Slide 1: Coty 2Q24 Earnings Call
COTY 2Q24 EARNINGS CALL February 7, 2024 1
Slide 2: Key Messages
KEY MESSAGES CONTINUED MOMENTUM IN Q2, FUELED BY CATEGORY STRENGTH & TOP NOTCH INNOVATION ▪ Q2 LFL REVENUE GROWTH OF +11% AND 1H24 +14%, AHEAD OF 1H24 UPDATED LFL GUIDANCE OF +11-13%, FUELED BY BOTH DIVISIONS WITH PARTICULAR STRENGTH IN PRESTIGE; VOLUME, PRICE AND MIX ALL CONTRIBUTING TO BALANCED GR
Slide 3: Significant Sales Growth
SIGNIFICANT SALES GROWTH
Slide 4: 2Q24 LFL Growth of +11% and 1H24 +14%, Ahead of Raised Guidance
2Q24 LFL GROWTH OF +11% AND 1H24 LFL GROWTH OF +14%, AHEAD OF RAISED GUIDANCE OF +11-13% IN 1H24 LFL REVENUE +11% LFL IN Q2 AND +14% LFL IN CB +5% LFL PRESTIGE +15% LFL 1H24, AHEAD OF 1H24 GUIDANCE PRESTIGE LFL +15% IN Q2 AND +18% IN 1H24 ➢ LFL GROWTH ACROSS ALL CATEGORIES, PARTICULARLY IN FRAGRANCE
Slide 5: Coty Prestige Outperforming in a Continued Strong Market Backdrop
COTY PRESTIGE OUTPERFORMING IN A CONTINUED STRONG MARKET BACKDROP Coty Prestige Revenues LFL Coty Prestige Sell-Out Est.1 +22% LFL Prestige Fragrance Market2 Est. service +18% LFL YoY recovery YoY +15% LFL YoY Innovation ~12 % ~13 % Est. service ~13 % pipefill ~10 % Est. service ~9 % recovery ~10 %
Slide 6: Growth Across All Regions
GROWTH ACROSS ALL REGIONS APAC AMERICAS LFL +11% IN Q2 AND +14% IN 1H24 +16% LFL AMERICAS DRIVEN BY ROBUST DOUBLE-DIGIT % GROWTH IN 12% LATIN AMERICA AND MSD % GROWTH IN NORTH +11% LFL AMERICA Q2 40% EMEA LFL +10% IN Q2 AND +14% IN 1H24 REVENUE SUPPORTED BY STRONG GROWTH ACROSS MOST MARKETS AND TRAV
Slide 7: Growth Fueled by Both Volumes and Price & Mix
GROWTH FUELED BY BOTH VOLUMES AND PRICE & MIX Q2 & 1H24 MSD – HSD % VOLUME GROWTH IN PRESTIGE FUELED BY BOTH CORE Volume + LSD % BUSINESS AND NEW LAUNCHES STABLE VOLUMES IN CONSUMER BEAUTY SUPPORTED BY FRAGRANCE Price + HSD % AND BRAZIL LIMITED AND TARGETED PRICING Mix & Other + LSD % ACTIONS GOING
Slide 8: Solid Profit Performance
SOLID PROFIT PERFORMANCE
Slide 9: Strong Service Levels & Easing Inflation
STRONG SERVICE LEVELS & EASING INFLATION ▪ PRESTIGE AND CONSUMER BEAUTY SERVICE LEVELS EXCEEDED EXPECTATIONS, ~96% IN Q2 ▪ COGS INFLATION MODERATED Q/Q, IN-LINE WITH EXPECTATIONS ➢ BENEFITTING FROM STABILIZATION IN COMMODITIES AND TRANSPORTATION INFLATION ➢ COTY BALANCING INFLATIONARY IMPACTS THROUG
Slide 10: Increased FY24 Savings Outlook, with FY25 Target on Track
INCREASED FY24 SAVINGS OUTLOOK, WITH FY25 TARGET ON TRACK ▪ Q2 SAVINGS DELIVERED OF ~$30M, WITH FYTD TOTAL OF ~$65M ▪ INCREASING FY24 SAVINGS TARGET TO $110-120M FROM PREVIOUS >$100M ➢ DRIVEN BY MATERIAL COSTS, STRUCTURAL A&CP SAVINGS AND TRADE INVESTMENT ➢ INCREASED SAVINGS FUELING REINVESTMENT IN
Slide 11: Q2 Gross Margin Slightly Lower, with Easing Inflation to Aid 2H24
Q2 GROSS MARGIN SLIGHTLY LOWER, WITH EASING INFLATION TO AID GROSS MARGINS IN 2H24 ADJUSTED GROSS MARGIN GROSS MARGIN 40 BPS LOWER YOY IN Q2, DRIVEN BY: ➢ INCREASED EXCESS & OBSOLESCENCE TIED TO THE -40 bps YoY INVENTORY BUILD-UP IN THE PRESTIGE BUSINESS TO -50 bps YoY SUPPORT STRONG SERVICE LEVELS
Slide 12: Maintaining Strong Marketing Investments
MAINTAINING STRONG MARKETING INVESTMENTS A&CP AS PERCENT OF SALES A&CP AT ~26% DURING Q2, DOWN ~1 PPS YOY, IN-LINE WITH EXPECTATIONS ~27% ~26% ~26% SHIFTING SOME INVESTMENT INTO ~25% GROWTH CAPABILITIES AROUND DIGITAL, SKINCARE AND DTC CONTINUE TO EXPECT A&CP TO BE IN THE HIGH 20% LEVEL OF SALES Q2
Slide 13: Q2 and 1H24 Operating Income and EBITDA Growth
Q2 AND 1H24 OPERATING INCOME AND EBITDA GROWTH ADJUSTED PROFIT +16%YoY ▪ ADJ OP INCOME +18% YOY IN Q2 AND +20% YOY IN 1H24 +20%YoY $727M $626M $612M ▪ ADJ OP MARGIN OF 17.9% IN Q2 +15%YoY $511M AND +18.2% IN 1H24 INCREASED 70 BPS YOY +18%YoY $366M $309M $318M ▪ ADJ EBITDA +15% YOY IN Q2 AND $261M +1
Slide 14: Strong 2Q24 Adjusted EPS Delivery
STRONG 2Q24 ADJUSTED EPS DELIVERY $ Millions Q1 Q2 1H24 ▪ Q2 ADJ EPS EXCLUDING Adjusted EBITDA 360 366 727 EQUITY SWAP OF $0.19, +12% YOY Depreciation (58) (57) (115) ▪ Q2 ADJ EPS INCLUDES A Net Interest (70) (60) (130) BENEFIT FROM TOTAL RETURN SWAP MARK-TO- Income Tax (68) (78) (146) MARKET OF ~$5
Slide 15: 2Q24 Free Cash Flow In-Line with Expectations
2Q24 FREE CASH FLOW IN-LINE WITH EXPECTATIONS Q2 1H24 FREE CASH FLOW $ Millions ▪ 2Q24 FCF OF $363M Adjusted EBITDA 366 727 ▪ EXPECTING SOLID FY24 FCF, BROADLY CONSISTENT WITH FY23 Capex, WC, one-offs 80 (106) Interest and tax (83) (134) FREE CASH FLOW 363 487 15
Slide 16: Met Target to End CY23 with Leverage of ~3x
MET TARGET TO END CY23 WITH LEVERAGE OF ~3X ➢ LEVERAGE EXITING 2Q24 OF ~3.1X, WITH FIXED RATE DEBT NOW 100% ➢ ENTERED A 3RD EQUITY SWAP TO HEDGE A TARGETED SHARE BUYBACK PROGRAM OF ~25M SHARES IN FY26 ➢ REMAIN ON TRACK TO EXECUTE THE FIRST TRANCHE OF EQUITY SWAP AGREEMENT BY THE END OF FEB. 2024, RE
Slide 17: Executing on Strategic Pillars
EXECUTING ON STRATEGIC PILLARS
Slide 18: Continued Momentum in Consumer Beauty
CONTINUED MOMENTUM IN CONSUMER BEAUTY Coty’s Consumer Beauty Solid sales growth across Leading color cosmetics grew 5% LFL, in-line with Color Cosmetics, Lifestyle brands gaining market MSD% market growth Fragrances and Mass Skin and share in e-commerce Bodycare 18
Slide 19: CoverGirl Essence Foundation: Encouraging Early Results
COVERGIRL ESSENCE FOUNDATION: VERY ENCOURAGING EARLY RESULTS FROM INFLUENCER-LED COMMUNICATION STRATEGY Engaged with >5K influencers CoverGirl Essence already around CoverGirl Simply Ageless #1 New Makeup Release on Amazon Essence foundation launch Only 1 month into launch 19
Slide 20: Strengthening Consumer Beauty Portfolio: Bruno Banani and Mexx Renewals
CONTINUING TO STRENGTHEN OUR CONSUMER BEAUTY PORTFOLIO: RECENT LONG-TERM RENEWALS OF BRUNO BANANI AND MEXX LICENSES Bruno Banani #1 lifestyle Mexx #3 lifestyle Both licenses extended by fragrance brand in fragrance brand in > 20 years Germany Germany 20
Slide 21: Coty's Top Brands All Grew Double-Digit % LFL in 1H24
COTY’S TOP 7 BRANDS ALL GREW DOUBLE-DIGIT % LFL IN 1H24 Prestige Fragrance Coty Prestige Fragrance Revenue Grew “Fragrance Index” Market Grew ~15% LFL YoY in Q2 remains in ~9% YoY in Q2 fueled by existing icons and new launches full effect 21
Slide 22: Record Setting Burberry Goddess Launch Continues
RECORD SETTING BURBERRY GODDESS LAUNCH CONTINUES #1 Female Fragrance Biggest Coty Burberry enters Overall Burberry Launch in fragrance launch Top 10 brand in fragrance revenues Key Markets EVER N.A. and Europe >60% higher in 1H2422
Slide 23: Entered New License Agreement
CONTINUING TO STRENGTHEN OUR PORTFOLIO: ENTERED NEW LICENSE AGREEMENT WITH Italian Premium/Premium+ License agreement fashion brand with strength in Asia & EU extends founded in 1994 amongst younger consumers beyond 2040 23
Slide 24: Steady Expansion in Prestige Makeup
STEADILY EXPANSION IN PRESTIGE MAKEUP Double digit % growth All brands SKKN by Kim makeup LFL in Coty Prestige growing launched on Jan. 26 on DTC, makeup sales in Q2 in Q2 and 1H24 with promising initial results 24
Slide 25: Building Momentum in Skincare
BUILDING MOMENTUM IN SKINCARE Lancaster growing DD % LFL Philosophy growing YoY for Orveda brand buzz fueling in Q2, supported by core skincare 3rd consecutive quarter, >2x productivity franchises and the new Ligne fueled by skincare icons growth in key doors Princiere line 25
Slide 26: Broad-Based Digital Momentum
BROAD-BASED DIGITAL MOMENTUM Q2 e-com revenue LFL growth E-commerce driving Both Prestige and >20% YoY driving penetration ~40% of Coty’s Consumer Beauty growing to low 20s % (+180bps YoY) Q2 LFL sales growth market share online 26
Slide 27: Coty's China Prestige Sales Expanding and Outpacing Market
COTY’S CHINA PRESTIGE SALES EXPANDING AND OUTPACING MARKET Coty Prestige China sales grew In Q2, Coty Prestige Opened first Orveda Maison strong double digits % significantly outgrew the LFL in Q2, while Consumer market at +27% vs. in Shanghai, marking major milestone for the brand Beauty sales lowe
Slide 28: Outstanding Growth in Travel Retail Business
OUTSTANDING GROWTH IN TRAVEL RETAIL BUSINESS Coty’s Travel Retail Double digit % sales growth Coty Travel Retail revenues grew in Europe, Americas gaining market share >20% YoY in Q2 and 1H and APAC in all 3 regions 28
Slide 29: Key ESG Updates from Our FY23 Sustainability Report
KEY ESG UPDATES FROM OUR FY23 SUSTAINABILITY REPORT PROGRESS ACROSS OUR THREE PILLARS COMMITS TO SETTING EXCEEDS 2030 GOALS EMISSIONS REDUCTION ON SCOPE 1 & 2 EMISSIONS, ENERGY TARGETS IN LINE WITH REDUCTION, AND RECYCLING SCIENCE-BASED WITHIN FACTORIES NET-ZERO & DISTRIBUTION CENTERS 14-WEEK TOWARD
Slide 30: Beauty Market Growth Trends Normalizing
BEAUTY MARKET GROWTH TRENDS NORMALIZING Coty Prestige Revenues LFL +18% LFL Prestige Fragrance Market 1 YoY Coty CB Revenues LFL Est. service Est. headwind from CB Market 2 recovery YoY restocking LY ~10% +7% LFL YoY ~8% MSD- MSD- HSD% HSD% LSD- LSD- MSD% MSD% 1H24 2H24E ➢ PRESTIGE AND MASS BEAUTY M
Slide 31: 2H24 Framework
2H24 FRAMEWORK EXPECTING +6-8%, IN-LINE WITH MEDIUM-TERM REVENUE LFL ALGORITHM, WITH OUTPERFORMANCE BY PRESTIGE 1-2% HEADWIND FROM FX, AND ~2% HEADWIND FROM THE REPORTED REVENUE IMPACTS DIVESTITURE OF LACOSTE LICENSE ADJ GROSS MARGIN STRONG IMPROVEMENT YOY ADJ EPS (EXCL. SWAP) $0.10-0.13 * Reflects
Slide 32: FY24 Guidance
FY24 GUIDANCE FY24 REVENUES OF +9-11% LFL, WITH OUTPERFORMANCE BY REVENUE LFL PRESTIGE NEUTRAL TO 2% BENEFIT FROM FX PRIMARILY IN 1H24, AND 1-2% REPORTED REVENUE IMPACTS HEADWIND FROM THE DIVESTITURE OF LACOSTE LICENSE PRIMARILY IN 2H24 ADJ GROSS MARGIN MODEST EXPANSION YOY ADJ EBITDA MARGIN EXPANSI
Slide 33: Key Messages
KEY MESSAGES CONTINUED MOMENTUM IN Q2, FUELED BY CATEGORY STRENGTH & TOP NOTCH INNOVATION ▪ Q2 LFL REVENUE GROWTH OF +11% AND 1H24 +14%, AHEAD OF 1H24 UPDATED LFL GUIDANCE OF +11-13%, FUELED BY BOTH DIVISIONS WITH PARTICULAR STRENGTH IN PRESTIGE; VOLUME, PRICE AND MIX ALL CONTRIBUTING TO BALANCED GR
Slide 34: Since 1904
SINCE 1904
Slide 35: 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, strategic planning, targets and outlook for future reporting periods (including the