Coty Inc. · NYSE:COTY
Coty — Investor Day (November 2021)
30 slides from Coty's investor day presentation, November 2021
Slide 1: Our Financial Journey
OUR FINANCIAL JOURNEY LAURENT MERCIER 1
Slide 2: Investment Highlights
ONE OF THE MOST BEAUTIFUL PORTFOLIOS, WITH TWO COMPLEMENTARY BUSINESSES RAPIDLY EXECUTING ON ALL KEY STRATEGIC GROWTH PILLARS INVESTMENT GROSS MARGIN AND COST REDUCTIONS ARE FUELING OUR GROWTH PLANS AND PROFIT HIGHLIGHTS EXPANSION STRONG EPS ACCRETION VIA CAPITAL STRUCTURE IMPROVEMENT CLEAR PATHWAY
Slide 3: 3 Phases of Coty's Financial Journey
3 PHASES OF COTY’S FINANCIAL JOURNEY GROWTH FLYWHEEL BUILD & GROW STABILIZE & FUEL 3
Slide 4: Phase 1 of Our Journey
PHASE 1 OF OUR JOURNEY: 4
Slide 5: 1H FY21: Stabilize
1H FY21: STABILIZE ACTIONS INITIATED FY21 RESULTS ✓ Fixed costs -16% YoY Streamlining of organization ✓ Net savings of >$330M, ahead of initial Non-people fixed costs cut to minimum target of >$200M Salary freezes and bonuses at zero ✓ EBITDA margins 300bps above pre- Completed 60% Wella sal
Slide 6: Significant Deleveraging
SIGNIFICANT DELEVERAGING 14.7x $2.5B Net Proceeds from Wella 6.9x Strong Free Cash Flow $145M Free Cash Flow (Cash Olympics) ~5x ~$150M Proceeds from Inorganic Initiatives <4x* FY20 FY21 Est. CY21 Net Debt Net Debt Net Debt (June FYE) (June FYE) (Dec YE) *Represents economic net debt on updated ~26%
Slide 7: 2H FY21: Fuel
2H FY21: FUEL #1 #2 #3 #4 #5 #6 Stabilize and grow Accelerate Luxury Build skincare Build e-commerce Expand in China on Become a Consumer Beauty fragrances & portfolio across and direct-to- Luxury and select beauty leader in make-up brands & become a key both divisions consumer expertise Consumer Be
Slide 8: Finance Partnering to Fuel Strategic Execution
FINANCE PARTNERING TO FUEL STRATEGIC EXECUTION BUSINESS OBJECTIVE FINANCE AS ENABLER RESULTS Launch Marc Jacobs Perfect Targeted investment behind Record ROI with Perfect as #1 fragrance mid pandemic fully digital launch fragrance launch in US over last 3 years Reposition CoverGirl & launch Innovati
Slide 9: Phase 2 of Our Journey
PHASE 2 OF OUR JOURNEY: 9
Slide 10: Building Top Class Finance Organization
BUILDING TOP CLASS FINANCE ORGANIZATION Leverage new technologies/platforms such as AI, machine learning to develop advanced planning, reporting & analytics Develop best in class business process outsourcing (BPO) operations through the multi-year partnership with Accenture Upgrade the transactional
Slide 11: Building Foundations for Growth Engine
BUILDING FOUNDATIONS FOR GROWTH ENGINE #1 Maintain discipline on fixed costs #2 Improve gross margin Targeted and competitive #3 marketing spend, with ROI mindset #4 Strong cash generation #5 Simplified capital structure 11
Slide 12: FY22: Increased EPS Guidance
FY22: INCREASED EPS GUIDANCE INITIAL GUIDANCE ACTUAL / LATEST VIEW 1Q22 LFL SALES High Teens % Growth +21% GROSS MARGIN Expansion +480bps YoY / +250bps Q/Q FY22 LFL SALES Low Teens % Growth Low-to-Mid Teens % Growth GROSS MARGIN Expansion Expansion ADJ EBITDA ~$900M (constant FX) Minimum $900M (cons
Slide 13: Accelerate Deleveraging
ACCELERATE DELEVERAGING 6.9x ~5x Strong Free Cash Flow Strong Free Cash Flow (Cash Olympics) ~4x <4x* ~$150M Proceeds from Inorganic Cash Initiatives Inorganic Initiatives ~3x* Approaching $1.0B EBITDA FY21 Est. CY21 Est. CY22 Net Debt Net Debt Net Debt (June FYE) (Dec YE) (Dec YE) *Represents econo
Slide 14: Phase 3 of Our Journey
PHASE 3 OF OUR JOURNEY: 14
Slide 15: FY23 Through FY25 & Beyond: Amplify Our Growth Engine
FY23 THROUGH FY25 & BEYOND: AMPLIFY OUR GROWTH ENGINE Operating at full potential as a leading #1 beauty company Complete execution of 6 strategic #2 pillars and transformation program Virtuous P&L, with sales growth ahead of #3 beauty market and profit growth ahead of sales growth Gross margin grow
Slide 16: 6-8% LFL Revenue CAGR Through FY25 and Beyond
6-8% LFL REVENUE CAGR THROUGH FY25 AND BEYOND $6.4B-$6.8B Low Single 25-30% CAGR Digit Growth Gucci, Inline with High-teens to market Burberry, ~$5.3B mid-20% Kylie CAGR Mid Single Existing Digit Growth brands + New Inline with (CoverGirl, market Kim, Orveda) FY22E Prestige Skincare Prestige Consume
Slide 17: Shifting Portfolio to Capture Key Beauty Growth Areas
SHIFTING PORTFOLIO TO CAPTURE KEY BEAUTY GROWTH AREAS 9% 6% 3% 7% 6% ~8% ~4% 5% ~10% 6% ~10% FY19 REMAINCO FY21 FY25 REVENUE MIX REVENUE MIX AMBITION ~45% 29% 27% 51% 51% Low 20% Prestige Fragrances Mass Cosmetics Prestige & Mass Skincare Prestige Cosmetics Body Care Mass Fragrances 17
Slide 18: Outsized Growth from China & Travel Retail
OUTSIZED GROWTH FROM CHINA & TRAVEL RETAIL $6.4B-$6.8B LSD-MSD MSD CAGR CAGR 20%-25% CAGR ~$5.3B LSD-MSD CAGR >2x driven by Prestige FY22E China U.S. Travel Rest of Rest of FY25E FY25E & Retail APAC World Beyond 18
Slide 19: Capturing Key Beauty Growth Markets
CAPTURING KEY BEAUTY GROWTH MARKETS 8% 7% MSD% 4% HSD% 8% 4% 27% ~30% 3% 32% >10% FY19 REMAINCO FY21 FY25 19% REVENUE MIX REVENUE MIX AMBITION 18% 15% 7% 9% 27% ~25% HSD 27% E-Com Mix High Single Digit % High Teens % Mid Twenties % (Total Coty) North America W. Europe Brazil & LatAm E. Europe & Midd
Slide 20: Financial Overview of Transformation Plan
FINANCIAL OVERVIEW OF TRANSFORMATION PLAN
Slide 21: Multi-Pronged Gross Margin Expansion Program
MULTI-PRONGED GROSS MARGIN EXPANSION PROGRAM GROSS MARGIN ATTACK PROGRAM: ~500BPS OPPORTUNITY IN NEXT 4 YEARS COMMERCIAL GM ATTACK SUPPLY CHAIN ATTACK Excess & Pricing and Net Revenue Obsolescence Manufacturing Management Distribution Value Distribution Planning Reduction Gross Margin Attack Portfol
Slide 22: Cost Savings Delivery Timeline
COST SAVINGS DELIVERY TIMELINE ~$675M Cumulative ~$75M ~$170M >$90M >$330M ONGOING IMPROVEMENT FY21 FY22E FY23E FY24E FY24E 22
Slide 23: Mid-Term Financial Algorithm
MID-TERM FINANCIAL ALGORITHM
Slide 24: Accelerating Sales and Profit Momentum
ACCELERATING SALES AND PROFIT MOMENTUM FY21 FY22E FY22-25 FY25 & Beyond NET REVENUES $4.63B + Low to Mid Teens LFL +6-8% LFL CAGR +6-8% LFL CAGR GROSS MARGIN 60% Growing Mid 60% by ‘25 Expanding EBITDA $762M $900M Minimum +9-11% CAGR +9-11% CAGR TAX RATE 21% High 20% High 20% High 20% EPS $0.05 $0.2
Slide 25: Targeting Sale of Remaining Wella Stake by FY25
TARGETING SALE OF REMAINING WELLA STAKE BY FY25 40% 31% 26% Stake Stake Stake $1.4B* $1.2B $1.2B* Value of Wella Value of Wella Value of Wella Stake Stake Stake (December ‘20) (September ‘21) (November ‘21) 25 *Based on implied value of KKR transactions
Slide 26: Accelerate Free Cash Flow Generation
ACCELERATE FREE CASH FLOW GENERATION FY21 FY22E FY25E ADJ EBITDA $762M $900M Minimum $1.1Bn - $1.2Bn 1X CASH COSTS <$200M ~$100M NM INTEREST $231M Low $200s Mid $100M CASH TAXES $16M Approx $100M Low $100M WORKING CAP Negative Positive Positive CAPEX $174M <$200M ~$200M FREE CASH FLOW $145M L
Slide 27: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES FUEL THE GROWTH IN EXISTING PORTFOLIO MEDIA R&D CAPABILITIES DIGITAL CHINA SKIN 27
Slide 28: Key Takeaways
KEY TAKEAWAYS
Slide 29: Investment Highlights
One of the most beautiful & comprehensive brand portfolios in the industry, and the only group at this level to operate two complementary businesses Targeting revenue CAGR of 6%-8% (FY22-FY25 & INVESTMENT beyond), above beauty market growth HIGHLIGHTS Targeting mid 60% gross margin by FY25, and expa
Slide 30: 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