Slide 1: Coty 1Q22 Earnings Call
COTY 1Q22 EARNINGS CALL SINCE 1904
Slide 2: Key Messages
KEY MESSAGES REVENUE SURPASSED EXPECTATIONS, FUELED BY GROWTH IN PRESTIGE AND CONSUMER BEAUTY ▪ STRONG PRESTIGE DEMAND IN U.S., CHINA, AND TRAVEL RETAIL, EXCEPTIONAL LAUNCH LINE-UP, AND CONTINUED IMPROVEMENT IN CONSUMER BEAUTY STRONG PROFITS ON SUBSTANTIAL GROSS MARGIN EXPANSION AND COST REDUCTIONS
Slide 3: LFL Revenue Growth Ahead of Guidance
LFL REVENUE GROWTH AHEAD OF GUIDANCE 3
Slide 4: Robust Q1 Sales Growth
ROBUST Q1 SALES GROWTH CONSUMER PRESTIGE PRESTIGE +34% LFL IN Q1, REFLECTING BEAUTY +34% LFL GROWTH ACROSS FRAGRANCES AND MAKEUP, +3% LFL AND IMPRESSIVE PERFORMANCE OF RECENT LAUNCHES 37% 1Q22 REVENUE CONSUMER BEAUTY +3% LFL IN Q1, WITH MIX GROWTH LED BY COVERGIRL AND MAX 63% FACTOR, AS NEW BRAND PO
Slide 5: Q1 Sales Led in Americas with Recovery in EMEA
Q1 SALES LED IN AMERICAS WITH RECOVERY IN EMEA APAC +29% LFL AMERICAS AMERICAS +23% LFL IN Q1, DRIVEN BY 12% +23% LFL DOUBLE-DIGIT GROWTH IN THE U.S. EMEA +17% LFL IN Q1, FUELED BY MARKET 1Q21 42% RECOVERY IN U.K., RUSSIA, AND LOCAL TRAVEL REVENUE RETAIL MIX ASIA PACIFIC +29% LFL, WITH CHINA GROWING
Slide 6: Robust Profit Performance
ROBUST PROFIT PERFORMANCE SINCE 1904
Slide 7: Strong Gross Margin Expansion
STRONG GROSS MARGIN EXPANSION Q1 GROSS MARGIN UP STRONGLY AT +480BPS YOY ADJUSTED GROSS MARGIN AND +250BPS QOQ GROSS MARGIN EXPANSION DRIVEN BY: +480 bps 63.4% 58.6% YoY ➢ MARGIN EXPANSION IN BOTH PRESTIGE AND CONSUMER BEAUTY, AIDED BY MIX ➢ MIXSHIFT TOWARDS PRESTIGE BRANDS ➢ E&O IMPROVEMENT ➢ ABSOR
Slide 8: Navigating Uncertain Inflation and Supply Chain Backdrop Well to Date
NAVIGATING UNCERTAIN INFLATION AND SUPPLY CHAIN BACKDROP WELL TO DATE • NAVIGATING UNCERTAIN ENVIRONMENT QUITE WELL TO DATE, THROUGH SUPPLY CHAIN & PROCUREMENT AGILITY AND BIZ GROWTH DRIVERS: ➢ SELECT COMPONENT SHORTAGES: MITIGATED THROUGH SAFETY STOCK & DUAL SOURCING ➢ SUPPLY CHAIN BOTTLENECKS: MIT
Slide 9: Stepping Up Marketing Investment
STEPPING UP MARKETING INVESTMENT A&CP AS PERCENT OF SALES A&CP REMAINED AT ~26% LEVEL IN 1Q, WITH WORKING MEDIA MORE THAN 2X YOY ~26% ~26% INVESTMENTS SUPPORTING INITIATIVES WITH ~23% STRONG ROI: ~20% ➢ SUCCESSFUL LAUNCHES AND MOMENTUM BRANDS (GUCCI FLORA, BURBERRY HERO, CK DEFY) ➢ EXPANSION INTO NE
Slide 10: Strong Savings Delivery in Q1, Supporting Growth Pillars & Profit
STRONG SAVINGS DELIVERY IN Q1, SUPPORTING GROWTH PILLARS & PROFIT • FIXED COSTS -8% YOY IN 1Q22 • ACHIEVED ~$60M OF SAVINGS IN Q1 • ~1/3 COGS • ~1/3 FIXED COSTS • ~1/3 TRADE INVESTMENT & OTHER • REMAIN ON TRACK FOR SAVINGS OF OVER $90M IN FY22, NET OF: • COST INFLATION • REINSTATING BONUSES • STRUCT
Slide 11: Profit Increased Over 60%
PROFIT INCREASED OVER 60% ADJUSTED EBITDA • STRONG ADJ EBITDA DELIVERY IN 1Q22, EVEN WITH DOUBLING OF WORKING MEDIA +550 bps vs. 1Q21 20.3% • 1Q22 ADJ EBITDA MARGIN OVER 500 BPS VS. $279M 1Q21 AND ~900BPS VS. 1Q20 14.8% $167M • SIGNIFICANT YOY PROFIT GROWTH SUPPORTED BY: • STRONG SALES GROWTH 1Q21 1
Slide 12: Solid Adjusted EPS Delivery
SOLID ADJUSTED EPS DELIVERY $ Millions Q1 • 1Q21 adjusted EPS of $0.08, driven by strong adjusted EBITDA results Adjusted EBITDA 279 (Continuing Ops) • Tax rate at ~29% due to tax jurisdictions and Depreciation (78) regional profit mix ➢ Full year tax rate should remain in similar Net Interest (60)
Slide 13: Robust Free Cash Flow Delivery
ROBUST FREE CASH FLOW DELIVERY Q1 FREE CASH FLOW $ Millions • STRONG Q1 FREE CASH FLOW GENERATION Adjusted EBITDA 279 DESPITE SEASONALLY WEAKER QUARTER • SOLID WORKING CAPITAL IMPROVEMENT Capex, WC, one-offs (4) • TIGHT MANAGEMENT OF CAPEX AND ONE- OFF COSTS Interest and tax (34) • 1Q FREE CASH FLOW
Slide 14: Net Debt Improvement
NET DEBT IMPROVEMENT $0.2 FCF generation ~$1.65 Bn $5.2 $4.96 Bn Bn Wella 40% financial ~$3.3 stake at end Bn of Q1 4Q21 FINANCIAL NET DEBT 1Q22 FINANCIAL NET DEBT 1Q22 ECONOMIC NET DEBT NET DEBT ACTIONS CAPITAL STRUCTURE ENHANCED • SECURED COMMITMENTS TO EXTEND REVOLVER • REDUCES OVERHANG FROM KKR
Slide 15: Executing on Deleveraging Agenda
EXECUTING ON DELEVERAGING AGENDA • EXECUTING SEVERAL REAL ESTATE DIVESTITURES, BRINGING ~$150M OF CASH PROCEEDS, WITH MAJORITY IN Q2 • ON-TRACK TO END CY21 WITH FINANCIAL NET DEBT TO EBITDA TOWARDS 5X AND END CY22 ~4X • COMMITTED TO PARTIAL IPO OF THE BRAZIL BUSINESS AND CONTINUE TO MONITOR BRAZIL M
Slide 16: Simplifying Our Capital Structure
SIMPLIFYING OUR CAPITAL STRUCTURE ▪ SIGNIFICANT STEPS TOWARDS SIMPLIFICATION OF CAP STRUCTURE IN 1H22: ➢ CONVERSION OF ~50M PREFERRED SHARES ➢ REDEMPTION OF ~75M PREFERRED SHARES ▪ MULTIPLE BENEFITS FOR COTY: ➢ REDUCES OVERHANG OF KKR’S PREFERRED SHARES ➢ ~$65M OF CASH FREED ON LOWER DIVIDEND ➢ CONF
Slide 17: Executing on Strategic Pillars
EXECUTING ON STRATEGIC PILLARS TITLE OF THE PRESENTATION 17
Slide 18: Clarified Brand Portfolio in Cosmetics
CLARIFIED BRAND PORTFOLIO IN COSMETICS 18
Slide 19: Stabilizing Consumer Beauty - CoverGirl
STABILIZING CONSUMER BEAUTY - COVERGIRL INVENTOR OF CLEAN MAKEUP, SINCE BRAND REBOOT IN GAINED SHELF SPACE IN TOTAL, NOW LEADS GROWTH IN THIS MARCH, COVERGIRL HAS DRIVEN BY KEY RETAILER, RESULTING IN: IMPORTANT MARKET SEGMENT GAINED MARKET SHARE IN 4 OF THE LAST 7 MONTHS • COVERGIRL OUTPERFORMING TH
Slide 20: Reapplying CoverGirl Playbook to Rimmel
REAPPLYING COVERGIRL PLAYBOOK TO RIMMEL LAUNCH OF KIND & FREE LINE OF CLEAN, VEGAN, CRUELTY-FREE PRODUCTS 20
Slide 21: Stabilizing Consumer Beauty - Rimmel
STABILIZING CONSUMER BEAUTY - RIMMEL BIGGEST LAUNCH IN CONSUMER RETAIL PARTNERS VIEW THIS AS PRE-LAUNCH SEEING PICK-UP IN BEAUTY FOR FY22 GAME CHANGING INNOVATION WEEKLY SALES AT RETAILERS 21 Source: Nielsen
Slide 22: Stabilizing Consumer Beauty - Max Factor
STABILIZING CONSUMER BEAUTY – MAX FACTOR GAINED 20BPS OF MARKET GAINED 50BPS OF MARKET BRAND STABLE OR GROWING SHARE IN THE UK SHARE IN THE NETHERLANDS IN >75% OF ITS MARKETS Source: Nielsen data September 2021 22
Slide 23: Accelerating Luxury Fragrances: Gucci Flora 'Gorgeous Gardenia'
ACCELERATING LUXURY FRAGRANCES: GUCCI FLORA ‘GORGEOUS GARDENIA’ ON TRACK TO BE WITHIN TOP 15 GLOBAL FEMALE ICON: • #1 LAUNCH WITH KEY U.S. RETAILERS • #3 LAUNCH IN U.K., PLACING FLORA AS #8 OVERALL LINE • #8 OVERALL LINE IN GERMANY • #1 FEMALE LINE IN ITALY • TOP 10 IN CHINA ACROSS KEY B&M RETAILERS
Slide 24: Accelerating Luxury Fragrances: Burberry 'Hero'
ACCELERATING LUXURY FRAGRANCES: BURBERRY ‘HERO’ ON TRACK TO BE GLOBAL MALE ICON, EXCEEDING TARGET IN ALL KEY MARKETS: • TOP 5 MEN’S FRAGRANCE WITH KEY U.S. RETAILERS • TOP 10 MEN’S LAUNCH IN ITALY, PLACING HERO AS #10 OVERALL LINE • TOP 20 OVERALL LINE IN GERMANY • TOP 10 IN CHINA ACROSS KEY B&M RET
Slide 25: Becoming a Key Player in Prestige Makeup: Kylie Cosmetics
BECOMING A KEY PLAYER IN PRESTIGE MAKEUP: KYLIE COSMETICS DTC U.K. Scandinavia - Kicks US B&M HALLOWEEN & BABY TOP 5 COSMETICS BEST EVER DAY 1 SKIN & COSMETIC SELL-OUT COLLECTIONS AMONG BRAND AT HARROD’S LAUNCH AT KICKS UP STRONG DOUBLE- MOST SUCCESSFUL, OVER AND SELFRIDGES IN SEPT. DIGITS VS. LY 40
Slide 26: Becoming a Key Player in Prestige Makeup: Gucci Beauty
BECOMING A KEY PLAYER IN PRESTIGE MAKEUP: GUCCI BEAUTY GUCCI MAKEUP REVENUES IN U.S. & CHINA TRIPLE DIGIT STRONG PERFORMANCE OF Q1 3X YOY SELL-OUT GROWTH CUSHION FOUNDATION – KEY FACE CATEGORY IN APAC 26
Slide 27: Building Out Skincare: Lancaster
BUILDING OUT SKINCARE: LANCASTER SKINCARE NOW REPRESENTS OVER HALF OF HAINAN TRAFFIC & LANCASTER SALES LANCASTER SELL-OUT IN HAINAN REBOUNDING IN SEPTEMBER 27
Slide 28: Building E-Commerce & DTC Expertise
BUILDING E-COMMERCE & DTC EXPERTISE 1Q22 % OF REVENUES PRESTIGE +21% YoY LOW TWENTIES % CONSUMER +27% YoY BEAUTY HIGH SINGLE DIGIT % COTY +23% YoY MID TEENS % Based on Coty Inc and third-party data 28
Slide 29: Expanding in China
EXPANDING IN CHINA DESPITE COVID RESURGENCE, COTY PRESTIGE BUSINESS TMALL REVENUES IN PRESTIGE CHINA REVENUE GROWING Q1 SELL-OUT FASTEST SHOW 7X GROWTH CLOSE TO 50% GROWING AMONG TOP 10 BEAUTY COMPANIES 29
Slide 30: 1H22 and FY22 Outlook
1H22 AND FY22 OUTLOOK 1H22 FY22 VERY STRONG SALES MOMENTUM IN Q1 IMPROVING BEAUTY DEMAND AND STRONG COTY AMPLIFIED BY SHIPMENTS OF SEVERAL KEY LAUNCH CALENDAR FRAGRANCE LAUNCHES ➢ FY22 LFL SALES UP LOW-TO-MID TEENS VS. PRIOR STRONG SELL-OUT OF LAUNCHES SUPPORTING GUIDANCE OF LOW TEENS GROWTH (ASSUMI
Slide 31: Key Messages
KEY MESSAGES REVENUE SURPASSED EXPECTATIONS, FUELED BY GROWTH IN PRESTIGE AND CONSUMER BEAUTY ▪ STRONG PRESTIGE DEMAND IN U.S., CHINA, AND TRAVEL RETAIL, EXCEPTIONAL LAUNCH LINE-UP, AND CONTINUED IMPROVEMENT IN CONSUMER BEAUTY STRONG PROFITS ON SUBSTANTIAL GROSS MARGIN EXPANSION AND COST REDUCTIONS
Slide 32: 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
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