Coty Q1 2024 Prepared Remarks Earnings Call Transcript

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Provided by Quartr
November 8, 2023

There are 3 speakers on the call.

Operator

Hello, everyone. This is Olga Levinson, Coty's Senior Vice President of Investor Relations. Thank you for joining us today for the prepared remarks portion of Coty's Q1 fiscal 2024 earnings. On Wednesday, November 8, 2023, at approximately 7:30 a. M.

Operator

Eastern Time for 1:30 p. M. Central Hillier Pierin Time. We will hold a separate live Q and A session on our results, which you can list via our Investor Relations website. Joining me for our presentation are Sue Ynavi, CODI's CEO and Laurent Mercier, Coty's CFO.

Operator

Before I hand the call over to Sue, I would like to remind you that many of the comments today may contain forward looking statements. Please refer to Coty's earnings release and the reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from these forward looking statements. In addition, except where noted, the discussion of CODI's financial results and CODI's expectations reflect certain adjustments as specified in the non GAAP financial measures section of the company's release. Thank you. I will now turn it over to our CEO, Sue Nabi.

Speaker 1

Thank you very much, Olga. Welcome, everyone. I'm very happy to share that today's Q1 results again reaffirm the strength of Coty's financial, operational and strategic performance. Once again, our sales growth was amongst the best in our peer set and ahead of the beauty market. These accomplishments are the results of the focus and agility across the full Coty organization as we continue to amplify our strengths, adjust to evolving market conditions and capture new opportunities.

Speaker 1

Even in a complex microeconomic environment, The beauty category remained resilient by offering consumers affordable luxury, self care and confidence boosting. We continue to see consumers premiumizing in beauty, and the fragrance index we have been discussing for over a year remains fully in effect. Once again, we delivered another quarter of balanced growth with like for like growth in both divisions and across each of our regions. As a result, we continue to target sales growth It has been a very exciting and some might say historic quarter for Coty as we embrace our European roots and footprint by dual listing on the Euronext Paris Stock Exchange to provide new European investors As we look forward, sorry, I'm extremely optimistic and excited about Coty's future. Let me now summarize the key messages from our results.

Speaker 1

First, we delivered market leading revenue growth ahead of both expectations and raised guidance fueled by the strength of the beauty category and Coty's successful icons and innovations. In the Q1, our like for like revenues grew 18%, which was ahead of our updated first half guidance of 10% to 12% growth and outlook at the start of the quarter of 10% like for like growth. We saw particularly strong sales momentum in Prestige, In Consumer Beauty division. 2nd, we delivered strong profits despite reinvestments in the business and adjusted EBITDA growing 17%. We remain on track to deliver leverage 3rd, we continue to execute and make progress across our strategic growth pillars.

Speaker 1

Finally, for the 2nd time this fiscal year, we are raising our fiscal 'twenty four outlook driven by the very strong Q1 delivery. We now expect to grow like for like revenues at plus 9% to plus 11%, driven by outperformance in Prestige, up from our recently raised outlook of +8 percent to 10 percent in fiscal 2024 10 to 30 basis points of adjusted EBITDA margin expansion. We now expect fiscal 2024 adjusted EBITDA of $1,080,000,000 to $1,090,000,000 as well as plus 16% to plus 25% adjusted EPS growth, Q2, excluding the equity swap. I will now take a few moments to cover our revenue trends during the quarter before Laurent takes you through our financials. Then, of course, I will finish with an update on our strategic progress and of course our outlook.

Speaker 1

Starting with our revenue performance. Our Q1 like for like revenues grew 18%, Significantly ahead of our raised guidance range for the first half of plus 10% to 12%. In Q1, our Prestige business grew 22% like for like. The very strong sales growth in Q1 was broad based across all regions and driven in particular by our leading fragrance brands as we continue to see robust demand in the fragrance category The momentum in Prestige was fueled by outperformance in volumes, which grew by a double digits percentage, coupled with pricing product mix. Since we are in a period of strong seasonal demand, it's important to note that retailer inventories 10% like for like.

Speaker 1

Our Q1 Consumer Beauty growth came from acceleration in mass fragrances and solid growth in color cosmetics and skin and body care with particular strength in North America and Latin America. Geographically now, all regions contributed to the strong like for like growth and in regional travel retail. In the EMEA region, like for like revenues grew 18% In Asia Pacific, like for like revenues grew 19% in the Q1, fueled by strong growth across most markets. In the quarter, our prestige revenues in China grew year on year, while Consumer Beauty revenues were lower as retailers work down inventory. As you know it, we are focused on driving balanced growth across the portfolio.

Speaker 1

A critical piece In Q1, we saw double digit percentage volume growth in Prestige, fueled by the success of the core business as well as new launches like Burberry Goddess, Gucci Flora Gorgeous Magnolia and BOSS Bottled Elixir. Volumes in Consumer Beauty remained stable. As a result, for the total company, volumes grew in the low single digits. In addition to strong volume growth, price grew an estimated high single digits and mix and other grew in the high single digits. Our intent is to continue to drive this balanced growth in the coming quarters and years fueled by volumes, premiumized mix and complemented by very targeted pricing.

Speaker 1

I will now hand the call over to Laurent to take you through our financial results.

Speaker 2

Thank you, Usul. In the current macroeconomic environment, I am pleased to share that we continue to deliver strong financial performance with the Q1 results marking the 13th consecutive quarter operational results in line to ahead of expectations. Let's begin with an update on how we are managing the global supply chain as well as our visibility into the inflationary environment. Last quarter, we reported improving service levels In Q1, Prestige and Consumer Beauty service levels exceeded expectations, reaching approximately 96% in the quarter. Turning to the inflationary backdrop.

Speaker 2

As anticipated, in Q1, COGS inflation remained high at approximately 2% of sales. We have been navigating these inflationary impacts through a combination of our execution on premiumization, mix management and productivity completed complemented by targeted price increases. Importantly, outlook. Looking to Q2 and second half fiscal twenty twenty four, we are now expecting COGS inflation to ease significantly, benefiting from stabilization in commodities and transportation inflation. I am proud and encouraged by our execution over the past year to achieve service levels ahead of plan and our ability to manage through an exceptional inflationary environment.

Speaker 2

I will now provide an update on our all in to win program. In the Q1, we delivered savings of approximately €35,000,000 Due to our very strong project pipeline, we remain on track to deliver over €100,000,000 of savings in fiscal 2024, We also reaffirmed our fiscal 2025 savings targets of €75,000,000 In sum, Having delivered over €630,000,000 of savings live to date, we are continuing to optimize all of our processes and expenditures, which positions Coty to be both flexible and fully equipped to invest in our strategic priorities. Call. And importantly, as we mentioned last quarter, we are in Phase 2 of our transformation as we put in place additional enablers for sustainable growth and business accelerations across brands and markets, supplementing your savings initiatives to fuel profit expansion and reinvestment. Moving to our gross margin performance.

Speaker 2

Q1 adjusted gross margin of 63.5% was in line with our expectations, decreasing 2% of revenues carried over from fiscal 2023. A return to fragrance gift sets, which had declined in the mix last year support strong service levels. These impacts to gross margin were partially offset by pricing, positive mix management and supply chain productivity in the Q1. Going forward, we expect significant easing of COGS inflation in the second quarter and second half of fiscal twenty twenty four to aid the year over year gross margin trajectory, which will support gross margin expansion in fiscal twenty twenty four. We will continue executing on our multi pronged, multiyear gross margin attack plan as we drive our gross margin In Q1, A and CP Investments represented approximately 25% of sales, increasing 30 basis points from the prior year behind many of our most recent innovations, including the highly successful Burberry Goddess, Gucci Flora Gorgeous Magnolia and Hugo Boss Dottle Elixir in Prestige as well as CoverGirl Clin Top Care Mascara and Remail's Street Seeker line in Consumer Beauty.

Speaker 2

We are continuing to shift media spend toward digital and social media activations, which now account for majority of our media spend. We continue to expect A and CP to be in the high 20s percentage level of sales in fiscal 2024. Moving to our profit delivery for the quarter. Our Q1 adjusted operating income grew a strong 21% to CHF 302,000,000 The Q1 adjusted operating margin of 18.4% grew 40 basis points year over year, and margin expansion going forward. Our Q1 adjusted EBITDA grew 17% year over year to $360,000,000 with the adjusted EBITDA margin decreasing 20 basis points year over year.

Speaker 2

And that brings me to our adjusted EPS. Our Q1 diluted adjusted EPS of $0.09 call. Due to the stock price decline in the Q1, excluding the swap, our adjusted EPS totaled $0.15 cash flow, which occurred at the end of the quarter, which resulted in a one time non cash tax impact of $24,000,000 or $0.03 per share. Outlook. Looking ahead to fiscal 2024, I would like to outline certain drivers of our adjusted EPS.

Speaker 2

Call. First, we expect depreciation to be in the €230,000,000 to €240,000,000 range. 2nd, We anticipate net interest expense for the year to be in the mid to high $200,000,000 reflecting the higher interest rate environment and cost of debt on our recent bond issuance. 3rd, in light of the change in the Swiss statutory tax rate and the $24,000,000 one time non cash impact we recorded in Q1. Now anticipate an adjusted effective tax rate for fiscal 2024 in the low-30s percentage.

Speaker 2

At the same time, the underlying tax rate excluding this discrete impact funding share count increased by approximately 33,000,000 at the beginning of Q2 due to the Paris share issuance. We plan for it to come down by €27,000,000 by Q4 with the exercise of the first equity swap with further share count reductions anticipated in fiscal year 2025 fiscal year 2020 6. Turning to our free cash flow. Generated free cash flow of CHF124,000,000 in the quarter, up 41% from the prior year outlook. Looking to the full year as we continue to expand our profitability and keep tight control of working capital, We expect strong free cash flow growth in fiscal 2024.

Speaker 2

I would like to take a moment to discuss Coty's historic dual listing. As a reminder, we made the decision to pursue a dual listing on Euronext Paris as this was a natural progression for Coty, aligning with our heritage, reflecting our substantial business presence in Europe and attracting European investors who are very familiar with the beauty and luxury sectors. As of September 28, Coty shares have been trading on both the New York Stock Exchange and the Professional segment of Euronext Paris. And in order to facilitate ownership by European investors And to build liquidity in Europe, we issued 33,000,000 shares at a price of $10.80 or €10.28 eligible dilution exiting fiscal 2024. We are targeting a further reduction in our share count through a $23,000,000 share buyback in fiscal 2025 using our second equity swap.

Speaker 2

In sum, we remain committed to managing our diluted share count toward approximately 800,000,000 shares by fiscal 2026. Moving to our capital structure. We ended Q1 with net debt of approximately DKK3.9 billion. Call. As a result, our leverage at the end of the quarter was around 3.8 times, down from around 4.1 times at the end of Q4 and consistent with our expectations.

Speaker 2

Factoring in our Vela stake, we ended the quarter with economic net debt of approximately 2,900,000,000 Specific to Vela, in light of Coty's strong free cash flow trajectory in the first half fiscal twenty twenty four, our successful Paris dual listing and given misalignment on final deal terms, Coty and the counterparties have decided financial sale of our Bela stake. It is important to emphasize that we remain committed to reaching an investment grade profile targeting leverage 3 times exiting calendar 2023, approximately 2.5 times exiting calendar 20 24 and approximately 2 times exiting calendar 2025. We also continue to target divesting our full Vela stake by end of calendar 2025. Focus on our balance sheet. In September, we successfully issued €500,000,000 of 20 28 senior secured euro notes, further extending our debt maturity profile.

Speaker 2

Following these insurance, close to 100% of our total debt is now fixed rate, which is important to the current in the current interest rate environment. Today, we are also announcing the launch of a tender to retire up to $400,000,000 of our outstanding 20.26 U. S. Dollar bonds based on our strong cash inflow in the first fiscal 2024. This speaks to our strengthening balance sheet and our financial flexibility as we continue to actively reduce our debt.

Speaker 2

Looking ahead, our strong continued progress on deleveraging and debt pay down support our expectation for our interest expense to steadily decline in the coming years despite the currently rising interest rate environment. I will now hand it back to Sue to review our strategic progress in the quarter.

Speaker 1

Thank you, Laurent. Let me take a few minutes to discuss the progress we continue to make on our 6 strategic pillars, starting with our first strategic pillar, which is stabilizing and growing our consumer beauty business. Building on the momentum we saw in our Consumer Beauty in fiscal 'twenty three, the business once again delivered strong growth. In Q1, our Consumer Beauty revenue grew 10% like for like, in line with the global mass beauty market, which remained very resilient in the macro volatility. The global and multi category footprint of our business continues to be a great strength as short term fluctuations in a given category or market is compensated color cosmetics category.

Speaker 1

The market continues to premiumize as products with price points well above the category average outperform the broader category. We see this trend across our core markets such as the U. S, U. K. And Germany, which reinforces our view of the limited price elasticity in beauty, products, including mass beauty, provided that the products are desirable, cool and good quality.

Speaker 1

Against this backdrop, We are continuing to elevate the desirability of our brands with relevant communication strategies and always on innovation. Following on the tremendous success of CoverGirl's Yummy! Glass, which went viral on TikTok, fueling unit demand that was several times higher than our initial expectations. We have platformed this winning innovation and brought it to our 2nd biggest cosmetic brand, Rimmel. We've recently launched the equivalent, Rimmel Glassy Glass, over the past month, and the results in the U.

Speaker 1

K. Look equally promising. Rimmel is now the number one lip gloss brand in the U. K. With the glassy gloss significantly over indexing with Gen Z consumers and premiumizing the re mail portfolio.

Speaker 1

At the same time, while U. S. Nielsen brick and mortar trends have been sluggish in recent months, CoverGirl is strongly outperforming online with double digit percentage sellout growth in ecom, supporting solid growth in overall brand sales. The strength of the CoverGirl brand is also reinforced by the latest household panel data, where CoverGirl remains the 2nd brand in terms of household penetration and the only brand amongst the top 3 growing repeat purchasers. As we discussed on the last earnings call.

Speaker 1

Having positioned repositioned our key consumer beauty brands and revamped the innovation pipeline for each brand, The next phase of our strategy is now to fully capitalize on the Gen Z opportunity. Our focus for fiscal 2024 is therefore to step change our social media reach in order to drive our brands We've kicked off multiple initiatives in this area. For our key consumer beauty brands, We have increased our paid and unpaid influencer partnerships from several dozen key brands like CoverGirl and ReMail. We've set up dedicated TikTok Studios in 15 countries, and generate creative content while utilizing our top notch facilities and equipments. The video playing on the side was filmed by an one influencer at our newly established CoverGirl TikTok studio in New York City.

Speaker 1

In the U. K, which was one of our first markets to fully embrace the Gen Z TikTok playbook, We are already seeing great results. In the past quarter, 2 of our cosmetic brands ranked in the top 10 in terms of earned media value and visibility, impact and trust, which are two measures of brands' consumer reach and engagement on social media. With REMEL ranking at number 4 and Max Factor at number 6 and tripling their earned media value year on year. We are very proud that our brands are resonating with consumers of all ages And we are expanding our influencer engagement further with the recent announcement of WEMAIL's Creator Crew, A group of 9 global influencers who will not only partner with Remail on new campaigns, and we look forward to sharing further updates on our key initiatives in this area.

Speaker 1

Turning now to our 2nd pillar focused on accelerating our Luxury Fragrance business. The Fragrance Index maintained momentum, driven by strong demand for fragrances across the globe and ongoing premiumization as consumers are seeking more concentrated, longer lasting and more sophisticated scents. In Q1, the prestige fragrance market grew over 10%, which was consistent with the growth levels we saw last year. At the same time, Coty's Prestige Fragrance revenues grew approximately 25% like for like, outperforming the market by 2x.5. These very strong results were driven by momentum in our core fragrance lines, the outstanding results for our recent innovations and improved service levels.

Speaker 1

As testament to the success we are driving in our portfolio, sales for our top 7 prestige fragrance brands grew in the high 20s percentage. Let me now take a minute to highlight the outstanding in market results of our prestige fragrance brands and, in particular, Burberry. I'm incredibly proud to share that the recently launched Burberry Goddess Eau De Parfums has become the number one female fragrance launch in key markets, becoming one of the only fragrances on the market Goddess is now ranking amongst the top 6 fragrance lines across key markets when compared against both new launches and existing icons, which is particularly impressive given Goddesk is currently a single SKU success of Goddess is elevating the sales of other Burberry Fragrance icons, including Burberry Hero and Burberry Her, results, resulting in total Burberry Fragrance revenues in Q1 nearly doubling year on year. Strengthening of our fragrance icons was also evidenced by 3 franchises, Burberry Goddess, Gucci Flora and Burberry Her, reaching the top 10 female fragrances in the U. S.

Speaker 1

For the first time in the company's history. Coty is now the only company to have 3 fragrance lines in the U. S. Top 10 female fragrances. All of this reaffirms Coty's position as a leading fragrance expert with best in class end to end capabilities From developing a winning scent, which resonates with consumers across all regions to activating distinctive marketing campaigns and finally, to disruptive in store and online activations.

Speaker 1

Complementing our expense and strategy in our core Prestige Fragrance businesses, we are continuing to strengthen our Prestige makeup business through both assortment and distribution expansion. For Kylie Cosmetics, The Kylage Mascara, which we launched last spring, has now become the 2nd franchise for the brand while also boosting door productivity. We are building on this momentum with the recent launch of the Kylie Power Plus concealer, which you see pictured here, further solidifying Kylie as a full range makeup brand. In Q1, we also delivered double digit growth in Burberry makeup. Burberry's recently launched Beyond Wear Foundation continues to resonate with consumers in Asia, And we therefore intend to expand our distribution in the region led by our 2 leading Burberry franchises, Burberry Goddess Fragrance and Burberry Beyond Wear Foundation.

Speaker 1

And while Chinese retailers are still working through some inventory, The China sellout of both Gucci and Burberry makeup grew strongly in the quarter. Shifting to our 3rd strategic pillar, building our skincare business. We kicked off our skincare acceleration strategy in the spring with brand relaunches and exciting initiatives across each of our key skincare brands, philosophy, Lancaster and Orvida. Philosophy announced a new brand formulation principle, dermatologic wisdom and began upgrading its presence both online and in store, including in over 1,000 Ulta Doors. The resonance of this new brand equity and our activations have resulted Desophy being the number one U.

Speaker 1

S. Skincare brand in terms of advocacy. And importantly, This has fueled double digit percentage revenue growth in Q1 and in the last 6 months. In fact, we are seeing strong momentum in both the hero skincare lines like Micro Delivery and Miracle Worker as well as the newly launched Dose of Wisdom Bouncy Skin Reactivating Serum, which was recently awarded the 2023 Opera Daily Beauty Award. Moving to our 2nd key skincare brand, Lancaster.

Speaker 1

As you recall, in early spring, we launched the ultra premium Lancaster skincare line call Lineup Francier with the launch initially focused on the Chinese mainland and Hainan markets. Having presented in Transyere's superior technology formulations and winning textures to China's leading influencers, beauty editors and consumers. I am incredibly proud to share that these key opinion leaders as the best anti aging cream on the market, while e. L. China named Lancastirlines Prancer As A Beauty Star of 2023.

Speaker 1

These awards by the leading beauty publications in China raise Lancaster's brand awareness and scientific credentials with the very discerning Chinese consumers. Now while starting from a smaller baseline, our amplification of our skincare brand, Orveda, is also in full swing. In Q1, we launched the breakthrough omnipotent concentrate serum with a market leading 24% concentration active ingredients, which do not irritate the skin due to their biocompatible formulations. With the ultra premium pricing and positioning of Orvida, our focus has been on building a Whispek campaign We are continuing to drive brand trial, education and awareness as our VIDA partners with the leading art and fashion shows today, while also welcoming celebrities at key events such as the MET Gala and the Cannes Film Festival. And these activations are beginning to translate into real buzz.

Speaker 1

As some of you may have seen, During the recent Paris Fashion Week, Pamela Anderson made a beauty statement by attending the fashion show without makeup. Newly authentic and unpaid endorsement for the brand. She shared with Vogue that she relies on Aveda Skin Care As the buzz and excitement around Orvida continues to grow, we are seeing this translate into first business results. For example, in recent months, sales productivity at leading Orvida counters such as the Saks 5th Avenue flagship in New York accelerating the opening of new doors and counters. Moving now to our 4th strategic pillar, which is digital and ecom.

Speaker 1

In Q1, both divisions delivered very strong e comm sales momentum with growth of over 25% like for like in both Prestige and Consumer Beauty. As a result, the e com penetration in both businesses expanded by approximately 140 basis points, resulting in total Coty ecom penetration was ahead of the underlying e commerce trends with both our prestige and consumer beauty businesses expanding their online market share. We've achieved this momentum through best in class online launches, The success of our digital advocacy strategy, active participation in key online shopping events, And expanding on my earlier comments regarding building on Castel's momentum in China, I'm happy to report That as we are building Lancaster presence in China e comm, the brand Q1 sales on Timon and Douyin We're 1.5 to 3 times higher quarter over quarter. Moving to our 5th strategic pillar, building our presence in China. While the overall China market recovery has been somewhat slower than many expected, The white space opportunity for Coty in China remains intact and immense.

Speaker 1

And we have, therefore, continued to outperform The Prestige Beauty consumption. In Q1, our Prestige revenues in China grew year on year, lead by Mainland China with strong momentum in Gucci, Burberry, Chloe and Marc Jacobs retail sales. On the Consumer Beauty side, which accounts for a fraction of our China sales, revenues declined due to elevated trade inventory. Importantly, the sellout growth in our Prestige business far exceeded the underlying market growth in Q1 With Coty's sellout growing double digit percentage in Mainland China and triple digit percentage in Hainan, while the beauty market was modestly positive. In sum, we are continuing to expand our presence in China, Which remains one of the several significant opportunities for us in both the short and, of course, the mid- and long term.

Speaker 1

Finally, we are continuing to see very strong momentum in our Travel Retail channel. In Q1, our Travel Retail sales grew over 20% like for like coming on top of over 30% growth in fiscal 2023. Importantly, we are seeing this momentum across all regions with double digit percentage travel retail sales growth in Europe, The Americas and Asia Pacific. We have continued to gain share in the high growth and highly profitable travel retail channel, Particularly in EMEA and the Americas fueled by distribution expansion, travel retail launch exclusivities, successful innovations and our growing multi category presence. In fact, Lancaster's sellout in Asia Travel Retail is now growing triple digits.

Speaker 1

And looking forward, we do not see any slowdown in consumer travel, particularly when taking into account That international travel by the Chinese Corps is beginning to recover, but is still roughly half on our ESG framework. On the environmental side, 3 of our factories are now carbon neutral, including in Spain, Monaco and Brazil. Our teams achieved this primarily through a transition to renewable electricity high quality credits. On the social side, we are continuing to deliver on our gender equity commitment across key metrics, and we will share more in the coming months. And finally, we are strengthening our resources and governance of sustainability matters as we expand our sustainability office.

Speaker 1

That brings me to our outlook for fiscal 2024. First, let me share some updates outlook for the first half. Given the very strong revenue growth momentum we saw in the Q1 and strong progress in Q2, We now expect the first half like for like sales growth to be plus 11% to plus 13%, which is up from our recently raised guidance of +10 percent to +12%. The increase is supported by outperformance in the Prestige segment. For reported revenues, we are still expecting a ForEx benefit to revenues We expect gross margins to be flattish year over year.

Speaker 1

On the profit side, we continue to expect first half twenty twenty four adjusted EBITA margin expansion 10 to 30 basis points consistent with the full year. And we estimate first half adjusted EPS tax rate. For the full fiscal 'twenty four year, we are now expecting revenues to grow 9% to 11% like for like, fiscal 'twenty four reported revenues are still expected to include a 0% to 2% benefit from ForEx, primarily in first half 'twenty four fiscal 'twenty four and a 1% to 2% scope headwind for the year from the divestiture of the Lacoste license concentrated in the second half. We continue to expect modest fiscal 'twenty four gross margin expansion year on year, consistent with our growth algorithm, driven by strong year on year improvement in gross margins in the second half as the Q1 gross margin pressures abate. We are targeting fiscal 2024 adjusted EBITA margin expansion of 10 to 30 basis points, implying adjusted EBITA of 1,080,000,000 billion to 1,090,000,000,000 based on current ForEx rates, which is above the previous guidance of 1,075,000,000,000 to 1,085,000,000,000 We still estimate total fiscal 2024 adjusted EPS, excluding the equity swap of 0.44 to 0 point 47% implying a strong plus 16% to plus 25% growth.

Speaker 1

The EPS outlook incorporates the stronger EBITDA outlook balanced by the onetime noncash tax impact in Q1, which is driving our fiscal 2024 tax rate to the low 30s even as we expect the tax rate to return to the high 20s going forward as well as incrementally higher interest expense. And we continue to target further reduction in leverage to 3x exiting calendar 2023 fueled by cash inflow approximately 2.5x exiting calendar 24 Approximately 2x exiting calendar 'twenty 5. To sum up, the beauty market continues to be resilient, holding a prioritized position with consumers all over the world, while also benefiting from ongoing premiumization trends. In this attractive backdrop, we are successfully executing on the strategy we laid out 3 years ago With momentum across our core categories and early wins in the white space opportunities we are pursuing, including Shemale Fragrances and Ultra Premium Fragrances, Skincare, Prestige Cosmetics, China and Travel Retail. And we are delivering a best in class medium term financial growth algorithm, active deleveraging and capital returns.

Speaker 1

As we propel Coty's growth momentum, we are strengthening our position as a beauty powerhouse. Thank you for joining our prepared remarks call today. As a reminder, we'll be hosting a separate question and answer session on Wednesday, November 8 at 7:30 a. M. Eastern Time or 1:30 p.

Speaker 1

M. Central European Time.

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Key Takeaways

  • Q1 like-for-like revenues grew 18%, led by Prestige business growth of 22%, significantly ahead of the company’s prior guidance.
  • Adjusted EBITDA increased 17% to $360 million, and Coty raised its full-year adjusted EBITDA outlook to $1.08–1.09 billion while targeting 16%–25% adjusted EPS growth.
  • Coty completed a dual listing on Euronext Paris, issuing 33 million new shares to attract European investors and plans to reduce its share count to around 800 million by fiscal 2026 through buybacks.
  • Consumer Beauty revenues in China declined as retailers work down elevated inventories, and the company’s leverage remains elevated at approximately 3.8x net debt to EBITDA.
  • E-commerce sales surged over 25% in both Prestige and Consumer Beauty divisions, driving online penetration and market share gains.
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