Sally Beauty Holdings, Inc. 10-Q

Item 1. Financial Statements. Sally Beauty Holdings, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except par value data) June 30, 2026 September 30, 2025 (Unaudited) Assets Current assets: Cash and cash equivalents $ 173,100 $ 149,162 Trade accounts receivable, net 26,443 31,828 Accounts receivable, other 69,499 84,734 Inventory 996,001 987,575 Other current assets 46,159 48,154 Total current assets 1,311,202 1,301,453 Property and equipment, net of accumulated depreciation of $ 984,490 at June 30, 2026 and $ 937,596 at September 30, 2025 279,220 284,284 Operating lease assets 652,279 646,698 Goodwill 538,429 540,674 Intangible assets, excluding goodwill, net of accumulated amortization of $ 9,687 at June 30, 2026 and $ 14,686 at September 30, 2025 50,760 53,018 Other assets 51,254 44,969 Total assets $ 2,883,144 $ 2,871,096 Liabilities and Stockholders’ Equity Current liabilities: Current maturities of long-term debt $ 4,000 $ 4,000 Accounts payable 223,860 224,507 Accrued liabilities 163,992 184,641 Current operating lease liabilities 161,743 158,566 Income taxes payable 293 4,260 Total current liabilities 553,888 575,974 Long-term debt 803,567 861,974 Long-term operating lease liabilities 546,098 538,426 Other liabilities 20,904 21,026 Deferred income tax liabilities, net 87,213 79,489 Total liabilities 2,011,670 2,076,889 Stockholders’ equity: Common stock, $ 0.01 par value. Authorized 500,000 shares; 94,092 and 97,875 shares issued and shares outstanding at June 30, 2026 and September 30, 2025, respectively 941 979 Preferred stock, $ 0.01 par value. Authorized 50,000 shares; none issued — — Accumulated earnings 979,960 898,076 Accumulated other comprehensive loss, net of tax ( 109,427 ) ( 104,848 ) Total stockholders’ equity 871,474 794,207 Total liabilities and stockholders’ equity $ 2,883,144 $ 2,871,096 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents Sally Beauty Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Earnings (In thousands, except per share data) (Unaudited) Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 Net sales $ 935,490 $ 933,307 $ 2,782,040 $ 2,754,348 Cost of goods sold 445,241 452,322 1,332,760 1,337,706 Gross profit 490,249 480,985 1,449,280 1,416,642 Selling, general and administrative expenses 403,853 402,812 1,215,019 1,168,776 Operating earnings 86,396 78,173 234,261 247,866 Interest expense 13,693 15,709 42,478 49,440 Earnings before provision for income taxes 72,703 62,464 191,783 198,426 Provision for income taxes 18,621 16,740 49,449 52,479 Net earnings $ 54,082 $ 45,724 $ 142,334 $ 145,947 Earnings per share: Basic $ 0.57 $ 0.46 $ 1.47 $ 1.44 Diluted $ 0.55 $ 0.44 $ 1.43 $ 1.40 Weighted-average shares: Basic 95,058 100,463 96,537 101,367 Diluted 97,912 103,239 99,402 104,187 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents Sally Beauty Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (In thousands) (Unaudited) Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 Net earnings $ 54,082 $ 45,724 $ 142,334 $ 145,947 Other comprehensive income (loss): Foreign currency translation adjustments 314 27,174 ( 4,378 ) 11,350 Interest rate swap, net of tax 4 ( 41 ) ( 45 ) 703 Foreign exchange contracts, net of tax ( 203 ) ( 1,122 ) ( 156 ) ( 220 ) Other comprehensive income (loss), net of tax 115 26,011 ( 4,579 ) 11,833 Total comprehensive income $ 54,197 $ 71,735 $ 137,755 $ 157,780 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents Sally Beauty Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity (In thousands) (Unaudited) Accumulated Additional Other Total Common Stock Paid-in Accumulated Comprehensive Stockholders’ Shares Amount Capital Earnings Loss Equity Balance at September 30, 2025 97,875 $ 979 $ — $ 898,076 $ ( 104,848 ) $ 794,207 Net earnings — — — 45,557 — 45,557 Other comprehensive income — — — — 4,132 4,132 Share-based compensation — — 7,555 — — 7,555 Stock issued for equity awards 1,493 15 192 — — 207 Employee withholding taxes paid related to net share settlement ( 517 ) ( 5 ) ( 7,331 ) — — ( 7,336 ) Share Repurchase Program ( 1,359 ) ( 14 ) ( 416 ) ( 20,327 ) — ( 20,757 ) Balance at December 31, 2025 97,492 $ 975 $ — $ 923,306 $ ( 100,716 ) $ 823,565 Net earnings — — — 42,695 — 42,695 Other comprehensive loss — — — — ( 8,826 ) ( 8,826 ) Share-based compensation — — 5,969 — — 5,969 Stock issued for equity awards 68 1 70 — — 71 Employee withholding taxes paid related to net share settlement ( 1 ) — ( 9 ) — — ( 9 ) Share Repurchase Program ( 1,661 ) ( 17 ) ( 6,030 ) ( 19,546 ) — ( 25,593 ) Balance at March 31, 2026 95,898 $ 959 $ — $ 946,455 $ ( 109,542 ) $ 837,872 Net earnings — — — 54,082 — 54,082 Other comprehensive income — — — — 115 115 Share-based compensation — — 4,572 — — 4,572 Stock issued for equity awards 94 1 419 — — 420 Share Repurchase Program ( 1,900 ) ( 19 ) ( 4,991 ) ( 20,577 ) — ( 25,587 ) Balance at June 30, 2026 94,092 $ 941 $ — $ 979,960 $ ( 109,427 ) $ 871,474 7 Table of Contents Sally Beauty Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity (In thousands) (Unaudited) Accumulated Additional Other Total Common Stock Paid-in Accumulated Comprehensive Stockholders’ Shares Amount Capital Earnings Loss Equity Balance at September 30, 2024 101,854 $ 1,019 $ — $ 740,685 $ ( 113,169 ) $ 628,535 Net earnings — — — 61,013 — 61,013 Other comprehensive loss — — — — ( 23,981 ) ( 23,981 ) Share-based compensation — — 6,053 — — 6,053 Stock issued for equity awards 1,162 12 69 — — 81 Employee withholding taxes paid related to net share settlement ( 392 ) ( 4 ) ( 5,260 ) — — ( 5,264 ) Share Repurchase Program ( 753 ) ( 8 ) ( 862 ) ( 9,078 ) — ( 9,948 ) Balance at December 31, 2024 101,871 $ 1,019 $ — $ 792,620 $ ( 137,150 ) $ 656,489 Net earnings — — — 39,210 — 39,210 Other comprehensive income — — — — 9,803 9,803 Share-based compensation — — 4,238 — — 4,238 Stock issued for equity awards 112 1 321 — — 322 Employee withholding taxes paid related to net share settlement ( 1 ) — ( 7 ) — — ( 7 ) Share Repurchase Program ( 1,088 ) ( 11 ) ( 4,552 ) ( 5,676 ) — ( 10,239 ) Balance at March 31, 2025 100,894 $ 1,009 $ — $ 826,154 $ ( 127,347 ) $ 699,816 Net earnings — — — 45,724 — 45,724 Other comprehensive income — — — — 26,011 26,011 Share-based compensation — — 4,509 — — 4,509 Share Repurchase Program ( 1,456 ) ( 15 ) ( 4,509 ) ( 8,627 ) — ( 13,151 ) Balance at June 30, 2025 99,438 $ 994 $ — $ 863,251 $ ( 101,336 ) $ 762,909 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents Sally Beauty Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended June 30, 2026 2025 Cash Flows from Operating Activities: Net earnings $ 142,334 $ 145,947 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 75,135 75,593 Share-based compensation expense 18,096 14,800 Amortization of deferred financing costs 1,437 1,609 Loss on early extinguishment of debt 441 943 Impairment of long-lived assets 418 3,222 Gain on sale of property and other — ( 26,641 ) Gain on divestiture of subsidiary — ( 768 ) Deferred income taxes 7,657 ( 6,846 ) Changes in: Trade accounts receivable 5,248 4,028 Accounts receivable, other 14,926 ( 6,836 ) Inventory ( 10,259 ) 34,193 Other current assets 2,086 3,954 Other assets ( 6,396 ) 506 Operating leases, net 5,026 ( 10 ) Accounts payable and accrued liabilities ( 4,592 ) ( 74,571 ) Income taxes payable ( 3,976 ) ( 14,120 ) Other liabilities ( 120 ) ( 1,051 ) Net cash provided by operating activities 247,461 153,952 Cash Flows from Investing Activities: Payments for property and equipment ( 84,257 ) ( 59,271 ) Proceeds from sale of property and other — 43,574 Proceeds from divestiture of subsidiary — 3,128 Acquisitions, net of cash acquired — ( 371 ) Net cash used by investing activities ( 84,257 ) ( 12,940 ) Cash Flows from Financing Activities: Proceeds from ABL Facility — 466,000 Repayments of long-term debt and ABL Facility ( 60,000 ) ( 564,122 ) Debt issuance costs — ( 1,535 ) Proceeds from stock options exercised 698 403 Payments for common stock repurchased ( 71,937 ) ( 33,338 ) Employee withholding taxes paid related to net share settlement of equity awards ( 7,345 ) ( 5,271 ) Net cash used by financing activities ( 138,584 ) ( 137,863 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 682 ) 1,690 Net increase in cash and cash equivalents 23,938 4,839 Cash and cash equivalents, beginning of period 149,162 107,961 Cash and cash equivalents, end of period $ 173,100 $ 112,800 Supplemental Cash Flow Information: Interest paid $ 32,097 $ 38,769 Income taxes paid $ 48,236 $ 75,391 Capital expenditures incurred but not paid $ 8,497 $ 8,480 The accompanying notes are an integral part of these condensed consolidated financial statements. 9 Table of Contents Sally Beauty Holdings, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated interim financial statements of Sally Beauty Holdings, Inc. and its subsidiaries included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures included herein are adequate for the interim period presented. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 10-K”). In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and that are necessary to present fairly our consolidated financial position as of June 30, 2026 and September 30, 2025, our consolidated results of operations, consolidated comprehensive income, consolidated statements of stockholders’ equity for the three and nine months ended June 30, 2026 and 2025, and consolidated cash flows for the nine months ended June 30, 2026 and 2025. Principles of Consolidation The unaudited condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All amounts are presented in U.S. dollars. Accounting Policies We adhere to the same accounting policies in the preparation of our condensed consolidated interim financial statements as we do in the preparation of our full year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon our estimated annual effective income tax rate. Use of Estimates In order to present our unaudited condensed consolidated interim financial statements in conformity with GAAP, we are required to make certain estimates and assumptions that impact our interim financial statements and supplementary disclosures. These estimates may use forecasted financial information based on reasonable assumptions available at the time of preparation, however, actual results could differ due to changes in facts and circumstances. Significant estimates and assumptions are involved in the accounting for sales allowances, deferred revenue, valuation of inventory, amortization and depreciation, intangible assets and goodwill, and other reserves. We believe these estimates and assumptions are reasonable based on management’s knowledge of current events and anticipated further actions, and changes in facts and circumstances may result in revised estimates and impact actual results. Revisions to estimates are recognized in the period in which the facts that give rise to the change become known. 2. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , to expand disclosures in an entity’s income tax rate reconciliation table and the disaggregation of taxes paid in U.S. and foreign jurisdictions. The amendments in this update are effective for annual periods beginning after December 15, 2024, which for us is the fiscal year ending September 30, 2026. The new standard is not expected to have a material impact on our consolidated financial statements; however, we expect to provide additional detail and disclosures upon adoption. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40) , which requires, among other things, more detailed disclosure about types of expenses in commonly presented expense captions such as cost of goods sold (“COGS”) and selling, general and administrative (“SG&A”) expenses. The update is intended to improve disclosures by providing amounts related to inventory purchases, employee compensation, depreciation, and amortization. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted, but we currently do not expect to adopt this standard early. We are currently evaluating the impact of this update to our consolidated financial statements and disclosures. 10 Table of Contents 3. Revenue Recognition Substantially all of our revenue is derived through the sale of merchandise at the point-of-sale in our stores or when products are shipped for e-commerce orders. Revenue is recognized net of estimated sales returns and sales taxes, when control of the merchandise is transferred to the customer. We estimate sales returns based on historical data. Changes to our contract liabilities, which are included in accrued liabilities in our condensed consolidated balance sheets, were as follows (in thousands): Nine Months Ended June 30, 2026 2025 Beginning Balance $ 10,027 $ 11,493 Loyalty points and gift cards issued but not redeemed, net of estimated breakage 6,901 5,904 Revenue recognized from beginning liability ( 7,743 ) ( 6,703 ) Ending Balance $ 9,185 $ 10,694 See Note 12, Segment Reporting , for additional information regarding the disaggregation of our sales revenue. 4. Fair Value Measurements We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement , as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This valuation hierarchy is based upon the transparency of inputs used in the valuation of an asset or liability on the measurement date. The three levels of that hierarchy are defined as follows: Level 1 - Quoted prices are available in active markets for identical assets or liabilities; Level 2 - Pricing inputs are other than quoted prices in active markets, included in Level 1, that are either directly or indirectly observable; and Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own model with estimates and assumptions. Financial Instruments Measured at Fair Value on Recurring Basis Consistent with the fair value hierarchy, we categorized our financial assets and liabilities as follows: (in thousands) Classification Fair Value Hierarchy Level June 30, 2026 September 30, 2025 Financial Assets: Foreign exchange contracts Designated cash flow hedges Other current assets Level 2 $ 94 $ 87 Non-designated cash flow hedges Other current assets Level 2 127 570 Interest rate swap Other assets Level 2 — 59 Total assets $ 221 $ 716 Financial Liabilities: Foreign exchange contracts Designated cash flow hedges Accrued liabilities Level 2 $ 386 $ 57 Non-designated cash flow hedges Accrued liabilities Level 2 330 225 Total liabilities $ 716 $ 282 The fair value of each asset and liability was determined using widely accepted valuation techniques, including discounted cash flow analyses and observable inputs, such as market interest rates and foreign exchange rates. 11 Table of Contents Other Fair Value Disclosures The carrying amounts, if any, of cash equivalents, trade and other accounts receivable, accounts payable, and borrowings under our $ 500 million asset-based senior secured loan facility (the “ABL Facility”) approximate their respective fair values due to the short-term nature of these financial instruments. The carrying amounts and corresponding estimated fair values of our long-term debt, excluding debt issuance costs and original issue discounts, are as follows: Fair Value June 30, 2026 September 30, 2025 (in thousands) Hierarchy Level Carrying Value Fair Value Carrying Value Fair Value Long-term debt Senior notes due 2032 Level 2 $ 600,000 $ 612,000 $ 600,000 $ 622,500 Term loan B due 2030 Level 2 215,000 215,538 275,000 276,375 Total long-term debt $ 815,000 $ 827,538 $ 875,000 $ 898,875 5. Stockholders’ Equity Share Repurchase Program We have a share repurchase program, as originally approved and authorized by our Board of Directors (the “Board”) in August 2017, with the term extended by the Board in May 2025 to September 30, 2029 to repurchase up to $ 1.0 billion of our common stock, subject to certain limitations governed by our debt agreements. Under the share repurchase program, we had remaining authorization to use $ 395.9 million to repurchase shares of our common stock as of June 30, 2026. During the three and nine months ended June 30, 2026, we repurchased 1.9 million shares and 4.9 million shares of our common stock at a total cost of $ 25.3 million and $ 71.4 million, respectively, excluding the impact of excise taxes. During the three and nine months ended June 30, 2025, we repurchased 1.5 million shares and 3.3 million shares of our common stock at a total cost of $ 13.0 million and $ 33.0 million, respectively, excluding the impact of excise taxes. Shares purchased under this program are cancelled after being repurchased. Accumulated Other Comprehensive Loss The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands): Foreign Currency Translation Adjustments Interest Rate Swap Foreign Exchange Contracts Total Balance at September 30, 2025 $ ( 104,329 ) $ 84 $ ( 603 ) $ ( 104,848 ) Other comprehensive income (loss) before reclassification, net of tax ( 4,378 ) 59 ( 692 ) ( 5,011 ) Reclassification to net earnings, net of tax — ( 104 ) 536 432 Balance at June 30, 2026 $ ( 108,707 ) $ 39 $ ( 759 ) $ ( 109,427 ) The tax impacts for the changes in other comprehensive income (loss) and the reclassifications to net earnings were not material. 6. Weighted-Average Shares The following table presents a reconciliation of basic and diluted weighted-average shares (in thousands): Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 Weighted-average basic shares 95,058 100,463 96,537 101,367 Dilutive potential common stock: Restricted stock awards and stock options 2,854 2,776 2,865 2,820 Weighted-average diluted shares 97,912 103,239 99,402 104,187 Anti-dilutive stock options excluded from diluted shares 1,249 1,840 1,249 1,499 12 Table of Contents 7. Property and Equipment, Net In October 2024, we sold our former corporate headquarters located in Denton, Texas to Denton County, Texas for $ 45.5 million, excluding $ 1.5 million in closing costs. As a result of the sale, we recognized a gain of approximately $ 26.6 million within SG&A expenses in our condensed consolidated statements of earnings for the nine months ended June 30, 2025. 8. Goodwill and Intangible Assets As of January 31, 2026, we completed our annual assessments for impairment of goodwill and indefinite-lived intangible assets. We performed a qualitative analysis for goodwill and determined there was no indication of impairment. We performed a quantitative analysis for indefinite-lived assets and determined that there was no impairment. While no impairment losses were recognized in 2025 in connection with our goodwill, we recognized a $ 1.8 million impairment loss in 2025 in SG&A expenses for a trade name within the Sally reporting segment. Goodwill allocated to our Sally and BSG reporting units, which are also defined as our Sally and BSG segments, was $ 89.9 million and $ 448.5 million, respectively, as of June 30, 2026. For the nine months ended June 30, 2026, changes in goodwill reflected the effects of foreign currency exchange rates of $ 2.2 million. The following table presents our amortization expense for the period (in thousands): Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 Intangible assets amortization expense $ 652 $ 851 $ 1,956 $ 2,550 9. Accrued Liabilities Accrued liabilities consist of the following (in thousands): June 30, 2026 September 30, 2025 Compensation and benefits $ 63,186 $ 85,058 Deferred revenue 14,388 14,195 Interest payable 13,905 3,819 Rental obligations 12,804 10,286 Insurance reserves 8,092 7,331 Accrued freight 7,699 8,761 Operating accruals and other 43,918 55,191 Total accrued liabilities $ 163,992 $ 184,641 10. Short-Term and Long-Term Debt At June 30, 2026, there were no outstanding borrowings under our ABL Facility, and we had $ 482.4 million available for borrowing, including under our Canadian sub-facility, subject to a borrowing base limitation, as reduced by outstanding letters of credit. During the three and nine months ended June 30, 2026, we voluntarily repaid $ 19.0 million and $ 57.0 million, respectively, of outstanding Term Loan B principal in addition to our mandatory quarterly payment. In connection with the voluntary repayments, we recognized a $ 0.1 million loss and a $ 0.4 million loss on debt extinguishment within interest expense for the write-off of related unamortized debt issuance costs for the three and nine months ended June 30, 2026, respectively. 11. Derivative Instruments and Hedging Activities During the nine months ended June 30, 2026, we did not purchase or hold any derivative instruments for trading or speculative purposes. See Note 4, Fair Value Measurements , for the classification and fair value of our derivative instruments. 13 Table of Contents Designated Cash Flow Hedges Foreign Currency Forwards We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on forecasted inventory purchases in U.S. dollars by our foreign subsidiaries. At June 30, 2026, we held forwards, which expire ratably through September 30, 2026, with notional amounts, based upon exchange rates at June 30, 2026, as follows (in thousands): Notional Currency Notional Amount Mexican Peso $ 4,846 Canadian Dollar 2,415 Total $ 7,261 The changes in fair value related to these foreign currency forwards are recorded quarterly in AOCL. As the forwards are exercised, the realized gains or losses are recognized in COGS, based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended June 30, 2026 and 2025, we recognized a net loss of $ 0.2 million and a net gain of $ 0.6 million, respectively. For the nine months ended June 30, 2026 and 2025, we recognized a net loss of $ 0.7 million and a net gain of $ 0.7 million, respectively. Based on valuations and exchange rates as of June 30, 2026, we expect to reclassify net losses of approximately $ 0.7 million from AOCL to COGS over the next 12 months. Interest Rate Swap We had a three-year interest rate swap agreement with an initial notional amount of $ 200 million (the “Interest Rate Swap”) that matured in April 2026. The Interest Rate Swap was used to mitigate the exposure to higher interest rates in connection with our Term Loan B due in 2030. The Interest Rate Swap involved fixed monthly payments at the contract rate of 3.705 % in exchange for a floating interest payment based on the one-month Adjusted Term SOFR Rate. The Interest Rate Swap was designated as a cash flow hedge. Changes in the fair value of the Interest Rate Swap were recorded quarterly, net of income tax, in AOCL. During the term of the agreement, we recognized either income or expense, based on the position of the interest rates, in interest expense on our condensed consolidated statements of earnings related to the Interest Rate Swap. For the three months ended June 30, 2025, we recognized income of $ 0.2 million. For the nine months ended June 30, 2026 and 2025, we recognized income of $ 0.1 million and $ 1.1 million, respectively. Non-Designated Derivative Instruments We also use foreign exchange forward contracts to mitigate our exposure to exchange rate fluctuations related to certain intercompany balances that are not considered permanently invested. At June 30, 2026, we held forward contracts, which mature in July and October 2026, with notional amounts, based upon exchange rates at June 30, 2026, as follows (in thousands): Notional Currency Notional Amount British Pound $ 47,858 Euro 13,177 Canadian Dollar 9,192 Total $ 70,227 Changes in the fair value of the forward contracts, as well as realized gains or losses upon settlement, are recorded in SG&A expenses. For the three months ended June 30, 2026 and 2025, the effects of foreign exchange contracts on our condensed consolidated financial statements were net losses of $ 0.3 million and $ 1.3 million, respectively. For the nine months ended June 30, 2026 and 2025, the effects of foreign exchange contracts on our condensed consolidated financial statements were net losses of $ 0.2 million and $ 0.3 million, respectively. 14 Table of Contents 12. Segment Reporting Our business is organized into two reportable segments: (i) Sally, a domestic and international chain of retail stores and digital platforms that offers professional beauty supplies to both salon professionals and retail customers primarily in North America, including Puerto Rico, and parts of Europe and South America and, (ii) BSG, including its franchise-based business Armstrong McCall, a full service distributor of beauty products and supplies that offers professional beauty products directly to salons and salon professionals through its professional-only stores, its own sales force, and digital platforms in partially exclusive geographic territories in the U.S., including Puerto Rico, and Canada. Our Chief Operating Decision Maker (“CODM”), whom we have determined to be our Chief Executive Officer , regularly evaluates the performance of our reportable segments by comparing current segment operating earnings to comparable prior periods and forecasted amounts. Included within segment operating earnings, the significant expense categories below are regularly provided to the CODM. Segment Operating Performance The following tables summarize our results for the three and nine months ended June 30, 2026 and 2025 (in thousands): Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 Sally BSG Total Sally BSG Total Net sales (a) $ 538,570 $ 396,920 $ 935,490 $ 526,782 $ 406,525 $ 933,307 Less: COGS 207,604 237,637 445,241 205,916 246,406 452,322 SG&A expenses 241,610 110,310 351,920 237,561 109,447 347,008 Segment operating earnings 89,356 48,973 138,329 83,305 50,672 133,977 Unallocated expenses (b) 51,933 55,804 Interest expense 13,693 15,709 Earnings before provision for income taxes $ 72,703 $ 62,464 Nine Months Ended June 30, 2026 Nine Months Ended June 30, 2025 Sally BSG Total Sally BSG Total Net sales (a) $ 1,591,407 $ 1,190,633 $ 2,782,040 $ 1,552,803 $ 1,201,545 $ 2,754,348 Less: COGS 623,167 709,593 1,332,760 612,284 725,422 1,337,706 SG&A expenses 722,838 330,792 1,053,630 700,035 331,048 1,031,083 Segment operating earnings 245,402 150,248 395,650 240,484 145,075 385,559 Unallocated expenses (b) 161,389 137,693 Interest expense 42,478 49,440 Earnings before provision for income taxes $ 191,783 $ 198,426 (a) There were no intersegment sales between our segments, nor did any single customer account for 10% or more of revenue. (b) Unallocated expenses consist of corporate and shared costs, including certain costs associated with our Fuel for Growth initiative, and are included in SG&A expenses in our condensed consolidated statements of earnings. For the nine months ended June 30, 2025, unallocated expenses included a $ 26.6 million gain related to the sale of our corporate headquarters. See Note 7, Property and Equipment , Net, for more information. 15 Table of Contents Other Segment Disclosures Three Months Ended June 30, Nine Months Ended June 30, (in thousands) 2026 2025 2026 2025 Depreciation and amortization: Sally $ 14,859 $ 13,471 $ 42,597 $ 42,203 BSG 9,257 9,677 26,937 27,929 Unallocated 2,107 1,521 5,601 5,461 Total $ 26,223 $ 24,669 $ 75,135 $ 75,593 Disaggregation of net sales by segment The following tables disaggregate our segment revenues by merchandise category. Three Months Ended June 30, Nine Months Ended June 30, Sally 2026 2025 2026 2025 Hair color 45.2 % 42.9 % 44.4 % 41.9 % Hair care 21.2 % 23.0 % 21.6 % 23.5 % Styling tools and supplies 15.8 % 16.2 % 16.4 % 16.9 % Nail 10.0 % 10.2 % 9.9 % 10.0 % Skin and cosmetics 7.6 % 7.5 % 7.4 % 7.5 % Other beauty items 0.2 % 0.2 % 0.3 % 0.2 % Total 100.0 % 100.0 % 100.0 % 100.0 % Three Months Ended June 30, Nine Months Ended June 30, BSG 2026 2025 2026 2025 Hair color 44.3 % 43.0 % 43.3 % 41.9 % Hair care 40.6 % 41.6 % 41.4 % 41.8 % Styling tools and supplies 9.7 % 9.9 % 10.0 % 10.4 % Skin and cosmetics 3.0 % 3.2 % 3.1 % 3.5 % Nail 2.3 % 2.2 % 2.1 % 2.3 % Other beauty items 0.1 % 0.1 % 0.1 % 0.1 % Total 100.0 % 100.0 % 100.0 % 100.0 % The following tables disaggregate our segment revenue by sales channels: Three Months Ended June 30, Nine Months Ended June 30, Sally 2026 2025 2026 2025 Company-operated stores 90.3 % 91.8 % 90.4 % 91.9 % E-commerce 9.7 % 8.2 % 9.6 % 8.1 % Total 100.0 % 100.0 % 100.0 % 100.0 % Three Months Ended June 30, Nine Months Ended June 30, BSG 2026 2025 2026 2025 Company-operated stores 69.2 % 69.5 % 69.2 % 69.4 % E-commerce 14.6 % 13.7 % 14.7 % 13.9 % Salon business consultants 8.6 % 9.2 % 8.5 % 9.4 % Franchise stores 7.6 % 7.6 % 7.6 % 7.3 % Total 100.0 % 100.0 % 100.0 % 100.0 % 16 Table of Contents