Sally Beauty Holdings, Inc. Canaccord Genuity's 46th Annual Growth Conference

Great. Thank you, Susan. We appreciate you hosting us today, and we're very excited to talk about the Sally Beauty Holdings story. What I want to start with is a little bit about who we are. Susan mentioned it well. We are quite a differentiated beauty company, spanning both consumer and professional markets, which is a key source of differentiation for us. We operate a strong omni-channel business, but we also operate 4,300 stores globally that span both pro and consumer service, and it's a highly resilient model. The hair color category, which represents over 40% of the business on both sides of our business, is highly resilient because it's a staple. People don't think about that as discretionary beauty spend. They think about it as needed beauty spend. Once you start coloring your hair, you generally don't stop that trend.

We are the largest source of professional-level hair color to service 61% of U.S. women who color their hair. On top of that, very strong cash flow generation gives us ample opportunity to reinvest in the business for growth, which we're excited to share with you today, as well as return value to our shareholders. So who are we? In total, we're about a $4 billion company. We posted a $1.90 EPS last year, which was 12% growth with very healthy cash flow of over $200 million a year. That trend has continued three quarters into our FY 2026. We continue to generate modestly positive comp with an EPS up 9%, and our free cash flow year-over-year up an additional 18%. A great business for us to be able to continue to invest behind. So who are we at the core?

You'll see us talk about two brands, our Sally brand and our CosmoProf brand. Our Sally brand is how we go to market retail. It's 3,000 stores. It's about 10% e-commerce penetration. Those stores are about 1,800 square feet. Very efficient small boxes. Our pro business that operates under the name CosmoProf is about 1,300 stores, 15% e-commerce penetration, and 550 full-service sales consultants. What's unique about the stylist community is 70% of stylists generate and operate their own independent business. So for where some businesses you would think a B2B business would not operate storefronts, we're quite efficient in that that is the core source of how people utilize a hand-to-mouth kind of cash business.

They come in and buy what they need to service their customers for a week or a day and will come back and repurchase again with that convenience of being able to come into a store to do it. As I mentioned earlier, we service two distinct but very related markets, in servicing hair color as the primary differentiator of our model. Where I mentioned that 61% of women color their hair, what's amazing is the way that they do it. Out of that 61%, only 11% only go to a salon, 25% only DIY, and that middle 25%, which is just such a fun segment, is the customer who says, "I'll go a few times a year to my stylist, and in between, I'll touch it up myself." We can capture both sides of that equation when we do our business.

In addition to that allows us to serve beauty on a pro beauty services side, which is a large addressable market, and tap into the broader beauty and strength of the beauty category, leveraging color into beauty in the market, and we'll talk about some of those places we're doing that today. Let me talk a little bit about Sally, then a little about BSG. I'll hit a couple of points about our key strategies driving growth, and then Adrian is going to bring us home with some of the financials. For Sally, what really differentiates Sally as a retail concept? First of all, extremely convenient way to shop. While only about 10% e-commerce penetration, we participate in all the marketplaces that you can think of, including DoorDash and Uber Eats.

Our e-commerce business is heavily serviced from our stores, with 70% of our e-commerce sales actually being distributed through inventory that exists in our store base today. We have an extremely loyal consumer. 80% of our sales come from those in our loyalty program, which is about 15 million active known customers in the U.S. We've seen nice new customer growth over the past quarters as our performance marketing, our CRM, and personalization initiatives have really taken hold. Finally, on this page, I'll hit on leadership and color expertise. What's particularly unique about our business is while we have small, mighty boxes, the associates in those stores are trained to help people use our products effectively.

We've then translated that into an online service called Licensed Colorist OnDemand, where at a click of a button for free, you can connect with a licensed colorist, video, audio, chat, show them a picture of what you want, what color correction you need. They're going to walk you through everything that you need to do. We're proud to see that we now do 5,200 of those consultations a week, with those customers having a much higher lifetime value as we've tracked that program for the last few years, and excited in the way that we can support that customer with their DIY needs. When we think about the Sally portfolio, as I mentioned earlier, a little over 40% of the business is hair color, another 23% is hair care.

What we are really excited about is our opportunity to hit a broader total addressable market when we think about participating now in new categories like fragrance and men's and nails, and we are starting to dip into skin as well, as we see that opportunity to take our core customer into some new categories and new sets for us. In particular, I would call out fragrance, where we tested it in 1,000 stores going into holiday last year, saw such great results, we ramped it up to 2,000 coming out of holiday, and are now set up for a wonderful season ahead. Our own brands are also a key source of differentiation. On the Sally side, 35% of our sales come from our own brands, where margins in that business are 10 percentage points or more higher than our vendor-branded product.

In addition to the margin, what is extremely important is this has people saying, "Why Sally and only at Sally?" ion, our largest own brand, is over a $300 million brand in and of itself, and we are excited to keep building on this and offering great value to our customers in very well-known own brand space. Then finally, while to date, so many of our initiatives around performance marketing and assortment and assortment expansion, as well as digital, have been driving 3.5% growth last quarter. We are looking to the future and looking about how we reinvent the store experience, which we are calling Sally Ignited. These stores, if you went into one of our stores today, it feels a little bit more like a drugstore. It is a supply house. It is high gondolas, maybe not that exciting and appealing to wander the store.

It is very functional for what people need to get in, get great customer service, and get out. Our new concept, as you can see the pictures here, much more specialty beauty experience, much more for a reason to somebody to come in and linger, cross-shop across categories, experience nail if they have not done it. An impulse section as they check out. Things that as we are watching our first 80 stores that we are testing right now, we are seeing higher dwell times. We are seeing increased frequency. We are seeing more cross-category baskets. In this past quarter, those stores nicely comped above of the fleet. So a great trajectory that we are on, and we will make more decisions as we come to the end of our fiscal year on the expansion program here. But see the really opportunity to continue to drive growth with the remodel program.

Turning to the BSG side of the house, this is our pro distribution, wholesale distribution side of the house. You all hit on a few things that are here that are very unique. First of all, we are the largest distributor to pro stylists in the U.S. We know every stylist that is out there, and while that stylist population is relatively flat, they are incredibly sticky and high value. Our average customer spends over $800 with us a year, and is a regular frequent visitor to our stores or to our e-commerce sites and experience. This is also a place where color matters. So we sell 20 color brands, over 3,000 shades. When stylists shop, they are very sticky with their color category, and then they sample and dabble across shampoos, conditioners, other hair care products.

We win them in with color, and they stick with us for the breadth of the rest of the assortment. As I mentioned, this is definitely a category killer distribution model where color and care and all things hair are the dominant space here. 84% of the business is hair color and hair care with some nice additional businesses in nail and styling tools. What we are particularly excited about right now is expanding into pro distribution of skin and spa. When we think about that space, we can target both our existing salon customers who are coming in and shopping with us, but there is a population of estheticians who uniquely service that skincare side of the community, that by bringing in pro brands like Matter of Fact and Image Skincare, we are giving them that same convenience of shopping that our stylists on the hair care side have today.

We look forward to that expansion coming into the business. As I mentioned earlier, we are a house of brands. This is a business that is not an own brand business. It is very much a pro business that we are out there with, and you can see some of the great brands that we participate with today. The most interesting and new addition to our portfolio on the color side has been Danger Jones, a very well-regarded brand that started as vivid color and has expanded into core color as well. I think the part that I will close on BSG is a reminder of why this business is so unique. We know 100% of the customers that shop with us. They have to be professionally licensed to come in and shop at wholesale prices.