Slide 1: Coty 4Q23 Earnings Call
COTY 4Q23 EARNINGS CALL August 22, 2023 1
Slide 2: Key Messages
KEY MESSAGES Q4 SALES GROWTH AHEAD OF RAISED GUIDANCE, FUELED BY STRONG DEMAND FOR BEAUTY ▪ Q4 CORE LFL REVENUE GROWTH OF +17%, AHEAD OF UPDATED CORE LFL GUIDANCE OF +12-15%, WITH PARTICULAR STRENGTH IN PRESTIGE & DD GROWTH IN CONSUMER BEAUTY FY23 PROFITS AHEAD OF GUIDANCE, DESPITE REINVESTMENTS AND
Slide 3: Significant Sales Acceleration
SIGNIFICANT SALES ACCELERATION
Slide 4: 4Q23 Core LFL Growth of +17% Ahead of Raised Guidance, With FY23 Core LFL +12%
4Q23 CORE LFL GROWTH OF +17% AHEAD OF RAISED GUIDANCE, WITH FY23 CORE LFL +12% CORE LFL REVENUE +17% LFL IN Q4 AND +12% IN FY23, AHEAD OF GUIDANCE CB +10% LFL PRESTIGE +21% LFL PRESTIGE CORE LFL +21% IN Q4 AND +13% IN FY23 ➢ DOUBLE DIGIT Q4 GROWTH IN AMERICAS AND EMEA, AND LOWER COMPARISON IN 41% Q4
Slide 5: Growth Across All Regions
GROWTH ACROSS ALL REGIONS APAC +40% LFL AMERICAS AMERICAS +13% IN Q4 AND +10% IN FY23, WITH 14% +13% LFL DOUBLE-DIGIT GROWTH IN NEARLY EVERY MARKET AND TRAVEL RETAIL IN Q4 Q4 42% EMEA +13% IN Q4 AND +13% IN FY23 FUELED BY REVENUE DOUBLE-DIGIT GROWTH ACROSS MOST MARKETS AND MIX TRAVEL RETAIL IN Q4 44
Slide 6: Growth Fueled by Both Volumes and Price & Mix
GROWTH FUELED BY BOTH VOLUMES AND PRICE & MIX 4Q23 FY23 + LSD % Volume + LSD % Volume + Mid Teens % Price & Mix ~10 % Price & Mix Notes: All figures refer to core LFL growth, excluding Russia exit impact. 6
Slide 7: Solid Profit Performance
SOLID PROFIT PERFORMANCE
Slide 8: Continued Improvement in Fragrance Service Levels
CONTINUED IMPROVEMENT IN FRAGRANCE SERVICE LEVELS ▪ Q4 PRESTIGE SERVICE LEVELS HAVE IMPROVED SIGNIFICANTLY, NOW IN THE MID 90S ➢ CONFIDENT IN MEETING FY24 DEMAND ▪ COGS INFLATION OF ~1.9% OF REVENUES IN FY23, OFFSET BY PRICING, COGS SAVINGS AND TRADE INVESTMENT OPTIMIZATION ➢ COGS INFLATION WAS ~2.1
Slide 9: Savings for FY23 & FY24 Ahead of Target
SAVINGS FOR FY23 & FY24 AHEAD OF TARGET ▪ DELIVERED SAVINGS OF ~$180M IN FY23, INCLUDING ~$50M IN Q4, AHEAD OF PRIOR TARGET OF ~$170M ▪ STRONG PROJECT PIPELINE SUPPORTS INCREASED FY24 SAVINGS ESTIMATE OF >$100M, AHEAD OF PRIOR TARGET OF ~$90M ➢ FY24 SAVINGS DRIVEN BY MATERIAL VALUE ANALYSIS / PLATFO
Slide 10: Modest Gross Margin Expansion in Q4 and FY23
MODEST GROSS MARGIN EXPANSION IN Q4 AND FY23 ADJUSTED GROSS MARGIN GROSS MARGIN 70 BPS HIGHER YOY IN Q4 AND +20 BPS YOY IN FY23, DRIVEN BY: +70 bps YoY +20 bps YoY ➢ POSITIVE SUPPLY CHAIN PRODUCTIVITY DRIVEN BY MANUFACTURING AND PROCUREMENT 63.7% 63.9% 62.8% 62.1% ➢ PRICE INCREASES EXECUTED IN Q3 ➢
Slide 11: R&D Close to 10% Higher Than 2YA, With Further Step-Up Expected
R&D CLOSE TO 10% HIGHER THAN 2YA, WITH FURTHER STEP-UP EXPECTED ~10% growth vs. 2YA $105M $97M $97M FY 2021 FY 2022 FY 2023 11
Slide 12: Maintaining Strong Marketing Investments
MAINTAINING STRONG MARKETING INVESTMENTS A&CP AT ~28% DURING Q4 AND ~27% FY23, INLINE WITH EXPECTATIONS AND STABLE YOY A&CP AS PERCENT OF SALES INVESTMENTS MADE BEHIND: ~28% ~27% (STABLE YOY) (RELATIVELY STABLE YOY) • PRESTIGE INNOVATIONS AND ICONS, INCLUDING LANCASTER LIGNE PRINCIÈRE, PHILOSOPHY DO
Slide 13: FY23 EBITDA Ahead of Raised Guidance, Despite FX Headwinds
FY23 EBITDA AHEAD OF RAISED GUIDANCE, DESPITE FX HEADWINDS ADJUSTED PROFIT ▪ 4Q23 ADJ OP INCOME +61% YOY, WITH FY23 +7%YoY ADJ OP INCOME +20% YOY +20%YoY $973M ▪ 4Q23 ADJ OP MARGIN OF 7.8% INCREASING $905M 220 BPS, WITH FY23 MARGIN OF 13.3% $739M INCREASING 170 BPS $616M +25% YoY ▪ 4Q23 ADJ EBITDA A
Slide 14: Strong FY23 Adjusted EPS Delivery
STRONG FY23 ADJUSTED EPS DELIVERY $ Millions Q4 FY23 Adjusted EBITDA 165 973 • Q4 ADJ EPS EXCLUDING EQUITY SWAP OF $0.01, UP $0.02 YOY Depreciation (60) (234) Net Interest (72) (258) • MUCH STRONGER Q4 Income Tax (22) (177) ADJ OPERATING INCOME PARTIALLY OFFSET BY HIGHER Other (3) 167 TAX AND INTERE
Slide 15: FY23 Free Cash Flow Inline With Guidance
FY23 FREE CASH FLOW INLINE WITH GUIDANCE FREE CASH FLOW Q4 FY23 $ Millions • 4Q23 FCF OF $38M Adjusted EBITDA 165 973 • FY23 STRONG FCF OF $403M, INLINE WITH INITIAL GUIDANCE, Capex, WC, one-offs (42) (282) DESPITE INVENTORY BUILD TO INCREASE SAFETY STOCK AND MEET Interest and tax (85) (288) ANTICIP
Slide 16: Leverage on Track Towards ~3x Exiting CY23
LEVERAGE ON TRACK TOWARDS ~3X EXITING CY23 ➢ LEVERAGE EXITING 4Q23 OF ~4.1X ➢ SUCCESSFUL ISSUANCE OF $750M OF 2030 SENIOR SECURED NOTES, WITH FIXED RATE DEBT NOW AT ~85% OF TOTAL ➢ IN JULY 2023, COTY ENTERED A BINDING LETTER OF INTENT TO SELL 3.6% OF ITS WELLA STAKE TO IGF WEALTH MANAGEMENT FOR $150
Slide 17: Executing on Strategic Pillars
EXECUTING ON —. FF STRATEGIC PILLARS! ~ Recs |
Slide 18: Continued Momentum in Consumer Beauty, With a Step-Change in Influencer Engagement in FY24
CONTINUED MOMENTUM IN CONSUMER BEAUTY, WITH A STEP-CHANGE IN INFLUENCER ENGAGEMENT IN FY24 Coty Consumer Beauty Q4 revenue growth of Most leading Coty Brands Grew Revenues Grew HSD to DD % LFL HSD to LDD % LFL ~10% LFL across Cosmetics, Bodycare in FY23 18 in Q4 & FY23 and Mass Fragrances
Slide 19: CoverGirl
~ COVERGIRL
Slide 20: Fragrance Index Maintaining Momentum, With Strong Fragrance Demand and Premiumization
“FRAGRANCE INDEX” MAINTAINING MOMENTUM, WITH STRONG FRAGRANCE DEMAND AND ONGOING PREMIUMIZATION Prestige Fragrance Coty Prestige Fragrance All top Coty Brands Grew Market Grew Revenue Grew Double Digits % LFL >10% >20% LFL in Q4 & in FY23 20 in Q4 & FY23 Low Teens % LFL in FY23
Slide 21: Burberry Goddess
BURBERRY GODDESS TITLE OF THE PRESENTATION 21
Slide 22: Burberry Hero Top 3 Male Fragrance
Top 3 Fragrance at Leading Airports Sell-out 1.5-3x Higher than Coty’s Recent Blockbuster Launches Strong Halo Effect on Burberry Hero Male Fragrance TITLE OF THE PRESENTATION 22
Slide 23: Expanding and Extending Marc Jacobs Partnership
EXPANDING AND EXTENDING MARC JACOBS PARTNERSHIP Coty to create and launch Marc Jacobs license extends Avg remaining duration of Marc Jacobs Prestige Makeup for over 15 years Coty’s Top 7 prestige fragrance line in next few years licenses is now ~13 years 23 23
Slide 24: Continuing to Expand the Prestige Makeup Business
CONTINUING TO EXPAND THE PRESTIGE MAKEUP BUSINESS BECOMING A KEY PLAYER IN PRESTIGE MAKEUP Sales of new Burberry Beyond Gucci makeup and Kylie makeup Kylie global makeup sales Wear Foundation in China sell-out growing >30% in the growing strong double digits, well above target U.S., 1.5-2x the growt
Slide 25: Strong Early Start on Skincare Pillar: Lancaster
STRONG EARLY START ON SKINCARE PILLAR: LANCASTER BRAND REVENUES UP >15% YOY IN Q4 STORE SALES IN CHINA GROWING 20-30% M/M SINCE THE LAUNCH OF LIGNE PRINCIERE VERY STRONG FEEDBACK FROM PURCHASERS, WITH REPEAT INTENT >40% 25
Slide 26: Strong Early Start on Skincare Pillar: Brand Revenues Up >10% in Q4
STRONG EARLY START ON SKINCARE PILLAR: BRAND REVENUES UP >10% IN Q4 DOSE OF WISDOM SALES AHEAD OF PLAN AND 4.7-STAR AVG RATING 26 26 Source: Circana Period ending June 2023 (Total Skincare). Comparing L12M (Apr22-Mar23) vs L2M (Apr23-May23)
Slide 27: Broad-Based Digital Momentum
BROAD-BASED DIGITAL MOMENTUM LIVESTREAMING E-COMMERCE ADVOCACY Lancaster China Marc Jacobs launches on CoverGirl Yummy Gloss on livestreaming sales Lazmall, top track for >8M units, driven growing M/M S.E. Asia e-retailer, reaching by virality on TikTok #1 fragrance in April 3x original target 27
Slide 28: China Sales Rebounding, as Coty Expands Local Presence
CHINA SALES REBOUNDING, AS COTY EXPANDS LOCAL PRESENCE Coty China Q4 LFL Revenues Burberry Hero now Coty continuing to build out ~2x YoY & Top 3 physicalTITLE & digital China OF THE PRESENTATION 28 >15% Higher vs. 2YA Male fragrance in China presence in FY24 28
Slide 29: Booming and Multi-Pronged Travel Retail Business
BOOMING AND MULTI-PRONGED TRAVEL RETAIL BUSINESS Travel Retail revenues Travel Retail now Sustained global travel recovery grew >30% LFL YoY ~8% & return of Chinese travelers to 29 in Q4 & FY23 of Coty sales fuel ongoing momentum 29
Slide 30: New ESG Milestones Reached
NEW ESG MILESTONES REACHED EXPANDING PORTFOLIO OF REFILLABLE STRENGTHENING ESG GOVERNANCE THROUGH PRODUCTS WITH BURBERRY GODDESS LAUNCH EXPANDED SUSTAINABILITY OFFICE 30
Slide 31: FY24 Guidance
FY24 GUIDANCE TOP OF THE MEDIUM-TERM TARGET RANGE OF +6-8% LFL, WITH CORE LFL OUTPERFORMANCE BY 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 ADJUSTE
Slide 32: 1H24 Framework
1H24 FRAMEWORK CORE LFL +8-10%, WITH OUTPERFORMANCE BY PRESTIGE REPORTED REVENUE IMPACTS FX BENEFIT +1-2% ADJ EBITDA MARGIN ADJ EBITDA MARGIN +10-30 BPS, CONSISTENT WITH FY24 ADJ EPS (EXCL. SWAP) $0.35-0.38 * Reflects current EUR/USD of ~1.11 and GBP/USD of ~1.29 32
Slide 33: Key Messages
KEY MESSAGES Q4 SALES GROWTH AHEAD OF RAISED GUIDANCE, FUELED BY STRONG DEMAND FOR BEAUTY ▪ Q4 CORE LFL REVENUE GROWTH OF +17%, AHEAD OF UPDATED CORE LFL GUIDANCE OF +12-15%, WITH PARTICULAR STRENGTH IN PRESTIGE & DD GROWTH IN CONSUMER BEAUTY FY23 PROFITS AHEAD OF GUIDANCE, DESPITE REINVESTMENTS AND
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, the impact of COVID-19 and potential recovery scenarios, strategic planning, targets