward-looking statements made in this call represent our views only as of today, and we undertake no obligation to update them. The company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures and its earnings press release and audits website. Now I'd like to turn the call over to Denise to begin the full remarks.

Thank you, Jeff, and good morning, everyone. The resilience, educational excellence, and customer-first mindset of our team was on display in the third quarter. In turn, we delivered 13% earnings per share growth amidst a complex macro backdrop. Comparable sales were approximately flat, near the high end of our guidance range, and adjusted operating margin of .2% exceeded the high end of our expectations. In fact, our healthy gross margin profile and prudent cost control, coupled with benefits from our Fuel for Growth initiative, drove a fourth consecutive quarter of operating margin expansion. Additionally, our strong cash flow generation allowed us to strengthen the balance sheet through $21 million of debt repayment and also return value to shareholders via $13 million of share repurchases. In our Sally segment, our color category delivered continued standout performance, growing 4% with color customer count up, supported by strengths in our performance marketing results, particularly our -it-yourself value messaging, expansion of our personalization journeys, and consultation growth from our licensed colorist on-demand digital experience. Additionally, momentum continued in our digital marketplace expansion. Continuing the more cautious spending behavior we saw last quarter, our Sally customers were more choiceful in hair care and other ancillary categories, with some trade down in price and a focus on value. We are digging in deeper into our customers' needs in these areas and are refining our tactics from personalization and performance marketing to promotions to better serve them. Looking at BSG, sales returned to positive territory as the external factors that impacted stylist appointment books and purchasing behavior in Q2 receded. Of note, BSG has now delivered sales growth in six of the last seven quarters. Key drivers of Q3's top-line strengths include expanded distribution and robust product innovation across categories and brands. While navigating today's dynamic landscape, we're laser-focused on profitability and driving operating efficiencies through our Fuel for Growth program, which is currently in year two. This work encompasses merchandising, sourcing, supply chain, best cost locations, and non-trade spend, where we've carried out deep dives in our extracting value. We remain on track to generate cumulative gross margin and SG&A benefits of approximately $70 million by the end of this fiscal year and expect to capture cumulative run rate savings of $120 million by the end of fiscal 2026. Marla will provide a more granular look at the program in her remarks. Now I'll move to an update of some of the key 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. Starting with our marketplace strategy, we are pleased to see strong momentum across our portfolio partners, which includes DoorDash, Instacart, UberEats, Amazon, and Walmart. Our marketplace growth continues to be a key driver of e-commerce sales at Sallie US in Canada, which increased 21% over the prior year in fiscal Q3 and comprised 8% of total sales. Our presence on high visibility platforms is attracting new customers to the brand and enabling us to meet them where they shop while driving more profitable sales. We're pleased with how quickly this initiative is scaling and believe there is more growth to come. Turning now to our Licensed Colorist on Demand initiative, we're continuing to see broad-based strengths across the platform with consistent increases in key metrics including traffic, consultation, average transaction value, and purchasing frequency. In Q3, we had more than 90 licensed colorists averaging over 4,700 consultations per week. Additionally, our LCOD customers had an average transaction value of $35, which is 25% higher than what we see for non-LCOD customers, and LCOD customers are averaging one more trip on an annual basis compared to non-LCOD customers. Customer feedback has been overwhelmingly positive, and retention rates are significantly higher than non-LCOD customers. When we initially launched this platform, it gained traction quickly and has proven to be a powerful tool for broadening our reach, attracting new customers to Sally, and deepening our strategic mode and professional color for home use. Moving to innovation, which remains a cornerstone of our operating and growth strategies. In both segments of our business, we are proud to have built a reputation for bringing our customers a consistent pipeline of on-trend innovation, relevant brands, and exclusive launches. In the Sally segment, we saw strong performance from many of our own brands in Q3, including Ion, Bonbar, Inspired by Nature, and Strawberry Leopard. In June, we doubled down on the nail category with a significantly expanded assortment focused on trend-driven innovation, including brands like Nailboo, KISS, and Dashing Diva. We view nails as an important growth category for Sally, one that has become a leading discovery channel for new Sally customers and furthers our position as a leading destination for shoppers seeking trends, value, and convenience. At VSG, recent launches continue to perform well across color and care. This includes the successful and much anticipated April launch of K18, as well as Goddess Maintenance, a brand rooted in biotech. Additionally, our stylists embraced newness and expanded distribution from ColorWow, Image, Moroccan Oil, Schwarzkopf, and Wella. Innovation continued as we entered Q4 with the launch of the cruelty-free brand Unite in 800 Cosmoprof stores, our full service channel, and e-commerce. Unite includes hair masks, styling, and detangler products. I'm pleased to note that our core strategic pillars are continuing to drive sales and engagement. The combination of marketplaces, licensed colors on demand, and innovation, as well as personalization and enhanced performance marketing, contributed approximately 290 base points of comp sales growth in the third quarter and 250 points -to-date. Now I'll turn to our longer-term initiatives, starting with our Sally brand Refresh, which is designed to pivot Sally Beauty from a beauty supply house to a modernized specialty beauty retailer. As of July 31st, we have completed the Refresh in a total of 20 locations, which are one in Minnesota and one in New York. We expect to complete another 15 stores across the U.S. during our fourth quarter, resulting in approximately 35 stores updated by the end of our fiscal year. In these Refresh locations, we're prioritizing the customer journey and operational execution to deliver a superior in-store experience, one that encourages discovery, inspires, and engages. We're also testing expanded categories such as nail and cosmetics, along with adjacencies such as fragrance, by creating additional space through skew count rationalization. To date, we see customers spending more time in store and cross-shopping categories at an increased rate, as evidenced by basket growths coming from sales, cosmetics, and skin care. Additionally, we're seeing key indicators, including units per transaction, average unit retail, and average transaction value, all trending above the rest of the fleet. In short, the new look, feel, navigation, and merchandising strategies are driving the desired results. Importantly, in mid-July, we kicked off our Orlando marketing initiative, which includes billboards, paid social, paid search, YouTube, and CRM. This is a planned incremental marketing investment, spreading the word on our transformed Sallie experience to drive traffic and new customer acquisition. For a look at how the store refreshes are taking shape, please visit our IR website, where we've posted a short video. Looking ahead to fiscal 2026, we expect to complete another 50 refreshes, all occurring in stores that were previously slated for update or relocation. Therefore, we don't anticipate a material deviation to our historical capex level. We're moving forward at the measured pace to ensure we're positioned to generate meaningful returns and continue to have conviction in the future. We believe the opportunity to refresh up to 1,500 stores or approximately two-thirds of the Sallie U.S. fleet. We believe the refresh has the potential to be an important contributor to driving consistent top-line growth and look forward to advancing this strategy over the coming quarters. Shifting now to our happy beauty initiative, we continue to see some nice trends in our happy beauty stores, especially in our mall stores where there's natural traffic. We're still testing and learning on this concept and are leaning into happy beauty as an indie brand headquarters with a focus on key trends such as Korean beauty and fragrance stories. Additionally, our marketing message is focused on highlighting on-trend brands, offering tests before you buy, and utilizing influencer partnerships and social media to drive traffic and conversion. We're pleased to be entering the final stretch of our fiscal year on a strong note. We're raising our full-year adjusted operating margin guidance to reflect the strength of Q3 and our confidence in the company's strong market positioning, durable operating model, and long-term growth potential as we continue to advance our strategic pillars. We appreciate the support of our shareholders and remain committed to building long-term value for all of our stakeholders. Now, I'll turn the call over to Marlo to discuss the financials.