Jueves 26 de Abril 2018

Coty Inc. Reports First Quarter Fiscal 2018 Results

Improving Net Revenue Trends as Strategy Starts to Deliver

Reported Operating Income Impacted by Acquisition and Restructuring
Costs

Significant Growth in Adjusted Operating Income

NEW YORK–(BUSINESS WIRE)–Coty Inc. (NYSE:COTY) today announced financial results for the first
quarter of fiscal year 2018, ended September 30, 2017.

   
Results at a glance Three Months Ended September 30, 2017
    Change YoY
(in millions, except per share data)  

Reported
Basis

   

Combined
Company *

   

Combined
Company
Constant
Currency *

Net revenues $ 2,238.3 >100%

7%

5%
Operating income – reported 28.7 (38%)
Operating income – adjusted* 195.1 17%
Net (loss) income – reported (19.7 ) NM
Net income – adjusted* 76.3 (3%)
EPS (diluted) – reported $ (0.03 ) NM
EPS (diluted) – adjusted*     $ 0.10       (57%)            
 
* As compared to combined Coty and P&G Beauty Business net revenues
(herein defined as “Combined Company”). These measures, as well as
“free cash flow,” are Non-GAAP Financial Measures. Refer to “Basis
of Presentation and Exceptional Items” and “Non-GAAP Financial
Measures” for discussion of these measures. Net Income (Loss)
represents Net Income (Loss) Attributable to Coty Inc.
Reconciliations from reported to adjusted results can be found at
the end of this release. Combined Company year-over-year change in
net revenues is presented giving effect to the completion of the
acquisition of the P&G Beauty Business (the “Merger”), as if the
Merger had occurred as of July 1, 2015. “NM” indicates calculation
not meaningful.
 

First Quarter Fiscal 2018 Summary

  • Net revenues of $2,238.3 million increased >100% as reported compared
    to Legacy-Coty net revenues in the prior-year period and increased 5%
    for the combined company at constant currency
  • Excluding the positive contribution from the acquisitions of ghd and
    Younique, the combined company organic net revenues declined 2% on a
    constant currency basis
  • Reported operating income of $28.7 million decreased from $46.4
    million for Legacy-Coty
  • Adjusted operating income of $195.1 million increased 17% from $166.4
    million for Legacy-Coty
  • Reported net loss of $(19.7) million, declined from $0.0 million for
    Legacy-Coty, while adjusted net income of $76.3 million is in line
    with Legacy-Coty
  • Reported earnings per diluted share of $(0.03) decreased from $0.00
    for Legacy-Coty, while adjusted earnings per diluted share of $0.10
    declined from $0.23 for Legacy-Coty
  • Net cash used in operating activities was $(8.9) million compared to
    $(15.0) million for Legacy-Coty

Commenting on Coty’s performance, Camillo Pane, Coty CEO said:

“Q1 was a much better quarter. We saw strong growth in Luxury, continued
positive momentum in Professional and a reduced net revenue decline in
the Consumer Beauty division. While results are likely to be a bit
uneven from quarter to quarter going forward, the improving revenue
trend gives me confidence that the growth strategy I outlined earlier
this year is moving Coty gradually onto a path of full recovery.

We also delivered significant improvement in profits, driven by better
gross margin performance and strong financial discipline on the cost
structure.

I am pleased to announce that, as of September 1, we have exited our
third and final TSA with P&G for the ALMEA region and now have control
of processes, systems and data across the new Coty.

We are also satisfied with the contributions from our other strategic
acquisitions, Hypermarcas, ghd and Younique and continue to strengthen
our overall portfolio through our strategic partnership with Burberry,
an iconic brand that is an exciting addition to our portfolio. We
believe we are uniquely positioned to develop and grow this luxury brand
to its full potential.

Looking ahead to the remainder of fiscal 2018, we expect to continue to
deliver on our announced synergies, finalize the streamlining of our
brand portfolio and relaunch several of our key brands. With these
programs, we aim to deliver improved net revenue growth trends for the
remainder of the year, with an organic second half top line roughly
comparable to prior year, as well as healthy margin improvement over the
balance of the year.

I am highly confident that all of our efforts will lead to Coty becoming
a new global leader and challenger in beauty.”

Basis of Presentation

To supplement financial results presented in accordance with GAAP,
certain financial information is presented in this release using the
non-GAAP financial measures described in this section. The term
“combined company” describes net revenues of Coty Inc. and the P&G
Beauty Business giving effect to the Merger for purposes of the three
months ended September 30, 2017 as if it had occurred on July 1, 2015.
Combined company period-over-period and combined company constant
currency period-over-period do not include any adjustments related to
potential profit improvements, potential cost savings or adjustments to
fully conform to the accounting policies of Coty. The term “combined
company constant currency” describes the combined company net revenues
excluding the effect of foreign currency exchange translations. The term
“adjusted” primarily excludes the impact of restructuring and business
realignment costs, amortization, costs related to acquisition
activities, private company share-based compensation expense, and asset
impairment charges to the extent applicable. Refer to “Non-GAAP
Financial Measures” below for additional discussion of these measures as
well as the definition of free cash flow.

Net revenues are reported by segment and geographic region and are
presented on a reported (GAAP), combined company and combined company
constant currency basis. Operating income is reported by segment. All
changes in margin percentage are described in basis points rounded to
the nearest tenth of a percent.

Operating income, net income, operating income margin, gross margin,
effective tax rate, and earnings per diluted share (EPS (diluted)) are
presented on a reported (GAAP) basis and an adjusted (non-GAAP) basis.
Adjusted EPS (diluted) is a performance measure and should not be
construed as a measure of liquidity. Net revenues on a combined company
basis, net revenues on a combined company constant currency basis,
adjusted operating income, adjusted operating income on a constant
currency basis, adjusted operating income margin, adjusted effective tax
rate, adjusted net income, adjusted gross margin, adjusted EPS (diluted)
and free cash flow are non-GAAP financial measures. Refer to “Non-GAAP
Financial Measures” below for additional discussion of these measures. A
reconciliation between GAAP and non-GAAP results can be found in the
tables and footnotes at the end of this release.

To the extent that Coty 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, adjustments to inventory, and other charges
reflected in our reconciliation of historic numbers, the amount of
which, based on historical experience, could be significant.

First Quarter Fiscal 2018 Summary Operating
Review

Net revenues of $2,238.3 million increased >100% as reported
compared to Legacy-Coty net revenues in the prior-year period due to the
P&G Beauty Business acquisition and increased 5% on a combined company
constant currency basis. The 5% combined company net revenue growth
reflected a 7% contribution from ghd and Younique, and a 2% decline in
the underlying business. The decline was driven by Consumer Beauty,
partially offset by strong growth in Luxury and moderate growth in
Professional Beauty.

Gross margin of 60.9% increased from 58.8% for Legacy-Coty, while
adjusted gross margin increased to 61.6% from 58.8%, driven by the
acquisition of higher margin businesses and supply-chain and procurement
synergies.

Reported operating income decreased to $28.7 million from $46.4
million for Legacy-Coty due to higher SG&A and amortization expenses
driven by the P&G Beauty Business acquisition, partially offset by
improved gross margin and lower acquisition-related costs.

Adjusted operating income increased 17% to $195.1 million from
$166.4 million for Legacy-Coty driven by improved gross margin as well
as tight financial discipline.

Reported effective tax rate was 61.1% compared to (108.5)% for
Legacy-Coty.

Adjusted effective tax rate was 27.4% compared to 30.1% for
Legacy-Coty.

Reported net income decreased to $(19.7) million from $0.0
million for Legacy-Coty, reflecting lower reported operating income and
higher interest expense from the acquisitions.

Adjusted net income of $76.3 million was in line with $78.3
million for Legacy-Coty, with higher interest expense, offset by the
benefit from higher adjusted operating income.

Cash Flows

  • Net cash from operating activities in the quarter was $(8.9) million,
    compared to $(15.0) million for Legacy-Coty, reflecting improved
    working capital for the combined company.
  • Negative free cash flow of $(120.3) million was impacted by
    acquisition and restructuring costs and declined from $(101.8) million
    for Legacy-Coty, reflecting increased capital expenditures partially
    offset by improvements in cash from operations.
  • On September 14, 2017, the Company paid a quarterly dividend of $0.125
    per share for a total of $93.6 million.
  • Net debt of $6,919.4 million up $239.2 million from the balance on
    June 30, 2017 driven primarily by negative quarterly free cash flow.

First Quarter Fiscal 2018 Business Review by
Segment

   
Three Months Ended September 30,
Net Revenues     Change    

Reported Operating
Income

   

Adjusted Operating
Income

(in millions) 2017     2016

Actual
Year –
over –
Year

   

Combined
Company
Year-
Over-Year

   

Combined
Company
Constant
Currency

2017     Change   2017     Change
Luxury $ 764.4 $ 449.0 70% 6%   4% $ 56.7   (25%)   $ 89.9 (1%)
Consumer Beauty 1,043.4 571.9 82% 4% 2% 61.9 16% 88.3 54%
Professional 430.5 59.3 > 100% 15% 13% (1.7 ) NM 16.9 (8%)
Corporate     N/A N/A   N/A (88.2 ) 11%   N/A
Total $ 2,238.3   $ 1,080.2   >100% 7%   5% $ 28.7   (38%) $ 195.1   17%
 

Luxury

  • Net revenues of $764.4 million increased 70% as reported compared to
    Legacy-Coty net revenues in the prior-year period reflecting the
    contribution from the acquired P&G Beauty Business. Net revenues
    increased 4% on a combined company constant currency basis reflecting
    momentum in Hugo Boss, Gucci and Tiffany & Co.
  • Adjusted operating income of $89.9 million was in line with $90.6
    million in the prior-year period.

Consumer Beauty

  • Net revenues of $1,043.4 million increased 82% as reported compared to
    Legacy-Coty net revenues in the prior-year period reflecting the
    contribution from the acquired P&G Beauty Business and Younique. Net
    revenues grew 2% on a combined company constant currency basis
    reflecting a 10% contribution from Younique and an (8)% decline in the
    underlying business. The decline was driven by the performance of
    certain brands, including our retail hair brands, as well as continued
    weakness in the global mass beauty market.
  • Adjusted operating income increased 54% to $88.3 million from $57.5
    million for Legacy-Coty.

Professional

  • Net revenues of $430.5 million increased > 100% as reported compared
    to Legacy-Coty net revenues in the prior-year period reflecting the
    contribution from the acquired P&G Beauty Business and the ghd
    acquisition. Net revenues increased 13% on a combined company constant
    currency basis reflecting a 12% contribution from ghd and continued
    strength in Wella and System Professional which was partly offset by
    declines in Clairol Professional.
  • Adjusted operating income declined slightly to $16.9 million from
    $18.3 million for Legacy-Coty.

First Quarter Fiscal 2018 Business Review by
Geographic Region

   
Three Months Ended September 30,
Net Revenues     Change
(in millions) 2017     2016

Reported
Basis

   

Combined
Company
Year-
Over-Year

   

Combined
Company
Constant
Currency

North America $ 767.6 $ 343.1 >100% 13% 12%
Europe 964.5 446.9 >100% 5% 1%
ALMEA 506.2   290.2   74% 1% 0%
Total $ 2,238.3   $ 1,080.2   >100% 7%   5%
 
 

North America

  • Reported net revenues increased >100% compared to Legacy-Coty net
    revenues in the prior-year period and increased 12% on a combined
    company constant currency basis driven primarily by the contribution
    from Younique, partially offset by declines in the U.S., primarily in
    the Consumer Beauty division.

Europe

  • Reported net revenues increased >100% compared to Legacy-Coty net
    revenues and increased 1% on a combined company constant currency
    basis driven primarily by the contribution from ghd partially offset
    by declines in Germany.

ALMEA

  • Reported net revenues increased 74% compared to Legacy-Coty net
    revenues and was flat on a combined company constant currency basis.

Noteworthy Company Developments

Other noteworthy company developments include:

  • On September 8, 2017, Coty announced the appointment of Daniel Ramos
    as Chief Scientific Officer. Daniel brings extensive experience in the
    consumer goods industry spanning the health, beauty & grooming,
    fragrance and cosmetics categories where he has delivered
    transformative and disruptive innovation internationally. Daniel will
    be located in Coty’s R&D center of global excellence in Morris Plains,
    New Jersey.
  • On October 2, 2017 Coty announced the completion of the acquisition of
    the exclusive long-term global license rights for Burberry Beauty
    luxury fragrances, cosmetics and skincare.
  • On November 9, 2017, Coty announced a dividend of $0.125 per share,
    payable December 14, 2017 to holders of record on November 30, 2017.

Conference Call

Coty Inc. will host a conference call at 8:00 a.m. (ET) today,
November 9, 2017 to discuss its results. The dial-in number for the call
is (855) 889-8783 in the U.S. or (720) 634-2929 internationally
(conference passcode number: 9396799). The call will also be webcast
live at http://investors.coty.com.
The conference call will be available for replay. The replay dial-in
number is (855) 859-2056 in the U.S. or (404) 537-3406 outside the U.S.
(conference passcode number: 9396799).

About Coty Inc.

Coty is one of the world’s largest beauty companies with approximately
$9 billion in pro forma revenue, with a purpose to celebrate and
liberate the diversity of consumers’ beauty. Its strong entrepreneurial
heritage has created an iconic portfolio of leading beauty brands. Coty
is the global leader in fragrance, a strong number two in professional
salon hair color & styling, and number three in color cosmetics. Coty
operates three divisions – Consumer Beauty, which is focused on mass
color cosmetics, mass retail hair coloring and styling products, body
care and mass fragrances with brands such as COVERGIRL, Max Factor and
Rimmel; Luxury, which is focused on prestige fragrances and skincare
with brands such as Calvin Klein, Marc Jacobs, Hugo Boss, Gucci and
philosophy; and Professional Beauty, which is focused on servicing salon
owners and professionals in both hair and nail, with brands such as
Wella Professionals, Sebastian Professional, OPI and ghd. Coty has over
20,000 colleagues globally and its products are sold in over 150
countries. Coty and its brands are committed to a range of social causes
as well as seeking to minimize its impact on the environment.

For additional information about Coty Inc., please visit www.coty.com.

Forward Looking Statements

Certain statements in this 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, establishing the Company as a
global leader and challenger in beauty, the Company’s future operations
and financial performance (including brand relaunches and returning to
profitable top line growth and other revenue trends), ongoing cost
efficiency initiatives and the timing and presentation of future cost
saving plans, mergers and acquisitions, divestitures (including brand
portfolio streamlining), synergies (including the timing and amount
thereof), growth from and future performance of acquisitions, the
success of the integration of the P&G Beauty Business, accelerating
digital & e-commerce innovation, future dividends and any outlook for
future reporting periods, including for the fiscal year ending June 30,
2018. These forward-looking statements are generally identified by words
or phrases, such as “anticipate”, “are going to”, “estimate”, “plan”,
“project”, “expect”, “believe”, “intend”, “foresee”, “forecast”, “will”,
“may”, “should”, “outlook”, “continue”, “target”, “aim”, “potential”,
“should” and similar words or phrases. These statements are based on
certain assumptions and estimates that the Company considers reasonable
and are subject to a number of risks and uncertainties, many of which
are beyond the Company’s control, which could cause actual events or
results to differ materially from such statements, including:

  • the Company’s ability to achieve its global business strategies,
    compete effectively in the beauty industry and achieve the benefits
    contemplated by its recent strategic transactions, including our joint
    ventures and recent acquisitions, within the expected time frame, or
    at all;
  • use of estimates and assumptions in preparing the Company’s financial
    statements, including with regard to revenue recognition, stock
    compensation expense, purchase price allocations, the assessment of
    goodwill, other intangible assets and long-lived assets for
    impairment, the market value of inventory, pension expense and the
    fair value of acquired assets and liabilities associated with
    acquisitions;
  • managerial, integration, operational, regulatory, legal and financial
    risks including management of cash flows, and expenses associated with
    the Company’s strategic transactions and internal reorganizations;
  • the continued integration of the P&G Beauty Business with the
    Legacy-Coty business, operations, systems, financial data and culture
    and the ability to realize synergies, reduce costs and realize other
    potential efficiencies and benefits (including through the Company’s
    restructuring and business realignment programs) at the levels and at
    the costs and within the time frames currently contemplated 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 any relaunched or
    rebranded products, execution of new launches, and the anticipated
    costs associated with such relaunches and rebrands;
  • increased competition, consolidation among retailers, shifts in
    consumers’ preferred distribution channels (including to digital
    channels) and other changes in the retail, e-commerce and wholesale
    environment in which the Company does business and sells its products;
  • changes in law, regulations and policies and/or the enforcement
    thereof that affect the Company’s business, operations or its products;
  • the Company and its brand partners’ and licensors’ ability to obtain,
    maintain and protect the intellectual property rights, including
    trademarks, brand names and other intellectual property used in their
    respective businesses, products and software, and their abilities to
    protect their respective reputations and defend claims by third
    parties for infringement of intellectual property rights;
  • the Company’s ability to successfully execute its announced intent to
    divest and/or discontinue non-core brands and to rationalize wholesale
    distribution by reducing the amount of product diversion to the value
    and mass channels;
  • any unanticipated problems, liabilities or other challenges associated
    with an acquired business which could result in increased risk of new,
    unanticipated or unknown liabilities, including with respect to
    environmental, competition and other regulatory matters;
  • the Company’s international operations and joint ventures, including
    reputational, compliance, regulatory, economic and foreign political
    risks, including difficulties and costs associated with maintaining
    compliance with a broad variety of complex domestic and international
    regulations;
  • the Company’s dependence on certain licenses (especially in the Luxury
    division), entities performing outsourced functions and third-party
    suppliers, including third party software providers;
  • administrative, development and other difficulties in meeting the
    expected timing of market expansions, product launches and marketing
    efforts;
  • global political and/or economic uncertainties or disruptions,
    including the impact of Brexit and the new U.S. administration;
  • the number, type, outcomes (by judgment, order or settlement) and
    costs of legal, tax, regulatory or administrative proceedings, and/or
    litigation;
  • the Company’s ability to manage seasonal and other variability and to
    anticipate future business trends and needs;
  • disruptions in operations, including due to disruptions in supply
    chain, manufacturing or information technology systems, labor
    disputes, natural disasters and consolidation of our legal entities,
    supply chain, footprint and information technology systems;
  • restrictions imposed on the Company through its license agreements and
    credit facilities and changes in the manner in which the Company
    finances its debt and future capital needs, including potential
    acquisitions;
  • increasing dependency on information technology and the Company’s
    ability to protect against service interruptions, data corruption,
    cyber-based attacks or network security breaches, costs and timing of
    implementation and effectiveness of any upgrades or other changes to
    information technology systems, inability to control the quality or
    level of detail of financial data provided by third parties, and its
    failure to comply with any privacy or data security laws or to protect
    against theft of customer, employee and corporate sensitive
    information;
  • the Company’s ability to attract and retain key personnel, including
    during times of integration, transition and restructurings;
  • the distribution and sale by third parties of counterfeit and/or gray
    market versions of the Company’s products; and
  • other factors described elsewhere in this document and from time to
    time in documents that the Company files with the U.S. Securities and
    Exchange Commission (the “SEC”).

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 fiscal year ended June 30, 2017 and other
periodic reports the Company has filed and may file with the SEC from
time to time.

All forward-looking statements made in this release are qualified by
these cautionary statements. These forward-looking statements are made
only as of the date of this release, and the Company does not undertake
any obligation, other than as may be required by 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.

Contacts

Coty Inc.
Investor Relations
Kevin Monaco,
+1-212-389-6815
or
Media
Jennifer Friedman,
+1-917-754-8399

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