Ladies and gentlemen, thank you for standing by and welcome to the Sally Beauty Fiscal 2017 Third Quarter Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct the question-and-answer session. Instructions will be given to you at that time. And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Karen Fugate. Please go ahead.

Thank you. Before we begin, I would like to remind you that certain comments, including matters such as forecasted financial information, contracts or business and trend information, made during this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934. Many of these forward-looking statements can be identified by the use of words such as may, will, should, expect, anticipate, estimate, assume, continue, project, plan, believe and similar words or phrases. These statements are subject to a number of factors that could cause actual results to differ materially from expectations. Those factors are described in Sally Beauty Holdings' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. The company does not undertake any obligation to publicly update or revise its forward-looking statements. The company has provided a detailed explanation with reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website. With me on the call today are Chris Brickman, President and Chief Executive Officer; and Don Grimes, Senior Vice President, Chief Financial Officer and Chief Operations Officer. Now, I would like to turn the call over to Chris.

Thank you, Karen, and good morning, everyone. Thank you for joining us for our 2017 third quarter earnings call. First, I will provide a brief overview of our performance for the quarter and review the progress we have made on our strategic initiatives. Don will then discuss our third quarter results in more detail. Our third quarter financial results were solid, with improved revenue performance, strong gross margin expansion and meaningful growth in adjusted earnings per share. These results reflect our balanced approach to managing our business in a challenging retail environment, which combines long-term strategic investments with an unrelenting focus on operating discipline and organizational efficiencies. As you know, earlier this year, we recognized the need to right-size our cost structure in light of the current retail environment and launched a restructuring and cost reduction initiative with the goal of lowering our full-year 2017 operating expenses by more than $30 million. We have continued to execute against these initiatives, resulting in flat SG&A expenses for the quarter and year-to-date. In addition, we have identified more opportunities to drive efficiency in our international operations through store rationalization, overhead reductions, vendor negotiations and global sourcing. Our effort to position the company for better financial performance extends to our capital structure as well. As we announced shortly after quarter-end, we refinanced $850 million of our long-term debt by redeeming higher cost senior notes with funds generated from a new lower cost institutional term loan, a move that we expect will generate a significant reduction in annual cash interest expense. In Sally and BSG, revenue and store traffic improved sequentially and we executed on many of our core initiatives during the quarter. With respect to pricing, we are always trying to balance promotions designed to drive short-term sales with our goal of maximizing…

Thank you, Chris, and good morning, everyone. Overall, we are pleased with the fiscal third quarter and the sequential improvement reflected in our financial results. We believe the steps we're taking to run the business more efficiently, along with many of the strategic initiatives that Chris just discussed, led to the solid financial performance for the quarter. Turning to some of the details, consolidated revenue was $998 million in the quarter, essentially flat versus the prior year. A very slight increase in same store sales and incremental sales from 116 new stores were more than offset by a negative foreign currency impact of approximately $10 million. Additionally, third quarter sales growth was negatively impacted by the shift of the Easter holiday when most of our stores are closed to April this year versus March in the prior year. This calendar shift negatively impacted revenue growth in the quarter by approximately 60 basis points and same store sales growth by a similar amount. Gross margin improved 40 basis points in the quarter to 50.4%. The excellent margin performance was driven by both tactical and strategic pricing initiatives and reduced promotional activity and favorable channel mix in the U.S., only partially offset by unfavorable channel mix in certain international markets. We were extremely pleased with the gross margin delivery in the quarter. Selling, general and administrative expenses, excluding depreciation and amortization expense, were $337 million in the quarter, down 0.4% versus the prior year, representing 33.9% of sales, a decrease of 10 basis points from the prior year. The slight decrease in operating expenses was driven by the benefits realized from our restructuring plan, lower incentive comp expense and a shift in our Sally U.S. marketing strategy towards lower cost, but more efficient and effective social media initiatives. These favorable items were…

Certainly. And our first question will come from the line of Simeon Siegel with Nomura/Instinet. Your line is open. Simeon Avram Siegel - Nomura/Instinet: Thanks. Good morning, guys. So, ex the calendar shift, it looks like the Sally comps were close to flat. Where do see the Sally comps over the next several quarters? Can you speak to the drivers there, maybe elaborating on the zone and tactical pricing and any thoughts on potential opportunity there? And then, just given all the talk on the increased promotions across the sector and the potential advancement of Amazon, can you share your view on maybe both of those, just in light of the comments on the reduced reliance on the promotional activity at Sally, and then maybe the puts and takes between Prime Now partnership versus the risk of just the general shift toward purchasing online? Thanks.

Simeon, that's a lot of questions there, but let me tackle a few of them here. So, we're not going to get into forecasting comps by division for the coming quarters. That being said, I think we've made reference to a relatively challenging retail market. We do see traffic to the malls, where our Sally stores are at, as being slightly down, 1% to 2% down. We're working to offset those headwinds obviously. Some of that will come through pricing and some of it will come through ticket, and obviously, some of it hopefully will come through better execution of our marketing plans. But it is still a challenging market on the retail side. In terms of Amazon, again, the real focus for us in working with them on Prime Now is to access customers that we wouldn't otherwise access. The average income demographic of a Amazon Prime Now customer is 3x an average Sally customer, and we find very little overlap between the customers that are buying through that channel versus our current customers. So, the net result of that is we see it as mostly an incremental opportunity to drive trial for our brands, as well as some incremental sales in our stores, and to leverage inventory and labor that's already existing in our stores, as that's where the product is picked from. So, in our mind, that's mostly an upside opportunity. And I don't see a lot of risk there. We also work with them on our primary website. We have an Amazon Store there, which is a reasonable percentage of our total sales online and that's also a productive opportunity for us to reach more customers. So, I think the net benefits of that far outweigh any negatives and we're going to continue to expand that over time. Simeon Avram Siegel - Nomura/Instinet: Great. Thanks a lot. Best of luck for the rest of the year.

Thank you.

Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Your line is open. Rupesh Parikh - Oppenheimer & Co. Inc.: Thanks for taking my question. So, I had a few questions on the loyalty card program. As you look at the test that you guys are doing so far, is there anything that has surprised you or is there anymore color you can provide in terms of the lift you're seeing so far within your test markets?

No, I'm not going to get into the details of lift by market. I think a couple of surprises I would highlight: A, how easy it's been to transition customers over. There hasn't been a lot of resistance there, and obviously, we were worried about that. I do think one of the big learnings for us is that the amount of training and education it takes for our associates to get it done right is very important, as we've seen significant differences by store, by region within the 300-store test based upon the level of execution of the store managers and the associates. So, obviously, it tells us that we've got to invest significant time in the training in order to prepare our associates for this when the time comes for rolling this out to a broader set of stores. So, overall, though, I'd say it's been received very well by our customers, but we still got work to do to get it right. Rupesh Parikh - Oppenheimer & Co. Inc.: Okay, great. And then, on the expense side, just curious as labor costs and I think you guys had rent pressures in some of the previous quarters. As you look forward, how are you thinking about some of the labor cost and rent pressures within the Sally Beauty segment?

Rupesh, this is Don. I think we've cycled through a lot of the labor inflation that we're experiencing. It's not going to be non-existent going forward, because there's still pressure to hire the type of employees that we hire into our Sally stores in the U.S. We are seeing, as we've talked about in the past, a moderation of rent inflation, and we expect that to continue. It hasn't turned negative. But when we renew on average our five-year leases, we've seen increases decline from the high single-digit to the mid to low single-digit, and we expect that kind of trend to continue. So, that's a real positive as it relates to SG&A on a go-forward basis. But clearly, we've seen the worst of the labor inflation, still moderate amount going forward, and rent inflation has for sure moderated. Rupesh Parikh - Oppenheimer & Co. Inc.: Okay, great. Thank you.

Thank you. Our next question comes from the line of Mark Altschwager with Robert W. Baird. Your line is open. Mark R. Altschwager - Robert W. Baird & Co., Inc.: Thanks for taking the question and nice quarter. I wanted to ask on gross margin. You've made some great progress there at Sally. How much runway is left on that front? I think comparisons are a bit easier for one to two quarters. But would you expect gross margin to then begin to level off after that? And then separately, just on the full-year operating income guidance, it was tempered a little bit. You look on plan with comps, on plan with gross margins, so maybe SG&A a little bit higher, just any drivers to that? Thanks.

Why don't I take the first part of that question? Don will take the second part. And by the way, Mark, great to hear from you. I think there's still opportunity on pricing. We're trying to be judicious about it. So, we implemented a price increase. The last two markets that went up were in Dallas and Las Vegas. And so far, those have gone very well. Our thinking is – we're in about 600 stores now, so about 20% of the network has moved into a zone pricing model. Our thinking is that if those continue to go well, we'll consider other markets. And we're doing the analysis on those now, as well as there'll be additional tactical pricing. But again, what we try to do is make a move and then watch it for three to six months before we make the next move. But I certainly see that that will be part of our gross margin trajectory next year as well, and we'll continue to expect gross margin expansion next year based on some of the pricing activity we take.

And as it relates to the operating income guidance – or the adjusted operating income guidance, there was a slight reduction in that versus our prior guidance. It really was more around revenue and gross margin within the range of flat comp store sales. We're now forecasting slightly lower than we were forecasting at the end of Q2. And within the range of the approximately 30 basis points of gross margin expansion, it's a little bit lower now than it was before. Our SG&A is, in fact, tracking with our prior forecast. So, that reduction in the full-year operating income outlook is more driven by a small take-down in revenue and gross margin and less by SG&A. Mark R. Altschwager - Robert W. Baird & Co., Inc.: Thank you for that color. And then, maybe just any initial thoughts on how you're thinking about earnings growth for fiscal 2018?

Not during today's call, no. We're in the midst of our fiscal 2018 planning. We've obviously had several discussions with our Board of Directors regarding our outlook for fiscal 2018. But we're in the throes of the detailed planning right now. So, obviously, more to come on that. Mark R. Altschwager - Robert W. Baird & Co., Inc.: Fair enough. We'll check back next quarter. Thank you.

Thanks, Mark.

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open. Simeon Ari Gutman - Morgan Stanley & Co. LLC: Good morning. Hey, guys. So, this quarter, you benefited from being, I think, a little less reliant on promotion or the GM got better from it. Can you describe in general the environment? Is the need to engage in short-term promotions increasing, such that the business is changing a bit? And again, you did a nice job balancing it this quarter. But can you give us the tone or the tenor of the environment with promotions?

Yeah. I think my overall take is it's continued to be a pretty value-conscious and competitive market, any market where – as you're seeing in department stores, fairly significant declines in traffic, and then in strip malls, modest declines in traffic. Inevitably, that leads some retailers to be fairly aggressive with their promotional activity. So, we feel like you have to have a good consistent stream of value messages out there in order to drive traffic. But I think that's manageable within the margin guidance we've given. So, I don't think that's going to change that guidance. I think we can continue to get margin expansion and be responsive to that. But it's going to continue to be a challenging market going forward in my view. Simeon Ari Gutman - Morgan Stanley & Co. LLC: Okay. And then, on the influencers, which sounds like it's going well, are you having more success with national brands or private brands? And I would think what this influencer thing does, it's lowering the barrier for new bands to rise up. Is that apparent in what you're seeing and is it beginning to change the conversation with vendors?

Yeah. The way I describe it is, I do think social media in general is inverting the pyramid of marketing, and the mass scale brands – in all, right. In CPG as well as in retail, it's changing that, because it's creating a new venue and medium for people to reach large groups of consumers. In the Sally context, these events change in terms of which brands are the focus market-by-market. We're focused more on the Sally store. We bring amazing secrets, obviously, great alternatives to salon-quality brands at a better value, and we showcase that with all kinds of nail artists, brow artists, colorists, stylists who then show up. Our vendor partners are actually playing a significant role in these events and co-funding these events with us in many cases. And so, I think it's a great chance for us to reach hundreds and even thousands of beauty influencers, which then magnifies the impact of that to millions and even tens of millions of consumers in a very low cost way. And that's what we're really leveraging. I think we have an authentic story to tell there, which is that we have a great array of both own brands as well as national brands that are all salon-quality at a better value. We bring hundreds of stylists into an event that's very fun. As an example, at Beautycon, they'll be right on the floor of the Beautycon event, where they'll get a chance to enjoy some music, some drinks, some food, as well as then all kinds of tips and tricks around beauty both in hair and nails and makeup. They'll get to meet celebrity stylists and celebrity makeup artists, develop content which is what they're hungry for. They're hungry for content to put on their – to attract followers. And then, obviously, Sally becomes the center of that. And we're going to probably move to a calendar of 10 to 12 of those a year. It'll become a regular part of our marketing plan, and our vendors will be right there with us as we do it. Simeon Ari Gutman - Morgan Stanley & Co. LLC: I just had two quick housekeeping – more math things for Don maybe, because there's something I caught on the call a second ago. In the press release, I think the gross margin guidance was tweaked up a little bit for the full-year. But in the Q&A just recently, did Don say that you lowered your gross margin, just to clarify that point? And then, can you also tell us what is the adjusted base of EBIT or operating income in 2016 that the guidance is based off of?

Yes. Within the range of the gross margin guidance, it came down ever so slightly from kind of our – there's a specific internal forecast and then there's a range that kind of brackets that forecast. And so, it's down slightly on the full-year gross margin outlook. But we did kind of narrow the gross margin guidance from a range of 20 basis points to 30 basis points, to 30 basis points of expansion. So, that kind of addresses the first question. And the second question on the base of the adjusted operating income, hang on one second Simeon Ari Gutman - Morgan Stanley & Co. LLC: No problem.

Adjusted operating income – yeah, hold on a second. It's right here. It is – $515.5 million was the prior year adjusted EBIT. Simeon Ari Gutman - Morgan Stanley & Co. LLC: $515 million?

Yeah. Simeon Ari Gutman - Morgan Stanley & Co. LLC: Okay, thanks.

Thank you.

Thanks, Simeon.

Our next question comes from the line of Jason Gere with KeyBanc Capital Markets. Your line is open.

Okay, thanks. Good morning, guys. Hey, I guess I have two questions. One, I know you gave, in early June, the kind of April-May update when you're doing the refinancing. You didn't break-out between, I guess, the two businesses. Just wondering how June kind of played out and trends into July? Was there any change in terms of what you saw in April-May – again, you have to, I guess, normalize for the Easter shift. But just wondering if you can talk about the trend, any sea change? I know BSG had some new innovation coming. So, just wondering that BSG kind of re-accelerated in June, into July. Just any thoughts that you could provide there is the first question.

I would describe that June is in line with the rest of the quarter. Obviously, there's little calendar shifts that happen every single month. But I describe it as in line overall. Obviously, you saw that BSG showed pretty significant sequential growth quarter-to-quarter, and we expect that BSG will continue to improve. But overall, June was in line with the rest of the quarter.

Okay. And then, how about anything on July?

We're not going to give inter-quarter performance. But again, we continue to believe that we're doing well and we're making sequential progress.

Okay.

And just to clarify, the disclosure of the April-May comps was done specifically related to the refinancing. So, that wasn't meant to establish a precedent that we're going to comment on performance in a quarter, so.

I know, but it was nice to see. Okay. All right. So, the second question, if we talk about the store growth, the 1.5%, that level – is that because of the international markets because of Colombia and then – so that implies that you'll see more impact in the fourth quarter? Or can you give maybe a view on stores – and I'm talking Sally, international and the U.S.? Because I know Europe, you're talking about some changes. But the U.S., I think you're looking to optimize maybe the store base. You like the number of stores that you have, but maybe there's some changes that you could make when stores come off of lease. And I guess maybe any context in terms of that square footage number, and is that the right way we should be thinking about it going forward? Thank you.

I think, Jason, the best way to think about it is that's a full-year number, obviously. And so, we opened quite a few stores in the first couple of quarters of this year, and that growth has slowed down. And what we've said, I think, for next year, we're not giving guidance yet at this point in time. But directionally, we see opportunities to rationalize the store base in Sally, we see continued growth in BSG, and maybe a little bit of growth internationally. So, we don't know exactly how that's all going to fall out yet. We'll see as our plan finalizes. But we're, obviously, working hard to make sure that we improve profitability in our Sally U.S. business.

And our store count at Q3 is up 116 or up 2.3% versus the prior year's Q3. So, that guidance for full-year net store count increase of 1.5% suggests that we're going to open fewer stores this year's Q4 than we opened in last year's Q4.

Okay, right. Thank you.

You bet.

Thank you. Our next question will come from the line of Oliver Chen with Cowen & Company. Your line is open. Courtney Willson - Cowen & Co. LLC: Hey, everyone. It's Courtney Willson. I'm on for Oliver today. As you consider some of your efforts like the new loyalty program, some of the new marketing with social and events, Amazon Prime, how do you view kind of your core customer demographic evolving over the long-term? Has where she's cross-shopping changed at all?

I don't think the core customer changes that much. I think she is still mostly a trade-up opportunity from mass. She's a beauty enthusiast, so she aspires to the salon brands. But in many cases, they're out of reach for her. So, I think that demographic stays the same. I think our message needs to be sharper there. So, I think at some point in time – we try to get very clear that what we do is we take salon-quality ingredients, the best ingredients there are, and we work directly with manufacturers and producers to create salon-quality products at a better value. And in many cases, we're trying to create great alternatives to overpriced salon brands. And that's what Sally does. I don't think that the target changes. I think the message needs to get sharper. Courtney Willson - Cowen & Co. LLC: Okay. Thank you.

You bet.

Thank you. Our next question comes from the line of Ike Boruchow with Wells Fargo. Your line is open.

Hey. Good morning, everyone. Don, thanks for all the help on the refinancing activities. Just to dumb it down, in dollars, how much did all of those actions save you in a forward-looking kind of basis? Basically, how many millions of dollars is that going to save on the interest expense line going forward?

Well, the unknown is what's LIBOR going to do, because we've left the $550 million floating rate tranche float below the interest rate cap. So, you can do the easy math on the rates that I gave versus the 5.75%. But we think that it ought to add in the $0.04 to $0.06 per range for adjusted EPS in fiscal 2018. That's a full-year benefit in fiscal 2018 versus the one quarter benefit in fiscal 2017. So, the benefit for fiscal 2017 Q4 EPS will be in the, call it, $0.01 or $0.015 range based on where rates are currently. But it's a very successful refinancing, and just as the rate – the environment is still favorable to borrowers, we were able to get essentially an institutional term loan with covenants that kind of mirrored the high yield notes indentures. So, there was really little downside to doing that. And taking advantage of this emerging concept of a fixed rate tranche within the term loan B world was something we were able to do, to get $300 million of it fixed. So, it was interesting to go through it and I think very beneficial to the company.

Got it. No, that's helpful. And then, just a quick follow-up. Just – I know you had a lot of questions about the pricing initiatives at Sally supply. Just kind of curious how you're balancing the traffic and the pricing, because the gross margins within the segment are much, much better year-over-year. You're showing nice expansion. But the gross profit dollars are also not as strong in the comps, not as strong as it was in the prior year. So, just kind of curious, how do you balance those? Is there a point in time where you look at it and say we should actually be adding more value and investing more in margin to drive better traffic, better comp? Just kind of curious how you guys think about that internally.

Yeah. We do, obviously, and we've got to break all those pieces apart. So, I would say overall, our pricing activity has been quite successful. If I was to pick one area where perhaps we may change our strategy a bit or tweak it a bit is on the pro side, where we're worried that maybe some of the pricing actions we've taken has accelerated some of the negative comps we've been seeing with pros. So, I think we're breaking it apart. We're looking at it by customer. And I think the reality is, is that we feel pretty comfortable that we can continue to expand zone pricing and tactical pricing on an overall basis. And then, we may attempt some changes in pricing strategy around the pro in order to reduce some of the declines we've been seeing there, so overall, a positive thing. We'll continue to test it and learn from it. In the end of the day, you can do all the planning you want, but until it hits the market, you don't know what the consumer or the customer will react to. And what we're seeing is, in general, pretty positive signs on the retail side, with some opportunity perhaps to refine our pricing with pros.

Got it. Thanks. Very helpful.

You bet.

Thank you. Our next question comes from the line of Olivia Tong with Bank of America. Your line is open.

Hi, guys. This is Chris Carey on for Olivia. Thanks for the question. Just one quick one, and then a follow-up just on the quick question, not sure if you mentioned this, but share buybacks were a bit higher than we were looking for this quarter. So, just wondering what your thoughts are for that going forward, if you expect it to stay at this elevated level.

Well, we took advantage of the drop in the stock price. But honestly, we have a strategy and it's opportunistic in nature. We have a long track record of sharing our strong cash flow with shareholders in the form of stock buybacks, because we don't currently pay a cash dividend. And so, we did go more aggressive in buying the stock back in the quarter. We ended the quarter with a little more than $80 million drawn on our ABL, in contrast to much lower levels drawn on the ABL the last couple of quarters, including a couple of quarters ago, it was zero. But we saw the opportunity there to go deeper into stock buybacks in the quarter, given the share price dropped down below $18 a share. And so, I think going forward, without being overly specific, the actual stock buybacks will be a function of our priorities for cash, and those priorities do include returning cash to shareholders via stock buybacks. But the actual dollar amount will be somewhat related to where we're trading relative to our intrinsic value that we calculate internally.

Okay, got it. That makes sense. And then, just following up on the previous question around gross margin and some of the select pricing initiatives, based on your analysis so far, like how much you think you can expand this initiative into other markets that might be more price sensitive, especially in light of maybe a more promotional environment or with traffic a bit slower, as you indicated on this call? Can that be a more important helper for gross margin over coming quarters? Thanks.

I don't think it's going to accelerate, but I think it will continue is the best way to describe it. There continues to be opportunity to take pricing on specific SKUs and in specific markets or stores. And you separate the list price from the discounted price, the discount drives the traffic in the sense that you're offering a deal for a period of time that hopefully drives customers to your stores. And then, the list price, obviously, is what you're working off of in terms of the perception of value overall. Our perception is that there's still opportunity to raise zone pricing and take tactical pricing on certain SKUs and that we'll continue to be judicious about that. We're not pushing it very hard. So, it's important to remember, we're pushing this just a little bit at a time and few stores at a time with the goal of learning from that and then reacting and deciding how to move forward. And at this time point, it still looks like the right thing to do.

Okay, got it. Thanks very much.

Thank you. Our next question will come from the line of Joe Altobello with Raymond James. Your line is open.

Hi, good morning. This is Kristina (44:11) on for Joe. Most of our questions have been answer. But I was just wondering about the overall competitive promotional environment that you're seeing right now.

Yeah. I think consistent with what I've said earlier, I think, obviously, in a market where traffic to both strip malls and major malls is down, retailers are in a fairly promotional mode and we're having to react to that to some extent. And so, I would expect that that will continue to be the nature of the environment, that it will be highly promotional. But I don't think it's more promotional than it was in the last two quarters.

Great. Thank you so much.

You bet.

Thank you. Our next question comes from the line of Stephanie Wissink with Jefferies. Your line is open.

Hi, this is Ashley (44:56) on for Steph. Thanks for taking our question. Is your Amazon fulfillment partnership a profitable structure? And also how should we think about Amazon's involvement in the pro beauty space going forward?

The answer to the first one is yes, we do make money in our online business including our Amazon business. And then, the second part is, I think that over time – thus far, Amazon has mostly been focused on pro beauty products for retail, which is more of a competitive set for ULTA. I don't think they're going to have a major move in the wholesale business, at least not for a long time. It's a relatively small niche of the total beauty segment. You're talking $2.5 billion to $3 billion out of a $70 billion beauty segment. So, I don't think that's going to be job one. That being said, I think we need to continue to up our ability to service accounts, and we're working on a personal shopper capability within our BSG business today, where people can enter orders online and then pick those up at the store. That should move to an automotive click-and-collect over time. And I would guess that eventually we'll have something like click, collect and deliver in order to service salons in a way that differentiates us from potential online competitors in the future.

Okay, great. Thank you.

You bet.

Thank you. Our next question comes from the line of Jenna Giannelli from Citi. Your line is open.

Hi, there. Thanks for taking the questions. I know you said that just on your free cash flow priorities that repurchases will be contingent upon where the stock price is trading. But can you talk to us a little bit about the market and appetite for acquisitions and how you're thinking about balancing that with repurchases and use the cash flow going forward? Thanks.

We always evaluate acquisitions. If they build our business, then we would put them – obviously, we would take them to our board and seek approval for them. At this point in time, although there are some small ones that we see, they're not going to be a major – they wouldn't affect our cash flow or our ability return cash to shareholders in a significant way. If that changes, we'll be transparent about it. But at this point, we don't see anything on the horizon that would significantly affect our ability to drive our share buyback program.

Okay. And then, just separately, are there any particular, I'd say, brands or categories that you're seeing perform better? I know that you tend to – you operate differently than the mass channel. But when you look at some of the mass channels, we have seen a bit of divergence in different categories like hair versus nails versus facial cosmetics. So, just wondering if you're seeing any of that in your business.

Yeah. I think, obviously, the biggest driver of our business and the one that is performing the best is color, and that's true in both businesses. I think some of that is just there's more experimentation going on with color and more demand for color in the marketplace. And obviously, given that both of our businesses are well defined in that segment and highly differentiated in the segment, that bodes well for us over time. The appliance and electrical category probably continues to be the toughest category in both businesses. And nails, we're finally starting to see a little bit of a rebound, and hair care is doing pretty well overall as well. But I would point to color as being the strongest category, and just really that comes down to both innovation as well as the willingness of the consumer to experiment with color both in – your everyday customer in more normal colors, as well as vibrant colors, obviously, have been where the huge innovation has happened in the last few years.

Okay. And then, just one final one, if I may. I know people have been curious about your Amazon discussion. But in the test market that you're in, is it still too early or have you seen a level – where have you seen online penetration grow to in that market? Overall, remind us where penetration stands for the company overall and just about where you see that going potentially?

It's hard to extrapolate off a single market like Dallas. The reality is we're still very low penetration of e-commerce in our business. As we've mentioned before, we're at about 1.5% (49:03) in our Sally business, a little more than that in the BSG business. The reality is what we're learning from it, the Amazon Prime Now test in Dallas is that, A, it' mostly an incremental customer; and B, as far as we can tell, it's almost all incremental to the store. And in fact, overall store sales seem to be growing most likely because it builds awareness for the store and the product. So, it's very early in the test. We have lots more to learn. But it looks like it's a positive contributor to growing our brand and our franchise, and therefore, we're going to continue to test it.

Very helpful. Thank you.

Thank you.

Thank you. Our final question will come from the line of William Reuter with Bank of America. Your line is open.

Good morning, guys.

Good morning.

In terms of – you talked about 116, I think, new brands that you launched this quarter. Can you talk about how that number compares to the historical amount of new products that you'll be launching? And then, what percentage of your sales are coming from new products versus prior periods?

So, let me clarify that. I think it was 116 new stores total in the fiscal year-to-date.

Q3 versus last year's Q3.

Yeah, Q3 year-over-year.

(50:15).

Yeah. In terms of new brands, we would obviously never have that number of new brands. That being said, a lot of our growth does come from new product and new product innovation. I mentioned on the BSG side on the call that there's a number of new brands, including #mydentity from Guy Tang, Puff.ME (50:33), Celeb Luxury, Babe Lash. So, a number of new brands on the BSG side that are driving a significant part of the growth for BSG. And then, in addition, there are some new brands coming into Sally, mostly in the fall, the biggest of which, which we're very excited about, is Collabs (50:49) which is a new cosmetics line which we have jointly developed with social media beauty influencers, as well as our own technicians creating a dedicated line that will exclusively be sold in Sally stores, but marketed through social media in a significant way. So, those are the types of strategies that we'll continue to pursue to add value to our stores and bring new traffic to our stores. And they don't add a lot of complexity, but they're obviously – they do drive investments for us both in terms of fixturing and inventory. So, we've got to manage them in the context of our overall portfolio.

I guess I'm curious if you guys are seeing a dramatic shift in terms of smaller competitors taking share from some of the larger incumbents across your different categories.

I don't know if I'd call it dramatic, but there is definitely a shift towards smaller vendors stealing share and using social media. A great example of that is #mydentity, where Guy Tang is launching a line effectively with no marketing support other than his own social media influence. Now, that's backed by a large manufacturer, so it's in partnership. There are other times where we're seeing lines that are simply a smaller company leveraging the power of social media. A great example of that in the last three years in professional beauty would be Olaplex, where they've done a magnificent job of marketing a line through social media and driving a lot of innovation and growth in the business. So, yes, I would say the game is changing. I don't know if it's dramatic yet, but it is definitely changing. And I expect that social media will continue to unleash new brands on the marketplace and allow smaller brands to compete on a much larger scale. And that's obviously one of the reasons why we're launching Collabs (52:35) in conjunction with social media influencers is that we believe the marketing scale is getting turned on its head a bit.

Okay. And then, just lastly for me, there's a lot of differing opinions based upon the performance of – people talk about A malls, B malls, C malls, and how different the performances of those different categories. I guess what are you seeing in terms of your stores in terms of – are you guys seeing a dramatic difference in the performance based upon location – I guess based upon the demographics of that mall?

Yeah. There's not quite as much volatility in strip malls, where we typically are, as there are in enclosed malls, where I think there's a much greater spread there in terms of performance. That being said, there are clearly differences in locational performance. It's just not as wide of a bell curve as it is, as an example, in enclosed malls.

Okay. Thank you very much.

And first of all, thank you everyone. To summarize, in the fiscal third quarter, we made significant progress executing our planned restructuring and our most importance strategic initiatives. We will remain focused on evolving our business model to better meet the needs of our customers and to create value for shareholders. Thanks to everybody for your questions and for joining us today.

Thank you. Ladies and gentlemen, today's conference call will be available for replay after 9:30 AM today until midnight August 10. You may access the AT&T TeleConference replay system by dialing 1-800-475-6701 and entering the access code of 427540. International participants may dial 320-365-3844. Those numbers once again, 1-800-475-6701 or 320-365-3844 and enter the access code of 427540. That does conclude your conference call for today. Thank you for your participation and for using the AT&T Executive TeleConference Service. You may now disconnect.