Slide 1: Coty 3Q23 Earnings Call
COTY 3Q23 EARNINGS CALL May 9, 2023 1
Slide 2: Key Messages
KEY MESSAGES ROBUST BEAUTY DEMAND DRIVES Q3 SALES GROWTH AHEAD OF GUIDANCE ▪ Q3 CORE LFL REVENUE GROWTH OF +15%, AHEAD OF UPDATED CORE LFL GUIDANCE OF +10%, WITH PARTICULAR STRENGTH IN PRESTIGE & DD GROWTH IN CONSUMER BEAUTY REINVESTING IN GROWTH FLYWHEEL, WHILE SECURING PROFIT DELIVERY IN FY23 & BE
Slide 3: Significant Sales Acceleration
SIGNIFICANT SALES ACCELERATION
Slide 4: 3Q23 Core Revenue Growth Ahead of Guidance
3Q23 CORE REVENUE GROWTH AHEAD OF GUIDANCE Q3 CORE REVENUES +15% LFL AND +10% FYTD, AHEAD OF GUIDANCE CB +12% LFL PRESTIGE +16% LFL PRESTIGE CORE LFL +16% IN Q3, WITH +10% FYTD ➢ ACCELERATION IN FRAGRANCE MARKET + 38% RETAILER RESTOCKING Q3 ➢ MSD VOLUME GROWTH AND DD PRICE/MIX IN Q3 REVENUE MIX 62%
Slide 5: Growth Across All Regions
GROWTH ACROSS ALL REGIONS APAC +4% LFL AMERICAS AMERICAS +15% LFL IN Q3, WITH DOUBLE-DIGIT 12% +15% LFL GROWTH IN NEARLY EVERY MARKET Q3 EMEA +18% CORE LFL FUELED BY DOUBLE-DIGIT 42% GROWTH IN NEARLY EVERY MARKET REVENUE MIX ASIA PACIFIC +4% LFL IN Q3 WITH VERY STRONG 46% MOMENTUM IN BROADER ASIA AN
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Slide 7: Strong Improvement in Fragrance Service Levels
STRONG IMPROVEMENT IN FRAGRANCE SERVICE LEVELS ▪ Q3 PRESTIGE SERVICE LEVELS IMPROVED SIGNIFICANTLY, UP OVER 10 POINTS Q/Q, NOW IN THE HIGH 80S ➢ IMPROVEMENT DRIVEN BY STRONG EFFORTS AROUND QUALIFYING ADDITIONAL SUPPLIERS AND ADDITIONAL INDUSTRY CAPACITY COMING ONLINE ▪ CONTINUE TO ESTIMATE COGS INFL
Slide 8: On Track for FY23 Savings of ~$170M, with ~$165M in FY24 & FY25
ON TRACK FOR FY23 SAVINGS OF ~$170M, WITH ~$165M IN FY24 & FY25 ▪ REMAIN ON TRACK FOR SAVINGS OF ~$170M IN FY23, WITH ~$130M DELIVERED FYTD, INCLUDING ~$60M IN Q3 ▪ POSITIONING COTY FOR FUTURE SUCCESS, DEFENSIVELY & OFFENSIVELY THROUGH STRONG SAVINGS PIPELINE: ➢ FY24 SAVINGS TARGET OF ~$90M REAFFIRM
Slide 9: Robust 3Q23 and FYTD Adjusted EPS Delivery
ROBUST 3Q23 AND FYTD ADJUSTED EPS DELIVERY $ Millions Q3 FYTD Adjusted EBITDA 182 807 • Q3 ADJ EPS EXCLUDING EQUITY SWAP OF $0.06, UP $0.03 YOY Depreciation (59) (174) Net Interest (59) (186) • Q3 EPS INCLUDES NON-CASH Income Tax (45) (156) BENEFIT FROM TOTAL RETURN SWAP MARK-TO-MARKET OF Other 152
Slide 10: Strong 3Q23 Profit Growth, Despite FX Headwinds
STRONG 3Q23 PROFIT GROWTH, DESPITE FX HEADWINDS ADJUSTED PROFIT ▪ 3Q23 ADJ OP INCOME +8% YOY, WITH FYTD +4%YoY ADJ OP INCOME +15% YOY $807M +15%YoY $773M ▪ 3Q23 ADJ OP MARGIN OF 9.5% STABLE YOY, $634M WITH FYTD MARGIN OF 15.1% INCREASING 180 $550M BPS FLAT YoY ▪ 3Q23 ADJ EBITDA IN LINE WITH GUIDANCE
Slide 11: Continue to Expect Modest Gross Margin Expansion in FY23
CONTINUE TO EXPECT MODEST GROSS MARGIN EXPANSION IN FY23 GROSS MARGIN 170 BPS LOWER YOY IN Q3 AND FLAT ADJUSTED GROSS MARGIN YOY FYTD, DRIVEN BY: ➢ CLOSE TO 100 BPS FROM ONE-TIME IMPACTS -170 bps YoY Flat YoY INCLUDING WELLA TSA BENEFIT IN PRIOR YEAR 64.6% 64.2% 64.2% 62.9% ➢ A STEP UP IN COGS INFLA
Slide 12: Maintaining Strong Marketing Investments
MAINTAINING STRONG MARKETING INVESTMENTS A&CP AT ~27% DURING Q3 AND ~26% FYTD, INLINE WITH EXPECTATIONS A&CP AS PERCENT OF SALES INVESTMENTS MADE BEHIND: ~27% ~26% • PRESTIGE INNOVATIONS AND ICONS, INCLUDING LANCASTER LIGNE PRINCIÈRE, BURBERRY BEYOND WEAR FOUNDATION, GUCCI ÉTERNITÉ DE BEAUTÉ FOUNDAT
Slide 13: On Track to Deliver >$400M Free Cash Flow in FY23
ON TRACK TO DELIVER >$400M FREE CASH FLOW IN FY23 FREE CASH FLOW Q3 FYTD $ Millions • 3Q23 FCF OF $(178)M Adjusted EBITDA 182 807 ➢ REFLECTS SEASONALLY WEAKER CASH FLOW PERIOD AND RISING INVENTORY TO Capex, WC, one-offs (305) (239) ADDRESS COMPONENT SHORTAGES Interest and tax (54) (203) • CONTINUE T
Slide 14: Leverage on Track Towards ~3x Exiting CY23
LEVERAGE ON TRACK TOWARDS ~3X EXITING CY23 ➢ LEVERAGE EXITING 3Q23 OF ~4.4X, REFLECTING SEASONALLY NEGATIVE FREE CASH FLOW AND FX TRANSLATION ➢ CURRENTLY ~70% OF DEBT IS FIXED ➢ WELLA BOOK VALUE REMAINS ~$1 BILLION ~4.4x ~4.1x $0.08 ~$1.04 $0.18 ~3.0x FX hurt, Bn FCF interest & other cash Wella Co.
Slide 15: Executing on Strategic Pillars
EXECUTING ON STRATEGIC PILLARS
Slide 16: Double-Digit Consumer Beauty Sales Growth
DOUBLE-DIGIT CONSUMER BEAUTY SALES GROWTH Coty revenues and sell-out growing double-digits, driving market share gains for 5th consecutive quarter COVERGIRL RIMMEL SALLY HANSEN MAX FACTOR +20 BPS +20 BPS +20 BPS +20 BPS * +10 BPS Source: NielsenIQ Market: B&M and E-com Period: Last 3 Months February
Slide 17: "Fragrance Index" Remains in Full Effect & License Portfolio Extended
“FRAGRANCE INDEX” REMAINS IN FULL EFFECT & LICENSE PORTFOLIO EXTENDED Q3 FRAGRANCE DEMAND GROWTH ACCELERATED TO MID TEENS % IN BOTH NORTH AMERICA AND EUROPE, ABOVE HISTORICAL GROWTH OF LSD-MSD % MARKET IS >40% HIGHER THAN 2019, CONFIRMING STRUCTURAL GROWTH DRIVERS NO SLOWING IN PREMIUMIZATION TRENDS
Slide 18: Becoming a Key Player in Prestige Makeup
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 growth of U.S. fueled by growing distribution Prestige
Slide 19: We Are Igniting Our Skincare Portfolio
WE ARE IGNITING OUR SKINCARE PORTFOLIO Democratization Activate the power Works with the skin No pain The GenZ Dermatologist’s that lies in you not against it with gain toolbox secrets REPAIR IS DERM EFFICACY ORIGINAL GLOW EFFICACY WITH YOUNG HEALTHY OUR DNA & SKIN BARRIER IS THE NEW YOUTH RESPECT L
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20
Slide 21: Promising Early Results
PROMISING EARLY RESULTS LIGNE PRINCIÈRE #1 BRAND BUZZ ON TOTAL SOCIAL MEDIA CONVERSION RATE AT COUNTERS INLINE TO AHEAD OF LEADING BEAUTY BRANDS POSITIVE CONSUMER FEEDBACK; 4.9/5 AVG RATING ON SOCIAL MEDIA 21
Slide 22: Orveda: Building Awareness & Excitement with Target Consumers
O R V E D A : B U I L D I N G AWA R E N E S S & E X C I T E M E N T W I T H TA R G E T C O N S U M E R S PA R TN ERSH I PS W I T H PA R TN ERSH I PS W I T H LEADING SKINCARE AWARDS ART FAIRS FASHION SHOWS
Slide 23: Newly Launched Serum, New Website, New Merchandising
Newly launched SERUM New WEBSITE New MERCHANDISING
Slide 24: Dermatologic Wisdom Philosophy
™ ermatologic wisdom philosophy
Slide 25: Broad-Based Digital Momentum
BROAD-BASED DIGITAL MOMENTUM E-COMMERCE OMNICHANNEL ADVOCACY Chloe and Hugo Boss Kylie brand exclusive CoverGirl Yummy Gloss now Top 5 fragrances launch with Namshi, going viral on TikTok on Lazmall, top fastest growing e- with >100M views e-retailer in S.E. Asia retailer in Middle East 25
Slide 26: China Showing Steady Recovery in Trends
CHINA SHOWING STEADY RECOVERY IN TRENDS Consumer traffic returning following the lifting of COVID restrictions Q3 sales trends improving sequentially but still lower YoY ➢ April sales in China, including Hainan, have increased YoY and vs. 2YA Consumer actively engaging with key Coty launches in Q3:
Slide 27: Booming and Multi-Pronged Travel Retail Business
BOOMING AND MULTI-PRONGED TRAVEL RETAIL BUSINESS Travel Retail revenues Travel Retail now Sustained global travel growing >30% YoY in ~8% recovery & expected return Q3 and FYTD of Coty sales of Chinese travelers to fuel ongoing momentum 27
Slide 28: New ESG Milestones Reached
NEW ESG MILESTONES REACHED ▪ COTY LAUNCHED THE WORLD’S FIRST GLOBALLY DISTRIBUTED FRAGRANCE MANUFACTURED USING ETHANOL FROM 100% RECYCLED CARBON EMISSIONS IN A PARTNERSHIP WITH LANZATECH ▪ GUCCI’S LATEST FRAGRANCE, WHERE MY HEART BEATS, IS A KEY DEVELOPMENT IN COTY’S BEAUTY THAT LASTS SUSTAINABILITY
Slide 29: 4Q23 and FY23 Outlook
4Q23 AND FY23 OUTLOOK 4Q23 FY23 EXPECT Q4 LFL SALES GROWTH OF CORE BUSINESS NOW EXPECTS FY23 REVENUES FOR THE CORE BUSINESS, RELATIVELY CONSISTENT WITH FYTD GROWTH +10% ADJUSTING FOR THE IMPACT OF THE RUSSIA EXIT, TO GROW 9-10% LFL WHICH REFLECTS A SIGNIFICANT INCREASE FROM THE NO IMPACT FROM RUSSIA
Slide 30: Key Messages
KEY MESSAGES ROBUST BEAUTY DEMAND DRIVES Q3 SALES GROWTH AHEAD OF GUIDANCE ▪ Q3 CORE LFL REVENUE GROWTH OF +15%, AHEAD OF UPDATED CORE LFL GUIDANCE OF +10%, WITH PARTICULAR STRENGTH IN PRESTIGE & DD GROWTH IN CONSUMER BEAUTY REINVESTING IN GROWTH FLYWHEEL, WHILE SECURING PROFIT DELIVERY IN FY23 & BE
Slide 31: Since 1904
SINCE 1904
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, strategic planning, targets and outlook for future reporting periods (including the