Slide 1: Coty 2Q23 Earnings Call
COTY 2Q23 EARNINGS CALL February 8, 2023 1
Slide 2: Key Messages
KEY MESSAGES ROBUST BEAUTY DEMAND DRIVES Q2 SALES GROWTH AHEAD OF GUIDANCE ▪ Q2 LFL REVENUE GROWTH OF +4%, WITH CORE BUSINESS (ADJUSTING FOR RUSSIA EXIT) +7% LFL, BRINGING 1H23 CORE LFL TO +9%, AHEAD OF GUIDANCE OF 6-8% SOLID GROSS MARGIN, PROFIT & NET DEBT PERFORMANCE DESPITE INFLATION ▪ 2Q22 ADJ G
Slide 3: Strong Sales Delivery
STRONG SALES DELIVERY 3
Slide 4: 1H23 Core Revenue Growth Ahead of Guidance, Despite Component Constraint
1H23 CORE REVENUE GROWTH AHEAD OF GUIDANCE, DESPITE COMPONENT CONSTRAINT Q2 SALES +4% LFL, WITH CORE REVENUES +7% CB +6% LFL PRESTIGE +3% LFL LFL (ADJUSTING FOR RUSSIA EXIT) (+8% ADJUSTING (+6% ADJUSTING ➢ BRINGS 1H23 CORE LFL TO +9% LFL, AHEAD FOR RUSSIA) FOR RUSSIA) OF GUIDANCE OF +6-8% LFL PRESTI
Slide 5: Growth Across All Regions
GROWTH ACROSS ALL REGIONS APAC +2% LFL AMERICAS AMERICAS +8% LFL IN Q2 AND +7% IN 1H23, WITH 12% +8% LFL PARTICULARLY STRONG MOMENTUM IN LATAM AND TRAVEL RETAIL, WHILE U.S. CONSTRAINED BY PRESTIGE SUPPLY Q2 41% REVENUE EMEA +2% LFL IN Q2 AND +6% IN 1H23 (INCLUDING MIX ~500 BPS IMPACT FROM RUSSIA EXI
Slide 6: Solid Profit Performance
SOLID PROFIT PERFORMANCE 6
Slide 7: Robust Gross Margin Performance
ROBUST GROSS MARGIN PERFORMANCE ADJUSTED GROSS MARGIN GROSS MARGIN UP STRONGLY, +90BPS YOY IN Q2 AND +80BPS YOY IN 1H23 +90 bps YoY +80 bps YoY GROSS MARGIN EXPANSION REFLECTS: 65.5% 64.6% 64.8% 64.0% ➢ PRICING EXECUTION IN BOTH PRESTIGE AND CONSUMER BEAUTY ➢ SUPPLY CHAIN AND PLANNING IMPROVEMENTS ➢
Slide 8: Fragrance Component Shortages Easing Into 2H FY23
FRAGRANCE COMPONENT SHORTAGES EASING INTO 2H FY23 ▪ Q2 FRAGRANCE REVENUES AND SELL-OUT MEANINGFULLY CONSTRAINED BY COMPONENT SHORTAGES (GLASS BOTTLES, CAPS, PUMPS) ➢ COTY’S Q2 PRESTIGE SERVICE LEVELS <80% AND MODERATELY LOWER Q/Q ➢ DESPITE CONSTRAINTS, COTY DELIVERED Q2 REVENUES AHEAD OF GUIDANCE AN
Slide 9: FY24 Savings Increased to ~$90M, With Further ~$75M in FY25
FY24 SAVINGS INCREASED TO ~$90M, WITH FURTHER ~$75M IN FY25 ▪ REMAIN ON TRACK FOR SAVINGS OF ~$170M IN FY23, WITH ~$70M DELIVERED IN 1H23 ▪ POSITIONING COTY FOR SUCCESS, DEFENSIVELY & OFFENSIVELY, BY BOOSTING SAVINGS PIPELINE: ➢ FY24 SAVINGS TARGET INCREASED TO ~$90M (FROM ~$75M PREVIOUSLY) ➢ FY25 S
Slide 10: Maintaining Strong Marketing Investments
MAINTAINING STRONG MARKETING INVESTMENTS A&CP AT ~27% DURING Q2 AND ~26% IN 1H23, INLINE WITH EXPECTATIONS A&CP AS PERCENT OF SALES INVESTMENTS MADE BEHIND: 1 ~27% ~26% • PRESTIGE INNOVATIONS LIKE HUGO BOSS BOTTLED PARFUM, BURBERRY HERO, AND GUCCI FLORA GORGEOUS JASMINE • CB INNOVATIONS LIKE COVERGI
Slide 11: Strong 2Q23 Profit Growth, Despite FX Headwinds
STRONG 2Q23 PROFIT GROWTH, DESPITE FX HEADWINDS 2Q23 ADJUSTED PROFIT ▪ 2Q23 ADJ OP INCOME +11% YOY, WITH 1H23 ADJ OP INCOME +17% YOY +2%YoY +11%YoY $312M $318M ➢ DOUBLE DIGIT Q2 PROFIT GROWTH $261M DESPITE HIGH SINGLE DIGIT FX HEADWIND $236M ▪ 2Q23 ADJ OP MARGIN OF 17.2% (+220BPS YOY), WITH 1H23 MAR
Slide 12: Robust 2Q23 and 1H23 Adjusted EPS Delivery
ROBUST 2Q23 AND 1H23 ADJUSTED EPS DELIVERY $ Millions Q1 Q2 H1 • Q2 ADJ EPS OF $0.22, +29% YOY Adjusted EBITDA 308 318 626 Depreciation (58) (56) (114) • Q2 EPS INCLUDES NON- CASH BENEFIT FROM Net Interest (66) (61) (127) TOTAL RETURN SWAP MARK-TO-MARKET OF ~$45M OR $0.05 IN EPS Income Tax (44) (68)
Slide 13: Strong Free Cash Flow Generation
STRONG FREE CASH FLOW GENERATION FREE CASH FLOW Q2 H1 $ Millions • 2Q23 FCF OF $455M, AHEAD OF Adjusted EBITDA 318 626 EXPECTATIONS ➢ REFLECTS TIMING OF CAPEX AND WORKING CAPITAL PAYMENTS Capex, WC, one-offs 247 66 ➢ RISING INVENTORY TO ADDRESS COMPONENT SHORTAGES Interest and tax (110) (149) • CONT
Slide 14: Active Deleveraging Path, Meeting CY22 Target
ACTIVE DELEVERAGING PATH, MEETING CY22 TARGET • LEVERAGE EXITING 2Q23 OF ~4.1X, INLINE WITH GUIDANCE, IMPROVING FROM <4.5X EXITING 1Q23 • ~90% OF DEBT IS FIXED, INCLUDING HEDGES; ~70% FIXED ONCE HEDGES EXPIRE • WELLA VALUE INCREASED BY ~$75M TO ~$1.04B, REFLECTING LOWER DISCOUNT RATE & HIGHER MARKET
Slide 15: Executing on Strategic Pillars
EXECUTING ON STRATEGIC PILLARS 15
Slide 16: Full Year of Market Share Gains for Consumer Beauty
FULL YEAR OF MARKET SHARE GAINS FOR CONSUMER BEAUTY Coty sell-out growing mid-to-high single digits, above CB market growing mid single digits 29 bps 22 bps 19 bps 12 bps 10 bps (28)bps Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 SEP-NOV 2022 Source: NielsenIQ Market: B&M and E-com Period: November 2022
Slide 17: "Fragrance Index" in Full Effect Across Key Markets
“FRAGRANCE INDEX” IN FULL EFFECT ACROSS KEY MARKETS FRAGRANCE MARKET CONTINUING TO GROW AT HIGH SINGLE DIGIT LEVEL IN BOTH Luxury Fragrance Market Growth (YoY) NORTH AMERICA AND EUROPE, ABOVE 16.0% HISTORICAL GROWTH OF LSD-MSD % 14.0% 12.0% MARKET IS 25-30% HIGHER THAN 2019, CONFIRMING STRUCTURAL GR
Slide 18: Coty FY23 Innovations Building on Successful FY22 Launches
COTY FY23 INNOVATIONS BUILDING ON SUCCESSFUL FY22 LAUNCHES 18
Slide 19: Becoming a Key Player in Prestige Makeup
BECOMING A KEY PLAYER IN PRESTIGE MAKEUP Coty Prestige Makeup sell-out in FYTD prestige makeup sales in Kylie makeup sales U.S. growing >40%, almost Travel Retail 7x higher than growing double digits in Q2 3x the market, fueled by Gucci FY19, and now and Kylie ~10% of overall TR sales 19
Slide 20: Lancaster Ultra Premium Skincare China Omnichannel Launch in March '23
LANCASTER ULTRA PREMIUM SKINCARE CHINA OMNICHANNEL LAUNCH IN MARCH ‘23 TITLE OF THE PRESENTATION 20
Slide 21: Fueling Digital Momentum Through Social Commerce, New Partnerships, and E-Retail
FUELING DIGITAL MOMENTUM THROUGH SOCIAL COMMERCE, NEW PARTNERSHIPS, AND E-RETAIL Burberry Tmall sales on 11.11 CoverGirl and Rimmel products Chloe flagship grew >50% YoY going viral on TikTok, driving opening on Tmall this month strong sales uplift 21
Slide 22: China Market Reopening to Propel Key Brand Initiatives in 2H FY23
CHINA MARKET REOPENING TO PROPEL KEY BRAND INITIATIVES IN 2H FY23 COVID restrictions drove Q3 QTD store traffic Key brand initiatives for 2H fully in- double-digit declines in rebounding strongly from Q2 sync with market re-opening: Q2 China sales levels, though still lower YoY ➢ Lancaster ultra pre
Slide 23: Booming and Multi-Pronged Travel Retail Business
BOOMING AND MULTI-PRONGED TRAVEL RETAIL BUSINESS Travel Retail revenues Travel Retail now Sustained global travel growing ~40% YoY in ~8% recovery & expected return Q2 and 1H23 of Coty sales of Chinese travelers to fuel ongoing momentum 23
Slide 24: 2H23 and FY23 Outlook
2H23 AND FY23 OUTLOOK 2H23 FY23 JANUARY SALES GROWTH ACCELERATING CONTINUE TO EXPECT FY23 LFL SALES GROWTH OF CORE SEQUENTIALLY BUSINESS INLINE WITH MEDIUM TERM GROWTH TARGET OF +6-8% (ADJUSTING FOR THE IMPACT OF THE RUSSIA EXIT; ASSUMING EXPECT 2H23 LFL SALES GROWTH OF CORE BUSINESS NO SIGNIFICANT
Slide 25: Key Messages
KEY MESSAGES ROBUST BEAUTY DEMAND DRIVES Q2 SALES GROWTH AHEAD OF GUIDANCE ▪ Q2 LFL REVENUE GROWTH OF +4%, WITH CORE BUSINESS (ADJUSTING FOR RUSSIA EXIT) +7% LFL, BRINGING 1H23 CORE LFL TO +9%, AHEAD OF GUIDANCE OF 6-8% SOLID GROSS MARGIN, PROFIT & NET DEBT PERFORMANCE DESPITE INFLATION ▪ 2Q22 ADJ G
Slide 26: Since 1904
SINCE 1904
Slide 27: 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