Slide 1: Coty 2Q22 Earnings Call
COTY 2Q22 EARNINGS February 8, 2022 CALL 1
Slide 2: Key Messages
KEY MESSAGES 1H22 REVENUES AND SELL-OUT ALIGNED WITH MID TEENS GROWTH ▪ Q2 LFL REVENUES INLINE WITH LOW TEENS GROWTH GUIDANCE, FOLLOWING Q1 PIPEFILL, WHILE SELL-OUT ACCELERATES PROFITS AND CASH GENERATION AHEAD OF EXPECTATIONS ▪ 2Q22 ADJ GROSS MARGIN +590 BPS YOY AND +120 BPS QOQ; ADJ EBITDA AHEAD O
Slide 3: Building Revenue and Sell-Out Momentum
BUILDING REVENUE i AND SELL-OUT i MOMENTUM COTY Ae) ap i ef
Slide 4: Accelerating Q2 Sell-Out
ACCELERATING Q2 SELL-OUT Q2 REVENUES +12% LFL, INLINE WITH GUIDANCE, FOLLOWING Q1 PIPEFILL Q2 FOCUS ON SUPPORTING KEY INITIATIVES DROVE ACCELERATING SELL-OUT, SETTING STAGE FOR STRONG SALES TRENDS IN 2H22 COTY LFL REVENUES AND SELL-OUT 21% Low-to-Mid Mid-to-High 21% Teens % Teens % 16% 12% 8% 1Q22 2
Slide 5: Growth Led by Travel Retail, U.S., and China
GROWTH LED BY TRAVEL RETAIL, U.S., AND CHINA APAC +22% LFL AMERICAS AMERICAS +15% IN 1H22 AND +9% LFL IN Q2, 12% +15% LFL DRIVEN BY BROAD BASED STRENGTH IN THE U.S., CANADA AND MEXICO 1H22 40% EMEA +14% IN 1H22 AND +13% LFL IN Q2, FUELED BY REVENUE RECOVERY IN KEY MARKETS AND LOCAL TRAVEL MIX RETAIL
Slide 6: Strong Profit Performance
STRONG PROFIT PERFORMANCE
Slide 7: Strong Gross Margin Expansion
STRONG GROSS MARGIN EXPANSION ADJUSTED GROSS MARGIN Q2 GROSS MARGIN UP STRONGLY AT +590BPS YOY AND +120BPS QOQ +590 bps YoY / +120bps QoQ 64.6% GROSS MARGIN EXPANSION DRIVEN BY: 58.7% ➢ MARGIN EXPANSION IN BOTH PRESTIGE AND CONSUMER BEAUTY, AIDED BY MIX ➢ PRICING & REVENUE MANAGEMENT ➢ PRODUCTIVITY
Slide 8: Continued Successful Navigation of Supply Chain Uncertainties
CONTINUED SUCCESSFUL NAVIGATION OF SUPPLY CHAIN UNCERTAINTIES • CONTINUE TO SUCCESSFULLY NAVIGATE THE UNCERTAIN ENVIRONMENT ➢ SELECT COMPONENT SHORTAGES: SITUATION REMAINS STABLE ➢ SUPPLY CHAIN BOTTLENECKS: REMAIN MITIGATED ➢ FREIGHT & MATERIALS INFLATION: MITIGATED THROUGH MAJORITY OF FREIGHT UNDER
Slide 9: Stepping Up Marketing Investments
STEPPING UP MARKETING INVESTMENTS A&CP AS PERCENT OF SALES A&CP INCREASED T0 ~30% LEVEL IN 2Q, WITH WORKING MEDIA MORE THAN 2X YOY ~30% INVESTMENTS SUPPORTING INITIATIVES WITH ~26% ~26% STRONG ROI, FUELING SALES GROWTH ACCELERATION IN 2H22: ~23% ~20% ➢ SUCCESSFUL LAUNCHES (I.E. GUCCI FLORA, BURBERRY
Slide 10: Strong Savings Deliver in Q2
STRONG SAVINGS DELIVER IN Q2 • FIXED COSTS -5% YOY IN 2Q22 • ACHIEVED OVER $40M OF SAVINGS IN Q2, WITH YTD CLOSE TO $100M ➢ ~75% GROSS MARGIN ➢ ~25% FIXED COSTS • REMAIN ON TRACK FOR NET SAVINGS OF OVER $90M IN FY22 ➢ NEUTRAL NET SAVINGS IN 2H22 AS CORE INITIATIVES CONCENTRATED IN 1H22, WITH STEP UP
Slide 11: Profit Ahead of Guidance
PROFIT AHEAD OF GUIDANCE ADJUSTED EBITDA • STRONG ADJ EBITDA DELIVERY IN 2Q22, EVEN WITH A&CP AT 30% LEVEL +31% YoY • 1HFY22 ADJ EBITDA +31% YOY, WITH MARGIN $590M OF 20.0% $451M • PROFIT GROWTH SUPPORTED BY: $311M $279M $284M • STRONG SALES GROWTH $167M • SIGNIFICANT GROSS MARGIN EXPANSION Q1 Q2 1H
Slide 12: Solid Adjusted EPS Delivery
SOLID ADJUSTED EPS DELIVERY $ Millions Q1 Q2 H1 • 2Q22 adjusted EPS of $0.17, driven by strong adjusted EBITDA results Adjusted EBITDA and $0.02 from discrete tax 279 311 590 (Continuing Ops) benefit Depreciation (78) (76) (154) • Q2 tax rate at ~10% due to discrete benefit from revaluation of Net I
Slide 13: Robust Free Cash Flow Delivery
ROBUST FREE CASH FLOW DELIVERY FREE CASH FLOW Q2 H1 $ Millions ROBUST Q2 AND H1 FREE CASH FLOW Adjusted EBITDA 311 590 GENERATION STRONG WORKING CAPITAL IMPROVEMENT Capex, WC, one-offs 215 211 CONTINUED MANAGEMENT OF CAPEX Interest and tax (118) (152) AND ONE-OFF COSTS FREE CASH FLOW 408 649 2Q FREE
Slide 14: CY21 Leverage Ahead of Expectations
CY21 LEVERAGE AHEAD OF EXPECTATIONS • STRONG FCF AND ADDITIONAL INORGANIC LEVERAGE DRIVE ~$500M REDUCTION IN NET DEBT • LEVERAGE EXITING CY21 OF ~4.9X AHEAD OF GUIDANCE ~5.7x $0.4 ~4.9x FCF $0.1 generation Real Estate ~$1.18 ~3.6x $4.96 Sales / Other Bn Bn $4.45 Bn Wella 26% financial ~$3.28 stake a
Slide 15: Accelerating Progress to Reach Leverage of ~4x by CY22
ACCELERATING PROGRESS TO REACH LEVERAGE OF ~4X BY CY22 • IN Q3, WELLA HAS COMPLETED A REFINANCING OF ITS EXISTING DEBT IN ORDER TO FUND A DISTRIBUTION, WHICH SHOULD RESULT IN ~$175M OF CASH PROCEEDS FOR COTY TO BE USED FOR DEBT PAYDOWN • IN LIGHT OF THE CURRENT ECONOMIC VOLATILITY AND ADVERSE FINANC
Slide 16: Executing on Strategic Pillars
EXECUTING ON STRATEGIC PILLARS
Slide 17: Consumer Beauty Grows Global Share for the First Time in 5 Years
CONSUMER BEAUTY GROWS GLOBAL SHARE FOR THE FIRST TIME IN 5 YEARS Coty Total Consumer Beauty (Global Share Pts YoY) Coty Color Cosmetics (Global Share Pts YoY) Source: NielsenIQ through Dec. 2021 Market: B&M and E-com (Amazon) 17 Total Countries: Argentina, Australia, Brazil, Canada, China, Czech Rep
Slide 18: All Top Color Cosmetics Brands Gaining Share Globally
ALL 4 TOP COLOR COSMETICS BRANDS GAINING SHARE GLOBALLY GROWN OR HELD SHARE GROWING SHARE IN U.K., GROWING SHARE IN U.K., GROWING SHARE IN U.K., IN 26 OF THE LAST 40 AUSTRALIA, SPAIN AND AUSTRALIA, AND SPAIN SPAIN AND POLAND WEEKS SINCE RELAUNCH POLAND COVERGIRL RIMMEL SALLY HANSEN MAX FACTOR Source
Slide 19: Accelerating Luxury Fragrances
ACCELERATING LUXURY FRAGRANCES FAVORABLE FRAGRANCE MARKET BACKDROP ➢ GLOBAL FRAGRANCE MARKET UP DOUBLE DIGITS YOY AND VS. 2019 ➢ U.S. AND CHINA STRONG ACCELERATION VS. 2019 ➢ EUROPE AND TRAVEL RETAIL STILL IN RECOVERY VS 2019 LEADING INNOVATION – GUCCI FLORA GORGEOUS GARDENIA • #1 INNOVATION OF CY21
Slide 20: Becoming a Key Player in Prestige Makeup
BECOMING A KEY PLAYER IN PRESTIGE MAKEUP 1H22 PRESTIGE MAKEUP REVENUES PRESTIGE MAKEUP AS % OF COTY SALES ~2X YOY INCREASING FROM <3% IN 1H21 TO >4% IN 1H22 20
Slide 21: Becoming a Key Player in Prestige Makeup: Gucci Makeup
BECOMING A KEY PLAYER IN PRESTIGE MAKEUP: GUCCI MAKEUP GUCCI MAKEUP REVENUES IN U.S. DOUBLING OF BOTH COMP GUCCI MAKEUP 1H22 CHINA IN 1H22 >2X YOY STORE SALES & DOOR COUNT SELL-OUT >3X YOY, WITH FOR GUCCI MAKEUP MAKEUP NOW SURPASSING FRAGRANCES 21
Slide 22: Building Out Skincare: Lancaster
BUILDING OUT SKINCARE: LANCASTER BUILDING SCIENTIFIC SKINCARE SINCE OPENING INITIAL 3 NO. 2 EXCLUSIVE BRAND IN BRAND IMAGE (REPAIR + DOORS IN HAINAN IN MAY, SEPHORA CHINA WITH PROTECTION) IN MAINLAND CHINA MONTHLY SALES HAVE NEARLY STRONG +DD SELL-OUT AND HAINAN DOUBLED 22
Slide 23: Building Out Skincare: Covergirl
BUILDING OUT SKINCARE: COVERGIRL COVERGIRL CLEAN FRESH SKINCARE ROLLING OUT NATIONALLY IN FEBRUARY 2022 23
Slide 24: Building E-Commerce & DTC Expertise
BUILDING E-COMMERCE & DTC EXPERTISE 1H22 % OF REVENUES PRESTIGE +12% YoY MID 20S % CONSUMER +32% YoY BEAUTY ~10% COTY +16% YoY HIGH TEENS % 24 Based on Coty Inc and third-party data
Slide 25: Expanding in China
EXPANDING IN CHINA MAINTAINING DOUBLE DIGIT COTY PRESTIGE BUSINESS TMALL REVENUES >3X YOY, WITH REVENUE GROWTH, DESPITE SELL OUT FASTEST GUCCI REACHING #10 RANK ON COVID RESURGENCE & ZERO GROWING AMONG TOP 10 TMALL IN DECEMBER TOLERANCE POLICY BEAUTY COMPANIES IN Q1 & Q2 25
Slide 26: 2H22 and FY22 Outlook
2H22 AND FY22 OUTLOOK 2H22 FY22 STRONG Q2 SELL-OUT SUPPORTING EXPECT FY22 LFL SALES AT UPPER END OF OUR GUIDANCE ACCELERATING LFL SALES GROWTH IN Q3 AND RANGE OF LOW-TO-MID TEENS GROWTH (ASSUMING NO 2H22 IN THE MID TEENS % SIGNIFICANT DETERIORATION IN COVID OR MACRO ENVIRONMENT) EXPECT GREATER FX IM
Slide 27: Key Messages
KEY MESSAGES 1H22 REVENUES AND SELL-OUT ALIGNED WITH MID TEENS GROWTH ▪ Q2 LFL REVENUES INLINE WITH LOW TEENS GROWTH GUIDANCE, FOLLOWING Q1 PIPEFILL, WHILE SELL-OUT ACCELERATES PROFITS AND CASH GENERATION AHEAD OF EXPECTATIONS ▪ 2Q22 ADJ GROSS MARGIN +590 BPS YOY AND +120 BPS QOQ; ADJ EBITDA AHEAD O
Slide 28: Disclaimer
DISCLAIMER Forward-Looking Statements Certain statements in this presentation are forward-looking statements. These forward-looking statements reflect the Company's current views with respect to, among other things, the impact of COVID-19 and potential recovery scenarios, strategic planning, targets
Slide 29: 29
29