Coty 1Q23 Results Exceed Expectations and Guidance
Coty Inc. (COTY) reported strong Q1 FY23 results, with revenues of $1,390 million, up 1% year-over-year, and 9% on a like-for-like (LFL) basis, despite FX headwinds. Prestige revenue fell 1% reported, but grew 7% LFL. Consumer Beauty saw a 12% LFL growth. Gross margins expanded to 63.9%, driven by pricing improvements. Operating income surged to $171.9 million, a tenfold increase, with adjusted EBITDA rising 11% to $307.9 million. Coty is on track to reduce financial leverage towards 4x by CY22 end. The company aims for FY23 adjusted EBITDA growth of 955-965 million.
- Q1 FY23 sales increased 1% to $1,390 million, with 9% LFL growth.
- Prestige division achieved 7% LFL sales growth despite supply chain issues.
- Consumer Beauty revenues grew 12% LFL, with 10 consecutive months of market share gains.
- Gross margins improved by 70 bps YoY to 63.9%, driven by favorable pricing.
- Operating income rose to $171.9 million, a 10x increase from last year.
- Coty reported strong free cash flow of $88.2 million.
- Financial Net Debt decreased to $4.2 billion, indicating improving leverage.
- Reported Prestige revenue fell 1% year-over-year, constrained by the exit from Russia.
- Q1 results faced approximately 300 bps negative impact from the Russia exit.
- Consumer demand is limited by ongoing supply constraints in the fragrance segment.
Sales Growth Well Ahead of
Prestige Double-Digit Sell-Out Growth Continues to Lead, Fueled by Strong Fragrance Demand
FY23 Revenue and Profit Reaffirmed
Committed to Leverage Towards 4x Exiting CY22 and Towards 3x Exiting CY23
Advancing ESG Strategy, with Top Quartile ESG Rating from Sustainalytics
Coty's Q1 sales performance was once again well ahead of the underlying beauty market, putting Coty amongst the best in its competitive set. Q1 sales increased
During the quarter, consumer demand for beauty products, particularly prestige fragrances, remained robust, with estimated sell-out in Coty's Prestige division growing in the low double digits1. This performance is ahead of the estimated sell-out in Coty's Consumer Beauty division growing in the mid-to-high single digits. At the same time, the Company delivered strong LFL growth across both divisions, with Prestige growth constrained due to industry-wide supply-chain pressures which were exacerbated by strong fragrance demand which has surpassed expectations, the impact of the Company's exit from
Coty's Prestige business maintained its strong momentum in Q1, supported by a robust fragrance market and Coty's leading innovation. Q1 Prestige revenues declined
Coty's Consumer Beauty business delivered strong Q1 results, supported by sustained market share momentum and strong activity. Consumer Beauty Q1 revenues grew
Geographically, revenues grew in all regions on a constant currency basis. EMEA sales declined
Despite the heightened inflationary environment and a higher contribution from the lower gross margin bodycare business, Coty continued to generate solid gross margin expansion in the quarter, while also maintaining an increased level of media activities to further drive revenue and sell-out growth. In Q1, reported gross margins expanded by 70 bps YoY to
During Q1, Coty generated strong free cash flow of
Commenting on the operating results,
"Our strong Q1 results, in the midst of a complex external environment including ongoing component shortages, confirm the strength and resilience of Coty's brands, teams, strategy and operating model. This represents the ninth consecutive quarter of Coty reporting results in-line to ahead of expectations. The progress we continue to make should be evident across all key financial KPIs, from sales to gross margins and adjusted EBITDA to our deleveraging progress.
While Coty has certainly benefited from a resilient beauty category, I am particularly pleased that our balanced growth strategy remains in full force. We delivered robust growth across all of our regions, each of our key categories including fragrances, cosmetics, skincare and bodycare, and across both divisions. This has allowed us to again report sales growth well above the underlying beauty market and among the best in our competitive set.
Our strong topline delivery and gross margin expansion has enabled us to maintain our reinvestment in working media, and we remain committed to continuing this trajectory, particularly during the crucial Q2 holiday period. While FX has naturally weighed on our reported sales, I am pleased that the close alignment between our regional sales mix and regional cost mix have protected our profit delivery.
In addition, we continued to execute on each of our strategic pillars. In Consumer Beauty, we have continued the momentum, with the 10th consecutive month of share gains.
Our Prestige fragrance business also continued to deliver outstanding results, despite facing a very tough year-over-year comparison in Q1. We are continuing to witness the "fragrance index" at full force, as consumers turn to fragrances as mood-boosting and affordable luxuries in an uncertain environment.
In Prestige cosmetics, we continued to build out our footprint across our 3 brands Burberry, Gucci and Kylie Cosmetics.
As we shared in September, growing our Skincare business is a key strategic objective for us in the coming years. With
In Digital, our multi-pronged strategy continued to push Coty to the forefront, whether through viral social commerce successes around the Marc Jacobs Daisy Ever So Fresh launch, an exclusive, digital-first partnership between
On
Finally, on our sixth strategic pillar, becoming a leader in sustainability, I am incredibly pleased that Coty's continued improvements in its ESG transformation, disclosures and policy-setting have been recognized by Sustainalytics. This leading rating agency recently raised our ESG rating, putting Coty in the top quartile of Personal Products companies. Our transformation does not end there, with a major milestone in our Social agenda with the recent announcement of Coty's market-leading gender-neutral global parental leave policy. With more updates soon to come on our Environmental agenda, we are excited by Coty's progress to date and journey ahead."
*Adjusted financial metrics used in this release are non-GAAP. See reconciliations of GAAP results to Adjusted results in the accompanying tables. |
1 Prestige sell-out based on sell-out data covering over |
2 Consumer Beauty global market share data available through |
Highlights
- 1Q23 net revenue trends were driven by strong LFL growth in both Prestige and Consumer Beauty, with sell-out growth in Prestige in the low double digits and sell-out growth in Consumer Beauty in the mid-to-high single digits.
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Reported operating income totaled
$171.9 million -
1Q23 adjusted operating income increased
24% to$249.6 million 18.0% , reflecting very strong 340 bps of margin expansion. -
1Q23 adjusted EBITDA grew
11% to$307.9 million 22.2% , delivering strong margin expansion of 190 bps. -
1Q23 reported EPS was
$0.15 $0.11 $0.08 $0.04 -
Savings totaled over
$20M $170 million -
1Q23 free cash flow was solid at
$88.2 million -
Financial Net Debt was
$4.2 billion $3.2 billion
Outlook
Coty continues to see strong demand growth across nearly all markets, particularly in Prestige fragrances, with Coty maintaining strong launch activity in both Prestige and Consumer Beauty. At the same time, this robust demand is contributing to component shortages, which remain the primary limitation to near-term growth. The Company remains confident in its FY23 outlook, which is inline with its medium term growth algorithm.
Coty continues to target FY23 adjusted EBITDA of
Coty continues to expect FY23 adjusted EPS growth in the mid-teens to
The Company continues to expect FY23 revenues for the core business, adjusting for the impact of the
With strong Q1 results, 1H23 core business LFL revenue growth trends are expected to be consistent with its annual growth target of +6
Coty continues to expect modest gross margin expansion in both Q2 and in FY23, despite the elevated inflationary environment.
In addition, the Company continues to target leverage towards 4x exiting CY22 based on CY22 adjusted EBITDA approaching
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:
-
1Q23 reported net revenues of
$1,390.0 million 1% year-over-year, including a negative foreign exchange (FX) impact of7% . LFL revenue increased9% , driven by a7% increase in Prestige and a12% increase in Consumer Beauty. The exit fromRussia represented ~2% headwind to total Coty LFL, a ~3% headwind to Prestige LFL, and a negligible impact to Consumer Beauty.
Gross Margin:
-
1Q23 reported gross margin of
63.9% increased from63.2% in the prior-year period, while adjusted gross margin of64.1% increased from63.4% in 1Q22. The increase was driven by pricing and improved trade spend, partially offset by COGS inflation.
Operating Income and EBITDA:
-
1Q23 reported operating income of
$171.9 million $17.2 million $77.1 million $15.9 million -
1Q23 adjusted operating income of
$249.6 million 24% from$200.5 million $19.7 million $307.9 million 11% from the prior year. For 1Q23, the adjusted operating margin was18.0% , a strong increase of 340 bps YoY while the adjusted EBITDA margin was22.2% , increasing 190 bps YoY.
Net Income:
-
1Q23 reported net income of
$125.3 million $103.0 million -
The 1Q23 adjusted net income of
$92.7 million $63.1 million $38 million
Earnings Per Share (EPS) - diluted:
-
1Q23 reported earnings per share of
$0.15 $0.13 -
1Q23 adjusted EPS of
$0.11 $0.08 $0.04
Operating Cash Flow:
-
1Q23 cash from operations totaling
$163.2 million $285.7 million
-
1Q23 free cash flow of
$88.2 million $240.7 million $122.5 million $30.0 million
Financial Net Debt:
-
Financial Net Debt of
$4,191.4 million September 30, 2022 , decreased from$4,265.2 million June 30, 2022 , driven by the free cash flow generation.
First Quarter Business Review by Segment*
Prestige
In 1Q23, Prestige net revenues of
During Q1, the Prestige fragrance category across
The Prestige segment generated a reported operating income of
Consumer Beauty
In 1Q23, Consumer Beauty net revenues of
During the quarter, the total Coty Consumer Beauty business continued to gain market share globally for the last 10 consecutive months, fueled by momentum in Rimmel,
The Consumer Beauty reported operating income was
First Quarter Fiscal 2023 Business Review by Region*
-
In 1Q23,
Americas net revenues of$607.6 million 44% of Coty sales, increased4% as reported and5% LFL. This was driven by growth of both Prestige and Consumer Beauty. The Prestige performance was fueled by particularly strong growth throughout most Latin American markets, with theU.S. Prestige business lapping very tough comparisons in the year-ago period. Meanwhile, in Consumer Beauty, nearly every region delivered growth. The overall performance was also supported by strong innovation performance during the quarter including Gucci Flora Gorgeous Jasmine,Marc Jacobs Daisy Ever So Fresh , and Burberry Hero EDP on the Prestige side, and CoverGirl Exhibitionist Stretch & Strengthen mascara in Consumer Beauty.
EMEA
-
In 1Q23, EMEA net revenues of
$609.3 million 44% of Coty sales, decreased3% as reported driven by FX, but grew11% LFL. The exit fromRussia negatively impacted LFL sales by 600 bps. The performance was driven by strong increases in both Prestige and Consumer Beauty, as markets continued to benefit from the post-COVID re-opening.
-
In 1Q23,
Asia Pacific net revenues of$173.1 million 12% of Coty sales, increased6% as reported and12% LFL. Both Prestige and Consumer Beauty delivered solid growth. Encouragingly, nearly all markets delivered double-digit growth during the quarter. AlthoughChina sales increased during Q1, performance continued to be impacted by COVID-related restrictions.
Noteworthy Company Developments
Other noteworthy company developments include:
-
On
September 21 , Coty provided a comprehensive update on its Skincare strategy, one of its six strategic pillars. The company detailed its distinct and superior skincare intellectual property, upcoming operational and portfolio milestones, early evidence of success, and financial goals through FY25 and beyond, including its goal to double skincare sales by FY25. -
On
September 26 , Coty announced the expansion of its partnership withCruelty Free International , the leading global organization working to end animal testing. Coty powerhouse brands Rimmel,Manhattan , and Risque are now approved under the Cruelty Free International Leaping Bunny Program. -
On
October 6 , Coty unveiled its new corporate identity, centered around the value of fearless kindness. Coty also announced its new company purpose: together, we unleash every vision of beauty.
Conference Call
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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, the Company’s comprehensive transformation agenda (the “Transformation Plan”), 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 wind down of the Company’s operations in
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the Company’s ability to successfully implement its 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 e-commerce and direct-to-consumer capabilities, and expanding its presence in
China through prestige products and select consumer beauty brands, 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 related to Kylie Jenner’s or Kim Kardashian West’s existing beauty businesses, any relaunched or rebranded products and the anticipated costs and discounting associated with such relaunches and rebrands, and consumer receptiveness to our current and future marketing philosophy and consumer engagement activities (including digital marketing and media);
- 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, the fair value of the equity investment, and the fair value of acquired assets and liabilities associated with acquisitions;
- the impact of any future impairments;
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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 response to COVID-19, the Company's transformation agenda, its global business strategies, the integration of the strategic partnerships with
Kylie Jenner andKim Kardashian West , 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 avoid future supply chain 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 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 or, if the Company's Board declares dividends on the Company's common stock, the Company’s stock dividend reinvestment program;
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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 andKim 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),ability to protect trademarks and brand names, litigation or investigations by governmental authorities, and changes in law, regulations and policies that affectKKW 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 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 related to Kylie Jenner’s or Kim Kardashian West’s existing beauty businesses or new products related to Orveda;
- 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, natural or other disasters, weather, pandemics, security concerns, terrorist attacks or other factors;
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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 related escalation or expansion thereof, Brexit (and related business or market disruption), recent elections inBrazil , the currentU.S. administration and mid-term elections, changes in theU.S. tax code, and recent changes and future changes in tariffs, retaliatory or trade protection measures, trade policies and other international trade regulations in theU.S. , theEuropean Union andAsia and in other regions where the Company operates; recent and future changes in sanctions regulations including in connection with the war inUkraine and any escalation or expansion thereof; - currency exchange rate volatility and currency devaluation and/or inflation;
- 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;
- the impact of COVID-19 (or future similar events), including demand for the Company’s products, illness, quarantines, government actions, facility closures, store closures or other restrictions in connection with the COVID-19 pandemic, and the extent and duration thereof, the widespread distribution of effective vaccines, related impact on the Company's ability to meet customer needs and on the ability of third parties on which the Company relies, including its suppliers, customers, contract manufacturers, distributors, contractors, commercial banks and joint-venture partners, to meet their obligations to the Company, in particular collections from customers, and the ability to successfully implement measures to respond to such impacts;
- disruptions in the availability and distribution of raw materials and components needed to manufacture the Company's products;
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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 COVID-19 or similar global public health events, the outbreak of war or hostilities (including the war in
Ukraine and any escalation or expansion thereof), impact of global supply chain challenges, 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 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), and the impact of such measures 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;
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increasing dependency on information technology, including as a result of remote working in response to COVID-19, and the Company’s ability 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 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 and organizational structure changes;
- 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 transformation agenda on the Company’s relationships with key customers and suppliers and certain material contracts;
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the Company’s relationship with
Cottage Holdco 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
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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
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
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
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 continuing operations excludes 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, 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
- 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.
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Costs related to market exit: The Company has 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: The Company has 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 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. We have excluded the gain on the exchange of Series B Preferred Stock. 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.
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Deemed Preferred Stock Dividends: The Company has excluded preferred stock deemed dividends related to the First Exchange and the Second Exchange from our calculation of adjusted net income attributable to
Coty Inc. These deemed dividends are non-monetary in nature, the transactions were entered into to simplify our capital structure and do not reflect our underlying ongoing business. Management believes that this adjustment helps investors and others compare and analyze our performance from period to period.
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 a reconciliation of adjusted operating income to operating income and adjusted operating income margin to operating income margin, see the tables entitled “Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income” and "Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income by Segment." 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 a reconciliation of adjusted net income and adjusted net income margin to net income (loss), 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"), immediate liquidity, 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.” Further, our immediate liquidity is defined as the sum of available cash and cash equivalents and available borrowings under our Revolving Credit Facility (please see table "Immediate Liquidity").
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 -
SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES(a)
RESULTS AT A GLANCE
|
|
Three Months Ended |
|||||
(in millions, except per share data) |
|
|
|
Change YoY |
|||
|
|
|
|
Reported Basis |
|
(LFL) |
|
Net revenues |
|
$ |
1,390.0 |
|
|
|
|
Operating income - reported |
|
|
171.9 |
|
> |
|
|
Operating income - adjusted* |
|
|
249.6 |
|
|
|
|
EBITDA - adjusted |
|
|
307.9 |
|
|
|
|
Net income attributable to common shareholders - reported** |
|
|
125.3 |
|
|
|
|
Net income attributable to common shareholders - adjusted* ** |
|
|
92.7 |
|
|
|
|
EPS attributable to common shareholders (diluted) - reported |
|
$ |
0.15 |
|
|
|
|
EPS attributable to common shareholders (diluted) - adjusted* |
|
$ |
0.11 |
|
|
|
|
* These measures, as well as “free cash flow,” “adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA),” "immediate liquidity," “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
FIRST QUARTER BY SEGMENT (CONTINUING OPERATIONS)
|
|
Three Months Ended |
|
|
|||||||||||||||||||||||||||
|
|
Net Revenues |
|
Change |
Reported Operating Income (Loss) |
|
Adjusted Operating Income |
||||||||||||||||||||||||
(in millions) |
|
|
2022 |
|
|
2021 |
|
Reported Basis |
|
LFL |
|
|
2022 |
|
|
Change |
|
Margin |
|
|
2022 |
|
Change |
|
Margin |
||||||
Prestige |
|
$ |
863.4 |
|
$ |
870.7 |
|
(1 |
%) |
|
7 |
% |
|
$ |
170.3 |
|
|
29 |
% |
|
20 |
% |
|
$ |
207.3 |
|
17 |
% |
|
24 |
% |
Consumer Beauty |
|
|
526.6 |
|
|
501.0 |
|
5 |
% |
|
12 |
% |
|
|
32.0 |
|
|
> |
|
6 |
% |
|
|
42.3 |
|
80 |
% |
|
8 |
% |
|
Corporate |
|
|
— |
|
|
— |
|
N/A |
|
|
N/A |
|
|
|
(30.4 |
) |
|
76 |
% |
|
N/A |
|
|
|
— |
|
N/A |
|
|
N/A |
|
Total |
|
$ |
1,390.0 |
|
$ |
1,371.7 |
|
1 |
% |
|
9 |
% |
|
$ |
171.9 |
|
|
> |
|
12 |
% |
|
$ |
249.6 |
|
25 |
% |
|
18 |
% |
|
|
Adjusted EBITDA |
|||||
|
|
Three Months Ended |
||||
(in millions) |
|
|
2022 |
|
|
2021 |
Prestige |
|
$ |
234.9 |
|
$ |
215.0 |
Consumer Beauty |
|
|
73.0 |
|
|
63.5 |
Corporate |
|
|
— |
|
|
— |
Total |
|
$ |
307.9 |
|
$ |
278.5 |
FIRST QUARTER FISCAL 2023 BY REGION
Continuing Operations
|
|
Three Months Ended |
||||||||||
|
|
Net Revenues |
|
Change |
||||||||
(in millions) |
|
|
2022 |
|
|
2021 |
|
Reported Basis |
|
LFL |
||
|
|
$ |
607.6 |
|
$ |
581.5 |
|
4 |
% |
|
5 |
% |
EMEA |
|
|
609.3 |
|
|
627.1 |
|
(3 |
) % |
|
11 |
% |
|
|
|
173.1 |
|
|
163.1 |
|
6 |
% |
|
12 |
% |
Total |
|
$ |
1,390.0 |
|
$ |
1,371.7 |
|
1 |
% |
|
9 |
% |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
Three Months Ended
|
||||||
(in millions, except per share data) |
|
2022 |
|
|
|
2021 |
|
Net revenues |
$ |
1,390.0 |
|
|
$ |
1,371.7 |
|
Cost of sales |
|
501.3 |
|
|
|
504.8 |
|
as % of Net revenues |
|
36.1 |
% |
|
|
36.8 |
% |
Gross profit |
|
888.7 |
|
|
|
866.9 |
|
Gross margin |
|
63.9 |
% |
|
|
63.2 |
% |
|
|
|
|
||||
Selling, general and administrative expenses |
|
670.7 |
|
|
|
776.3 |
|
as % of Net revenues |
|
48.3 |
% |
|
|
56.6 |
% |
Amortization expense |
|
47.3 |
|
|
|
57.0 |
|
Restructuring costs |
|
(1.2 |
) |
|
|
12.4 |
|
Acquisition-and divestiture- related costs |
|
— |
|
|
|
4.0 |
|
Operating income |
|
171.9 |
|
|
|
17.2 |
|
as % of Net revenues |
|
12.4 |
% |
|
|
1.3 |
% |
Interest expense, net |
|
65.9 |
|
|
|
59.8 |
|
Other income, net |
|
(98.2 |
) |
|
|
(386.1 |
) |
Income from continuing operations before income taxes |
|
204.2 |
|
|
|
343.5 |
|
as % of Net revenues |
|
14.7 |
% |
|
|
25.0 |
% |
Provision for income taxes on continuing operations |
|
69.7 |
|
|
|
114.6 |
|
Net income from continuing operations |
|
134.5 |
|
|
|
228.9 |
|
as % of Net revenues |
|
9.7 |
% |
|
|
16.7 |
% |
Net income |
|
134.5 |
|
|
|
228.9 |
|
Net (loss) income attributable to noncontrolling interests |
|
— |
|
|
|
(0.5 |
) |
Net income attributable to redeemable noncontrolling interests |
|
5.9 |
|
|
|
3.4 |
|
Net income attributable to |
$ |
128.6 |
|
|
$ |
226.0 |
|
Amounts attributable to |
|
|
|
||||
Net income from continuing operations |
$ |
128.6 |
|
|
$ |
226.0 |
|
Convertible Series B Preferred Stock dividends |
|
(3.3 |
) |
|
|
(123.0 |
) |
Net income from continuing operations attributable to common stockholders |
$ |
125.3 |
|
|
$ |
103.0 |
|
Net income attributable to common stockholders |
$ |
125.3 |
|
|
$ |
103.0 |
|
|
|
|
|
||||
Earnings per common share: |
|
|
|
||||
Basic for Continuing Operations |
$ |
0.15 |
|
|
$ |
0.13 |
|
Diluted for Continuing Operations(a) |
$ |
0.15 |
|
|
$ |
0.13 |
|
Basic for |
$ |
0.15 |
|
|
$ |
0.13 |
|
Diluted for |
$ |
0.15 |
|
|
$ |
0.13 |
|
Weighted-average common shares outstanding: |
|
|
|
||||
Basic |
|
842.0 |
|
|
|
777.6 |
|
Diluted(a)(b) |
|
882.2 |
|
|
|
787.7 |
|
|
|
|
|
||||
Depreciation - Continuing Operations |
$ |
59.2 |
|
|
$ |
80.8 |
|
(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 and Series A Preferred Stock, restricted stock 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 |
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 |
|
||||||||||
|
|
|
||||||||||
(in millions) |
Reported (GAAP) |
|
Adjustments(a) |
|
Adjusted (Non-GAAP) |
|
||||||
Net revenues |
$ |
1,390.0 |
|
|
$ |
— |
|
|
$ |
1,390.0 |
|
|
Gross profit |
|
888.7 |
|
|
|
2.7 |
|
|
|
891.4 |
|
|
Gross margin |
|
63.9 |
% |
|
|
|
|
64.1 |
% |
|
||
Operating income |
|
171.9 |
|
|
|
77.7 |
|
|
|
249.6 |
|
|
as % of Net revenues |
|
12.4 |
% |
|
|
|
|
18.0 |
% |
|
||
Net income |
|
125.3 |
|
|
|
(32.6 |
) |
|
|
92.7 |
|
|
as % of Net revenues |
|
9.0 |
% |
|
|
|
|
6.7 |
% |
|
||
Adjusted EBITDA |
|
|
|
|
|
307.9 |
|
|
||||
as % of Net revenues |
|
|
|
|
|
22.2 |
% |
|
||||
EPS (diluted) |
$ |
0.15 |
|
|
|
|
$ |
0.11 |
|
|
||
|
|
|
|
|
|
|
||||||
|
Three Months Ended |
|
||||||||||
|
|
|
||||||||||
(in millions) |
Reported (GAAP) |
|
Adjustments(a) |
|
Adjusted (Non-GAAP) |
|
||||||
Net revenues |
$ |
1,371.7 |
|
|
$ |
— |
|
|
$ |
1,371.7 |
|
|
Gross profit |
|
866.9 |
|
|
|
2.7 |
|
|
|
869.6 |
|
|
Gross margin |
|
63.2 |
% |
|
|
|
|
63.4 |
% |
|
||
Operating income |
|
17.2 |
|
|
|
183.3 |
|
|
|
200.5 |
|
|
as % of Net revenues |
|
1.3 |
% |
|
|
|
|
14.6 |
% |
|
||
Net income |
|
103.0 |
|
|
|
(39.9 |
) |
|
|
63.1 |
|
|
as % of Net revenues |
|
7.5 |
% |
|
|
|
|
4.6 |
% |
|
||
Adjusted EBITDA |
|
|
|
|
|
278.5 |
|
|
||||
as % of Net revenues |
|
|
|
|
|
20.3 |
% |
|
||||
EPS (diluted) |
$ |
0.13 |
|
|
|
|
$ |
0.08 |
|
|
||
(a) |
See “Reconciliation of Reported Operating Income (Loss) to Adjusted Operated Income” and “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for a detailed description of adjusted items. |
RECONCILIATION OF REPORTED OPERATING INCOME TO ADJUSTED OPERATING INCOME AND ADJUSTED EBITDA
CONTINUING OPERATIONS |
|
Three Months Ended |
|||||||||
(in millions) |
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
Reported Operating income |
|
$ |
171.9 |
|
|
$ |
17.2 |
|
|
> |
|
% of Net revenues |
|
|
12.4 |
% |
|
|
1.3 |
% |
|
|
|
Amortization expense (a) |
|
|
47.3 |
|
|
|
57.0 |
|
|
(17 |
%) |
Restructuring and other business realignment costs (b) |
|
|
(0.8 |
) |
|
|
15.1 |
|
|
<( |
|
Stock-based compensation |
|
|
31.1 |
|
|
|
108.2 |
|
|
(71 |
%) |
Acquisition- and divestiture-related costs (c) |
|
|
— |
|
|
|
4.0 |
|
|
(100 |
%) |
(Gain) on sale of real estate (d) |
|
|
(1.0 |
) |
|
|
(1.0 |
) |
|
0 |
% |
Costs related to market exit |
|
|
1.1 |
|
|
|
— |
|
|
N/A |
|
Total adjustments to reported operating income |
|
|
77.7 |
|
|
|
183.3 |
|
|
(58 |
%) |
Adjusted Operating income |
|
$ |
249.6 |
|
|
$ |
200.5 |
|
|
24 |
% |
% of Net revenues |
|
|
18.0 |
% |
|
|
14.6 |
% |
|
|
|
Adjusted depreciation (e) |
|
|
58.3 |
|
|
|
78.0 |
|
|
(25 |
%) |
Adjusted EBITDA |
|
$ |
307.9 |
|
|
$ |
278.5 |
|
|
11 |
% |
% of Revenues |
|
|
22.2 |
% |
|
|
20.3 |
% |
|
|
|
(a) |
In the three months ended |
| (b) |
In the three months ended |
| (c) | In the three months ended |
| (d) |
In the three months ended |
| (e) | In the three months ended |
RECONCILIATION OF REPORTED INCOME BEFORE INCOME TAXES AND EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATES FOR CONTINUING OPERATIONS
|
|
Three Months Ended |
|
Three Months Ended |
||||||||
(in millions) |
|
(Loss) income before income taxes |
|
(Benefit) Provision for income taxes |
|
Effective tax rate |
|
(Loss) income before income taxes |
|
Provision for income taxes |
|
Effective tax rate |
Reported Income before income taxes - Continuing Operations |
|
|
|
|
|
34.1 % |
|
|
|
|
|
33.4 % |
Adjustments to Reported Operating Income (a) |
|
77.7 |
|
|
|
|
|
183.3 |
|
|
|
|
Change in fair value of investment in Wella Business (c) |
|
(135.0) |
|
|
|
|
|
(390.0) |
|
|
|
|
Other adjustments (d) |
|
0.2 |
|
|
|
|
|
0.2 |
|
|
|
|
Total Adjustments (b) |
|
(57.1) |
|
(26.2) |
|
|
|
(206.5) |
|
(74.8) |
|
|
Adjusted Income before income taxes - Continuing Operations |
|
|
|
|
|
|
|
|
|
|
|
|
The adjusted effective tax rate was |
|
| (a) | See a description of adjustments under “Adjusted Operating Income (Loss) for Continuing Operations.” |
| (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 realized and unrealized gain recognized for the change in the fair value of the investment in Wella. |
| (d) |
For the three months ended |
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME FOR COTY INC.
|
Three Months Ended |
|||||||||
(in millions) |
|
2022 |
|
|
|
2021 |
|
|
Change |
|
Net income from |
$ |
128.6 |
|
|
$ |
226.0 |
|
|
(43 |
%) |
Convertible Series B Preferred Stock dividends (c) |
|
(3.3 |
) |
|
|
(123.0 |
) |
|
97 |
% |
Reported Net income attributable to |
$ |
125.3 |
|
|
$ |
103.0 |
|
|
22 |
% |
% of Net revenues |
|
9.0 |
% |
|
|
7.5 |
% |
|
|
|
Adjustments to Reported Operating income (a) |
|
77.7 |
|
|
|
183.3 |
|
|
(58 |
%) |
Change in fair value of investment in Wella Business (d) |
|
(135.0 |
) |
|
|
(390.0 |
) |
|
65 |
% |
Adjustments to other expense (e) |
|
0.2 |
|
|
|
0.2 |
|
|
0 |
% |
Adjustments to noncontrolling interests (b) |
|
(1.7 |
) |
|
|
(1.8 |
) |
|
6 |
% |
Change in tax provision due to adjustments to Reported Net income attributable to |
|
26.2 |
|
|
|
74.8 |
|
|
(65 |
%) |
Adjustment for deemed Series B Preferred Stock dividends related to the First and Second Exchanges (f) |
|
— |
|
|
|
93.6 |
|
|
(100 |
%) |
Adjusted Net income attributable to |
$ |
92.7 |
|
|
$ |
63.1 |
|
|
47 |
% |
|
|
|
|
|
|
|||||
Per Share Data |
|
|
|
|
|
|||||
Adjusted weighted-average common shares |
|
|
|
|
|
|||||
Basic |
|
842.0 |
|
|
|
777.6 |
|
|
|
|
Diluted (c) |
|
858.5 |
|
|
|
787.7 |
|
|
|
|
Adjusted Net income attributable to |
|
|
|
|
|
|||||
Basic |
$ |
0.11 |
|
|
$ |
0.08 |
|
|
|
|
Diluted (c) |
$ |
0.11 |
|
|
$ |
0.08 |
|
|
|
|
(a) |
See a description of adjustments under “Adjusted Operating Income (loss) 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) |
Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the three months ended |
| (d) | The amount represents the realized and unrealized gain recognized for the change in the fair value of the investment in Wella. |
| (e) | For the three months ended |
| (†) | For the three months ended |
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
|
|
Three Months Ended |
||||||
(in millions) |
|
|
2022 |
|
|
|
2021 |
|
Net cash provided by operating activities |
|
$ |
163.2 |
|
|
$ |
285.7 |
|
Capital expenditures |
|
|
(75.0 |
) |
|
|
(45.0 |
) |
Free cash flow |
|
$ |
88.2 |
|
|
$ |
240.7 |
|
RECONCILIATION OF TOTAL DEBT TO ECONOMIC NET DEBT
|
|
As of |
|
(in millions) |
|
|
|
Total debt |
|
$ |
4,407.1 |
Less: Cash and cash equivalents |
|
|
215.7 |
Financial Net debt |
|
$ |
4,191.4 |
Less: Value of Wella stake |
|
|
965.0 |
Economic Net debt |
|
$ |
3,226.4 |
IMMEDIATE LIQUIDITY
|
|
As of |
|
(in millions) |
|
|
|
Cash and cash equivalents |
|
$ |
215.7 |
Unutilized revolving credit facility |
|
|
1,710.4 |
Immediate Liquidity |
|
$ |
1,926.1 |
RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA
|
|
Twelve months ended |
|
|
|
|
|
(in millions) |
|
CONTINUING OPERATIONS |
|
Adjusted operating income (a) |
|
$ |
664.6 |
Add: Adjusted depreciation(b) |
|
|
270.1 |
Adjusted EBITDA |
|
$ |
934.7 |
(a) |
Adjusted operating income for the twelve months ended |
| (b) |
Adjusted depreciation for the twelve months ended |
FINANCIAL NET DEBT/ADJUSTED EBITDA
|
|
|
|
Financial Net Debt - |
|
$ |
4,191.4 |
Adjusted EBITDA - Continuing operations |
|
|
934.7 |
Financial Net Debt/Adjusted EBITDA |
|
|
4.48 |
RECONCILIATION OF REPORTED NET REVENUES TO LIKE-FOR-LIKE
|
|
Three Months Ended Net Revenue Change |
||||||||||
Net Revenues Change YoY |
|
Reported Basis |
|
Constant Currency |
|
Impact from Acquisitions and Divestitures |
|
LFL |
||||
Prestige |
|
(1 |
) % |
|
7 |
% |
|
— |
% |
|
7 |
% |
Consumer Beauty |
|
5 |
% |
|
12 |
% |
|
— |
% |
|
12 |
% |
Total Continuing Operations |
|
1 |
% |
|
9 |
% |
|
— |
% |
|
9 |
% |
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions) |
|
|
|
|
||
ASSETS |
|
|
|
|
||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
215.7 |
|
$ |
233.3 |
Restricted cash |
|
|
35.4 |
|
|
30.5 |
Trade receivables, net |
|
|
483.0 |
|
|
364.6 |
Inventories |
|
|
676.4 |
|
|
661.5 |
Prepaid expenses and other current assets |
|
|
419.5 |
|
|
392.0 |
Total current assets |
|
|
1,830.0 |
|
|
1,681.9 |
Property and equipment, net |
|
|
668.6 |
|
|
715.5 |
|
|
|
3,796.4 |
|
|
3,914.7 |
Other intangible assets, net |
|
|
3,714.6 |
|
|
3,902.8 |
Equity investments |
|
|
976.7 |
|
|
842.6 |
Operating lease right-of-use assets |
|
|
299.6 |
|
|
320.9 |
Other noncurrent assets |
|
|
662.0 |
|
|
737.7 |
TOTAL ASSETS |
|
$ |
11,947.9 |
|
$ |
12,116.1 |
|
|
|
|
|
||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY |
|
|
|
|
||
Current liabilities: |
|
|
|
|
||
Accounts payable |
|
$ |
1,229.7 |
|
$ |
1,268.3 |
Short-term debt and current portion of long-term debt |
|
|
32.7 |
|
|
23.0 |
Other current liabilities |
|
|
1,348.2 |
|
|
1,274.3 |
Total current liabilities |
|
|
2,610.6 |
|
|
2,565.6 |
Long-term debt, net |
|
|
4,312.8 |
|
|
4,409.1 |
Long-term operating lease liabilities |
|
|
265.0 |
|
|
282.2 |
Other noncurrent liabilities |
|
|
1,304.7 |
|
|
1,301.2 |
TOTAL LIABILITIES |
|
|
8,493.1 |
|
|
8,558.1 |
|
|
|
|
|
||
CONVERTIBLE SERIES B PREFERRED STOCK |
|
|
142.4 |
|
|
142.4 |
REDEEMABLE NONCONTROLLING INTERESTS |
|
|
69.3 |
|
|
69.8 |
|
|
|
3,051.8 |
|
|
3,154.5 |
Noncontrolling interests |
|
|
191.3 |
|
|
191.3 |
Total equity |
|
|
3,243.1 |
|
|
3,345.8 |
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY |
|
$ |
11,947.9 |
|
$ |
12,116.1 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Three Months Ended
|
||||||
|
|
2022 |
|
|
|
2021 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
||||
Net income |
$ |
134.5 |
|
|
|
228.9 |
|
|
|
|
|
||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
106.6 |
|
|
|
137.8 |
|
Non-cash lease expense |
|
16.0 |
|
|
|
18.2 |
|
Deferred income taxes |
|
59.5 |
|
|
|
89.9 |
|
Provision (releases) for bad debts |
|
(3.3 |
) |
|
|
1.9 |
|
Provision for pension and other post-employment benefits |
|
2.3 |
|
|
|
4.1 |
|
Share-based compensation |
|
31.1 |
|
|
|
108.2 |
|
Losses on disposals of long-term assets, net |
|
2.4 |
|
|
|
3.3 |
|
Realized and unrealized gains from equity investments, net |
|
(134.1 |
) |
|
|
(389.4 |
) |
Other |
|
59.5 |
|
|
|
3.3 |
|
Change in operating assets and liabilities, net of effects from purchase of acquired companies: |
|
|
|
||||
Trade receivables |
|
(133.8 |
) |
|
|
(183.5 |
) |
Inventories |
|
(42.1 |
) |
|
|
(24.4 |
) |
Prepaid expenses and other current assets |
|
(58.4 |
) |
|
|
(2.6 |
) |
Accounts payable |
|
50.6 |
|
|
|
82.9 |
|
Accrued expenses and other current liabilities |
|
119.1 |
|
|
|
231.0 |
|
Operating lease liabilities |
|
(18.0 |
) |
|
|
(20.4 |
) |
Other assets and liabilities, net |
|
(28.7 |
) |
|
|
(3.5 |
) |
Net cash provided by operating activities |
|
163.2 |
|
|
|
285.7 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
||||
Capital expenditures |
|
(75.0 |
) |
|
|
(45.0 |
) |
Net cash used in investing activities |
|
(75.0 |
) |
|
|
(45.0 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
||||
Proceeds from revolving loan facilities |
|
220.7 |
|
|
|
285.3 |
|
Repayments of revolving loan facilities |
|
(208.9 |
) |
|
|
(365.5 |
) |
Repayments of term loans and other long term debt |
|
(5.6 |
) |
|
|
(6.0 |
) |
Dividend payment on Class A Common Stock |
|
(3.6 |
) |
|
|
(4.3 |
) |
Net (repayments for) proceeds from foreign currency contracts |
|
(89.5 |
) |
|
|
(11.0 |
) |
Purchase of remaining mandatorily redeemable noncontrolling interest |
|
— |
|
|
|
(7.1 |
) |
Payment of deferred financing fees |
|
— |
|
|
|
(10.4 |
) |
All other |
|
(0.9 |
) |
|
|
(3.7 |
) |
Net cash provided by financing activities |
|
(87.8 |
) |
|
|
(122.7 |
) |
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
(13.1 |
) |
|
|
(6.0 |
) |
|
|
(12.7 |
) |
|
|
112.0 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period |
|
263.8 |
|
|
|
310.4 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period |
$ |
251.1 |
|
|
$ |
422.4 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20221108005245/en/
For more information:
Investor Relations
olga_levinzon@cotyinc.com
Media
Antonia_Werther@cotyinc.com
Source: Coty
FAQ
What were Coty's Q1 FY23 revenue results?
How did the Prestige division perform in Q1 FY23?
What growth did Coty report in its Consumer Beauty segment?
What is Coty's outlook for FY23 adjusted EBITDA?
How did Coty's gross margins change in Q1 FY23?
