(Former name, former address and former fiscal year, if changed since last report): N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January 27,~~April 28, 2023, there were ~~107,328,599~~107,554,671 shares of the issuer’s common stock outstanding.

In this Quarterly Report, references to “the Company,” “Sally Beauty,” “our company,” “we,” “our,” “ours” and “us” refer to Sally Beauty Holdings, Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions may also identify such forward-looking statements.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.

	December 31, 2022			September 30, 2022			March 31, 2023			September 30, 2022
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	99,071		$	70,558		$	61,620		$	70,558
Trade accounts receivable, net		32,671			34,102			30,540			34,102
Accounts receivable, other		42,741			38,175			45,123			38,175
Inventory		986,878			936,374			1,023,656			936,374
Other current assets		57,840			53,192			48,072			53,192
Total current assets		1,219,201			1,132,401			1,209,011			1,132,401
Property and equipment, net of accumulated depreciation of $849,202 at December 31, 2022, and $820,811 at September 30, 2022		288,732			297,876
Property and equipment, net of accumulated depreciation of $841,760 at March 31, 2023, and $820,811 at September 30, 2022								283,356			297,876
Operating lease assets		542,806			532,177			562,336			532,177
Goodwill		532,514			526,066			534,218			526,066
Intangible assets, excluding goodwill, net of accumulated amortization of $28,820 at December 31, 2022, and $26,794 at September 30, 2022		50,963			50,315
Intangible assets, excluding goodwill, net of accumulated amortization of $29,921 at March 31, 2023, and $26,794 at September 30, 2022								50,533			50,315
Other assets		34,330			38,032			35,660			38,032
Total assets	$	2,668,546		$	2,576,867		$	2,675,114		$	2,576,867
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	65,171		$	68,658		$	38,175		$	68,658
Accounts payable		296,170			275,717			265,075			275,717
Accrued liabilities		142,785			161,065			168,187			161,065
Current operating lease liabilities		156,168			157,734			154,255			157,734
Income taxes payable		16,972			4,740			4,949			4,740
Total current liabilities		677,266			667,914			630,641			667,914
Long-term debt		1,082,175			1,083,043			1,065,439			1,083,043
Long-term operating lease liabilities		427,168			424,762			444,819			424,762
Other liabilities		22,748			22,427			22,044			22,427
Deferred income tax liabilities, net		85,891			85,085			86,283			85,085
Total liabilities		2,295,248			2,283,231			2,249,226			2,283,231
Stockholders’ equity:
Common stock, $0.01 par value. Authorized 500,000 shares; 107,291 and 107,024 shares issued and 107,284 and 106,970 shares outstanding at December 31, 2022, and September 30, 2022, respectively		1,073			1,070
Common stock, $0.01 par value. Authorized 500,000 shares; 107,556 and 107,024 shares issued and 107,549 and 106,970 shares outstanding at March 31, 2023, and September 30, 2022, respectively								1,076			1,070
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued		—			—			—			—
Additional paid-in capital		8,329			4,241			13,790			4,241
Accumulated earnings		490,509			440,172			531,370			440,172
Accumulated other comprehensive loss, net of tax		(126,613	)		(151,847	)		(120,348	)		(151,847	)
Total stockholders’ equity		373,298			293,636			425,888			293,636
Total liabilities and stockholders’ equity	$	2,668,546		$	2,576,867		$	2,675,114		$	2,576,867

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended				Three Months Ended				Six Months Ended
	December 31,				March 31,				March 31,
	2022		2021		2023		2022		2023		2022
Net sales	$	957,055	$	980,251	$	918,712	$	911,387	$	1,875,767	$	1,891,638
Cost of goods sold		468,481		480,122		450,373		446,055		918,854		926,177
Gross profit		488,574		500,129		468,339		465,332		956,913		965,461
Selling, general and administrative expenses		391,580		386,250		389,657		378,871		781,237		765,121
Restructuring		10,406		1,099		7,274		—		17,680		1,099
Operating earnings		86,588		112,780		71,408		86,461		157,996		199,241
Interest expense		17,923		20,241		16,685		19,896		34,608		40,137
Earnings before provision for income taxes		68,665		92,539		54,723		66,565		123,388		159,104
Provision for income taxes		18,328		23,701		13,862		19,757		32,190		43,458
Net earnings	$	50,337	$	68,838	$	40,861	$	46,808	$	91,198	$	115,646
Earnings per share:
Basic	$	0.47	$	0.61	$	0.38	$	0.43	$	0.85	$	1.05
Diluted	$	0.46	$	0.60	$	0.37	$	0.42	$	0.83	$	1.03
Weighted-average shares:
Basic		107,140		111,995		107,453		108,743		107,294		110,387
Diluted		109,460		113,968		109,706		110,540		109,499		112,207

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended						Three Months Ended						Six Months Ended
	December 31,						March 31,						March 31,
	2022			2021			2023			2022			2023			2022
Net earnings	$	50,337		$	68,838		$	40,861		$	46,808		$	91,198		$	115,646
Other comprehensive income (loss):
Foreign currency translation adjustments		25,941			(4,509	)		9,445			(2,752	)		35,386			(7,261	)
Interest rate caps, net of tax		203			278			(2,163	)		—			(1,960	)		278
Foreign exchange contracts, net of tax		(910	)		480			(1,017	)		(324	)		(1,927	)		156
Other comprehensive income (loss), net of tax		25,234			(3,751	)		6,265			(3,076	)		31,499			(6,827	)
Total comprehensive income	$	75,571		$	65,087		$	47,126		$	43,732		$	122,697		$	108,819

The accompanying notes are an integral part of these condensed consolidated financial statements.

												Accumulated																	Accumulated
							Additional					Other			Total									Additional					Other			Total
	Common Stock						Paid-in			Accumulated		Comprehensive			Stockholders’			Common Stock						Paid-in			Accumulated		Comprehensive			Stockholders’
	Shares			Amount			Capital			Earnings		Loss			Equity			Shares			Amount			Capital			Earnings		Loss			Equity
Balance at September 30, 2022		106,970		$	1,070		$	4,241		$	440,172	$	(151,847	)	$	293,636			106,970		$	1,070		$	4,241		$	440,172	$	(151,847	)	$	293,636
Net earnings		—			—			—			50,337		—			50,337			—			—			—			50,337		—			50,337
Other comprehensive income		—			—			—			—		25,234			25,234			—			—			—			—		25,234			25,234
Share-based compensation		—			—			5,135			—		—			5,135			—			—			5,135			—		—			5,135
Stock issued for equity awards		404			4			78			—		—			82			404			4			78			—		—			82
Employee withholding taxes paid related to net share settlement		(90	)		(1	)		(1,125	)		—		—			(1,126	)		(90	)		(1	)		(1,125	)		—		—			(1,126	)
Balance at December 31, 2022		107,284		$	1,073		$	8,329		$	490,509	$	(126,613	)	$	373,298			107,284		$	1,073		$	8,329		$	490,509	$	(126,613	)	$	373,298
Net earnings																			—			—			—			40,861		—			40,861
Other comprehensive income																			—			—			—			—		6,265			6,265
Share-based compensation																			—			—			3,838			—		—			3,838
Stock issued for equity awards																			266			3			1,638			—		—			1,641
Employee withholding taxes paid related to net share settlement																			(1	)		—			(15	)		—		—			(15	)
Balance at March 31, 2023																			107,549		$	1,076		$	13,790		$	531,370	$	(120,348	)	$	425,888

													Accumulated																		Accumulated
							Additional						Other			Total									Additional						Other			Total
	Common Stock						Paid-in			Accumulated			Comprehensive			Stockholders’			Common Stock						Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Capital			Earnings			Loss			Equity			Shares			Amount			Capital			Earnings			Loss			Equity
Balance at September 30, 2021		112,913		$	1,129		$	17,286		$	356,967		$	(94,641	)	$	280,741			112,913		$	1,129		$	17,286		$	356,967		$	(94,641	)	$	280,741
Net earnings		—			—			—			68,838			—			68,838			—			—			—			68,838			—			68,838
Other comprehensive loss		—			—			—			—			(3,751	)		(3,751	)		—			—			—			—			(3,751	)		(3,751	)
Share-based compensation		—			—			3,958			—			—			3,958			—			—			3,958			—			—			3,958
Stock issued for equity awards		795			8			7,364			—			—			7,372			795			8			7,364			—			—			7,372
Employee withholding taxes paid related to net share settlement		(56	)		(1	)		(1,136	)		—			—			(1,137	)		(56	)		(1	)		(1,136	)		—			—			(1,137	)
Repurchases and cancellations of common stock		(3,675	)		(36	)		(27,472	)		(47,492	)		—			(75,000	)		(3,675	)		(36	)		(27,472	)		(47,492	)		—			(75,000	)
Balance at December 31, 2021		109,977		$	1,100		$	—		$	378,313		$	(98,392	)	$	281,021			109,977		$	1,100		$	—		$	378,313		$	(98,392	)	$	281,021
Net earnings																				—			—			—			46,808			—			46,808
Other comprehensive loss																				—			—			—			—			(3,076	)		(3,076	)
Share-based compensation																				—			—			2,032			—			—			2,032
Stock issued for equity awards																				111			1			423			—			—			424
Employee withholding taxes paid related to net share settlement																				(1	)		—			(15	)		—			—			(15	)
Repurchases and cancellations of common stock																				(3,157	)		(32	)		(2,440	)		(52,856	)		—			(55,328	)
Balance at March 31, 2022																				106,930		$	1,069		$	—		$	372,265		$	(101,468	)	$	271,866

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended December 31,						Six Months Ended March 31,
	2022			2021			2023			2022
Cash Flows from Operating Activities:
Net earnings	$	50,337		$	68,838		$	91,198		$	115,646
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation and amortization		25,285			24,421			50,347			48,471
Share-based compensation expense		5,135			3,958			8,973			5,990
Amortization of deferred financing costs		648			932			1,311			1,865
Loss on early extinguishment of debt								601			—
Impairment of long-lived assets, including operating lease assets		2,103			—			1,765			—
Loss on disposal of equipment and other property		77			3			2			80
Deferred income taxes		889			1,867			862			6,507
Changes in (exclusive of effects of acquisitions):
Trade accounts receivable		2,270			2,841			4,632			3,800
Accounts receivable, other		(3,817	)		(1,724	)		(5,805	)		2,108
Inventory		(38,019	)		(137,326	)		(68,355	)		(95,468	)
Other current assets		(4,018	)		(446	)		6,053			(6,273	)
Other assets		4,074			1,371			2,201			1,979
Operating leases, net		(10,392	)		6,475			(14,286	)		3,657
Accounts payable and accrued liabilities		7,606			16,729			108			(70,217	)
Income taxes payable		12,460			18,166			434			(8,393	)
Other liabilities		313			(11,790	)		(393	)		(12,525	)
Net cash provided (used) by operating activities		54,951			(5,685	)		79,648			(2,773	)
Cash Flows from Investing Activities:
Payments for property and equipment, net of proceeds		(25,007	)		(26,390	)		(42,181	)		(44,109	)
Acquisitions, net of cash acquired		—			(319	)		—			(318	)
Net cash used by investing activities		(25,007	)		(26,709	)		(42,181	)		(44,427	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		229,000			—			853,000			—
Repayments of long-term debt, including prepayment costs		(233,927	)		(1,421	)
Repayments of long-term debt								(898,093	)		(2,841	)
Payments for common stock repurchased		—			(75,000	)		—			(130,328	)
Proceeds from equity awards		60			7,372			1,723			7,796
Debt issuance costs								(4,726	)		—
Employee withholding taxes paid related to net share settlement of equity awards		(1,125	)		(1,136	)		(1,141	)		(1,151	)
Net cash used by financing activities		(5,992	)		(70,185	)		(49,237	)		(126,524	)
Effect of foreign exchange rate changes on cash and cash equivalents		4,561			(240	)		2,832			178
Net increase (decrease) in cash and cash equivalents		28,513			(102,819	)
Net decrease in cash and cash equivalents								(8,938	)		(173,546	)
Cash and cash equivalents, beginning of period		70,558			400,959			70,558			400,959
Cash and cash equivalents, end of period	$	99,071		$	298,140		$	61,620		$	227,413
Supplemental Cash Flow Information:
Interest paid	$	26,758		$	35,034		$	35,191		$	37,809
Income taxes paid	$	3,081		$	3,978		$	32,077		$	56,701
Capital expenditures incurred but not paid	$	5,542		$	3,594		$	5,466		$	3,205

The accompanying notes are an integral part of these condensed consolidated financial statements.

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 pursuant to the rules and regulations of the SEC, 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, 2022. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly our consolidated financial position as of ~~December~~March 31, ~~2022,~~2023, and September 30, 2022, ~~and~~ our consolidated results of operations, consolidated comprehensive income ~~consolidated cash flows~~ and consolidated statements of stockholders’ equity for the three and six months ended ~~December~~March 31, 2023 and 2022 and ~~2021.~~our consolidated cash flows for the for the six months ended March 31, 2023 and 2022.

The unaudited condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in U.S. Dollars.

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.

In order to present our 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 information available, however are subject to change in the future. Significant estimates and assumptions are part of our accounting for sales allowances, deferred revenue, valuation of inventory, amortization and depreciation, intangibles and goodwill, and other reserves. We believe these estimates and assumptions are reasonable; however, they are based on management’s current knowledge of events and actions, and changes in facts and circumstances may result in revised estimates and impact actual results.

Substantially all of our revenue is derived through the sale of merchandise at the point-of-sale. Revenue is recognized net of estimated sales returns and sales taxes. 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, for the periods were as follows (in thousands):

		Three Months Ended December 31,							Six Months Ended March 31,
		2022			2021				2023			2022
Beginning Balance		$	13,460		$	16,744			$	13,460		$	16,744
Loyalty points and gift cards issued but not redeemed, net of estimated breakage	Loyalty points and gift cards issued but not redeemed, net of estimated breakage		6,291			5,842		Loyalty points and gift cards issued but not redeemed, net of estimated breakage		9,327			6,214
Revenue recognized from beginning liability	Revenue recognized from beginning liability		(4,489	)		(3,509	)	Revenue recognized from beginning liability		(8,370	)		(6,316	)
Ending Balance		$	15,262		$	19,077			$	14,417		$	16,642

See Note 10, Segment Reporting, for additional information regarding the disaggregation of our sales revenue.

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 to the valuation of an asset or liability on the measurement date.

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.

Consistent with the fair value hierarchy, we categorized our financial assets and liabilities as follow:

(in thousands)	Classification	Fair Value Hierarchy Level	December 31, 2022		September 30, 2022		Classification	Fair Value Hierarchy Level	March 31, 2023		September 30, 2022
Financial Assets:
Foreign exchange contracts
Non-designated cash flow hedges	Other current assets	Level 2	$	4,463	$	294	Other current assets	Level 2	$	327	$	294
Interest rate caps	Other current assets	Level 2		3,627		3,860	Other current assets	Level 2		—		3,860
Total assets			$	8,090	$	4,154			$	327	$	4,154
.
Financial Liabilities:
Foreign exchange contracts
Designated cash flow hedges	Accrued liabilities	Level 2	$	1,930	$	—	Accrued liabilities	Level 2	$	2,300	$	—
Non-designated cash flow hedges	Accrued liabilities	Level 2		4,045		79	Accrued liabilities	Level 2		1,887		79
Total liabilities			$	5,975	$	79			$	4,187	$	79

The fair value for interest rate caps and foreign exchange contracts were measured using widely accepted valuation techniques, such as discounted cash flow analyses and observable inputs, such as market interest rates and foreign exchange rates.

The carrying amounts of cash equivalents, trade and other accounts receivable and accounts payable and borrowing under our ABL facility approximate their respective fair values due to the short-term nature of these financial instruments. Carrying amounts and the related estimated fair value of our long-term debt, excluding ~~capital~~finance lease obligations, ~~and~~ debt issuance costs and original issue discounts, are as follows:

		December 31, 2022				September 30, 2022					March 31, 2023				September 30, 2022
(in thousands)	Fair Value Hierarchy Level	Carrying Value		Fair Value		Carrying Value		Fair Value		Fair Value Hierarchy Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, excluding capital leases
Senior notes	Level 1	$	679,961	$	652,763	$	679,961	$	639,163	Level 1	$	679,961	$	668,062	$	679,961	$	639,163
Term loan B	Level 2		406,125		403,587		407,500		398,331
Term loan B due 2024										Level 2		—		—		407,500		398,331
Term loan B due 2030										Level 2		400,000		398,500		—		—
Total long-term debt		$	1,086,086	$	1,056,350	$	1,087,461	$	1,037,494		$	1,079,961	$	1,066,562	$	1,087,461	$	1,037,494

The fair value of the term loan B was measured using quoted market prices for similar debt securities in active markets or widely accepted valuation techniques, such as discounted cash flow analyses, using observable inputs, such as market interest rates.

In August 2017, our Board of Directors (“Board”) approved a share repurchase program authorizing us to repurchase up to $1.0 billion of its common stock, subject to certain limitations governed by our debt agreements. In July 2021, our Board approved a term extension of the share repurchase program for the four-year period ending September 30, 2025. As of ~~December~~March 31, ~~2022,~~2023, we had authorization of approximately $595.8 million of additional potential share repurchases remaining under our share repurchase program. For the three and six months ended ~~December~~March 31, ~~2022,~~2023, we did not repurchase shares under our share repurchase program. For the three and six months ended ~~December~~March 31, ~~2021,~~2022, we repurchased ~~3.7~~3.1 million and 6.8 million shares of common stock, respectively, at a total cost of ~~$75.0 million.~~$55.0 million and $130.3 million, respectively.

The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):

	Foreign Currency Translation Adjustments			Interest Rate Caps		Foreign Exchange Contracts			Total			Foreign Currency Translation Adjustments			Interest Rate Caps			Foreign Exchange Contracts			Total
Balance at September 30, 2022	$	(153,128	)	$	1,960	$	(679	)	$	(151,847	)	$	(153,128	)	$	1,960		$	(679	)	$	(151,847	)
Other comprehensive income (loss) before reclassification, net of tax		25,941			155		(608	)		25,488
Other comprehensive loss before reclassification, net of tax													35,386			817			(1,815	)		34,388
Reclassification to net earnings, net of tax		—			48		(302	)		(254	)		—			(2,777	)		(112	)		(2,889	)
Balance at December 31, 2022	$	(127,187	)	$	2,163	$	(1,589	)	$	(126,613	)
Balance at March 31, 2023												$	(117,742	)	$	—		$	(2,606	)	$	(120,348	)

The tax impact for the changes in other comprehensive loss and the reclassifications to net earnings was not material.

The following table sets forth the reconciliation of basic and diluted weighted-average shares (in thousands):

	Three Months Ended December 31,				Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2023		2022		2023		2022
Weighted-average basic shares		107,140		111,995		107,453		108,743		107,294		110,387
Dilutive securities:
Stock option and stock award programs		2,320		1,973		2,253		1,797		2,205		1,820
Weighted-average diluted shares		109,460		113,968		109,706		110,540		109,499		112,207

Anti-dilutive options excluded from our computation of diluted shares		2,123		2,775		1,964		2,534		1,964		2,169

W~~e considered potential triggering events and determined there were none for~~During the three months ended ~~December~~March 31, ~~2022.~~2023, we completed our annual assessments for impairment of goodwill and indefinite-lived intangible assets. For our goodwill testing, we performed a qualitative analysis and determined that there was no indication of impairment requiring further quantitative testing. No material impairment losses were recognized in the current or prior periods presented in connection with our goodwill and ~~other~~ intangible assets.

Three Months Ended

December 31,

Three Months Ended

March 31,

Six Months Ended

March 31,

(in thousands)

2022

2021

2023

2022

2023

2022

Intangible assets amortization expense

1,008

1,071

866

999

1,875

2,070

Additionally, during the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, the changes in goodwill and other intangibles ~~were primarily from the~~included effects of foreign currency exchange rates of ~~$6.4~~$8.2 million and ~~$1.7~~$2.1 million, respectively. ~~During the three months ended December 31, 2021, the changes in goodwill were primarily from the effects of foreign currency exchange rates of $0.9 million.~~

	December 31, 2022		September 30, 2022		March 31, 2023		September 30, 2022
Compensation and benefits	$	46,027	$	58,693	$	66,868	$	58,693
Deferred revenue		20,384		18,810		18,980		18,810
Rental obligations		14,353		10,701		12,766		10,701
Insurance reserves		6,104		5,742		6,111		5,742
Property and other taxes		4,266		4,161		3,022		4,161
Interest payable		3,865		13,445		13,699		13,445
Operating accruals and other		47,786		49,513		46,741		49,513
Total accrued liabilities	$	142,785	$	161,065	$	168,187	$	161,065

At ~~December~~March 31, ~~2022,~~2023, our ABL facility had ~~$65.0~~$34.0 million in outstanding borrowings and ~~$417.7~~$448.7 million available for borrowing, including the Canadian sub-facility, subject to borrowing base limitation, as reduced by outstanding letters of credit.

On February 28, 2023, we announced that our wholly-owned subsidiaries, Sally Holdings LLC (“Sally Holdings”) and Sally Capital, Inc. (“Sally Capital” and, together with Sally Holdings, the “Borrowers”), and certain of our other direct and indirect subsidiaries entered into a credit agreement with Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties thereto providing for a term loan B facility (“TLB 2030”) in an aggregate principal amount equal to $400.0 million, the net proceeds of which were used to repay an existing term loan B facility (“TLB 2024”). The TLB 2030 will bear interest at a floating rate equal to, at the Borrowers option, either the Adjusted Term SOFR Rate from time to time in effect plus 2.50% or an adjusted base rate plus 1.50%, payable quarterly on March 31, June 30, September 30 and December 31 of each year. The TLB 2030 matures on the earlier of (i) February 28, 2030 and (ii) the date that is 91 days prior to the stated maturity of the Borrowers’ 2025 Senior Unsecured Notes (the “2025 Senior Unsecured Notes”) unless all amounts exceeding $200.0 million of the 2025 Senior Unsecured Notes are refinanced or repaid according to certain conditions ~~contained therein.~~(the “Maturity Date”). The principal of the TLB 2030 is repayable in quarterly installments equal to 0.25% of the original principal amount of the TLB 2030, with a final installment equal to the entire remaining outstanding principal amount due on the Maturity Date. TLB 2030 was issued at a discount of 0.75% and we incurred $4.7 million in issuance costs; both of which are being amortized using the effective interest method.

The TLB 2030 is secured by a first-priority lien in and upon substantially all of the assets of the Company and its domestic subsidiaries other than the accounts, inventory (and the proceeds thereof) and other assets that secure Sally Holdings’ existing ABL facility on a first-priority basis (the “ABL Priority Collateral”). Additionally, the TLB 2030 is secured by a second-priority lien in and upon the ABL Priority Collateral. The TLB 2030 does not contain any financial maintenance covenants and is subject to a covenant package that is substantially consistent with the covenant package governing the 2025 Senior Unsecured Notes. The TLB 2030 is subject to customary asset sale mandatory prepayment provisions and excess cash flow mandatory prepayment provisions. The TLB 2030 is subject to a prepayment premium of 1.0% of the principal amount thereof upon any refinancing or amendment thereof that results in a reduced effective yield (subject to certain exceptions) within six months following the closing. Thereafter, the TLB 2030 may be prepaid without penalty or premium, other than customary breakage costs for prepayments that are made prior to the last date of an interest period.

The repayment of our TLB 2024, in the aggregate outstanding principal amount of $406.1 million, was made pursuant to the terms of the indenture dated February 28, 2017, at par plus interest accrued but unpaid up to, though not including, the repayment date. In connection with the repayment, we recognized a loss on the extinguishment of debt of $0.6 million within interest expense, which included the write-off of unamortized discount and deferred financing costs of $0.2 million and $0.4 million, respectively.

During the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, we did not purchase or hold any derivative instruments for trading or speculative purposes. See Note 3, Fair Value Measurements, for the classification and fair value of our derivative instruments.

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 ~~December~~March 31, ~~2022,~~2023, we held forwards, which expire ratably through September 30, 2023, with a notional amount, based upon exchange rates at ~~December~~March 31, ~~2022,~~2023, as follows (in thousands):

Notional Currency	Notional Amount		Notional Amount
Mexican Peso	$	17,629	$	12,846
Euro		11,549		7,699
Canadian Dollar		8,921		6,284
Total	$	38,099	$	26,829

Quarterly, the changes in fair value related to these foreign currency forwards are recorded into AOCL. As the forwards are exercised, the realized value is recognized into cost of goods sold, based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended ~~December~~March 31, 2023 and 2022, we recognized losses of $0.2 million and ~~2021,~~$0.1 million, respectively. For the six months ended March 31, 2023 and 2022, we recognized a gain of ~~$0.3~~$0.1 million and a loss of ~~$0.3~~$0.4 million, respectively. Based on ~~December~~March 31, ~~2022,~~2023, valuations and exchange rates, we expect to reclassify losses of approximately ~~$1.6~~$3.1 million into cost of goods sold over the next 12 months.

In July 2017, we purchased two interest rate caps with an initial aggregate notional amount of $550 million (the “interest rate caps”) to mitigate the exposure to higher interest rates in connection with our ~~term loan B.~~TLB 2024. The interest rate caps ~~are~~were comprised of individual caplets that ~~expire~~were expiring ratably through June 30, 2023, and ~~are~~were designated as cash flow hedges. Accordingly, the changes in fair value of the interest rate caps ~~are~~were recorded quarterly, net of income tax, and ~~are~~ included in AOCL.

During the three months ended March 31, 2023, we early settled both interest rate caps due to the forecasted transactions being hedged no longer occurring as a result of the repayment of our TLB 2024. In connection with the early settlement, we received approximately $2.7 million, which represented the fair value at the time of settlement. Furthermore, we released the remaining AOCL balances related to the interest rate caps into interest expense. For the three months ended ~~December~~March 31, ~~2022 and 2021,~~2023, we recognized income of $2.8 million into interest expense on our condensed consolidated statements of earnings related to the caps. The effects of our interest rate caps on our condensed consolidated statements of earnings were not material for the three months ended March 31, 2022. For the six months ended March 31, 2023 and 2022, we recognized income of $2.8 million and expense of ~~$0.1 million and~~ $0.4 million, respectively, into interest expense on our condensed consolidated statements of ~~earnings. Over~~earnings related to the ~~next 12 months, we expect to reclassify gains of~~

~~approximately $2.6 million into interest expense, which represents estimated interest rate settlements less the original value of the expiring caplets.~~caps.

We also use foreign exchange contracts to mitigate our exposure to exchange rate changes in connection with certain intercompany balances not permanently invested. At ~~December~~March 31, ~~2022,~~2023, we held forwards, which expire on various dates in the first month of both the ~~second~~third and ~~third~~fourth fiscal quarters of fiscal year 2023, with a notional amount, based upon exchange rates at ~~December~~March 31, ~~2022,~~2023, as follows (in thousands):

Notional Currency	Notional Amount		Notional Amount
British Pound	$	87,321	$	51,936
Canadian Dollar		56,329		13,491
Euro		56,269		21,173
Mexican Peso		23,865		26,175
Total	$	223,784	$	112,775

We record changes in fair value and realized gains or losses related to these foreign currency forwards into selling, general and administrative expenses. For the three months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, the effects of these foreign exchange contracts on our condensed consolidated financial statements were ~~gains~~losses of ~~$0.4~~$1.5 million ~~in both years.~~and $0.2 million, respectively. For the six months ended March 31, 2023 and 2022, the effects of these foreign exchange contracts on our condensed consolidated financial statements were a loss of $1.1 million and a gain of $0.1 million, respectively.

Segment data for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021,~~2022, is as follows (in thousands):

	Three Months Ended December 31,				Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2023		2022		2023		2022
Net sales:
Sally Beauty Supply ("SBS")	$	549,472	$	561,530	$	530,246	$	525,785	$	1,079,718	$	1,087,315
Beauty Systems Group ("BSG")		407,583		418,721		388,466		385,602		796,049		804,323
Total	$	957,055	$	980,251	$	918,712	$	911,387	$	1,875,767	$	1,891,638
Earnings before provision for income taxes:
Segment operating earnings:
SBS	$	99,174	$	100,623	$	92,134	$	80,940	$	191,308	$	181,563
BSG		49,647		58,546		37,260		46,008		86,907		104,554
Segment operating earnings		148,821		159,169		129,394		126,948		278,215		286,117
Unallocated expenses		51,827		45,290		50,712		40,487		102,539		85,777
Restructuring		10,406		1,099		7,274		—		17,680		1,099
Consolidated operating earnings		86,588		112,780		71,408		86,461		157,996		199,241
Interest expense		17,923		20,241		16,685		19,896		34,608		40,137
Earnings before provision for income taxes	$	68,665	$	92,539	$	54,723	$	66,565	$	123,388	$	159,104

Sales between segments, which are eliminated in consolidation, were not material during the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021.~~2022.

The following tables disaggregate our segment revenues by merchandise category. We have reclassified certain prior year amounts within BSG to conform to current year presentation.

	Three Months Ended December 31,						Three Months Ended March 31,						Six Months Ended March 31,
SBS	2022			2021			2023			2022			2023			2022
Hair color		38.7	%		36.8	%		39.8	%		38.1	%		39.2	%		37.4	%
Hair care		23.4	%		23.8	%		24.3	%		24.1	%		23.9	%		24.0	%
Styling tools and supplies		19.5	%		20.2	%		17.9	%		19.2	%		18.7	%		19.7	%
Nail		10.3	%		10.4	%		10.0	%		10.6	%		10.2	%		10.5	%
Skin and cosmetics		7.4	%		7.9	%		7.5	%		7.4	%		7.4	%		7.7	%
Other beauty items		0.7	%		0.9	%		0.5	%		0.6	%		0.6	%		0.7	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

	Three Months Ended December 31,						Three Months Ended March 31,						Six Months Ended March 31,
SBS	2022			2021			2023			2022			2023			2022
Company-operated stores		93.6	%		94.2	%		93.6	%		93.7	%		93.6	%		94.0	%
E-commerce		6.4	%		5.8	%		6.4	%		6.3	%		6.4	%		6.0	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

	Three Months Ended December 31,						Three Months Ended March 31,						Six Months Ended March 31,
BSG	2022			2021			2023			2022			2023			2022
Company-operated stores		66.3	%		67.5	%		67.5	%		66.6	%		66.9	%		67.1	%
E-commerce		13.6	%		11.7	%		13.7	%		12.4	%		13.7	%		12.0	%
Distributor sales consultants		12.6	%		13.6	%		11.4	%		14.0	%		12.0	%		13.8	%
Franchise stores		7.5	%		7.2	%		7.4	%		7.0	%		7.4	%		7.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Restructuring expenses, included in Cost of Goods Sold (“COGS”) and Restructuring for the three and six months ended ~~December~~March 31, ~~2022~~2023 and ~~2021~~2022 are as follows (in thousands):

	Three Months Ended December 31,						Three Months Ended March 31,					Six Months Ended March 31,
	2022				2021		2023			2022		2023			2022
Included in COGS(a)
Distribution Center Consolidation and Store Optimization Plan	$	(2,680	)	(a)	$	—	$	(2,362	)	$	—	$	(5,042	)	$	—

Included in Restructuring(b)
Distribution Center Consolidation and Store Optimization Plan	$	10,406		(b)	$	—	$	7,274		$	—	$	17,680		$	—
Transformation Plan		—				1,099		—			—		—			1,099
Total in Restructuring		10,406				1,099		7,274			—		17,680			1,099
Total Restructuring Expenses	$	7,726			$	1,099	$	4,912		$	—	$	12,638		$	1,099

In the fourth quarter of fiscal year 2022, our Board approved the Distribution Center Consolidation and Store Optimization Plan (“the Plan”) authorizing the closure of 330 SBS stores and 35 BSG stores, and the closure of two BSG distribution centers in Clackamas, Oregon and Pottsville, ~~Pennsylvania (“the Plan”).~~Pennsylvania.

~~During the three months ended December 31, 2022, we completed the closure of the two BSG distributions centers.~~ We believe that consolidating the operation of these two distribution centers into our larger distribution centers will increase product availability, shorten delivery times and reduce overall costs.

~~As of December 31, 2022,~~ ~~we have closed 327 SBS stores and 14 BSG stores as part of the Plan.~~

Stores identified for early closure were part of a strategic evaluation which included a market analysis of certain locations where we believe we will be able to recapture demand at other nearby store locations and improve overall profitability. By optimizing our store base, we are further focusing on our customers’ shopping experience and our product offerings.

As of March 31, 2023, we have closed 329 SBS stores and 28 BSG stores as part of the Plan and closed the two BSG distributions centers. The Plan will continue to be executed throughout fiscal year 2023 and into the first half of fiscal year 2024, and therefore it may include future charges related to store closures such as exit costs, lease negotiation penalties, termination benefits and adjustments to estimates.

The liability related to the Plan, which is included in accounts payable and accrued liabilities on our consolidated balance sheets, is as follows:

(in thousands)	Liability at September 30, 2022		SBS Expense		BSG Expense		Cash Payments			Non-Cash Amounts			Liability at December 31, 2022		Liability at September 30, 2022		SBS Expense		BSG Expense			Cash Payments			Non-Cash Amounts			Liability at March 31, 2023
Closing costs - leases ^(a)	$	—	$	4,738	$	132	$	—		$	(868	)	$	4,002	$	—	$	7,389	$	1,307		$	(5,463	)	$	(1,043	)	$	2,190
Closing costs - payroll expenses ^(b)		—		988		961		—			—			1,949		—		1,540		979			(2,458	)		—			61
Impairment - property and equipment ^(c)		—		1,069		610		—			(1,679	)		—		—		1,276		193			—			(1,469	)		—
Inventory transfer costs		—		1,128		204		(294	)		—			1,038		—		1,158		322			(1,372	)		—			108
Impairment - operating lease assets ^(c)		—		345		83		—			(428	)		—		—		350		244			—			(594	)		—
Other		1,291		102		46		(1,351	)		—			88
Other closure costs ^(d)																1,291		2,978		(56	)		(2,659	)		—			1,554
Total	$	1,291	$	8,370	$	2,036	$	(1,645	)	$	(2,975	)	$	7,077	$	1,291	$	14,691	$	2,989		$	(11,952	)	$	(3,106	)	$	3,913

In April 2023, we entered into an interest rate swap transaction to help mitigate the risk of our floating rate debt. The notional amount of the swap is $200 million with an effective date of April 28, 2023 and a termination date of April 30, 2026. Under the terms of the swap, we will pay a fixed rate of interest of 3.705% and will receive a floating rate of interest equal to one-month SOFR. The floating rate will be reset monthly and net settlements of interest due to/from the counterparty will also occur monthly. To the extent the floating rate of interest exceeds the fixed rate of interest, we will receive net interest settlements, which will be recorded as a reduction to interest expense. If the fixed rate of interest exceeds the floating rate of interest, we will be required to pay net settlements to the counterparty and will record those net payments in interest expense.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section discusses management’s view of the financial condition, results of operations and cash flows of Sally ~~Beauty.~~Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.

For fiscal 2023, we are focusing on three key strategic initiatives to drive growth and profitability:

We believe focusing in these areas will position our company for future growth and further enhance our ability to meet our customers where they are.

During the ~~quarter, BSG~~fiscal year, SBS launched ~~a new strategic partnership with Salon HQ.~~ Salon HQ is a customizable digital storefront platform that gives stylists the ability to curate a product selection from thousands of BSG merchandise choices and enables their clients to purchase directly from their shops without the stylists having to finance and carry inventory. In addition, SBS has identified the locations for its ~~initial~~first Studio by Sally pilot store in Denton, Texas and has identified other locations for its additional pilot stores ~~that we expect~~expected to open this fiscal year. The Studio by Sally pilot store program will have a digital-first focus, from digital check-in to digital education throughout the store and beyond, including personalized appointments at our in-store salons with licensed stylists who will train and educate consumers on how to ~~color their own hair and~~personally achieve their desired results. We believe that we will be able to expand the Studio by Sally concept to 100 locations throughout the U.S. over the next three to four fiscal years if successful.

Additionally, earlier this fiscal year, BSG launched a new strategic partnership with Salon HQ to help its professional stylist customers grow their business. Salon HQ is a customizable digital storefront platform that gives stylists the ability to curate a product selection from thousands of BSG merchandise choices, and enables their clients to purchase directly from their shops without the stylists having to finance and carry inventory.

We believe growing our SBS ~~owned-brands,~~owned brands, through innovation and marketing, will provide improved margins, strengthen our long-term relationships with existing customers and help attract new customers. During the ~~quarter,~~fiscal year, we have invested more into marketing of our ~~owned-brands~~owned brands and launched the first ~~phase~~and second phases of our new ~~owned-branded~~owned branded vegan hair repair product line – ~~bondbar.~~bondbar – that’s SLS/SLES-free, paraben-free, phthalate-free and cruelty-free. These initiatives delivered an increase in our ~~owned-brands~~owned brands sales penetration, resulting in increased SBS profit margins.

Furthermore weduring the second quarter, some of our BSG vendors began launching new and exciting product lines, including Paul Mitchell’s new permanent hair color line for gray coverage – the color 10 – that is a formulated using sustainably sourced beeswax, and Wella’s new hair care line – Ultimate Repair – which helps nourish and repair damaged hair. We are thrilled to be able to provide these new innovative products to salons and stylists, and look forward to providing ~~salons and stylists with new innovations from~~more of our BSG ~~vendors as they are launched over the next two fiscal quarters.~~vendor’s new innovative products in our third quarter.

InAt the ~~fourth quarter~~end of fiscal year 2022, we announced our plan to close 330 SBS stores, 35 BSG stores and two BSG distribution centers. Based on our strategic evaluation, we believe that we will able to recapture approximately half of the demand of closed stores in other nearby store locations and improve overall profitability. During the first quarter, we completed the closure of our two BSG distributions centers and the majority of our planned store closures. Additionally, we have re-optimized our store supply chain network based on our new store fleet. As of ~~December~~March 31, ~~2022,~~2023, we have closed ~~327~~329 SBS stores and 1428 BSG stores as part of the Plan and are currently meeting our sales recapture expectations.

See Note 11, Restructuring, in Item 1 of this quarterly report for more information on the Plan.

Global inflationary pressures continue to influence consumer and stylist behavior along with the cost for products and services. In the U.S. and Canada, we are seeing our SBS customers color their hair less frequently and reduce the size of their basket when they shop with us, while at BSG we are seeing stylists purchasing closer to the time they use products. Additionally, inflationary pressures have impacted wages, especially among retail and hourly employees, as we have experienced an increase in our labor costs in order to attract and retain associates. During the current ~~quarter,~~year, these headwinds have resulted in lower traffic and conversion in our business and increases in certain operating costs. We continue to monitor these challenges and implement measures to help mitigate their impacts, including managing our inventory levels to reduce out-of-stock items, adjusting our promotional activities, optimizing our store base and expanding our partnerships with delivery service providers. Although these initiatives have helped mitigate ongoing macro-headwinds, we cannot reasonably predict the long-term effects of inflation.

Furthermore, in a measure to curb inflation, the U.S. Federal Reserve has increased the federal funds effective rate. In turn, these increases have raised the cost of debt borrowings. We currently have ~~$471.1~~$434.0 million in variable rate debt outstanding ~~of which $406.1 million is hedged with interest rate caps to help mitigate the impact of raising rates. Future~~and future increases in the federal funds effective rate could have a material adverse impact to our cost of borrowing, including any future changes in our debt structure.

While we have seen signs of stabilization from the impacts of the COVID-19 virus, we cannot reasonably predict the effects of new variants or expect improving trends to continue. Therefore, our future performance may partially depend on impacts of COVID-19, such as decreased customer in-store traffic, temporary store closures, and labor and supply chain disruptions.

~~Refer to Item 1A. “Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2022, for further discussion on the risks and uncertainties created by COVID-19.~~

We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquisitions are excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.

The following table sets forth, for the periods indicated, information concerning key measures we rely on to evaluate our operating performance (dollars in thousands):

		Three Months Ended December 31,													Three Months Ended March 31,												Six Months Ended March 31,
		2022			2021			Increase (Decrease)							2023			2022			Increase (Decrease)						2023			2022			Increase (Decrease)
Net sales:
SBS		$	549,472		$	561,530		$	(12,058	)		(2.1	)%		$	530,246		$	525,785		$	4,461			0.8	%	$	1,079,718		$	1,087,315		$	(7,597	)		(0.7	)%
BSG			407,583			418,721			(11,138	)		(2.7	)%			388,466			385,602			2,864			0.7	%		796,049			804,323			(8,274	)		(1.0	)%
Consolidated		$	957,055		$	980,251		$	(23,196	)		(2.4	)%		$	918,712		$	911,387		$	7,325			0.8	%	$	1,875,767		$	1,891,638		$	(15,871	)		(0.8	)%

Gross profit:
SBS		$	323,475		$	328,172		$	(4,697	)		(1.4	)%		$	317,117		$	309,262		$	7,855			2.5	%	$	640,592		$	637,434		$	3,158			0.5	%
BSG			165,099			171,957			(6,858	)		(4.0	)%			151,222			156,070			(4,848	)		(3.1	)%		316,321			328,027			(11,706	)		(3.6	)%
Consolidated		$	488,574		$	500,129		$	(11,555	)		(2.3	)%		$	468,339		$	465,332		$	3,007			0.6	%	$	956,913		$	965,461		$	(8,548	)		(0.9	)%

Segment gross margin:
SBS			58.9	%		58.4	%	50			bps					59.8	%		58.8	%	100			bps				59.3	%		58.6	%	70			bps
BSG			40.5	%		41.1	%	(60)			bps					38.9	%		40.5	%	(160)			bps				39.7	%		40.8	%	(110)			bps
Consolidated			51.0	%		51.0	%	—			bps					51.0	%		51.1	%	(10)			bps				51.0	%		51.0	%	—			bps

Net earnings:
Segment operating earnings:
SBS		$	99,174		$	100,623		$	(1,449	)		(1.4	)%		$	92,134		$	80,940		$	11,194			13.8	%	$	191,308		$	181,563		$	9,745			5.4	%
BSG			49,647			58,546			(8,899	)		(15.2	)%			37,260			46,008			(8,748	)		(19.0	)%		86,907			104,554			(17,647	)		(16.9	)%
Segment operating earnings			148,821			159,169			(10,348	)		(6.5	)%			129,394			126,948			2,446			1.9	%		278,215			286,117			(7,902	)		(2.8	)%
Unallocated expenses and restructuring^(a)			62,233			46,389			15,844			34.2	%			57,986			40,487			17,499			43.2	%		120,219			86,876			33,343			38.4	%
Consolidated operating earnings			86,588			112,780			(26,192	)		(23.2	)%			71,408			86,461			(15,053	)		(17.4	)%		157,996			199,241			(41,245	)		(20.7	)%
Interest expense			17,923			20,241			(2,318	)		(11.5	)%			16,685			19,896			(3,211	)		(16.1	)%		34,608			40,137			(5,529	)		(13.8	)%
Earnings before provision for income taxes			68,665			92,539			(23,874	)		(25.8	)%			54,723			66,565			(11,842	)		(17.8	)%		123,388			159,104			(35,716	)		(22.4	)%
Provision for income taxes			18,328			23,701			(5,373	)		(22.7	)%			13,862			19,757			(5,895	)		(29.8	)%		32,190			43,458			(11,268	)		(25.9	)%
Net earnings		$	50,337		$	68,838		$	(18,501	)		(26.9	)%		$	40,861		$	46,808		$	(5,947	)		(12.7	)%	$	91,198		$	115,646		$	(24,448	)		(21.1	)%
		.													.
Number of stores at end-of-period (including franchises)^(b):	Number of stores at end-of-period (including franchises)^(b):													Number of stores at end-of-period (including franchises)^(b):
SBS			3,146			3,529			(383	)																		3,143			3,499			(356	)		(10.2	)%
BSG			1,352			1,364			(12	)																		1,341			1,363			(22	)		(1.6	)%
Consolidated			4,498			4,893			(395	)																		4,484			4,862			(378	)		(7.8	)%
Comparable sales growth (decline):	Comparable sales growth (decline):													Comparable sales growth (decline):
SBS			3.0	%		4.4	%	(140)			bps					9.1	%		(0.5	)%	960			bps				6.0	%		2.0	%	400			bps
BSG			(1.5	)%		8.6	%	(1,010)			bps					1.3	%		1.3	%	—			bps				(0.2	)%		4.9	%	(510)			bps
Consolidated			1.1	%		6.1	%	(500)			bps					5.7	%		0.2	%	550			bps				3.3	%		3.2	%	10			bps

The Three Months Ended ~~December~~March 31, ~~2022,~~2023, compared to the Three Months Ended ~~December~~March 31, ~~2021~~2022

SBS. The ~~decrease~~increase in net sales for SBS was primarily driven by the following (in thousands):

Comparable sales	$	15,954		$	43,868
Sales outside comparable sales ^(a)		(16,220	)		(34,456	)
Foreign currency exchange		(11,792	)		(4,951	)
Total	$	(12,058	)	$	4,461

The increase in SBS’s comparable sales was a result of a growth in our average unit retail, primarily from inflationary impacts and pricing leverage, and an increase in transactions, driven by recapturing approximately half of the sales from stores closed in connection with the Plan and the lapping of the prior year’s impact from Omicron and supply chain challenges.

BSG. The increase in net sales for BSG was primarily driven by the following (in thousands):

The decrease in SBS’s net sales was driven by the negative impact from foreign exchange rates and the impact of store closures in the prior twelve months, including stores closed under the Plan, partially offset by an increase in our comparable sales. SBS’s comparable sales increase was driven by a growth in average ticket, primarily from inflationary impacts and pricing leverage, and partially offset by fewer transactions.

~~BSG~~. ~~The decrease in net sales for BSG was primarily driven by the following (in thousands):~~

~~The decrease in BSG’s net sales was primarily due to lower comparable sales, the impact of closed stores and the negative impact from the Canadian foreign exchange rate.~~ BSG’s comparable sales ~~faced headwinds from elevated demand in~~reflected the lapping of the prior ~~year~~year’s impact from ~~the easing of COVID-19 restrictions~~supply challenges and Omicron, partially offset by the impacts of the current economic environment ~~which~~ on stylist shopping behaviors. These impacts resulted in an increase in our average unit retail and fewer ~~transactions, but was partially offset by growth in average ticket.~~units per transaction.

SBS. SBS’s gross profit ~~decreased~~increased for the three months ended ~~December~~March 31, ~~2022,~~2023, as a result of ~~lower~~an increase in net sales ~~partially offset by~~and a higher gross margin. SBS’s gross margin grew as a result of pricing leverage, ~~and~~ increased penetration of our ~~owned-brand products.~~owned brand products and adjustments to our expected obsolescence reserve related to the Plan.

BSG. BSG’s gross profit decreased for the three months ended ~~December~~March 31, ~~2022,~~2023, as a result of ~~lower net sales and~~ a lower gross ~~margin.~~margin, partially offset by an increase in net sales. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix, between stores and lower-margin Regis e-commerce sales, ~~partially offset by adjustments to our expected obsolescence reserve related to the Plan.~~and a shift in some distribution center costs from selling, general and administrative expenses into gross margin.

SBS. SBS’s selling, general and administrative expenses decreased ~~$3.2~~$3.3 million, or ~~1.4%~~1.5%, for the three months ended ~~December~~March 31, ~~2022~~2023 and included a favorable impact from foreign exchange rates of ~~$4.6~~$2.2 million. As a percentage of SBS net sales, SG&A for the three months ended ~~December~~March 31, ~~2022~~2023 was ~~40.8%~~42.4% compared to ~~40.5%~~43.4% for the three months ended ~~December~~March 31, ~~2021.~~2022. The ~~increase~~decrease as a percentage of sales was primarily driven by ~~deleveraging~~cost savings from the closure of stores as ~~a result~~part of ~~lower net sales.~~the Plan, partially offset by increased labor and personnel costs and higher advertising expense.

BSG. BSG’s selling, general and administrative expenses increased ~~$2.0~~$3.9 million, or ~~1.8%~~3.5%, for the three months ended ~~December~~March 31, ~~2022.~~2023. As a percentage of BSG net sales, SG&A for the three months ended ~~December~~March 31, ~~2022~~2023 was ~~28.3%~~29.3% compared to ~~27.1%~~28.5% for the three months ended ~~December~~March 31, ~~2021.~~2022. The increase as a percentage of sales was driven primarily by ~~deleveraging as a result of lower net sales as well as~~ increases in labor and personnel ~~costs and depreciation expenses.~~costs.

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased ~~$6.5~~$10.2 million, or ~~14.4%~~25.3%, for the three months ended ~~December~~March 31, ~~2022,~~2023, primarily due to increased labor and personnel costs ~~of $4.6 million~~ and information technology expense ~~of $2.9 million~~.

For the three months ended ~~December~~March 31, ~~2022,~~2023, we incurred ~~$10.4~~$7.3 million in restructuring charges related to our Distribution Center Consolidation and Store Optimization Plan. ~~For the three months ended December 31, 2021,~~ ~~restructuring charges in connection with our previously communicated Transformation Plan were immaterial~~. See Note 11, Restructuring, in Item 1 of this quarterly report for more information on the Plan.

The decrease in interest expense is due to the interest savings from the repayment of our 8.75% Senior Notes due 2025 ~~during~~in fiscal year 2022, partially offset by higher interest expense on our variable rate debt resulting from the increase in borrowing rates and outstanding amounts under our ABL facility. ~~See Note 9,~~ ~~Derivatives~~,Additionally, we released the $2.2 million in ~~Item 1 of this quarterly report for more information on~~net gains held in AOCL related to our interest rate caps ~~used~~due to ~~help mitigate raising interest rates.~~the early settlement of the derivatives driven by the repayment of our TLB 2024.

The effective tax rates were ~~26.7%~~25.3% and ~~25.6%~~29.7%, for the three months ended ~~December~~March 31, ~~2022,~~2023, and ~~2021,~~2022, respectively. The ~~increase~~decrease in the effective tax rate was primarily due to the tax impact of share-based compensation which was ~~detrimental in the current year~~beneficial this quarter, but ~~beneficial~~detrimental in the prior year quarter, and greater losses in the prior year quarter for which a tax benefit could not be recognized.

The Six Months Ended March 31, 2023, compared to the Six Months Ended March 31, 2022

SBS. The decrease in net sales for SBS was primarily driven by the following (in thousands):

SBS’s comparable sales increase was driven by a growth in our average unit retail, primarily from inflationary impacts, pricing leverage and the lapping of Omicron and supply chain challenges. Comparable sales were also positively impacted by recapturing of approximately half of the sales from stores closed in connection with the Plan.

BSG. The decrease in net sales for BSG was primarily driven by the following (in thousands):

BSG’s comparable sales faced headwinds from elevated demand in the prior year from the easing of COVID-19 restrictions and the impacts of the current economic environment which resulted in fewer transactions and units per transaction, partially offset by an increase in our average unit retail.

SBS. SBS’s gross profit increased for the six months ended March 31, 2023, as a result of a higher gross margin, partially offset by lower net sales. SBS’s gross margin grew as a result of pricing leverage, increased penetration of our owned brand products and adjustments to our expected obsolescence reserve related to the Plan.

BSG. BSG’s gross profit decreased for the six months ended March 31, 2023, as a result of lower net sales and a lower gross margin. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix, between stores and lower-margin Regis e-commerce sales, and a shift in some distribution center costs from selling, general and administrative expenses into gross margin, partially offset by adjustments to our expected obsolescence reserve related to the Plan.

SBS. SBS’s selling, general and administrative expenses decreased $6.6 million, or 1.4%, for the six months ended March 31, 2023 and included a favorable impact from foreign exchange rates of $6.8 million. As a percentage of SBS net sales, SG&A for the six months ended March 31, 2023 was 41.6% compared to 41.9% for the six months ended March 31, 2022. The decrease as a percentage of sales was primarily driven by cost savings from the closure of stores in connection with the Plan, partially offset by an increase in labor and personnel costs.

BSG. BSG’s selling, general and administrative expenses increased $5.9 million, or 2.7%, for the six months ended March 31, 2023. As a percentage of BSG net sales, SG&A for the six months ended March 31, 2023 was 28.8% compared to 27.8% for the six months ended March 31, 2022. The increase as a percentage of sales was driven primarily by deleveraging as a result of lower net sales as well as increases in labor and personnel costs.

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $16.8 million, or 19.5%, for the six months ended March 31, 2023, primarily due to increased labor and personnel costs and information technology expenses.

For the six months ended March 31, 2023, we incurred $17.7 million in restructuring charges related to the Plan. For the six months ended March 31, 2022, restructuring charges in connection with our prior transformation plan were immaterial. See Note 11, Restructuring, in Item 1 of this quarterly report for more information on the Plan.

The decrease in interest expense is due to interest savings from the repayment of our 8.75% Senior Notes due 2025 in fiscal year 2022, partially offset by higher interest expense on our variable rate debt resulting from the increase in borrowing rates and outstanding amounts under our ABL facility. Additionally, we released the $2.2 million in net gains held in AOCL related to our interest rate caps due to the early settlement of the derivatives driven by the repayment of our TLB 2024 in our second fiscal quarter.

The effective tax rates were 26.1% and 27.3%, for the six months ended March 31, 2023, and 2022, respectively. The decrease in the effective tax rate was primarily due to greater losses in the prior year for which a tax benefit could not be recognized.

Our principal sources of liquidity are from cash and cash equivalents, cash from operations and our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payment. Additionally, under our share repurchase program, see below for more details, we will from time-to-time repurchase shares of our common stock on the open market to return value to our shareholders. At ~~December~~March 31, ~~2022,~~2023, we had ~~$440.8~~$510.3 million in our liquidity pool, which includes ~~$417.7~~$448.7 million available for borrowings under our ABL facility and cash and cash equivalents of ~~$99.1~~$61.6 million.

Working capital (current assets less current liabilities) increased ~~$77.4~~$113.9 million, to ~~$541.9~~$578.4 million at ~~December~~March 31, ~~2022,~~2023, compared to $464.5 million at September 30, 2022. This increase was driven by higher inventory balances, resulting from inflationary cost increases and the impact of foreign exchange rates of ~~$12.7~~$21.7 million, and ~~an increase~~a decrease in ~~cash and cash equivalents.~~borrowing outstanding under our ABL facility.

We anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), cash expected to be generated by operations, and funds available under our ABL facility will be sufficient to fund our working capital and capital expenditure requirements over the next twelve months.

	Three Months Ended December 31,						Six Months Ended March 31,
(in thousands)	2022			2021			2023			2022
Net cash provided (used) by operating activities		54,951			(5,685	)	$	79,648		$	(2,773	)
Net cash used by investing activities		(25,007	)		(26,709	)		(42,181	)		(44,427	)
Net cash used by financing activities		(5,992	)		(70,185	)		(49,237	)		(126,524	)

The change in net cash provided by operating activities for the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, compared to the net cash used by operating activities ~~three~~for the six months ended ~~December~~March 31, ~~2021,~~2022, was driven by the timing of inventory purchases and vendor payments, primarily from the impact of global supply chain issues in the prior ~~year. Additionally, it was driven by~~year, and the ~~timing of income taxes and a~~ decrease in net sales.

The decrease in net cash used by investing activities for the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, compared to the ~~three~~six months ended ~~December~~March 31, ~~2021,~~2022, was driven by fewer capital expenditures related to store improvements and information technology.

The decrease in net cash used by financing activities for the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, compared to the ~~three~~six months ended ~~December~~March 31, ~~2021,~~2022, was primarily a result of no share repurchases in the ~~prior~~current year and ~~lower cash proceeds from employees exercising equity awards.~~the net reduction in our outstanding debt principal.

On February 28, 2023, we entered into a seven-year term loan facility agreement in the aggregate principal amount of $400.0 million and used the proceeds to subsequently repay our previously existing term loan facility. See Note 8, Short-term Borrowings and Long-term Debt, in Item 1 of this quarterly report for more information.

At ~~December~~March 31, ~~2022,~~2023, we had ~~$1,151.1~~$1,114.0 million in outstanding debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of ~~$3.7~~$10.7 million. Our debt consists of $680.0 million in ~~5.625%~~2025 Senior Notes ~~due 2025 (“2025 Senior Notes”)~~ outstanding, ~~$406.1~~$400.0 million remaining on our term loan and ~~$65.0~~$34.0 million in outstanding borrowings under our ABL facility.

We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts

drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, the weighted average interest rate on our borrowings under the ABL facility was ~~5.2%~~5.5%.

We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.

Our 2025 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to ~~pay~~make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.

The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.

The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of ~~December~~March 31, ~~2022,~~2023, and September 30, 2022:

(in thousands)	December 31, 2022		September 30, 2022		March 31, 2023		September 30, 2022
Inventory	$	742,642	$	714,477	$	768,531	$	714,477
Intercompany receivable	$	394	$	—	$	5,287	$	—
Current assets	$	882,858	$	827,155	$	879,479	$	827,155
Total assets	$	2,032,279	$	1,982,982	$	2,032,568	$	1,982,982
Current liabilities	$	550,883	$	549,415	$	517,349	$	549,415
Intercompany payable	$	—	$	4,431	$	—	$	4,431
Total liabilities	$	2,084,606	$	2,085,169	$	2,046,853	$	2,085,169

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for ~~three~~six months ended ~~December~~March 31, ~~2022~~2023 (in thousands):

Net sales	$	775,768	$	1,523,975
Gross profit	$	399,794	$	784,446
Earnings before provision for income taxes	$	52,383	$	96,854
Net Earnings	$	38,413	$	72,906

Under our current share repurchase program, we may from time-to-time repurchase our common stock on the open market. During the ~~three~~six months ended ~~December~~March 31, ~~2022,~~2023, no shares were repurchased in connection with our share repurchase program. During ~~three~~the six months ended ~~December~~March 31, ~~2021,~~2022, we repurchased ~~3.7~~6.8 million shares of our common stock for ~~$75.0~~$130.3 million under our share repurchase program. See Note 5,4, Stockholders’ Equity, for more information about our share repurchase program.

~~There~~Other than the repayment of our TLB 2024 and entering into the TLB 2030 as discussed above, there have been no material changes outside the ordinary course of our business in any of our contractual obligations since September 30, 2022.

At ~~December~~March 31, ~~2022~~2023 and September 30, 2022, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.

There have been no material changes to our critical accounting estimates or assumptions since September 30, 2022.

There have been no recent accounting pronouncements issued that will have a material impact to our business.

As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and government actions. ~~There have been no~~Since September 30, 2022, the only material ~~changes to~~change in our market risks relates to interest rate risks resulting from ~~September 30, 2022.~~ the early settlement of our interest rate caps which previously helped mitigate our exposure to interest rates changes on our prior term loan B. In April 2023, we entered into an interest rate swap. See Note 12, Subsequent Event, for more information. At March 31, 2023, we had $434.0 million in outstanding floating interest rate debt, and a 1.0 percentage point interest rate increase would negatively impact our annual interest expense and cash flows by $4.3 million.

See our disclosures about market risks contained in Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~December~~March 31, ~~2022.~~2023. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, internal audit, and legal departments under the supervision of our CEO and CFO.

Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.

Conclusions regarding Disclosure Controls. Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of ~~December~~March 31, ~~2022,~~2023, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are involved, from time to time, in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.

We are subject to a number of U.S., federal, state and local laws and regulations, as well as the laws and regulations applicable in each foreign country or jurisdiction in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products and the methods we use to import these products. We believe that we are in material compliance with such laws and regulations, although no assurance can be provided that this will remain true going forward.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors disclosed in such Annual Report. The risks described in such Annual Report and herein are not the only risks facing our company.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware		36-2257936
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3001 Colorado Boulevard
Denton, Texas		76210
(Address of principal executive offices)		(Zip Code)

	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements	4

Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Earnings	5
Condensed Consolidated Statements of Comprehensive Income	6
Condensed Consolidated Statements of Stockholders’ Equity	7
Condensed Consolidated Statements of Cash Flows	8
Notes to Condensed Consolidated Financial Statements	9

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	1617
Item 3. Quantitative And Qualitative Disclosures About Market Risk	2224
Item 4. Controls And Procedures	2224

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	2325
Item 1A. Risk Factors	2325
Item 6. Exhibits	2426


	•	Enhancing our customer centricity;
	•	Growing high margin owned brands at Sally Beauty and amplifying innovation; and

Exhibit No.		Description

3.1		Third Restated Certificate of Incorporation of Sally Beauty Holdings, Inc., dated January 30, 2014, which is incorporated herein by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on January 30, 2014

3.2		Amended and Restated Bylaws of Sally Beauty Holdings, Inc., dated April 26, 2017, which is incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 28, 2017

10.1		Credit Agreement, dated as of February 28, 2023, by and among Sally Holdings LLC, Sally Capital, Inc., Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties, which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 1, 2023

22		List of Subsidiary Guarantors*

31.1		Rule 13a-14(a)/15d-14(a) Certification of Denise Paulonis*

31.2		Rule 13a-14(a)/15d-14(a) Certification of Marlo M. Cormier*

32.1		Section 1350 Certification of Denise Paulonis*

32.2		Section 1350 Certification of Marlo M. Cormier*

101		The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarter ended ~~December~~March 31, ~~2022,~~2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements.

104		The cover page from our Quarterly Report on Form 10-Q for the fiscal quarter ended ~~December~~March 31, ~~2022,~~2023, formatted in Inline XBRL (contained in Exhibit 101).

		SALLY BEAUTY HOLDINGS, INC.
		(Registrant)

Date: ~~February 2,~~May 4, 2023

	By:	/s/ Marlo M. Cormier
		Marlo M. Cormier
		Senior Vice President, Chief Financial Officer
		For the Registrant and as its Principal Financial Officer


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Large accelerated filer	☒		Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐		Emerging growth company	☐

Comparable sales	$	4,769
Sales outside comparable sales ^(a)		171
Foreign currency exchange		(2,076	)
Total	$	2,864

Comparable sales	$	(6,109	)
Sales outside comparable sales ^(a)		(2,396	)
Foreign currency exchange		(2,633	)
Total	$	(11,138	)

Comparable sales	$	59,822
Sales outside comparable sales ^(a)		(50,676	)
Foreign currency exchange		(16,743	)
Total	$	(7,597	)

Comparable sales	$	(1,340	)
Sales outside comparable sales ^(a)		(2,225	)
Foreign currency exchange		(4,709	)
Total	$	(8,274	)