THIRD QUARTER FY19 FINANCIAL RESULTS May 8, 2019
CEO UPDATE THE PATH FORWARD - RETURN TO FUNDAMENTALS Management team Collectively identifying and prioritizing in place the strategic opportunities • Upside potential in shelf productivity Analysis of key • Prioritization of brands/markets markets and • Investment at scale business units • Talent that is skilled and results- oriented • Better, before bigger , business Core business • Gross margin obsessed principles confirmed • Selective and scaled brand building 2
3Q19 AND YTD RESULTS SOLID PROFIT AND CASH DELIVERY • 3Q19 Net Revenue LFL (3.7%) $ Millions 3 Months Year-to-Date Includes ~2% negative impact from Net Revenues 1,991 6,533 revenue recognition accounting change YoY -10.4% -8.0% LFL -3.7% -3.3% YTD LFL Net Revenues of (3.3%) • Increased control over cost structure Adj Operating Income 230 693 enabling solid profit delivery in-line with our expectations Adj Operating Margin 11.5% 10.6% Supported by proactive reductions in fixed costs and non-working media Free Cash Flow 142 121 • Positive FCF in Q3 and YTD Quarterly dividend of $0.125 per share Option of stock dividend reinvestment program introduced 3
LUXURY Q3 FY19 HIGHLIGHTS 4
LUXURY 3Q19 AND YTD RESULTS CONTINUED STRONG TOPLINE AND PROFIT GROWTH • 3Q19 Net Revenue LFL + 2.8%, which includes ~1% headwind from $ Millions 3 Months Year-to-Date temporary factors Continued strong underlying Net Revenues 729 2,540 growth YTD YoY -3.1% 2.9% Solid 3Q19 results, despite LFL 2.8% 4.4% lapping significant launch activity in the prior year Adj. Operating Income 126 405 • Strong growth in Burberry, Gucci, Adj. Operating Margin 17.3% 15.9% Hugo Boss and Calvin Klein • 3Q19 adjusted operating income of $126M (+26% YoY), reaching 17.3% adjusted operating margin 5
CONSUMER BEAUTY HIGHLIGHTS 6
CONSUMER BEAUTY 3Q19 RESULTS CONTINUED TOPLINE WEAKNESS, AS WE FOCUS ON BUILDING HEALTHIER BASE • 3Q19 Net Revenue LFL (10.0%), which includes ~3% headwind from temporary factors • 3Q19 YTD LFL of (10.4%), which includes ~2% $ Millions 3 Months Year-to-Date headwind from temporary factors Adjusted for temporary factors, net revenue Net Revenues 840 2,640 consistent with sell-out, and we are seeing YoY -17.8% -17.7% some moderation in share loss LFL -10.0% -10.4% • Industry weakness and share loss in several key brands masking share improvement in Wella Retail, adidas, and Brazil local brands Adj Operating Income 56 125 • Adjusted operating income of $56M (-43% YoY), Adj Operating Margin 6.6% 4.7% with an adjusted operating margin of 6.6%, which includes a negative impact of $23M from the revenue recognition accounting change • Underlying efforts continue to improve gross margin and shift resources to priority brands and working media investments * Supply chain impacts are calculated on the basis of estimated lost net revenues and gross profit, with no assumed impact to other operating expenses 7
PROFESSIONAL BEAUTY Q3 HIGHLIGHTS 8
PROFESSIONAL BEAUTY 3Q19 RESULTS SLIGHTLY NEGATIVE LFL BELOW RUN-RATE TRENDS • 3Q19 Net Revenue LFL (0.6%) YTD Net Revenue LFL of (1.3%), $ Millions 3 Months Year-to-Date which includes ~2% negative impact from the temporary Net Revenues 421 1,357 factors YoY -6.1% -4.9% Business is solid, but recovering LFL -0.6% -1.3% from supply chain issues • Return to solid growth in OPI alongside Adj Operating Income 47 162 strong momentum in ghd Adj Operating Margin 11.2% 12.0% • Adjusted operating income of $47M (+57% YoY), with adjusted operating margin of 11.2% * Supply chain impacts are calculated on the basis of estimated lost net revenues and gross profit, with no assumed impact to other operating expenses 9
3Q19 P&L FOCUSED ON PROFIT DELIVERY • 3Q19 gross margin 62.9%: 3Q19 3Q18 Total YoY Performance FX Down 140 bps YoY, but up 80bps -10.4% -5.5% -4.9% Net Revenues 1,991 2,223 vs. 2Q19 Continued margin expansion in Luxury and Professional Beauty -12.4% -7.9% -4.5% Adj Gross Profit 1,252 1,428 More than offset by Consumer Adj Gross Margin 62.9% 64.3% Beauty reflecting: High comps (Brazil) 0.4% 5.4% -5.0% Adj Operating Income 230 229 Negative impact from the Adj Operating Margin 11.5% 10.3% revenue recognition accounting change Continued weakness in Adj Net Income to Coty 102 96 5.6% Younique • Active cost control to drive flat 3Q19 Adj Operating income, in-line with our 0.0% Adj EPS 0.13 0.13 expectations 0.0% Diluted Shares 754 754 Proactively managing fixed costs and A&CP allocation Working media relatively stable • 3Q19 adjusted EPS of $0.13 (flat YoY) Refer to the March 31, 2019 Press Release on Form 8-K for complete reconciliations of reported operating income to adjusted operating income and reported net income to adjusted net income, including descriptions of the 10 adjustments.
YTD P&L FOCUSED ON PROFIT DELIVERY • YTD gross margin down 60 bps to 3Q19 3Q18 Total YoY Performance FX 61.8% a result of: YTD YTD Net Revenues 6,533 7,099 -8.0% -4.4% -3.6% Significant pressure in 1H19 stemming from the supply chain disruptions Adj Gross Profit 4,038 4,431 -8.9% -5.7% -3.2% Adj Gross Margin 61.8% 62.4% Continued topline weakness in Consumer Beauty -10.4% -6.3% -4.0% Adj Operating Income 693 773 • YTD Adj OI -10% YoY or ($80M), Adj Operating Margin 10.6% 10.9% including -4% FX headwind OI trends consistent with gross Adj Net Income to Coty 364 410 -11.2% profit decline Active cost management to -11.1% Adj EPS 0.48 0.54 counteract ~$100M lost profit Diluted Shares 753 753 0.0% due to supply chain disruptions • YTD adjusted EPS of $0.48 (-11% YoY) Refer to the March 31, 2019 Press Release on Form 8-K for complete reconciliations of reported operating income to adjusted operating income and reported net income to adjusted net income, including descriptions of the 11 adjustments.
NET DEBT DECREASE IN 3Q19 SUPPORTED BY FREE CASH FLOW DELEVERAGING IS A TOP PRIORITY, KEY LEVER FOR VALUE CREATION • 3Q19 FCF of $142M improved by $348 million from 3Q19 3Q18, reflecting impact of working capital management Adj Operating Income 230 initiatives, including: Depreciation 96 Adj EBITDA 325 A solid improvement in the aging of our underlying le Ebitda (loss) to net cash provided by (used in) operating activities: Working Capital including One Off cost (26) receivables Capex (72) The contribution of ~$110 million from receivables Interest (Cash) (55) Tax (Cash) (31) factoring Other - Lower capex as integration nears completion Free Cash Flow 142 Dividends (94) • 3Q19 FCF was pressured by ~$100M of one-off cash Minority Interest (11) costs, with year-to-date one-off cash costs over $300M M&A 0 Miscellaneous (7) • Net Debt decreased by $100M in 3Q19 vs. 2Q19, Cash Available for Debt Paydown 30 resulting in Net Debt / Adj. EBITDA ratio of 5.7x 3Q 19 • Covenant adjusted leverage remains well below our Net Debt - Opening (12/31/18) 7,489 permitted threshold Cash Available for Debt Paydown (30) FX and other (70) • Deleveraging remains our top priority, and we are Net Debt - Closing (3/31/19) 7,389 targeting a Net Debt / adjusted EBITDA ratio of <4.0x LTM Adj EBITDA 1,298 in the medium term Net Debt / Adj EBITDA 5.7x 12
QUARTERLY DIVIDEND AT $0.125 PER SHARE OPTION TO RECEIVE 50% IN STOCK • Consistent with our deleveraging objective, we are initiating a stock dividend reinvestment program giving shareholders the option to receive their full dividend in cash or to receive their dividend in 50% cash / 50% common stock Shareholders will be able to make this election on a quarterly basis, beginning with the June 2019 dividend payment • JAB , Coty’s largest shareholder, has informed us that it will elect to receive 50% of its dividend in common stock, until Coty has reached its targeted leverage of <4.0x Net Debt / Adjusted EBITDA Election shows that JAB is fully supportive of Coty’s medium -term leverage target Annual cash savings of $112M from JAB’s election alone Modest EPS dilution • This, together with our confidence in Coty’s prospects, affirms our dividend commitment which remains an essential part of our financial policy 13
KEY RECENT DEVELOPMENTS JAB TENDER OFFER COMPLETED • JAB Tender Offer to acquire 150 million Coty shares completed on May 1, 2019 • 337M shares tendered, implying a proration of ~45% • JAB's ownership of Coty now accounting for 60% of our outstanding shares • Underlying expression of confidence and support of Coty from JAB 14
FY19 OUTLOOK • During the final quarter of fiscal 2019, we continue to expect that FY19 constant currency adjusted operating income will be moderately below FY18 Constant currency adjusted operating income of $950-1,000M Implies a solid profit performance in 4Q19, despite expected continued weakness in topline • We continue to expect positive free cash flow for FY19 , with solid free cash flow generation in 4Q19 • Expect to announce the strategic plan towards the end of June 15
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