Q1 Sales Inline with Pre-Announcement, With
2% Reported and 4.5% LFL Growth
Strong Gross Margin Expansion And Sustained
Brand Investments
Reiterated FY25 EBITDA Underpinned by
Accelerating Actions to Adapt Coty for Future Success
Regulatory News:
Coty Inc. (NYSE: COTY) (Paris: COTY) ("Coty" or "the Company")
today announced its results for the first quarter of fiscal year
2025, ended September 30, 2024. The Company delivered continued
sales and gross margin expansion in the first quarter, while
continuing to invest behind its brands for the long term and
execute across its strategic growth pillars.
In 1Q25, Coty's net revenues grew 2% on a reported basis and
included a 1% headwind from FX and a 1% headwind from the
divestiture of the Lacoste license. Coty's Q1 net revenues grew
4.5% on a LFL basis, despite the very elevated comparison of the
prior year, when Coty's LFL revenues grew 18%. The Q1 reported
sales growth was supported by strong growth in fragrances across
all price points, including prestige, ultra premium and mass
fragrances, while some slowing in the mass cosmetics market and
active order management by retailers pressured sales for both mass
and prestige cosmetics. LFL revenue growth on a company-wide basis
and in the Americas region includes a contribution of 1% and 2%,
respectively, from Argentina, which experienced hyperinflation.
Prestige Q1 net revenues increased 5% on a reported basis,
including a 2% negative impact from the divestiture of the Lacoste
license, with net revenues growing at a strong 7% pace on a LFL
basis, including very strong growth in prestige fragrances, which
grew 6% as reported and 9% LFL. Prestige reported net revenue
growth in Q1 was driven by solid growth in the underlying fragrance
category and Coty's brand performance, with double-digit LFL growth
in the majority of Coty's leading fragrance brands, despite lapping
the very robust double-digit percentage growth Coty's Prestige
fragrance business in the prior year quarter.
Consumer Beauty Q1 net revenues declined 3% on a reported basis,
reflecting a 3% headwind from FX, with LFL net revenues flat
year-over-year off of elevated prior year comparisons when Consumer
Beauty grew 10% LFL. In 1Q25, Consumer Beauty reported net revenues
grew strongly in mass fragrance and mass skincare, partially
offsetting declines in body care and mass cosmetics reported net
revenues. For cosmetics, the weakness was concentrated in the U.S.
mass color cosmetics market which was further exacerbated by
significant channel shifts, resulting in Coty's U.S. Consumer
Beauty sell-in tracking well below sell-out.
By geography, EMEA net revenues increased 8% on both a reported
basis and LFL basis. The reported net revenue growth in EMEA was
driven by continued growth across nearly all markets and the Travel
Retail channel in combination with a 2% FX benefit partially offset
by a 2% headwind from the divestiture of the Lacoste license. Q1
Americas net revenues declined 2% on a reported basis, but grew
solidly by 4% on a LFL basis in 1Q25. The decline in reported net
revenue in Americas reflected growth in Mexico and South America,
and the regional Travel Retail channel, offset by lower U.S.
Consumer Beauty sales, a 5% negative impact from FX and a 1%
headwind from the divestiture of the Lacoste license. In Q1, Asia
Pacific net revenues declined 5% on both a reported and LFL basis,
primarily driven by the ongoing difficulty in the Chinese mainland
market and the Asia Travel Retail channel coupled with a 1%
headwind from the divestiture of the Lacoste license, partially
offset by a 1% benefit from FX.
Coty delivered continued very strong gross margin expansion in
the quarter. 1Q25 reported and adjusted gross margin of 65.5%
increased 200 basis points year-over-year. Coty's Q1 reported gross
margin improvement was mainly driven by the benefit from
premiumization, pricing actions, easing inflation, excess &
obsolescence reduction and supply chain savings.
Coty generated reported operating income of $237.8 million, up
20% year-over-year, supported by growth in sales and gross profit,
resulting in 220 basis points of reported operating margin
expansion to 14.2%. Coty's Q1 adjusted operating income of $303.6
million was roughly flat year-over-year resulting in an adjusted
operating margin of 18.2%, which was slightly lower year-over-year
as Coty continued to invest behind its brands as well as the timing
of certain operating expenses.
Q1 reported net income of $79.6 million increased from a net
loss of $1.7 million in the prior year, which drove a reported net
income margin of 4.8%, up 490 basis points year-over-year. Adjusted
net income of $128.1 million increased from $74.1 million with a
margin of 7.7%, up 320 basis points year-over-year. The increase in
both reported and adjusted net income reflects the $24 million
discrete one-time non-cash tax impact to the prior year quarter, as
well as a lower impact from the equity swap mark-to-market than in
the prior year.
Q1 adjusted EBITDA of $360.1 million was flat year-over-year,
with an adjusted EBITDA margin of 21.5%.
In Q1, cash flow from operating activities was $67.4 million and
free cash outflows totaled $7.9 million. Q1 cash from operating
activities and free cash flow was pressured by the phasing of order
placement made by retailers, which took place at the end of the
quarter and resulted in higher receivables at quarter end, as well
as the phasing of payables. Total debt at the end of the first
quarter totaled $4,002.2 million, while financial net debt totaled
$3,718.6 million. This drove the total debt to net income ratio to
21.1x and the financial leverage ratio (net debt to adjusted
EBITDA) to 3.4x, a reduction of 0.4x versus a year ago. Coty’s
retained 25.8% Wella stake was valued at $1,085.0 million at
quarter-end, supporting economic net debt of $2,633.6 million.
Updates on Strategic
Pillars
- The prestige fragrance market remains an outperforming category
in beauty, even as growth has moderated by a couple of percentage
points exiting Q1 from the low double digit percentage growth in
FY24 and the early part of Q1. Coty's prestige fragrance portfolio
performed strongly, particularly in the EMEA and Americas regions,
and the Company's very strong growth in prestige fragrances, which
grew 6% as reported and 9% LFL. In the United States, Coty's
sell-out and sell-in growth was impacted by the very elevated
comparisons of the prior year, which included the blockbuster
launch of Burberry Goddess, Coty's biggest launch ever. In Q1,
reported net revenue for the majority of Coty's leading prestige
fragrance brands grew by a double-digit percentage. Coty continued
to grow the Burberry Goddess franchise, which contributed to the to
the Burberry brand's strong double-digit percentage reported net
revenue growth. Marc Jacobs Daisy Wild and Cosmic Kylie Jenner
remained top ranked fragrance innovation in their launch markets,
reinforcing Coty's position as a leader in fragrance. In prestige
cosmetics, Coty brands Burberry and Kylie Cosmetics each grew
strongly in the quarter, while Gucci makeup declined due to
weakness in the Chinese mainland and Asia Travel Retail.
- The global mass beauty market continues to grow at a
low-single-digit pace, with outperformance by the mass fragrance
category which is growing at a high-single-digit percentage,
confirming that consumers continue to prioritize the fragrance
category across price points. In Q1, Coty's mass fragrances
outperformed the category, growing reported net revenues by a
strong double-digit percentage fueled by adidas, Nautica, Beckham
and Mexx, and Coty will continue to focus on amplifying its mass
fragrance offerings to capture market share in this attractive
category. At the same time, the global mass cosmetics category has
decelerated to flattish performance, with moderate unit growth, and
was further exacerbated by significant channel shifts, resulting in
Coty's U.S. Consumer Beauty sell-in tracking well below sell-out.
Coty's Consumer Beauty e-commerce sales grew at a mid-single-digit
percentage, ahead of the overall beauty market, as Coty continued
to gain share in this critical channel. Coty social media advocacy
strategy maintained momentum, with strong earned media value
results for viral Consumer Beauty innovations including CoverGirl
Simply Ageless Skin Perfector Essence, CoverGirl Eye Enhancer 3D
mascara and Rimmel Thrill Seeker Extreme mascara.
- Coty continued to fuel its skincare strategy. Lancaster
delivered mid-single-digit percentage net revenue growth as it
kicked off the brand's revamp in Europe, supported by its unique
positioning as the photo-aging prevention and repair expert, the
launch of its Golden Lift skincare range, and the expansion of
Ligne Princiere into the European market. For Philosophy, active
engagement with dermatologists and influencers, aided by its newly
opened influencer studio in New York, resulted in over 70% growth
in the brand's earned media value. Orveda continued to expand its
footprint with the opening of the La Maison Orveda in New York
City, the next step in its brand building and distribution
expansion.
- The e-commerce channel remains a strong growth channel for both
Prestige and Consumer Beauty, and across all major regions. Coty
e-commerce reported net revenues grew by a mid-single-digit
percentage in Q1. As a result, e-commerce penetration increased
approximately 40 basis points year-over-year to nearly 20% in Q1,
with e-commerce penetration growth in both divisions. Coty's
Prestige and Consumer Beauty brands continued to gain strong market
share in the e-commerce channels in which the brands are
present.
- The Company maintained strong momentum in growth engine markets
and channels. Results in Coty's growth engine markets, which
account for approximately 21% of total sales in Q1, continued grow
strongly with low-single-digit percentage reported net revenue
growth and double-digit percentage LFL net revenue growth, led by
strength in LATAM, Africa, Southeast Asia, including India and
North Asia. LFL growth in Q1 in Coty's growth engine markets
includes a 5% contribution from Argentina, which experienced
hyperinflation. Coty's global Travel Retail channel, which accounts
for 9% of the Company's sales in Q1, continued to expand led by the
Americas and EMEA, despite pressure in the Asia Travel Retail
corridor.
- Coty continued to make progress on its sustainability agenda.
Earlier this week, the Company published its FY24 Sustainability
Report, which included key milestones, such as achieving a
significant 65% reduction in Scope 3 air freight emissions versus
the 2019 baseline, establishing ambitious new targets for
sustainable packaging and water withdrawal, rejoining the Ellen
MacArthur Foundation as a Network Member and achieving gender
balance in leadership target ahead of its 2025 commitment.
Commenting on the operating results, Sue Nabi, Coty's CEO,
said:
"As we enter FY25, the macroeconomic environment remains as
complex as ever and the outsized growth of the last few years is
now entering the normalization phase. Nevertheless, one thing is
very clear: consumers continue to prioritize beauty in their
spending routines, even as they pull back on many other consumer
segments. And within the broader beauty backdrop, fragrances remain
a top performing category. As a beauty leader, and increasingly as
a beauty trendsetter, Coty remains at the forefront of fueling
consumer desire and driving category growth through disruptive
launches, new and improved formulations, and engaging activations
and campaigns.
First, we continue to deliver sustained LFL sales growth. In
fact, we are further building on our multi-year track record of
outperformance. We have delivered LFL growth which is ahead of the
leading global beauty players in 9 out of the last 13 quarters.
This confirms that our growth is a result of our clear strategic
vision, strong execution and our ability to seize on and develop
beauty trends in each of our core categories. This strong
operational and financial execution has been recognized by
stakeholders, as we have achieved 11 consecutive financial upgrades
from rating agencies since 2021.
Second, the fragrance market remains robust and remains a top
performing category in beauty, with more consumers entering the
category, using fragrances more often, and exploring with a variety
of concentrations and formats. This reinforces our view that the
structural drivers for the category will allow it to continue to
grow inline to ahead of the underlying beauty market in the coming
quarters and years. At Coty, as we continue to leverage our
best-in-class end-to-end fragrance expertise and to set the trends
in the industry, we are reinforcing our leadership in prestige
fragrances while simultaneously unlocking more opportunities across
the full price spectrum ranging from mass and masstige fragrances,
all the way up to ultra premium and niche fragrances. In Q1, we
delivered robust sales growth in each of these fragrance price
tiers.
Third, we are step-changing our efforts to adapt Coty for future
success in the ever more dynamic market environment. We are
accelerating existing plans and adding new initiatives across all
parts of the organization, whether its establishing centers of
excellence for various operations, accelerating our speed to
market, adapting our organizations for the increasingly omnichannel
world, and maximizing the benefits of emerging technologies and
artificial intelligence. Not only will these efforts enable Coty to
lead in the beauty market of tomorrow, but they are also bringing
additional savings in FY25 and beyond, supporting our ability to
deliver our FY25 adjusted EBITDA target of close to double-digit
growth.
Fourth, we will continue to play the full range of our brands
and categories to capture growth opportunities and support
sustained outperformance. We continue to grow our footprint across
growth engine markets, expand our product range and distribution
across skincare, prestige cosmetics, mass fragrances and ultra
premium fragrances, and capture share in growth channels like
e-commerce and travel retail.
And finally, as we continue to deliver strong profitability and
free cash flow in FY25 and beyond, we will deploy this cash toward
shareholder returns, further deleveraging, and amplifying Coty’s
growth trajectory.
As we strengthen our position as a global beauty powerhouse,
acting with the agility of smaller brands but also creating the
beauty trends of today and tomorrow, Coty remains one of the most
compelling investment opportunity in our industry."
1 For Scope 1 and 2 emissions.
*Adjusted financial metrics used in this
release are non-GAAP. See reconciliations of GAAP results to
Adjusted results in the accompanying tables.
** E-commerce penetration and contribution
based on countries where e-com info is available covering approx.
86% of total Coty. Sources: Circana (Prestige) and Nielsen (CB)
August 2024. Additionally, the data includes estimated data for
Brick and Click sales, which is subject to change.
RESULTS AT A GLANCE
Three Months Ended September
30, 2024
(in millions, except per share data)
Change YoY
COTY, INC.
Reported Basis
(LFL)(a)
Net revenues
$
1,671.5
2%
4.5%
Operating income - reported
237.8
20%
Net income attributable to common
shareholders - reported **
79.6
>100%
Operating income - adjusted*
303.6
—%
Net income attributable to common
shareholders - adjusted* **
128.1
73%
EBITDA - adjusted
360.1
—%
EPS attributable to common shareholders
(diluted) - reported
$
0.09
N/A
EPS attributable to common shareholders
(diluted) - adjusted*
$
0.15
67%
(a) LFL results for the three months ended
September 30, 2024 include 1% help from Argentina resulting from
significant price increases due to hyperinflation.
* These measures, as well as “free cash
flow,” “adjusted earnings before interest, taxes, depreciation and
amortization (adjusted EBITDA),” “financial net debt,” and
"economic net debt" are Non-GAAP Financial Measures. Refer to
“Non-GAAP Financial Measures” for discussion of these measures.
Reconciliations from reported to adjusted results can be found at
the end of this release.
** Net income for Coty Inc. is net of the
Convertible Series B Preferred Stock dividends.
Outlook
Over the last several months, the beauty market has maintained
solid momentum, though growth has moderated from the outsized
double-digit growth of the last few years. Prestige fragrances
remain an outperforming category, though growth has moderated by a
couple of points exiting Q1. Mass beauty is now growing in the low
single digits, with flattish performance in the mass cosmetics
category. Within this backdrop, slower end demand and significant
channel shifts in U.S. mass beauty and in Asia, are continuing to
weigh on order levels into Q2, with sell-in tracking well below
sell-out. As a result of these factors, Coty expect LFL sales
growth in the first half of 3-4%.
The pace of category growth and consumer demand during the
critical holiday period remains the central factor influencing the
outlook for the second half, including retailer inventory levels
and pace of re-orders. At present, Coty anticipates LFL growth in
the second half to be relatively consistent with the first half,
reflecting easier prior year comparisons and solid prestige
fragrance performance on the one hand, and continued pressure in
the Chinese mainland, Asia Travel Retail and U.S. mass cosmetics on
the other hand.
In this very dynamic beauty market environment, Coty is future
proofing its organization and processes to better capture new
opportunities, respond to changes in the market with more agility,
and solidify Coty’s position as a beauty leader over the long term.
Many of the workstreams are already under way, with an acceleration
now in the timing of delivery, while others are newly initiated.
Through the combination of these efforts, Coty now anticipates FY25
savings of over $120 million, an increase of over $45 million
versus its initial target. And importantly, these projects should
continue to deliver savings in FY26 and beyond.
Through the combination of continued sales growth, continuous
gross margin expansion and increased cost savings for FY25 and
beyond, while maintaining A&CP in the high 20s percentage, Coty
expects FY25 adjusted EBITDA to grow near the lower end of its
prior guidance of +9-11% YoY. This outlook includes resumed
adjusted EBITDA growth in Q2 in the mid single digit percentage,
with steady EBITDA growth acceleration in Q3 and Q4. This adjusted
EBITDA growth target, in conjunction with continued though more
moderate revenue growth, reflects an even stronger adjusted EBITDA
margin expansion in FY25 of close to 100 bps, following the 30 bps
adjusted EBITDA margin expansion in FY24. Coty expects FY25
adjusted EPS at the low end of its prior guidance range of
$0.54-0.57, reflecting mid teens percentage growth.
Finally, Coty continues to expect FY25 free cash flow to grow by
a double-digit percentage YoY to the low to mid $400M range. With
the tight inventory management by retailers adding some variability
on cash inflow timing, Coty remains on track to exit CY24 with
leverage below 3x and continues to target leverage close to 2.5x
exiting CY24.
Financial Results*
Refer to “Non-GAAP Financial Measures” for discussion of the
non-GAAP financial measures used in this release; reconciliations
from reported to adjusted results can be found at the end of this
release.
Revenues:
- 1Q25 reported net revenues of $1,671.5 increased 2%
year-over-year, which reflected a 5% increase in Prestige reported
net revenues as well as a 3% decrease in Consumer Beauty reported
net revenues, a 1% headwind from FX and a 1% headwind from the
divestiture of the Lacoste license. On a LFL basis, net revenues
increased 5% driven by a 7% increase in Prestige, while Consumer
Beauty revenues were flat.
Gross Margin:
- 1Q25 reported gross margin of 65.5% increased 200 basis points
year-over-year. The improvement in reported gross margin was mainly
driven by the benefit from premiumization, pricing actions, easing
inflation, excess & obsolescence reduction and supply chain
savings. 1Q25 adjusted gross margin of 65.5% increased by 200 basis
points from 63.5% in the prior year.
Reported Profit:
- 1Q25 reported operating income of $237.8 million increased by
20% from $197.5 million the prior year driven by higher sales and
gross profit. 1Q25 reported operating margin was 14.2% reflecting
220 basis points of margin expansion year-over-year. The
improvement in reported operating margin was driven by strong gross
margin expansion in the quarter.
- 1Q25 reported net income of $79.6 million increased from net
loss of $1.7 million in the prior year. Reported net income
reflected $24 million discrete one-time non-cash tax impact to the
prior year quarter from a change in the Swiss statutory rate as
well as an $32 million negative impact from the mark-to market on
the equity swap compared with a negative impact of $58 million in
the prior year. 1Q25 reported net income margin of 4.8% increased
490 basis points year-over-year.
- 1Q25 reported EPS of $0.09 increased from $0.00. The increase
in reported EPS was primarily due to the higher reported net income
as well as the discrete one-time non-cash tax impact of $0.03 to
the prior year quarter from a change in the Swiss statutory rate
and a lower negative impact from the equity swap mark-to-market of
$0.03, compared with a $0.06 negative impact from the equity swap
mark-to-market in the prior year.
Adjusted Profit:
- 1Q25 adjusted operating income of $303.6 million increased
slightly from $302.2 million in the prior year. 1Q25 adjusted
operating margin of 18.2% was 20 basis points lower year-over-year
compared with 18.4% driven by stronger investments behind our
strategic priorities.
- 1Q25 adjusted EBITDA of $360.1 million was flat year-over-year.
Adjusted EBITDA margin of 21.5% decreased by 50 basis points driven
by stronger investments behind our strategic priorities.
- 1Q25 adjusted net income of $128.1 million increased from $74.1
million in the prior year reflecting the discrete one-time non-cash
tax impact to the prior year quarter from a change in the Swiss
statutory rate and a lower negative impact from the equity swap
mark-to-market than in the prior year. 1Q25 adjusted net income
margin of 7.7% increased from 4.5% in the prior year.
- 1Q25 adjusted EPS of $0.15 increased from adjusted EPS of $0.09
in the prior year. 1Q25 adjusted EPS was higher year-over-year due
to the discrete one-time non-cash tax impact of $0.03 to the prior
year quarter from a change in the Swiss statutory rate and a
negative impact from the equity swap mark-to-market of $0.03,
compared with a $0.06 negative impact from equity swap
mark-to-market in the prior year.
Operating Cash Flow:
- 1Q25 cash from operations totaling $67.4 million decreased from
$186.2 million during the same period in the prior year.
- 1Q25 free cash outflow of $7.9 million decreased from free cash
flow of $124.0 million in the prior year driven by the $118.8
million decrease in operating cash flow and a $13.1 million
increase in capex.
- The lower Q1 cash from operating activities and free cash flow
was further pressured by the phasing of order placement made by
retailers, which took place at the end of the quarter and resulted
in higher receivables at quarter end, as well as the phasing of
payables.
Financial Net Debt:
- Total debt of $4,002.2 million on September 30, 2024 increased
from $3,913.7 million on June 30, 2024. This resulted in a total
debt to net income ratio of 21.1x.
- Financial net debt of $3,718.6 million on September 30, 2024
increased from $3,612.9 million on June 30, 2024. This resulted in
financial leverage of 3.4x, up slightly from 3.3x at the end of the
prior quarter.
- The value of Coty's retained 25.8% Wella stake remained
$1,085.0 million at quarter-end, supporting Coty's economic net
debt of $2,633.6 million.
First Quarter Business Review by
Segment*
Prestige
In 1Q25, Prestige net revenues of $1,114.1 million or 67% of
Coty sales, increased by 5% on a reported basis and increased by 7%
on a LFL basis, despite lapping an elevated comparison base in the
prior year. The growth on a reported basis was supported by growth
in EMEA and Americas, partially offset by a 2% negative impact from
the divestiture of the Lacoste license.
The prestige fragrance category continues to outperform the
overall beauty market across North America and Europe, supported by
expansion in both volumes and price/mix. During Q1, Coty's Prestige
fragrance reported net revenues continued to grow solidly, with the
majority of our leading Prestige fragrance brands growing reported
net revenues by a double-digit percentage driven by continued
global demand for fragrances and fueled by existing icons and new
innovations. Reported net revenue growth in the Global Travel
Retail channel was supported by strong double-digit growth in
Travel Retail Americas as well as more moderate growth in Travel
Retail Europe. Within Coty's Prestige cosmetics business, Burberry
makeup and Kylie Cosmetics grew reported net revenues, while Gucci
makeup declined due to weakness in the Chinese mainland and Asia
Travel Retail.
In 1Q25, the Prestige segment generated reported operating
income of $241.5 million, compared to $221.6 million in the prior
year. 1Q25 reported operating margin was 21.7%, up 90 basis points
year-over-year. Adjusted operating income was $279.7 million in
1Q25, up from $260.3 million in the prior year, with an adjusted
operating margin of 25.1%, which increased 70 basis points
year-over-year. Adjusted EBITDA rose to $307.6 million from $287.6
million in the prior year, with a margin of 27.6%, which expanded
by 60 basis points year-over-year.
Consumer Beauty
In 1Q25, Consumer Beauty net revenues of $557.4 million, or 33%
of Coty sales, declined by 3% as reported and were flat on a LFL
basis off of an elevated comparison base in the prior year. Global
mass beauty continues to experience slower growth trends fueled
entirely by unit demand. Within Consumer Beauty, reported net
revenues grew strongly in mass fragrance and mass skincare,
partially offsetting declines in body care and mass cosmetics
reported net revenues. For cosmetics, the weakness was concentrated
in the U.S. mass color cosmetics market which was further
exacerbated by significant channel shifts, resulting in Coty's U.S.
Consumer Beauty sell-in tracking well below sell-out. Consumer
Beauty's EMEA region delivered solid reported net revenue growth in
the quarter supported by solid growth in many countries including
in Central and Eastern Europe, Germany, France and Italy.
Coty's mass fragrance brands grew reported net revenues by a
strong double-digit percentage supported by very strong growth in
adidas, Nautica, Beckham and Mexx. In addition, Coty's Brazilian
brands, Risque, a color cosmetics brand, and Paixao, a body care
brand each grew reported net revenues, which partially offset lower
overall body care revenues in Brazil. Coty's color cosmetics
brands, including CoverGirl and Sally Hansen had lower revenues in
the quarter as the mass color cosmetics category in the U.S.
remains challenged. However, our brands, like Rimmel and CoverGirl,
are continuing to lean into the power of social media advocacy to
support recent innovations, like Rimmel Thrillseeker mascara and
CoverGirl Clean Fresh Yummy Gloss Plumper. Consumer Beauty
e-commerce channel sales grew by a mid-single-digit percentage on a
reported basis, delivering market share gains in the channel.
In 1Q25, the Consumer Beauty segment generated reported
operating income of $14.0 million compared to $32.0 million in the
prior year, with a reported operating margin of 2.5%, which
declined from 5.5% in the prior year. 1Q25 adjusted operating
income of $23.9 million decreased from $41.9 million in the prior
year, with an adjusted operating margin of 4.3%, which was lower
compared to 7.3% in the prior year quarter. 1Q25 adjusted EBITDA of
$52.5 million was compared with $72.7 million in the prior year. As
a result, adjusted EBITDA margin of 9.4% was 320 basis points lower
year-over-year.
First Quarter Fiscal 2025 Business
Review by Region*
Americas
- In 1Q25, Americas net revenues of $693.5 million, or 41% of
Coty sales, decreased 2% on a reported basis driven by a 5%
negative impact from FX as well as lower Consumer Beauty segment
revenues, which were impacted by the softness in the U.S. color
cosmetics market and body care in Brazil, partially offset by
mid-single-digit percentage reported growth in the Prestige
segment. While reported net revenues in the U.S. were lower,
reported net revenues grew in Latin America, Canada and the
regional Travel Retail channel. On a LFL basis, Americas net
revenues increased by 4% in the first quarter supported by
high-single-digit percentage growth in the Prestige segment and
included a 2% contribution from Argentina, which experienced
hyperinflation.
EMEA
- In 1Q25, EMEA net revenues of $787.8 million, or 47% of Coty
sales, increased 8% on a reported basis driven by high-single-digit
percentage reported net revenue growth in Prestige,
mid-single-digit percentage reported net revenue growth in Consumer
Beauty and a 2% FX benefit partially offset by a 2% headwind from
the divestiture of the Lacoste license. On a LFL basis, EMEA net
revenues increased by 8% in the first quarter. The regional
performance was supported by reported net revenue growth in nearly
all markets and the regional Travel Retail channel.
Asia Pacific
- In 1Q25, Asia Pacific net revenues of $190.2 million, or 11% of
Coty sales, decreased 5% on a reported basis driven by declines in
Prestige coupled with a 1% headwind from the divestiture of the
Lacoste license partially offset by a 1% benefit from FX. On a LFL
basis, Asia Pacific net revenues decreased 5% in the first quarter.
Reported net revenues declined in the region in both divisions
driven by the challenging market dynamics in the Chinese mainland
and the regional Travel Retail channel, but these declines were
partially offset by reported net revenue growth in other Asia
Pacific markets.
Noteworthy Company
Developments
Other noteworthy company developments include:
- On September 12, 2024, Coty announced the opening of the Orveda
brand’s first flagship boutique in the United States, La Maison
Orveda New York City. Located on the Upper East Side neighborhood
of Manhattan, the stand-alone spa and boutique will showcase the
best of the Orveda’s world-renowned facials and skincare as well as
high-end fragrances with an immersive room dedicated to the newly
launched INFINIMENT COTY PARIS collection.
- On September 24, 2024, Coty announced the launch of its first
Scientific Advisory Board, which brings together globally renowned
scientific experts from diverse technical disciplines, selected for
their unique expertise and contribution to cutting-edge research.
The Board will convene twice a year to inform and inspire
breakthrough innovations within Coty’s R&D specialists, and
therefore strengthen Coty’s efforts to shape the future of
skincare.
- On November 4, 2024, Coty announced the publication of its FY24
Sustainability Report. The report highlighted key milestones,
including Coty achieved a significant 65% reduction in Scope 3 air
freight emissions, Coty established ambitious new targets for
sustainable packaging and water withdrawal, Coty rejoined the Ellen
MacArthur Foundation as a Network member and Coty achieved gender
balance in leadership target ahead of its 2025 commitment.
Conference Call
Coty Inc. will issue pre-recorded remarks on November 6, 2024 at
approximately 4:45 PM (ET) / 10:45 PM (CET) and will hold a live
question and answer session on November 7, 2024 beginning at 10:30
AM (ET) / 4:30 PM (CET). The pre-recorded remarks and live question
and answer session will be available at http://investors.coty.com.
The dial-in number for the live question and answer session is
1-800-245-3047 in the U.S. or 1-203-518-9765 internationally
(conference passcode number: COTY1Q25).
About Coty Inc.
Founded in Paris in 1904, Coty is one of the world’s largest
beauty companies with a portfolio of iconic brands across
fragrance, color cosmetics, and skin and body care. Coty serves
consumers around the world, selling prestige and mass market
products in over 120 countries and territories. Coty and our brands
empower people to express themselves freely, creating their own
visions of beauty; and we are committed to protecting the planet.
Learn more at coty.com or on LinkedIn and Instagram.
Forward Looking
Statements
Certain statements in this Earnings Release are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. 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 extent and timing of revenue, expense and
profit trends and changes in operating cash flows and cash flows
from operating activities and investing activities), the Company’s
future operations and strategy (including the expected
implementation and related impact of its strategic priorities),
ongoing and future cost efficiency, optimization and restructuring
initiatives and programs, expectations of the impact of
inflationary pressures and the timing, magnitude and impact of
pricing actions to offset inflationary costs, strategic
transactions (including their expected timing and impact),
expectations and/or plans with respect to joint ventures (including
Wella and the timing and size of any related divestiture,
distribution or return of capital), the Company’s capital
allocation strategy and payment of dividends (including suspension
of dividend payments and the duration thereof and any plans to
resume cash dividends on common stock or to continue to pay
dividends in cash on preferred stock and expectations for stock
repurchases), investments, licenses and portfolio changes, product
launches, relaunches or rebranding (including the expected timing
or impact thereof), plans for growth in growth engine markets,
channels and other white spaces, synergies, savings, performance,
cost, timing and integration of acquisitions, future cash flows,
liquidity and borrowing capacity (including any refinancing or
deleveraging activities), timing and size of cash outflows and debt
deleveraging, the timing and extent of any future impairments, and
synergies, savings, impact, cost, timing and implementation of the
Company’s ongoing strategic transformation agenda (including
operational and organizational structure changes, operational
execution and simplification initiatives, fixed cost reductions,
continued process improvements and supply chain changes), the
impact, cost, timing and implementation of e-commerce and digital
initiatives, the expected impact, cost, timing and implementation
of sustainability initiatives (including progress, plans, goals and
our ability to achieve sustainability targets), the wind down of
the Company’s operations in Russia (including timing and expected
impact), the expected impact of geopolitical risks including the
ongoing war in Ukraine and/or the armed conflict in the Middle East
(including the Red Sea conflict) on our business operations, sales
outlook and strategy, expectations regarding economic recovery in
Asia, consumer purchasing trends and the related impact on our
plans for growth in China, the expected impact of global supply
chain challenges and/or inflationary pressures (including as a
result of the war in Ukraine and/or armed conflict in the Middle
East including the Red Sea conflict) and expectations regarding
future service levels and inventory levels, and the priorities of
senior management. These forward-looking statements are generally
identified by words or phrases, such as “anticipate”, “are going
to”, “estimate”, “plan”, “project”, “expect”, “believe”, “intend”,
“foresee”, “forecast”, “will”, “may”, “should”, “outlook”,
“continue”, “temporary”, “target”, “aim”, “potential”, “goal” and
similar words or phrases. These statements are based on certain
assumptions and estimates that we consider reasonable, but are
subject to a number of risks and uncertainties, many of which are
beyond our control, which could cause actual events or results
(including our financial condition, results of operations, cash
flows and prospects) to differ materially from such statements,
including risks and uncertainties relating to:
- the Company’s ability to successfully implement its multi-year
strategic transformation agenda and compete effectively in the
beauty industry, achieve the benefits contemplated by its strategic
initiatives (including revenue growth, cost control, gross margin
growth and debt deleveraging) and successfully implement its
strategic priorities (including stabilizing its consumer beauty
brands through leading innovation and improved execution,
accelerating its prestige fragrance brands and ongoing expansion
into prestige cosmetics, building a comprehensive skincare
portfolio, enhancing its organizational growth capabilities
including digital, direct-to-consumer (“DTC”) and research and
development, expanding its presence in growth channels, in China
and other growth engine markets, and establishing Coty as an
industry leader in sustainability) in each case within the expected
time frame or at all;
- the Company’s ability to anticipate, gauge and respond to
market trends and consumer preferences, which may change rapidly,
and the market acceptance of new products, including new products
in the Company's skincare and prestige cosmetics portfolios, any
relaunched or rebranded products and the anticipated costs and
discounting associated with such relaunches and rebrands, and
consumer receptiveness to the Company's current and future
marketing philosophy and consumer engagement activities (including
digital marketing and media) and the Company's ability to
effectively manage its production and inventory levels in response
to demand;
- use of estimates and assumptions in preparing the Company’s
financial statements, including with regard to revenue recognition,
income taxes (including the expected timing and amount of the
release of any tax valuation allowance), the assessment of
goodwill, other intangible and long-lived assets for impairments,
the market value of inventory, and the fair value of the equity
investment;
- the impact of any future impairments;
- managerial, transformational, operational, regulatory, legal
and financial risks, including diversion of management attention to
and management of cash flows, expenses and costs associated with
the Company's transformation agenda, its global business
strategies, the integration and management of the Company's
strategic partnerships, and future strategic initiatives, and, in
particular, the Company's ability to manage and execute many
initiatives simultaneously including any resulting complexity,
employee attrition or diversion of resources;
- the timing, costs and impacts of divestitures and the amount
and use of proceeds from any such transactions;
- future divestitures and the impact thereof on, and future
acquisitions, new licenses and joint ventures and the integration
thereof with, our business, operations, systems, financial data and
culture and the ability to realize synergies, manage supply chain
challenges and other business disruptions, reduce costs (including
through the Company’s cash efficiency initiatives), avoid
liabilities and realize potential efficiencies and benefits
(including through our restructuring initiatives) at the levels and
at the costs and within the time frames contemplated or at
all;
- increased competition, consolidation among retailers, shifts in
consumers’ preferred distribution and marketing channels (including
to digital and prestige channels), distribution and shelf-space
resets or reductions, compression of go-to-market cycles, changes
in product and marketing requirements by retailers, reductions in
retailer inventory levels and order lead-times or changes in
purchasing patterns, impact from COVID-19 or similar public health
events on retail revenues, and other changes in the retail,
e-commerce and wholesale environment in which the Company does
business and sells its products and the Company’s ability to
respond to such changes (including its ability to expand its
digital, direct-to-consumer and e-commerce capabilities within
contemplated timeframes or at all);
- the Company and its joint ventures’, business partners’ and
licensors’ abilities to obtain, maintain and protect the
intellectual property used in its and their respective businesses,
protect its and their respective reputations (including those of
its and their executives or influencers), public goodwill, and
defend claims by third parties for infringement of intellectual
property rights;
- any change to the Company’s capital allocation and/or cash
management priorities, including any change in the Company’s
dividend policy and any change in our stock repurchase plans;
- any unanticipated problems, liabilities or integration or other
challenges associated with a past or future acquired business,
joint ventures or strategic partnerships which could result in
increased risk or new, unanticipated or unknown liabilities,
including with respect to environmental, competition and other
regulatory, compliance or legal matters, and specifically in
connection with the strategic partnerships with Kylie Jenner and
Kim Kardashian, risks related to the entry into a new distribution
channel, the potential for channel conflict, risks of retaining
customers and key employees, difficulties of integration (or the
risks associated with limiting integration) and management of the
partnerships, the Company's relationships with Kylie Jenner and Kim
Kardashian, the Company's ability to protect trademarks and brand
names, litigation or investigations by governmental authorities,
and changes in law, regulations and policies that affect King Kylie
LLC ("King Kylie") and/or KKW Holdings, LLC’s (“KKW Holdings”)
business or products, including risk that direct selling laws and
regulations may be modified, interpreted or enforced in a manner
that results in a negative impact to King Kylie and/or KKW
Holdings’ business model, revenue, sales force or business;
- the Company’s international operations and joint ventures,
including enforceability and effectiveness of its joint venture
agreements and reputational, compliance, regulatory, economic and
foreign political risks, including difficulties and costs
associated with maintaining compliance with a broad variety of
complex local and international regulations;
- the Company’s dependence on certain licenses (especially in the
fragrance category) and the Company’s ability to renew expiring
licenses on favorable terms or at all;
- the Company’s dependence on entities performing outsourced
functions, including outsourcing of distribution functions, and
third-party manufacturers, logistics and supply chain suppliers,
and other suppliers, including third-party software providers,
web-hosting and e-commerce providers;
- administrative, product development and other difficulties in
meeting the expected timing of market expansions, product launches,
re-launches and marketing efforts, including in connection with new
products in the Company's skincare and prestige cosmetics
portfolios;
- changes in the demand for the Company’s products due to
declining or depressed global or regional economic conditions, and
declines in consumer confidence or spending, whether related to the
economy (such as austerity measures, tax increases, high fuel
costs, or higher unemployment), wars and other hostilities and
armed conflicts, natural or other disasters, weather, pandemics,
security concerns, terrorist attacks or other factors;
- global political and/or economic uncertainties, disruptions or
major regulatory or policy changes, and/or the enforcement thereof
that affect the Company’s business, financial performance,
operations or products, including the impact of the war in Ukraine
and any escalation or expansion thereof, armed conflict in the
Middle East, the outcome of U.S. elections, changes in the U.S. tax
code and/or other jurisdictions where the Company operates
(including recent and pending implementation of the global minimum
corporate tax (part of the “Pillar Two Model Rules”) that may
impact the Company's tax liability in the European Union), and
recent changes and future changes in tariffs, retaliatory or trade
protection measures, trade policies and other international trade
regulations in the U.S., the European Union and Asia and in other
regions where the Company operates, potential regulatory limits on
payment terms in the European Union, future changes in sanctions
regulations, regulatory uncertainty impacting the wind-down of our
business in Russia, recent and future changes in regulations
impacting the beauty industry, including regulatory measures
addressing products, formulations, raw materials and packaging, and
recent and future regulatory measures restricting or otherwise
impacting the use of web sites, mobile applications or social media
platforms that the Company uses in connection with its digital
marketing and e-commerce activities;
- currency exchange rate volatility and currency devaluation
and/or inflation;
- our ability to implement and maintain pricing actions to
effectively mitigate increased costs and inflationary pressures,
and the reaction of customers or consumers to such pricing
actions;
- the number, type, outcomes (by judgment, order or settlement)
and costs of current or future legal, compliance, tax, regulatory
or administrative proceedings, investigations and/or litigation,
including product liability cases (including asbestos and
talc-related litigation for which indemnities and/or insurance may
not be available), distributor or licensor litigation, and
compliance, litigation or investigations relating to the Company's
joint ventures or strategic partnerships;
- the Company’s ability to manage seasonal factors and other
variability and to anticipate future business trends and
needs;
- disruptions in the availability and distribution of raw
materials and components needed to manufacture the Company's
products, and the Company's ability to effectively manage its
production and inventory levels in response to supply
challenges;
- disruptions in operations, sales and in other areas, including
due to disruptions in our supply chain, restructurings and other
business alignment activities, manufacturing or information
technology systems, labor disputes, extreme weather and natural
disasters, impact from public health events, the outbreak of war or
hostilities (including the war in Ukraine and armed conflict in the
Middle East (including the Red Sea conflict) and any escalation or
expansion thereof), the impact of global supply chain challenges or
other disruptions in the international flow of goods, and the
impact of such disruptions on the Company’s ability to generate
profits, stabilize or grow revenues or cash flows, comply with its
contractual obligations and accurately forecast demand and supply
needs and/or future results;
- the Company's ability to adapt its business to address climate
change concerns, including through the implementation of new or
unproven technologies or processes, and to respond to increasing
governmental and regulatory measures relating to environmental,
social and governance matters, including expanding mandatory and
voluntary reporting, diligence and disclosure, as well as new taxes
(including on energy and plastic), new diligence requirements and
the impact of such measures or processes on its costs, business
operations and strategy;
- restrictions imposed on the Company through its license
agreements, credit facilities and senior unsecured bonds or other
material contracts, its ability to generate cash flow to repay,
refinance or recapitalize debt and otherwise comply with its debt
instruments, and changes in the manner in which the Company
finances its debt and future capital needs;
- increasing dependency on information technology, including as a
result of remote working practices, and the Company’s ability or
the ability of any of the third-party service providers the Company
uses to support its business, to protect against service
interruptions, data corruption, cyber-based attacks or network
security breaches, including ransomware attacks, costs and timing
of implementation and effectiveness of any upgrades or other
changes to information technology systems, and the cost of
compliance or the Company’s failure to comply with any privacy or
data security laws (including the European Union General Data
Protection Regulation, the California Consumer Privacy Act and
similar state laws, the Brazil General Data Protection Law, and the
China Data Security Law and Personal Information Protection Law) or
to protect against theft of customer, employee and corporate
sensitive information;
- the Company's ability to attract and retain key personnel and
the impact of senior management transitions;
- the distribution and sale by third parties of counterfeit
and/or gray market versions of the Company’s products;
- the impact of the Company's ongoing strategic transformation
agenda and continued process improvements on the Company’s
relationships with key customers and suppliers and certain material
contracts;
- the Company’s relationship with JAB Beauty B.V., as the
Company’s majority stockholder, and its affiliates, and any related
conflicts of interest or litigation;
- the Company’s relationship with KKR, whose affiliate KKR Bidco
is an investor in the Wella Business, and any related conflicts of
interest or litigation;
- future sales of a significant number of shares by the Company’s
majority stockholder or the perception that such sales could occur;
and
- other factors described elsewhere in this document and in
documents that the Company files with the SEC from time to
time.
When used herein, the term “includes” and “including” means,
unless the context otherwise indicates, “including without
limitation”. More information about potential risks and
uncertainties that could affect the Company’s business and
financial results is included under the heading “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in the Company’s Annual Report on Form 10-K
for the year ended June 30, 2024 and other periodic reports the
Company has filed and may file with the SEC from time to time.
All forward-looking statements made in this release are
qualified by these cautionary statements. These forward-looking
statements are made only as of the date of this release, and the
Company does not undertake any obligation, other than as may be
required by applicable law, to update or revise any forward-looking
or cautionary statements to reflect changes in assumptions, the
occurrence of events, unanticipated or otherwise, or changes in
future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance unless expressed as such, and should only be viewed as
historical data.
Non-GAAP Financial
Measures
The Company operates on a global basis, with the majority of net
revenues generated outside of the U.S. Accordingly, fluctuations in
foreign currency exchange rates can affect results of operations.
Therefore, to supplement financial results presented in accordance
with GAAP, certain financial information is presented excluding the
impact of foreign currency exchange translations to provide a
framework for assessing how the underlying businesses performed
excluding the impact of foreign currency exchange translations
(“constant currency”). Constant currency information compares
results between periods as if exchange rates had remained constant
period-over-period, with the current period’s results calculated at
the prior-year period’s rates. The Company calculates constant
currency information by translating current and prior-period
results for entities reporting in currencies other than U.S.
dollars into U.S. dollars using constant foreign currency exchange
rates. The constant currency calculations do not adjust for the
impact of revaluing specific transactions denominated in a currency
that is different to the functional currency of that entity when
exchange rates fluctuate. The constant currency information
presented may not be comparable to similarly titled measures
reported by other companies. The Company discloses the following
constant currency financial measures: net revenues, organic
like-for-like (LFL) net revenues, adjusted gross profit and
adjusted operating income.
The Company presents period-over-period comparisons of net
revenues on a constant currency basis as well as on an organic
(LFL) basis. The Company believes that organic (LFL) better enables
management and investors to analyze and compare the Company's net
revenues performance from period to period. For the periods
described in this release, the term “like-for-like” describes the
Company's core operating performance, excluding the financial
impact of (i) acquired brands or businesses in the current year
period until we have twelve months of comparable financial results,
(ii) the divested brands or businesses or early terminated brands,
generally, in the prior year non-comparable periods, to maintain
comparable financial results with the current fiscal year period
and (iii) foreign currency exchange translations to the extent
applicable. For a reconciliation of organic (LFL)
period-over-period, see the table entitled “Reconciliation of
Reported Net Revenues to Like-For-Like Net Revenues”.
The Company presents operating income, operating income margin,
gross profit, gross margin, effective tax rate, net income, net
income margin, net revenues, EBITDA, and EPS (diluted) on a
non-GAAP basis and specifies that these measures are non-GAAP by
using the term “adjusted” (collectively the Adjusted Performance
Measures). The reconciliations of these non-GAAP financial measures
to the most directly comparable financial measures calculated and
presented in accordance with GAAP are shown in tables below. These
non-GAAP financial measures should not be considered in isolation
from, or as a substitute for or superior to, financial measures
reported in accordance with GAAP. Moreover, these non-GAAP
financial measures have limitations in that they do not reflect all
the items associated with the operations of the business as
determined in accordance with GAAP. Other companies, including
companies in the beauty industry, may calculate similarly titled
non-GAAP financial measures differently than we do, limiting the
usefulness of those measures for comparative purposes.
Adjusted operating income/Adjusted EBITDA from Coty Inc., (as
well as adjusted operating income margin and adjusted EBITDA
margin, which are calculated by dividing Adjusted operating income
from Coty Inc. and Adjusted EBITDA from Coty Inc., respectively, by
net revenues) exclude restructuring costs and business structure
realignment programs, amortization, acquisition- and
divestiture-related costs and acquisition accounting impacts,
stock-based compensation, and asset impairment charges and other
adjustments as described below. For adjusted EBITDA and adjusted
EBITDA margin, in addition to the preceding, we exclude the
adjusted depreciation as defined below. We do not consider these
items to be reflective of our core operating performance due to the
variability of such items from period-to-period in terms of size,
nature and significance. They are primarily incurred to realign our
operating structure and integrate new acquisitions, and exclude
divestitures, and fluctuate based on specific facts and
circumstances. Additionally, Adjusted net income attributable to
Coty Inc. and Adjusted net income attributable to Coty Inc. per
common share are adjusted for certain interest and other (income)
expense and deemed preferred stock dividends, as described below,
and the related tax effects of each of the items used to derive
Adjusted net income as such charges are not used by our management
in assessing our operating performance period-to-period.
Adjusted Performance Measures reflect adjustments based on the
following items:
- Costs related to acquisition and divestiture activities: The
Company has excluded acquisition- and divestiture-related costs and
the accounting impacts such as those related to transaction costs
and costs associated with the revaluation of acquired inventory in
connection with business combinations because these costs are
unique to each transaction. Additionally, for divestitures, the
Company excludes write-offs of assets that are no longer
recoverable and contract related costs due to the divestiture. The
nature and amount of such costs vary significantly based on the
size and timing of the acquisitions and divestitures, and the
maturities of the businesses being acquired or divested. Also, the
size, complexity and/or volume of past transactions, which often
drives the magnitude of such expenses, may not be indicative of the
size, complexity and/or volume of any future acquisitions or
divestitures.
- Restructuring and other business realignment costs: The Company
has excluded the costs associated with restructuring and business
structure realignment programs to allow for comparable financial
results to historical operations and forward-looking guidance. In
addition, the nature and amount of such charges vary significantly
based on the size and timing of the programs. By excluding the
referenced expenses from the non-GAAP financial measures,
management is able to further evaluate the Company's ability to
utilize existing assets and estimate their long-term value.
Furthermore, our management believes that the adjustment of these
items supplements the GAAP information with a measure that can be
used to assess the sustainability of operating performance.
- Asset impairment charges: The Company has excluded the impact
of asset impairments as such non-cash amounts are inconsistent in
amount and frequency and are significantly impacted by the timing
and/or size of acquisitions. Our management believes that the
adjustment of these items supplements the GAAP information with a
measure that can be used to assess the sustainability of our
operating performance.
- Amortization expense: The Company has excluded the impact of
amortization of finite-lived intangible assets, as such non-cash
amounts are inconsistent in amount and frequency and are
significantly impacted by the timing and/or size of acquisitions.
Our management believes that the adjustment of these items
supplements the GAAP information with a measure that can be used to
assess the sustainability of our operating performance. Although we
exclude amortization of intangible assets from our non-GAAP
expenses, our management believes that it is important for
investors to understand that such intangible assets contribute to
revenue generation. Amortization of intangible assets that relate
to past acquisitions will recur in future periods until such
intangible assets have been fully amortized. Any future
acquisitions may result in the amortization of additional
intangible assets.
- Gain on sale and early license termination: We have excluded
the impact of gain on sale and early license termination as such
amounts are inconsistent in amount and frequency and are
significantly impacted by the size of the sale and early license
termination.
- Costs related to market exit: We have excluded the impact of
direct incremental costs related to our decision to wind down our
business operations in Russia. We believe that these direct and
incremental costs are inconsistent and infrequent in nature.
Consequently, our management believes that the adjustment of these
items supplements the GAAP information with a measure that can be
used to assess the sustainability of our operating
performance.
- Gains on sale of real estate: The Company has excluded the
impact of Gains on sale of real estate as such amounts are
inconsistent in amount and frequency and are significantly impacted
by the size of the sale. Our management believes that the
adjustment of these items supplements the GAAP information with a
measure that can be used to assess the sustainability of our
operating performance.
- Stock-based compensation: Although stock-based compensation is
a key incentive offered to our employees, we have excluded the
effect of these expenses from the calculation of adjusted operating
income and adjusted EBITDA. This is due to their primarily non-cash
nature; in addition, the amount and timing of these expenses may be
highly variable and unpredictable, which may negatively affect
comparability between periods.
- Depreciation and Adjusted depreciation: Our adjusted operating
income excludes the impact of accelerated depreciation for certain
restructuring projects that affect the expected useful lives of
Property, Plant and Equipment, as such charges vary significantly
based on the size and timing of the programs. Further, we have
excluded adjusted depreciation, which represents depreciation
expense net of accelerated depreciation charges, from our adjusted
EBITDA. Our management believes that the adjustment of these items
supplements the GAAP information with a measure that can be used to
assess the sustainability of our operating performance.
- Other (income) expense: We have excluded the impact of pension
curtailment (gains) and losses and pension settlements as such
events are triggered by our restructuring and other business
realignment activities and the amount of such charges vary
significantly based on the size and timing of the programs.
Further, we have excluded the change in fair value of the
investment in Wella, as well as expenses related to potential or
actual sales transactions reducing equity investments, as our
management believes these unrealized (gains) and losses do not
reflect our underlying ongoing business, and the adjustment of such
impact helps investors and others compare and analyze performance
from period to period. Such transactions do not reflect our
operating results and we have excluded the impact as our management
believes that the adjustment of these items supplements the GAAP
information with a measure that can be used to assess the
sustainability of our operating performance.
- Noncontrolling interest: This adjustment represents the
after-tax impact of the non-GAAP adjustments included in Net income
attributable to noncontrolling interests based on the relevant
noncontrolling interest percentage.
- Tax: This adjustment represents the impact of the tax effect of
the pretax items excluded from Adjusted net income. The tax impact
of the non-GAAP adjustments is based on the tax rates related to
the jurisdiction in which the adjusted items are received or
incurred. Additionally, adjustments are made for the tax impact of
any intra-entity transfer of assets and liabilities.
The Company has provided a quantitative reconciliation of the
difference between the non-GAAP financial measures and the
financial measures calculated and reported in accordance with GAAP.
For a reconciliation of adjusted gross profit to gross profit,
adjusted EPS (diluted) to EPS (diluted), and adjusted net revenues
to net revenues, see the table entitled “Reconciliation of Reported
to Adjusted Results for the Consolidated Statements of Operations.”
For reconciliations of: (i) adjusted EBITDA (and adjusted EBITDA
margin) and adjusted operating income (and adjusted operating
income margin) to net income (and net income margin), and (ii)
adjusted segment operating income (and adjusted segment operating
income margin) to segment operating income (and segment operating
income margin), see the tables entitled “Reconciliation of Reported
Net Income (Loss) to Adjusted Operating Income and Adjusted EBITDA”
and "Reconciliations of Segment Reported Operating Income (Loss) to
Segment Adjusted Operating Income (Loss) and Segment Adjusted
EBITDA, respectively." For a reconciliation of adjusted effective
tax rate to effective tax rate, see the table entitled
“Reconciliation of Reported Income (Loss) Before Income Taxes and
Effective Tax Rates to Adjusted Income Before Income Taxes and
Adjusted Effective Tax Rates for Coty Inc.” For a reconciliation of
adjusted net income and adjusted net income margin to net income
(and net income margin), see the table entitled “Reconciliation of
Reported Net Income (Loss) to Adjusted Net Income.”
The Company also presents free cash flow, adjusted earnings
before interest, taxes, depreciation and amortization ("adjusted
EBITDA"), Financial Net Debt and Economic Net Debt. Management
believes that these measures are useful for investors because it
provides them with an important perspective on the cash available
for debt repayment and other strategic measures and provides them
with the same measures that management uses as the basis for making
resource allocation decisions. Free cash flow is defined as net
cash provided by operating activities less capital expenditures;
adjusted EBITDA is defined as adjusted operating income, excluding
adjusted depreciation and non-cash stock-based compensation. Net
debt or Financial Net Debt (which the Company referred to as "net
debt" in prior reporting periods) is defined as total debt less
cash and cash equivalents, and Economic Net Debt is defined as
total debt less cash and cash equivalents less the value of the
Wella Stake. For a reconciliation of Free Cash Flow, see the table
entitled “Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow,” for adjusted EBITDA, see the table
entitled “Reconciliation of Adjusted Operating Income to Adjusted
EBITDA” and for Financial Net Debt and Economic Net Debt, see the
tables entitled “Reconciliation of Total Debt to Financial Net Debt
and Economic Net Debt.”
We operate on a global basis, with the majority of our net
revenues generated outside of the U.S. Accordingly, fluctuations in
foreign currency exchange rates can affect our results of
operations. Therefore, to supplement financial results presented in
accordance with GAAP, certain financial information is presented in
“constant currency”, excluding the impact of foreign currency
exchange translations to provide a framework for assessing how our
underlying businesses performed excluding the impact of foreign
currency exchange translations. Constant currency information
compares results between periods as if exchange rates had remained
constant period-over-period. We calculate constant currency
information by translating current and prior-period results for
entities reporting in currencies other than U.S. dollars into U.S.
dollars using prior year foreign currency exchange rates. The
constant currency calculations do not adjust for the impact of
revaluing specific transactions denominated in a currency that is
different to the functional currency of that entity when exchange
rates fluctuate, or for the impacts of hyperinflation. The constant
currency information we present may not be comparable to similarly
titled measures reported by other companies.
These non-GAAP measures should not be considered in isolation,
or as a substitute for, or superior to, financial measures
calculated in accordance with GAAP.
To the extent that the Company provides guidance, it does so
only on a non-GAAP basis and does not provide reconciliations of
such forward-looking non-GAAP measures to GAAP due to the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliation, including adjustments that could
be made for restructuring, integration and acquisition-related
expenses, amortization expenses, non-cash stock-based compensation,
adjustments to inventory, and other charges reflected in our
reconciliation of historic numbers, the amount of which, based on
historical experience, could be significant.
- Tables Follow -
COTY INC. SUPPLEMENTAL SCHEDULES
INCLUDING NON-GAAP FINANCIAL MEASURES
FIRST QUARTER BY SEGMENT (COTY INC)
Three Months Ended September
30,
Net Revenues
Change
Reported Operating Income
(Loss)
Adjusted Operating
Income
(in millions)
2024
2023
Reported Basis
LFL(a)
2024
Change
Margin
2024
Change
Margin
Prestige
$
1,114.1
$
1,064.7
5%
7%
$
241.5
9%
22 %
$
279.7
7%
25%
Consumer Beauty
557.4
576.7
(3%)
0%
14.0
(56%)
3 %
23.9
(43%)
4%
Corporate
—
—
N/A
N/A
(17.7)
68%
N/A
—
N/A
N/A
Total
$
1,671.5
$
1,641.4
2%
4%
$
237.8
20%
14 %
$
303.6
1%
18%
(a)
LFL results for the three months ended
September 30, 2024 include 1% help from Argentina resulting from
significant price increases due to hyperinflation.
Adjusted EBITDA
Three Months Ended September
30,
(in millions)
2024
2023
Prestige
$
307.6
$
287.6
Consumer Beauty
52.5
72.7
Corporate
—
—
Total
$
360.1
$
360.3
FIRST QUARTER FISCAL 2025 BY REGION
Coty, Inc.
Three Months Ended September
30,
Net Revenues
Change
(in millions)
2024
2023
Reported Basis
LFL(a)
Americas
$
693.5
$
708.0
(2
)%
4
%
EMEA
787.8
732.2
8
%
8
%
Asia Pacific
190.2
201.2
(5
)%
(5
)%
Total
$
1,671.5
$
1,641.4
2
%
4
%
(a)
Americas LFL results for the three months
ended September 30, 2024 include 2% help from Argentina resulting
from significant price increases due to hyperinflation.
COTY INC. &
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
Three Months Ended September
30,
(in millions, except per share
data)
2024
2023
Net revenues
$
1,671.5
$
1,641.4
Cost of sales
576.9
599.5
as % of Net revenues
34.5
%
36.5
%
Gross profit
1,094.6
1,041.9
Gross margin
65.5
%
63.5
%
Selling, general and administrative
expenses
808.0
767.4
as % of Net revenues
48.3
%
46.8
%
Amortization expense
48.1
48.6
Restructuring costs
0.7
28.4
Operating income
237.8
197.5
as % of Net revenues
14.2
%
12.0
%
Interest expense, net
61.8
69.8
Other expense, net
43.3
76.6
Income before income taxes
132.7
51.1
as % of Net revenues
7.9
%
3.1
%
Provision for income taxes
42.0
40.9
Net income
90.7
10.2
as % of Net revenues
5.4
%
0.6
%
Net income attributable to noncontrolling
interests
2.1
1.1
Net income attributable to redeemable
noncontrolling interests
5.7
7.5
Net income attributable to Coty Inc.
$
82.9
$
1.6
Amounts attributable to Coty
Inc.
Net income
$
82.9
$
1.6
Convertible Series B Preferred Stock
dividends
(3.3
)
(3.3
)
Net (loss) income attributable to
common stockholders
$
79.6
$
(1.7
)
Earnings per common share:
Basic for Coty Inc.
$
0.09
$
—
Diluted for Coty Inc.(a)
$
0.09
$
—
Weighted-average common shares
outstanding:
Basic
867.9
854.3
Diluted(a)(b)
875.3
854.3
Depreciation - Coty Inc.
$
56.5
$
58.1
(a)
Diluted EPS is adjusted by the effect of
dilutive securities, including awards under the Company's equity
compensation plans, the convertible Series B Preferred Stock, and
the Forward Repurchase Contracts. When calculating any potential
dilutive effect of stock options, Series A Preferred Stock,
restricted stock, RSUs and PRSUs, the Company uses the treasury
method and the if-converted method for the Convertible Series B
Preferred Stock and the Forward Repurchase Contracts. The treasury
method typically does not adjust the net income attributable to
Coty Inc., while the if-converted method requires an adjustment to
reverse the impact of the preferred stock dividends of $3.3 and
$3.3, respectively, and to reverse the impact of fair market value
losses/(gains) for contracts with the option to settle in shares or
cash of $24.6 and $44.3, respectively, if dilutive, for the three
months ended September 30, 2024 and 2023 on net income applicable
to common stockholders during the period.
(b)
For the three months ended September 30,
2024, outstanding stock options with rights to purchase 3.5 million
shares of Common Stock were anti-dilutive and excluded from the
computation of diluted EPS. For the three months ended September
30, 2023, outstanding stock options, Series A Preferred Stock,
restricted stock, and RSUs were excluded from the computation of
diluted loss per share due to the net loss incurred during the
period.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS FOR THE
CONSOLIDATED STATEMENTS OF OPERATIONS
These supplemental schedules provide adjusted Non-GAAP financial
information and a quantitative reconciliation of the difference
between the Non-GAAP financial measure and the financial measure
calculated and reported in accordance with GAAP.
Three Months Ended September
30, 2024
COTY INC.
(in millions)
Reported (GAAP)
Adjustments(a)
Adjusted (Non-GAAP)
Net revenues
$
1,671.5
$
—
$
1,671.5
Gross profit
1,094.6
—
1,094.6
Gross margin
65.5
%
65.5
%
Operating income
237.8
65.8
303.6
as % of Net revenues
14.2
%
18.2
%
Net income attributable to common
stockholders
79.6
48.5
128.1
as % of Net revenues
4.8
%
7.7
%
Adjusted EBITDA
360.1
as % of Net revenues
21.5
%
EPS (diluted)
$
0.09
$
0.15
Adjusted diluted EPS includes $0.03 hurt
related to the net impact of the Total Return Swaps in the three
months ended September 30, 2024.
Three Months Ended September
30, 2023
COTY INC.
(in millions)
Reported (GAAP)
Adjustments(a)
Adjusted (Non-GAAP)
Net revenues
$
1,641.4
$
—
$
1,641.4
Gross profit
1,041.9
—
1,041.9
Gross margin
63.5
%
63.5
%
Operating income
197.5
104.7
302.2
as % of Net revenues
12.0
%
18.4
%
Net (loss) income attributable to
common stockholders
(1.7
)
75.8
74.1
as % of Net revenues
(0.1
%)
4.5
%
Adjusted EBITDA
360.3
as % of Net revenues
22.0
%
EPS (diluted)
$
—
$
0.09
Adjusted diluted EPS includes $0.06 hurt
related to the net impact of the Total Return Swaps in the three
months ended September 30, 2023.
(a) See “Reconciliation of Reported Net
Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc”
and “Reconciliation of Reported Net Income to Adjusted Net Income”
for a detailed description of adjusted items.
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED OPERATING
INCOME AND ADJUSTED EBITDA
COTY INC.
Three Months Ended September
30,
(in millions)
2024
2023
Change
Net income
$
90.7
$
10.2
>100%
Net income margin
5.4
%
0.6
%
Provision (benefit) for income taxes
42.0
40.9
3
%
Income (loss) before income
taxes
$
132.7
$
51.1
>100%
Interest expense, net
61.8
69.8
(11
%)
Other income, net
43.3
76.6
(43
%)
Reported Operating income
$
237.8
197.5
20
%
Reported operating income (loss)
margin
14.2
%
12.0
%
Amortization expense (a)
48.1
48.6
(1
%)
Restructuring and other business
realignment costs (b)
0.7
27.3
(97
%)
Stock-based compensation
17.0
29.7
(43
%)
(Gain) on sale of real estate
—
(1.7
)
100
%
Early license termination and market exit
costs
—
0.8
(100
%)
Total adjustments to reported operating
income
65.8
104.7
(37
%)
Adjusted Operating income
$
303.6
$
302.2
—
%
Adjusted operating income margin
18.2
%
18.4
%
Adjusted depreciation (c)
56.5
58.1
(3
%)
Adjusted EBITDA
$
360.1
$
360.3
—
%
Adjusted EBITDA margin
21.5
%
22.0
%
RECONCILIATIONS OF SEGMENT REPORTED OPERATING INCOME (LOSS)
TO SEGMENT ADJUSTED OPERATING INCOME (LOSS) AND SEGMENT ADJUSTED
EBITDA
OPERATING INCOME, ADJUSTED OPERATING INCOME AND ADJUSTED EBITDA-
PRESTIGE SEGMENT
Three Months Ended
September 30,
(in millions)
2024
2023
Change %
Reported operating income
$
241.5
$
221.6
9
%
Reported operating income margin
21.7
%
20.8
%
Amortization expense
38.2
38.7
(1
%)
Total adjustments to reported operating
income
38.2
38.7
(1
%)
Adjusted operating income
$
279.7
260.3
7
%
Adjusted operating income margin
25.1
%
24.4
%
Adjusted depreciation
27.9
27.3
2
%
Adjusted EBITDA
$
307.6
287.6
7
%
Adjusted EBITDA margin
27.6
%
27.0
%
OPERATING INCOME, ADJUSTED OPERATING INCOME AND ADJUSTED EBITDA-
CONSUMER BEAUTY SEGMENT
Three Months Ended
September 30,
(in millions)
2024
2023
Change %
Reported operating income
$
14.0
$
32.0
(56
)%
Reported operating income margin
2.5
%
5.5
%
Amortization expense
9.9
9.9
0
%
Total adjustments to reported operating
income
9.9
9.9
0
%
Adjusted operating income
$
23.9
41.9
(43
%)
Adjusted operating income margin
4.3
%
7.3
%
Adjusted depreciation
28.6
30.8
(7
%)
Adjusted EBITDA
$
52.5
72.7
(28
%)
Adjusted EBITDA margin
9.4
%
12.6
%
OPERATING LOSS, ADJUSTED OPERATING LOSS AND ADJUSTED EBITDA-
CORPORATE SEGMENT
Three Months Ended
September 30,
(in millions)
2024
2023
Change %
Reported operating loss
$
(17.7
)
$
(56.1
)
68
%
Reported operating income (loss)
margin
N/A
N/A
Restructuring and other business
realignment costs
0.7
27.3
(97
%)
Stock-based compensation
17.0
29.7
(43
%)
Loss on sale of real estate
$
—
$
(1.7
)
100
%
Early license termination and market exit
costs
$
—
$
0.8
(100
%)
Total adjustments to reported operating
income
17.7
56.1
(68
%)
Adjusted operating loss
$
—
$
—
N/A
Adjusted operating income margin
N/A
N/A
Adjusted depreciation
—
—
N/A
Adjusted EBITDA
$
—
$
—
N/A
Adjusted EBITDA margin
N/A
N/A
RECONCILIATION OF REPORTED INCOME BEFORE INCOME TAXES AND
EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES AND
ADJUSTED EFFECTIVE TAX RATES FOR COTY INC.
Three Months Ended
September 30, 2024
Three Months Ended
September 30, 2023
(in millions)
Income before income
taxes
(Benefit) Provision for income
taxes
Effective tax rate
Income before income
taxes
Provision for income
taxes
Effective tax rate
Reported Income before income
taxes
$
132.7
$
42.0
31.7
%
$
51.1
$
40.9
80.0
%
Adjustments to Reported Operating Income
(a)
65.8
104.7
Change in fair value of investment in
Wella Business (c)
—
(4.0
)
Other adjustments (d)
(0.3
)
3.9
Total Adjustments (b)
65.5
15.3
104.6
27.1
Adjusted Income before income
taxes
$
198.2
$
57.3
28.9
%
$
155.7
$
68.0
43.7
%
The adjusted effective tax rate was 28.9% for the three months
ended September 30, 2024 compared to 43.7% for the three months
ended September 30, 2023. The differences were primarily due to an
expense of $24.3 recognized in the prior period on the revaluation
of the Company's deferred tax liabilities due to a tax rate
increase enacted in Switzerland.
(a) See a description of adjustments under
“Reconciliation of Reported Net Income to Adjusted Operating Income
and Adjusted EBITDA for Coty Inc.
(b) The tax effects of each of the items
included in adjusted income are calculated in a manner that results
in a corresponding income tax expense/provision for adjusted
income. In preparing the calculation, each adjustment to reported
income is first analyzed to determine if the adjustment has an
income tax consequence. The provision for taxes is then calculated
based on the jurisdiction in which the adjusted items are incurred,
multiplied by the respective statutory rates and offset by the
increase or reversal of any valuation allowances commensurate with
the non-GAAP measure of profitability.
(c) The amount represents the unrealized
(gain) loss recognized for the change in the fair value of the
investment in Wella.
(d) For the three months ended September
30, 2024, this primarily represents recovery of previously
written-off non-income tax credits and the amortization of basis
differences in certain equity method investments. For the three
months ended September 30, 2023, this primarily represents
divestiture-related costs related to our equity investments and the
amortization of basis differences in certain equity method
investments.
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME
FOR COTY INC.
Three Months Ended September
30,
(in millions)
2024
2023
Change
Net income attributable to Coty
Inc.
$
82.9
$
1.6
>100%
Convertible Series B Preferred Stock
dividends (c)
(3.3
)
(3.3
)
—
%
Reported Net income (loss) attributable
to common stockholders
$
79.6
$
(1.7
)
>100%
% of Net revenues
4.8
%
(0.1
%)
Adjustments to Reported Operating income
(a)
65.8
104.7
(37
%)
Change in fair value of investment in
Wella Business (d)
—
(4.0
)
100
%
Adjustments to other expense (e)
(0.3
)
3.9
<(100%)
Adjustments to noncontrolling interests
(b)
(1.7
)
(1.7
)
—
%
Change in tax provision due to adjustments
to Reported Net income (loss) attributable to Coty Inc.
(15.3
)
(27.1
)
44
%
Adjusted Net income attributable to
Coty Inc.
$
128.1
$
74.1
73
%
% of Net revenues
7.7
%
4.5
%
Per Share Data
Adjusted weighted-average common
shares
Basic
867.9
854.3
Diluted (c)(f)
899.0
867.3
Adjusted Net income attributable to
Coty Inc. per Common Share
Basic
$
0.15
$
0.09
Diluted (c)
$
0.15
$
0.09
Adjusted diluted EPS includes $0.03 hurt
related to the net impact of the Total Return Swaps in the three
months ended September 30, 2024. Adjusted diluted EPS includes
$0.06 hurt related to the net impact of the Total Return Swaps in
the three months ended September 30, 2023.
(a)
See a description of adjustments under
“Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty
Inc.”
(b)
The amounts represent the after-tax impact
of the non-GAAP adjustments included in Net income attributable to
noncontrolling interest based on the relevant noncontrolling
interest percentage in the Condensed Consolidated Statements of
Operations.
(c)
Diluted EPS is adjusted by the effect of
dilutive securities, including awards under the Company's equity
compensation plans, the convertible Series B Preferred Stock and
the Forward Repurchase Contracts, if applicable. When calculating
any potential dilutive effect of stock options, Series A Preferred
Stock, restricted stock, PRSUs and RSUs, the Company uses the
treasury method and the if-converted method for the Convertible
Series B Preferred Stock and the Forward Repurchase Contracts. The
treasury method typically does not adjust the net income
attributable to Coty Inc. while the if-converted method requires an
adjustment to reverse the impact of the preferred stock dividends
and the impact of fair market value (gains)/losses for contracts
with the option to settle in shares or cash, if dilutive, on net
income applicable to common stockholders during the period.
(d)
The amount represents the unrealized
(gain) loss recognized for the change in the fair value of the
investment in Wella Company.
(e)
For the three months ended September 30,
2024, this primarily represents recovery of previously written-off
non-income tax credits and the amortization of basis differences in
certain equity method investments. For the three months ended
September 30, 2023, this primarily represents divestiture-related
costs related to our equity investments and the amortization of
basis differences in certain equity method investments.
(f)
Adjusted Diluted EPS is adjusted by the
effect of dilutive securities. For the three months ended September
30, 2024 and 2023, no dilutive shares of the Forward Repurchase
Contracts were included in the computation of adjusted diluted EPS
as their inclusion would be anti-dilutive. Accordingly, we did not
reverse the impact of the fair market value losses/(gains) for
contracts with the option to settle in shares or cash of $24.6 and
$44.3, respectively. For the three months ended September 30, 2024,
as the Convertible Series B Preferred Stock was dilutive, an
adjustment to reverse the impact of the preferred stock dividends
of $3.3 was required. For the three months ended September 30,
2023, convertible Series B Preferred Stock (23.7 million weighted
average dilutive shares) were anti-dilutive. Accordingly, we
excluded these shares from the diluted shares and did not adjust
the earnings for the related dividend of $3.3.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW
COTY INC.
Three Months Ended September
30,
(in millions)
2024
2023
Net cash provided by operating
activities
$
67.4
$
186.2
Capital expenditures
(75.3
)
(62.2
)
Free cash flow
$
(7.9
)
$
124.0
RECONCILIATION OF TOTAL DEBT TO FINANCIAL NET DEBT AND
ECONOMIC NET DEBT
COTY INC.
As of
(in millions)
September 30, 2024
Total debt1
$
4,002.2
Less: Cash and cash equivalents
283.6
Financial Net debt
$
3,718.6
Less: Value of Wella stake
1,085.0
Economic Net debt
$
2,633.6
1 Total debt is derived from footnote 9
from the Form 10-Q for the quarter-ended September 30, 2024 and
includes both the Company's short-term and long-term debt
(including the current portion of long-term debt)
RECONCILIATION OF TTM(a) NET INCOME TO TTM ADJUSTED
EBITDA
Three Months Ended
Twelve months ended
December 31, 2023
March 31, 2024
June 30, 2024
September 30, 2024
September 30, 2024
(in millions)
Net income (loss) from continuing
operations
$186.0
$8.8
$(95.6)
$90.7
$189.9
Provision (benefit) for income taxes on
continuing operations
$71.4
$(5.4)
$(11.8)
$42.0
$96.2
Income (loss) from continuing
operations before income taxes
$257.4
$3.4
$(107.4)
$132.7
$286.1
Interest expense, net
$60.1
$60.4
$61.7
$61.8
$244.0
Other (income) expense, net
$(80.8)
$14.0
$80.4
$43.3
$56.9
Reported operating income from
continuing operations
$236.7
$77.8
$34.7
$237.8
$587.0
Amortization expense
$48.3
$48.5
$48.0
$48.1
$192.9
Restructuring and other business
realignment costs
$4.0
$(1.7)
$7.0
$0.7
$10.0
Stock-based compensation
$20.2
$20.5
$18.4
$17.0
$76.1
Early license termination and market exit
costs
$—
$(1.2)
$(0.1)
$—
$(1.3)
(Gain) Loss on sale of real estate
$0.1
$—
$—
$—
$0.1
Total adjustments to reported operating
loss
$72.6
$66.1
$73.3
$65.8
$277.8
Adjusted operating income
$309.3
$143.9
$108.0
$303.6
$864.8
Add: Adjusted depreciation(b)
$57.1
$56.0
$56.5
$56.5
$226.1
Adjusted EBITDA
$366.4
$199.9
$164.5
$360.1
$1,090.9
(a)
Trailing twelve months (TTM) net income
from continuing operations, reported operating income, adjusted
operating income, and adjusted EBITDA represents the summation of
each of these financial metrics for the quarters ended December 31,
2023, March 31, 2024, June 30, 2024, and September 30, 2024.
(b)
Adjusted depreciation for the twelve
months ended September 30, 2024 represents depreciation expense for
Coty Inc for the period, excluding accelerated depreciation.
COMPARISON OF TOTAL DEBT/NET INCOME FROM CONTINUING
OPERATIONS TO FINANCIAL NET DEBT/ADJUSTED EBITDA
Numerator
Total Debt
Financial Net Debt(c)
$
4,002.2
$
3,718.6
Denominator
TTM Net income from continuing
operations(b)
$
189.9
21.1
N/R(d)
TTM Adjusted EBITDA(a)
$
1,090.9
N/R(d)
3.4
(a)
TTM Adjusted EBITDA for the twelve months
ended September 30, 2024 represents the summation of Adjusted
EBITDA for each of the quarters ended September 30, 2024, June 30,
2024, March 31, 2024, and December 31, 2023. For a reconciliation
of net income (loss) from continuing operations to Adjusted EBITDA
for each of those periods, see the table entitled "Reconciliation
of TTM of Net Income to Adjusted Operating Income to Adjusted
EBITDA" for each of those periods.
(b)
TTM net income from continuing operations
for the twelve months ended September 30, 2024 represents the
summation of net income from continuing operations for each of the
quarters ended September 30, 2024, June 30, 2024, March 31, 2024,
and December 31, 2023.
(c)
Financial Net Debt equals Total Debt minus
Cash and cash equivalents as of September 30, 2024. See table
titled "Reconciliation of Total Debt to Financial Net Debt and
Economic Net Debt".
(d)
Not relevant.
RECONCILIATION OF REPORTED NET REVENUES TO LIKE-FOR-LIKE NET
REVENUES
Three Months Ended September
30, 2024 vs. Three Months Ended September 30, 2023 Net
Revenue Change
Net Revenues Change YoY
Reported Basis
Constant Currency
Impact from Acquisitions and
Divestitures (a)
LFL(b)
Prestige
5
%
5
%
(2
)%
7
%
Consumer Beauty
(3
)%
—
%
—
%
—
%
Total Continuing Operations
2
%
3
%
(1
)%
4
%
(a)
The Company had an early license
termination with Lacoste and concluded the sell-off period at the
end of the second quarter of fiscal 2024. In calculating the QTD
YoY LFL revenue change, to maintain comparability, we have excluded
the first quarter of fiscal 2024 Lacoste contribution.
(b)
LFL results for the three months ended
September 30, 2024 include 1% help from Argentina resulting from
significant price increases due to hyperinflation.
COTY INC. &
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
September 30,
2024
June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents
$
283.6
$
300.8
Restricted cash
23.9
19.8
Trade receivables, net
703.5
441.6
Inventories
782.5
764.1
Prepaid expenses and other current
assets
440.2
437.2
Total current assets
2,233.7
1,963.5
Property and equipment, net
715.6
718.9
Goodwill
3,983.7
3,905.7
Other intangible assets, net
3,612.5
3,565.6
Equity investments
1,089.6
1,090.6
Operating lease right-of-use assets
264.6
255.3
Other noncurrent assets
616.3
582.9
TOTAL ASSETS
$
12,516.0
$
12,082.5
LIABILITIES, MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
1,323.3
$
1,405.6
Short-term debt and current portion of
long-term debt
3.3
3.0
Other current liabilities
1,311.0
1,193.2
Total current liabilities
2,637.6
2,601.8
Long-term debt, net
3,934.4
3,841.8
Long-term operating lease liabilities
223.9
218.7
Other noncurrent liabilities
1,247.0
1,172.5
TOTAL LIABILITIES
8,042.9
7,834.8
CONVERTIBLE SERIES B PREFERRED
STOCK
142.4
142.4
REDEEMABLE NONCONTROLLING
INTERESTS
98.8
93.6
Total Coty Inc. stockholders’
equity
4,045.2
3,827.1
Noncontrolling interests
186.7
184.6
Total equity
4,231.9
4,011.7
TOTAL LIABILITIES, MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY
$
12,516.0
$
12,082.5
COTY INC. &
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Three Months Ended September
30,
2024
2023
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
90.7
10.2
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
104.6
106.8
Non-cash lease expense
15.6
15.8
Deferred income taxes
19.1
22.8
Provision for bad debts
2.7
1.0
Provision for pension and other
post-employment benefits
2.7
2.5
Share-based compensation
17.0
29.7
Other
59.2
80.9
Change in operating assets and
liabilities:
Trade receivables
(251.6
)
(190.8
)
Inventories
2.5
(9.9
)
Prepaid expenses and other current
assets
2.1
(47.4
)
Accounts payable
(80.5
)
(22.4
)
Accrued expenses and other current
liabilities
80.4
183.8
Operating lease liabilities
(13.6
)
(16.0
)
Other assets and liabilities, net
16.5
19.2
Net cash provided by operating
activities
67.4
186.2
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(75.3
)
(62.2
)
Payment for acquisition of license
agreement
(2.0
)
—
Net cash used in investing
activities
(77.3
)
(62.2
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from revolving loan
facilities
319.4
834.0
Repayments of revolving loan
facilities
(322.6
)
(962.0
)
Proceeds from issuance of other long-term
debt
—
1,284.3
Repayments of term loans and other long
term debt
—
(1,186.6
)
Dividend payments on Common Stock and
Convertible Series B Preferred Stock
(3.3
)
(3.3
)
Net proceeds from (payments of) foreign
currency contracts
5.4
(4.0
)
Payments related to forward repurchase
contracts
(6.7
)
(3.9
)
Payment of deferred financing fees
(2.0
)
(36.0
)
All other
(0.6
)
(1.1
)
Net cash used in financing
activities
(10.4
)
(78.6
)
EFFECT OF EXCHANGE RATES ON CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
7.2
(11.5
)
NET (DECREASE) INCREASE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
(13.1
)
33.9
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH—Beginning of period
320.6
283.8
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH—End of period
$
307.5
$
317.7
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241106455962/en/
For more information:
Investor Relations Olga
Levinzon, +1 212 389-7733 olga_levinzon@cotyinc.com
Media Antonia
Werther, +31 621 394495 antonia_werther@cotyinc.com
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