FY21 Results Above High End of Guidance
Accelerating Progress Across Each Pillar of Strategic Plan
Strong Momentum Into FY22, with Low Teens Sales Growth Expected
at Current FX Levels
Coty Inc. (NYSE: COTY) ("Coty" or "the Company") today announced
another quarter of improvement in its financial results and
demonstrated recovery across its operations for the fourth quarter
of fiscal year 2021, ended June 30, 2021.
In Q4, revenues increased 89.6%, or 80.7% LFL, lapping the peak
of COVID impact in the prior year, even as COVID-related
restrictions continued in many markets. As a result, Coty ended the
year with revenues of $4.63 billion, above the high end of its
$4.5-4.6 billion guidance range. While all regions returned to YoY
growth in Q4, the U.S. and China markets were standouts. The
Americas region grew 67% in Q4 and 6% in FY21, with the full year
performance driven by double-digit growth in U.S. prestige
products, and growth in Brazil and Canada. Asia Pacific grew 59% in
Q4, with China growing double digits on a quarterly and full-year
basis both year-on-year and versus FY19. EMEA sales more than
doubled in Q4, even as many markets remained under restrictions
through most of the quarter, with the consumer beauty brands
recording stable market share for the first time in over 5 years.
Underpinning the global momentum was the continued strength in
e-commerce, which grew nearly 19% in Q4 and 34% in FY21, resulting
in a high-teens e-commerce penetration for the year.
Coty's prestige brands sales more than doubled in Q4 and were
nearly flat LFL in FY21, even as the Company continued to reduce
sales in low quality channels, which represented a low teens
negative impact to prestige brand sales in Q4 and a high single
digit negative impact in FY21, relative to FY19. Nearly all
prestige brands were up double- to triple-digits, with standout
performance from Gucci, Marc Jacobs, Burberry, Calvin Klein, and
Chloe, supplemented with expansion in Coty's new growth engines,
prestige cosmetics and skincare.
In the mass channel, Coty continued to strengthen its consumer
beauty brands, reaching a key milestone with CoverGirl gaining
market share for three consecutive months, a first for the brand in
5 years. Building on this momentum, Coty launched the new brand
repositioning for Rimmel in June, followed by Max Factor in late
July. Coty's mass beauty revenues increased 37.9% LFL in Q4, with
growth across each region.
Over the course of the year, Coty also advanced on its strategic
pillar to become a beauty leader in sustainability. The Company
announced its partnership with Lanzatech, becoming the first
company in the fragrance industry to introduce sustainable ethanol,
created using carbon-capture technology, into its fragrance
products with the goal of having the majority of its fragrance
portfolio using carbon-captured ethanol by 2023. On the cosmetics
side, Coty has been leading with clean, vegan and cruelty-free
formulations across brands such as CoverGirl, Sally Hansen, and
Kylie Cosmetics. This has solidified Coty as the #2 player in clean
cosmetics, as tracked by U.S. Nielsen.
During the quarter, Coty continued to reduce its cost base, with
savings totaling approximately $70 million in the quarter. This
brought the FY21 savings to over $330 million, exceeding the
Company's initial plan for the year by over $100 million. Coty
remains on track to generate ~$600 million of savings by FY23, and
is identifying additional savings opportunities beyond FY23. At the
same time, Coty now expects one-time cash costs associated with the
cost savings program to come in approximately $100 million below
the original target, aided by the strong cash focus of the Company.
The company's efforts to drive gross margin expansion through a
combination of product and channel mix, COGS savings and improved
excess & obsolescence resulted in a reported and adjusted gross
margin of ~60% for the year, up ~200bps YoY and in line with FY19
levels on a Continuing Operations basis, despite a lower sales
base. The combination of gross margin expansion and accelerated
cost savings allowed Coty to deliver profitability above
expectations, while simultaneously reinvesting in the business.
Specifically, in Q4 working media investments increased
triple-digits versus last year and up over 30% versus 4Q19. At the
same time, Coty delivered FY21 reported operating loss of $48.6
million and an adjusted EBITDA $760.4 million, exceeding guidance
of ~$750 million and reflecting an adjusted EBITDA margin of 16.4%,
delivering over 300 bps of margin expansion versus FY19. Q4 EPS
totaled $(0.27) as reported and $(0.09) adjusted. The adjusted EPS
is impacted by non-operational items including deferred financing
fee write-offs, annual catch-up of tax expenses, and the impact of
the convertible preferred shares on the diluted EPS
calculation.
At the end of Q4, Financial Net Debt totaled approximately $5.2
billion. With an increase in the value of Coty's retained Wella
stake to approximately $1.26 billion1 at quarter-end, the Company's
Economic Net Debt totaled approximately $4.0 billion. During the
quarter, Coty successfully raised $900 million in secured notes in
April and €700 million in secured notes in June 2021, significantly
improving the maturity profile of its debt.
Commenting on the operating results, Sue Y. Nabi, Coty's CEO,
said:
"Today marks the completion of transformational year for Coty,
as we advance on our journey in strengthening Coty's position as a
global beauty powerhouse. Over the last 12 months, we have built a
leadership team of beauty and transformation experts, unveiled and
began executing on our multi-year strategy, completed the
divestiture Wella, significantly improved our leverage profile, and
over-delivered on our savings, revenue, and profit objectives.
We have ended the year on a high note, with Q4 sales nearly
doubling YoY. Sales in the Americas expanded in FY21, and we saw
particular strength in the U.S. and China. This a true testament
not only to the strength of our prestige brand portfolio, but also
to our innovation capabilities, with Marc Jacobs Perfect the best
performing U.S. fragrance launch in the industry over the last 3
years, Gucci Guilty Pour Homme and Burberry Her driving market
share gains for the beauty brands, and Chloe Atelier des Fleurs
solidifying its position as a leading ultra premium artisanal
fragrance collection.
At the same time, we made great strides on our objectives of
becoming a key player in prestige cosmetics and strengthening our
skincare portfolio. Gucci and Burberry makeup are already amongst
the Top 25 makeup brands in China overall only a couple of years
post launch, and Gucci makeup now ranks in the Top 10 within the
U.S. and Europe doors where it is present. We intend to capitalize
on this momentum in FY22, significantly expanding both our
distribution and assortment. On skincare, Lancaster is elevating
its visibility with Chinese consumers, with 3 branded counters
opening in Hainan in the last few months, while philosophy is
capitalizing on its Top 10 skincare position in the U.S. by leaning
into cleaner formulations and expanded distribution.
Finally, in our consumer beauty brands, we are clearly seeing
CoverGirl's transformation take hold with consumers, as the brand
gained market share for three consecutive months, for the first
time in 5 years. We are excited about the path ahead for Rimmel and
Max Factor, as the new brand positioning, communication and visuals
are being introduced now across European markets.
This operational and strategic progress was achieved without
sacrificing our financial delivery, with FY21 gross margins of 60%
back to FY19 levels and adjusted EBITDA margin of 16% up over 300
bps vs. FY19, setting the baseline for further expansion in the
coming years.
Importantly, with two months into the new FY22 year, I am
extremely encouraged by the momentum we are seeing across the
business. In the market, we are seeing strong fragrance demand
across the U.S. and China, some early signs of recovery in Europe
and Travel Retail, and improving cosmetics trends. And we are
capitalizing on this more favorable demand backdrop with a line-up
of strong launches in each core area of the business. In fragrances
we are already seeing very strong market reception for our launches
including Gucci Flora Gorgeous Gardenia with Miley Cyrus, Burberry
Hero with Adam Driver, Calvin Klein Defy with Richard Madden, and
Tiffany Rose Gold. And in cosmetics, the newly relaunched Kylie
cosmetics line is seeing great momentum on- and off-line in the
U.S. and across Europe, while Sally Hansen is once again disrupting
the nail market with its new concept, It Takes Two.
As we continue to make tangible progress in each of our focus
areas, I am more confident than ever in the growth and value
creation path in front of Coty."
*Adjusted financial metrics used in this
release are non-GAAP. See reconciliations of GAAP results to
Adjusted results in the accompanying tables.
1Based on fair market value, reflecting
the final Wella capital structure
Highlights
- 4Q21 net revenues increased 89.6% as reported and 80.7% LFL.
Despite COVID-related restrictions in certain markets during the
quarter, 4Q21 net revenue trends showed strong improvement across
all regions. For FY21, net revenues declined 2% as reported and
3.5% LFL, while showing sequential improvement through the
year
- 4Q21 reported operating income was $1.8 million, while the FY21
reported operating loss was $48.6 million
- 4Q21 adjusted operating income increased to $44.3 million from
an adjusted operating loss of $335.3 million.
- 4Q21 adjusted EBITDA of $127.3 million, increased significantly
from $(246.6) million last year, with an adjusted EBITDA margin of
12.0%
- FY21 adjusted EBITDA of $760.4 million exceeded our guidance of
$750 million, and was up from $174.6 million in FY20
- FY21 reported EPS of $(0.22) and adjusted EPS of $0.01,
significantly improving from $(0.48) in FY20
- 4Q21 cost reductions remained solid with an additional
approximately $70 million of reductions, bringing the FY21 total to
over $330 million
- 4Q21 free cash was neutral, improving from an outflow of $316.4
million last year through cost reductions and lower cash paid for
taxes, interest and capital projects.
- Financial Net Debt increased $121.4 million to $5,228.0 million
primarily due to FX headwinds and refinancing costs as Coty
significantly improved its debt maturity profile in 4Q21. Economic
Net Debt now $3,968.0 million at quarter end.
- Strong immediate liquidity of $2,323.2 million at end-quarter
and the Company is in compliance with our financial
covenants.
Outlook
Entering 1Q22, Coty continues to see fragrance market momentum
in U.S. and China, with some signs of recovery in EMEA and in
broader color cosmetics. The combination of this market backdrop
and Coty's strong launch calendar are fueling strong sales momentum
in 1Q22, with very strong double digit growth in July and August to
date. As a result, Coty expects 1Q22 LFL sales growth in the high
teens percentage.
With the base year comparisons getting more difficult in
subsequent quarters and some uncertainty in market conditions due
to the Delta variant of COVID, Coty is targeting FY22 LFL sales
growth in the low teens coupled with adjusted EBITDA of ~$900
million on a constant currency basis, reflecting strong EBITDA
margin expansion YoY. The Company continues to target leverage
moving towards 5x exiting CY21, and a further reduction in leverage
to approximately 4x exiting CY22.
Additional Updates
Considering the dynamism of the beauty market, Coty is always on
the lookout for opportunities to leverage its assets to create
value and fuel growth.
In order to support the growth of the Brazil business and Coty’s
personal care brands, Coty confirms that it is pursuing a partial
IPO of its Brazil business. Earlier today, Coty completed its first
filing at CVM - the Securities Commission which regulates capital
markets - in Brazil to commence this partial IPO process. If the
offering is successful, this will also help advance Coty’s
deleveraging agenda.
Coty intends to remain a controlling shareholder of the Brazil
affiliate.
Due to local Brazilian regulations, following its first filing
Coty cannot offer further details at this time but will provide
updates in due course. Additional information about the partial IPO
of the Brazil business can be accessed on the CVM website.
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:
- 4Q21 reported net revenues of $1,062.4 million increased 89.6%
year-over-year, including a positive foreign exchange (FX) impact
of 8.9%. LFL revenue increased 80.7%, driven by LFL increases in
the EMEA segment of 106.3%, the Americas of 67.2%, and Asia Pacific
of 58.7%. By channel, LFL sales increased 147.1% in prestige and
37.9% in mass, even as cuts in low quality channels impacted
prestige sales trends by a low teens percentage versus 2019.
- FY21 net revenues of $4,629.9 million decreased 1.9%
year-over-year, including a positive FX impact of 1.7%. LFL revenue
decreased 3.5%, driven by LFL decreases in EMEA of 10.1% and Asia
Pacific of 5.4%, partly offset an increase in the Americas of 5.5%.
By channel, LFL sales in prestige were nearly flat even as cuts in
low quality channels impacted prestige sales trends by a high
single digit percentage versus 2019, while mass LFL sales declined
6.9%.
Gross Margin:
- 4Q21 reported gross margin of 60.4% increased from 40.0% in the
prior-year period, while adjusted gross margin of 60.9% increased
from 40.6% in 4Q20. The increase was due to the year-over-year
improvement in volumes, revenue mix, and lower excess &
obsolescence.
- FY21 reported gross margin of 59.8% increased from 57.8% in the
prior-year period, while adjusted gross margin of 60.0% increased
from 58.1% in the prior year, primarily due revenue mix and lower
excess & obsolescence.
Operating Income and EBITDA:
- 4Q21 reported operating income of $1.8 million improved from a
reported operating loss of $920.5 million in the prior year due to
a $393.6 million reduction in asset impairment costs, $114.5
million reduction in restructuring and other business realignment
costs, a higher gross margin, lower SG&A expenses, and a $60.9
million reduction in acquisition and divestiture related
expenses.
- 4Q21 adjusted operating income of $44.3 million rose from a
loss of $335.3 million in the prior year, while the adjusted EBITDA
of $127.3 million improved from $(246.6) million in the prior year.
The $373.9 million increase was driven by a higher gross margin and
continued fixed cost reductions across both people and non-people
costs. For 4Q21, the adjusted operating margin increased 6,400 bps
to 4.2%, while the adjusted EBITDA margin increased 5,600 bps to
12.0%.
- FY21 reported operating loss of $48.6 million improved from a
reported operating loss of $1,236.5 million due primarily to a
reduction in restructuring and other business realignment cost, no
asset impairment costs, as well as lower media investments, fixed
cost expenses, and a higher gross margin. FY21 adjusted operating
income increased to $409.4 million from a loss of $161.7 million,
with a margin of 8.8%, while the adjusted EBITDA totaled $760.4
with a margin of 16.4%.
Net Income:
- 4Q21 reported net loss of $221.1 million improved from a net
loss of $696.2 million in the prior year, due to the aforementioned
increase in reported operating income, partially offset by higher
taxes and interest expense compared to the year-ago period.
- The 4Q21 adjusted net loss of $67.2 million compared to an
adjusted net loss of $353.7 million in the prior year period.
- FY21 reported net loss of $166.3 million improved from a net
loss of $1,100.4 million in the prior year. FY21 adjusted net
income of $9.6 million improved from an adjusted net loss of $364.2
million in the prior year.
Earnings Per Share (EPS) - diluted:
- 4Q21 reported loss per share of $(0.29) improved from a
reported loss per share of $(0.91) in the prior year.
- 4Q21 adjusted EPS of $(0.09) improved from $(0.46) in the prior
year. The Q4 adjusted EPS included approximately 2 cents of impact
from deferred financing fee write-offs following the refinancing
transactions in the quarter and 3 cents from the expensing of the
convertible preferred coupon based on accounting treatment during
periods of negative net income.
- FY21 reported loss per share of $(0.22) improved from a
reported net loss per share of $(1.45) in the prior year.
- FY21 adjusted EPS of $0.01 increased from $(0.48) in the prior
year.
Operating Cash Flow:
- 4Q21 cash provided by operations of $32.3 million improved from
$(255.4) million in the prior-year period, primarily reflecting an
increase in net income on a cash basis partially offset by working
capital declines. Year-to-date operating cash flow totaled $318.7
million, an increase of $369.6 million from the same period of the
prior year.
- 4Q21 free cash flow of $2.1 million improved from a free cash
outflow of $316.4 million in the prior year driven by the increase
in operating cash flow of $287.7 million coupled with a $30.8
million reduction in capex. FY21 free cash flow of $144.8 million
increased from a free cash outflow of $318.3 million in the prior
year.
Financial Net Debt:
- Financial Net Debt of $5,228.0 million on June 30, 2021
increased from $5,106.6 million on March 31, 2021, driven primarily
by negative FX impact.
Immediate Liquidity:
- Coty ended 4Q21 with $253.5 million in cash and cash
equivalents, and immediate liquidity of $2,323.2
million.
Fourth Quarter Business Review by
Segment
Americas
In 4Q21, Americas net revenues of $447.2 million or 42% of Coty
sales, increased by 68.9% versus the prior year. On a LFL basis,
Americas net revenues increased by 67.2%. Prestige brand sales
generated very strong growth, increasing in the triple-digits with
robust performance across fragrances, cosmetics, and skincare.
Meanwhile, mass beauty product sales also delivered solid growth,
up strong double-digits, as color cosmetics began to show
improvement during the quarter. For FY21, Americas net revenues of
$1,866.9 million rose 5.4% versus the prior year and increased 5.5%
LFL.
During 4Q21, Coty's U.S. prestige fragrance brands continued to
generate very robust sell-out growth. Performance was particularly
strong at Marc Jacobs, Gucci, Hugo Boss, and Burberry. Marc Jacobs
continued to deliver very strong sell-out growth, up triple-digits
versus last year in June, making it the fastest growing top 10
luxury fragrance brand, which was driven by continued strength of
Marc Jacobs Perfect. Encouragingly, Marc Jacobs Perfect is the #1
launch in the U.S. market in the past 3 years* and the best Coty
launch since 2005. Meanwhile, Burberry Her continued to excel
during the quarter, with triple-digit sell-out growth. Similar to
recent quarters, Gucci fragrance and cosmetic sell-out continues to
be very strong. Within fragrances, the performance was led by Gucci
Guilty Pour Homme, which is now the #5 male fragrance in the
market. For cosmetics, Gucci delivered another quarter of
triple-digit sell-out growth.
Within mass beauty brands, cosmetics and fragrances started to
show improvement during 4Q21, though both categories remained below
2019 levels. However, the Company had encouraging results in its
strategy of stabilizing the performance of its mass brands. In
particular, CoverGirl gained nearly 1 point of share during the
quarter. This performance was supported by the recent Lash Blast
Clean launch, which delivered very strong sell-out in the quarter,
outperforming the overall clean market and becoming the #11 mascara
in the total U.S. market. In addition, Simply Ageless has also
generated strong sell-out performance, with all top customers
seeing double-digit growth for 3 consecutive months. Meanwhile,
Sally Hansen also continued to gain market share in the U.S., with
sell-out also remaining solidly up versus 2019 levels.
E-commerce sales increased 36% in Q4, despite lapping a
difficult comparison last year. For FY21, e-commerce growth
remained over 60% fiscal year-to-date. Fiscal year-to-date,
e-commerce penetration is in the low double-digits, up a
mid-single-digit percent from last year.
The Americas segment generated a reported operating loss of
$18.8 million in 4Q21, compared to a reported operating loss of
$128.5 million in the prior year. The 4Q21 adjusted operating
income was $8.0 million, increased from an adjusted operating loss
of $102.9 million in the prior year, driven by gross margin
improvement and strong fixed cost reduction. The 4Q21 reported
operating margin was (4.2%) and the adjusted operating margin was
1.8% versus (38.9)% in the prior year. Adjusted EBITDA for the
Americas segment increased to $47.6 from $(58.8) in the prior year,
with a margin of 10.6%. FY21 reported operating income of $36.5
million compared to a reporting operating loss of $164.8 million in
the prior year. The FY21 adjusted operating income was $141.5
million versus $(89.5) million in the prior year. Adjusted EBITDA
in FY21 was $301.1 million compared to $56.1 million in the prior
year.
*Source: The NPD Group, Inc. / U.S.
Prestige Beauty Total Measured Market, Fragrance Brand Launch
Sales, July-June 2018, 2019, 2020
EMEA
In 4Q21, EMEA net revenues of $471.4 million, or 44% of Coty
sales, increased by 123.4% versus the prior year. On a LFL basis,
EMEA net revenues increased 106.3%. Despite COVID-related
restrictions impacting many markets during the quarter, sales
trends for both prestige and mass brands showed strong improvement,
up triple-digits and double-digits, respectively. For FY21, EMEA
net revenues of $2,183.7 million declined 5.4% reported from the
prior year and 10.1% LFL.
EMEA prestige sales performance was led by Hugo Boss Bottled,
Marc Jacobs Perfect. Meanwhile, Gucci Beauty continued its strong
performance in the quarter, and remains in the top 5 makeup brands
in the stores where its present in many key markets including
France, Italy, and Russia. In the mass beauty channel, sell-out
trends meaningfully improved during the quarter. Encouragingly,
Coty commenced the repositioning of Rimmel towards the end of the
quarter in June, with the brand holding its #1 position in the UK
makeup market and achieving its highest market share in 10
consecutive months. More recently, Coty began the re-positioning of
Max Factor earlier this month.
4Q21 EMEA e-commerce sales grew over 20% in 4Q. FY21 e-commerce
penetration as a percentage of sales was in the high-teens
percentage level, with strong growth in both prestige and mass.
Reported operating income was $0.1 million in 4Q21 versus
reported operating loss of $318.0 million in the prior year. The
4Q21 adjusted operating income of $29.4 million increased from an
adjusted operating loss of $182.4 million in the prior year, driven
by a higher gross margin, and solid fixed cost reductions. For
4Q21, the reported operating margin was neutral and the adjusted
operating margin increased to 6.2% from (86.4)% in the prior year.
During the quarter, adjusted EBITDA increased to $63.8 million from
$(150.7) million in the prior year, with a margin of 13.5%. For
FY21, reported operating income increased to $129.8 million from a
reported operating loss of $(248.4) million in the prior year. The
FY21 adjusted operating income of $251.9 million increased from an
adjusted operating loss of $(18.0) million in the prior year. For
the year, adjusted EBITDA increased to $400.2 million from $124.2
million in the prior year.
Asia Pacific
4Q21 Asia Pacific net revenues of $143.8 million, or 14% of Coty
sales, increased 70.0% on a reported basis and rose 58.7% LFL. The
robust LFL performance was largely fueled by strong trends within
Coty's prestige brands, including triple-digit prestige growth in
China. For FY21, Asia Pacific net revenues of $579.3 million
declined 0.6% as reported and 5.4% LFL from the prior year.
In China, Coty continued to see very strong, near triple-digit,
sell-out performance of its prestige beauty brands in both the
brick & mortar and e-commerce channels. During 4Q21, Coty
outperformed the prestige beauty market in China, and gained 1 rank
to become the #9 prestige beauty company. Similar to recent
quarters, Burberry and Gucci have delivered particularly strong
performance, double- to triple-digit-sell-out growth in the
quarter. Moreover, both brands continue to see very strong momentum
within their prestige cosmetics products, both of which are in the
top 25 prestige make-up brands in China.
E-commerce generated very strong growth, increasing at a
triple-digit rate during 4Q21, with FY21 penetration in the
low-teens.
Reported operating loss in 4Q21 of $2.3 million increased from a
reported operating loss of $56.7 million in the prior year. The
4Q21 adjusted operating income of $3.3 million increased from an
adjusted operating loss of $50.4 million in the prior year, driven
by a higher gross margin coupled with reduced fixed costs. The 4Q21
reported operating margin was (1.6%) and the adjusted operating
margin of 2.3% increased from (59.6)% in the prior year. For 4Q21,
adjusted EBITDA improved to $15.9 from $(37.1) in the prior year,
with a margin of 11.1%. For FY21, reported operating loss of $13.2
million improved from a reported operating loss of $74.0 million in
the prior year. The adjusted operating income for FY21 was $10.9
million as compared to an adjusted operating loss of $49.0 million
in the prior year. The FY21 adjusted EBITDA increased to $59.1
million from $(6.5) million in the prior year.
Fourth Quarter Fiscal 2021 Business
Review by Channel
Prestige
- During the quarter, prestige net revenues of $570.2 million, or
53.7% of Coty sales, increased 159.9% as reported and increased
147.1% LFL. This was driven by an improvement in sales trends
across regions, particularly the U.S, driving the Americas region
to very strong triple-digit revenue growth. The EMEA region
delivered triple-digit growth as well, with positive momentum
across many key markets, despite COVID-related lockdowns remaining
in place for much of the quarter. Encouragingly, China also
continued to generate robust growth, increasing triple-digits in
the quarter, and up versus 4Q19. By brand, Gucci, Marc Jacobs,
Burberry, Calvin Klein, and Chloe were stand-outs in the
quarter.
- During 4Q21, Coty continued to execute on its newest pillars of
growth: expanding its presence in prestige skincare, prestige
cosmetics, and China. In U.S. prestige skincare, philosophy is the
fastest growing skincare brand on Amazon. Importantly, the
repositioning has commenced with additional milestones planned in
1H22. Within prestige cosmetics, Gucci Beauty and Burberry continue
to see very strong trends with triple-digit sell-out growth in the
U.S. and Asia Pacific.
- In FY21, prestige net revenues of $2,718.6 million, or 58.7% of
Coty sales, increased 4.3% as reported, but declined (0.9)%
LFL.
- Prestige e-commerce sales grew 37% in FY21, representing a mid
20s penetration rate of Prestige sales for FY21.
Mass
- During 4Q21 sales trends improved as COVID-related
restrictions, including mask wearing, continued to ease globally.
In 4Q21, mass net revenues of $492.0 million, or 46.3% of Coty
continuing operations, increased 44.4% as reported and increased
37.9% LFL. The rebound in mass channel sales was primarily driven
by the EMEA and Americas regions, which were up strongly
double-digits. Meanwhile Asia Pacific increased, albeit at a slower
pace.
- Importantly, Coty remained focused on stabilizing its mass
beauty sales. CoverGirl, the first mass brand repositioned,
delivered very strong performance during 4Q21 as the brand gained
market share for three consecutive months, with the brand
outperforming the U.S. color cosmetics markets during the quarter.
In addition, Coty began the repositioning of Rimmel towards the
very end of 4Q21, with promising early results as the brand has
achieved its highest market share in 10 consecutive months in the
U.K. Moreover, the re-positioning of Max Factor has recently
begun.
- In FY21, mass net revenues of $1,910.7 million, or 41.3% of
Coty sales, decreased 9.5% as reported and 6.9% LFL.
- Mass e-commerce sales increasing 25% in FY21 and represented a
high-single-digit percent of Mass sales.
Noteworthy Company
Developments
Other noteworthy company developments include:
- On April 21, 2021, Coty completed the issuance of $900 million
of 5.000% senior secured notes due in 2026. The offering was
upsized to $900 million from the initial expectation of $750
million due to very strong demand. The proceeds are net leverage
neutral and have been used to partially paydown FY23 term loans,
resulting in reduced refinancing risk.
- On May 26, 2021, Coty announced the appointment of Andrew
Stanleick as CEO of Kylie Jenner Beauty Brands. Mr. Stanleick will
also manage Kim Kardashian West's business for Coty, with a focus
for both brands on driving global expansion and entry into new
beauty categories. Mr. Stanleick will also maintain his role as
Coty EVP Americas.
- On June 9, 2021, Coty completed the issuance of €700 million of
3.875% senior secured notes due in 2026. The offering was upsized
to €700 million from the initial expectation of €500 million due to
very strong demand. The proceeds are net leverage neutral and have
been used to partially paydown FY23 term loans, further reducing
refinancing risk.
- On June 25, 2021, Coty announced Richard Jones to step down
from his role as Chief Supply Officer and Head of R&D. Coty
intends to separate these roles into two positions, appointing an
expert leader over each of Supply Chain and R&D. These new
appointments will be announced in due course. In the interim,
current Coty leaders will be assuming these responsibilities.
- On July 1, 2021, Coty announced the relaunch of Kylie Cosmetics
with new and improved clean and vegan formulas, along with
refreshed packaging. Consumers can now shop the brand globally
through select brick and mortar retailers and a new
direct-to-consumer website that offers access to both Kylie's
cosmetics and skincare brands.
- On July 12, 2021, Coty announced the introduction of a
digitally-enabled touch-less fragrance testing device intended for
use at beauty retailers within the next 12 months. Real world
testing of the units at brick & mortar retail stores began in
July in key European markets, followed by a planned trial in Asia
later this year.
- On July 22, 2021, Coty announced the appointment of Constantin
Sklavenitis to the role of Chief Prestige Brands Officer, effective
September 6, 2021. Mr. Sklavenitis will be overseeing all prestige
brands, and be responsible for one of Coty's strategic growth
pillars, namely to become a key player in Prestige make-up and
expand in skincare.
Conference Call
Coty Inc. will host a conference call at 8:00 a.m. (ET) today,
August 26, 2021 to discuss its results. The dial-in number for the
call is (800) 895-3361 in the U.S. or (785) 424-1062
internationally (conference passcode number: COTY4Q21). The live
audio webcast and presentation slides will be available at
http://investors.coty.com. The conference call will be available
for replay.
About Coty Inc.
Coty is one of the world’s largest beauty companies with an
iconic portfolio of brands across fragrance, color cosmetics, and
skin and body care. Coty is the global leader in fragrance, and
number three in color cosmetics. Coty’s products are sold in over
130 countries around the world. 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 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
impact of COVID-19 and potential recovery scenarios, strategic
planning, targets, segment reporting and outlook for future
reporting periods (including the extent, timing and concentration
of revenue, expense and profit trends and changes in operating cash
flows and cash flows from operating activities and investing
activities, and expected drivers of sales and profitability in
future periods), the impact of the sale of the Wella Business and
the related transition services (the “Wella TSA”), the Company’s
future operations and strategy (including the expected
implementation and related impact of its strategic priorities),
ongoing and future cost efficiency, optimization and restructuring
initiatives and programs, strategic transactions (including their
expected timing and impact), plans with respect to opportunities to
leverage assets including through public offerings, the Company’s
capital allocation strategy and payment of dividends (including
suspension of dividend payments and the duration thereof and any
plans to resume cash dividends on common stock or to continue to
pay dividends in cash on preferred stock), investments, licenses
and portfolio changes, product launches, relaunches or rebranding
(including the expected timing or impact thereof) synergies,
savings, performance, cost, timing and integration of acquisitions
and investments, including the strategic partnership with Kylie
Jenner and the strategic partnership with Kim Kardashian West,
future cash flows, liquidity and borrowing capacity, timing and
size of cash outflows and debt deleveraging, future debt covenant
compliance, the timing and extent of any future impairments, and
synergies, savings, impact, cost, timing and implementation of the
Company’s comprehensive transformation agenda (the "Transformation
Plan"), including operational and organizational structure changes,
operational execution and simplification initiatives, cost
reductions, supply chain changes, e-commerce and digital
initiatives, and the priorities of senior management. These
forward-looking statements are generally identified by words or
phrases, such as “anticipate”, “are going to”, “estimate”, “plan”,
“project”, “expect”, “believe”, “intend”, “foresee”, “forecast”,
“will”, “may”, “should”, “outlook”, “continue”, “temporary”,
“target”, “aim”, “potential”, “goal” and similar words or phrases.
These statements are based on certain assumptions and estimates
that we consider reasonable, but are subject to a number of risks
and uncertainties, many of which are beyond our control, which
could cause actual events or results (including our financial
condition, results of operations, cash flows and prospects) to
differ materially from such statements, including risks and
uncertainties relating to:
- the 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 availability and widespread distribution of a safe and
effective vaccine, 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, the extent that
government funding and reimbursement programs in connection with
COVID-19 are available to the Company, and the ability to
successfully implement measures to respond to such impacts;
- the Company’s ability to successfully implement its multi-year
Transformation Plan, including its management realignment,
reporting structure changes, operational and organizational
changes, and the initiatives to further reduce the Company’s cost
base, and to develop and achieve its global business strategies
(including mix management, select price increases, more disciplined
promotions, and foregoing low value sales), 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 innovation
performance in prestige and mass channels, strengthening its
positions in core markets, accelerating its digital and e-commerce
capabilities, building on its skincare portfolio, and expanding its
presence in China) 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
business, 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;
- 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 Transformation Plan, the
Wella TSA, the integration of the King Kylie transaction and the
KKW transaction, opportunities to leverage assets including through
public offerings, 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, 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, and specifically in connection with the strategic
partnerships with Kylie Jenner and Kim Kardashian West, 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 affect KKW
Holdings, LLC’s (“KKW Holdings”) business or products, including
risk that direct selling laws and regulations may be modified,
interpreted or enforced in a manner that results in a negative
impact to KKW Holdings’ business model, revenue, sales force or
business;
- 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
its common stock, the Company’s stock dividend reinvestment
program;
- 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;
- 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;
- 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 Brexit (and related
business or market disruption), the current U.S. administration and
recent election, changes in the U.S. tax code, and recent changes
and future changes in tariffs, retaliatory or trade protection
measures, trade policies and other international trade regulations
in the U.S., the European Union and Asia and in other regions where
the Company operates;
- currency exchange rate volatility and currency
devaluation;
- 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 litigation relating to the tender offer by Cottage Holdco
B.V. (the “Cottage Tender Offer”) and product liability cases
(including asbestos and talc-related litigation for which
indemnities and/or insurance are not available), and litigation or
investigations relating to the strategic partnerships with Kylie
Jenner and Kim Kardashian West;
- the Company’s ability to manage seasonal factors and other
variability and to anticipate future business trends and
needs;
- disruptions in operations, sales and in other areas, including
due to disruptions in our supply chain, restructurings and other
business alignment activities, the Wella Transaction and related
carve-out and transition activities, manufacturing or information
technology systems, labor disputes, extreme weather and natural
disasters, impact from COVID-19 or similar global public health
events, 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;
- restrictions imposed on the Company through its license
agreements, credit facilities and senior unsecured bonds or other
material contracts, its ability to generate cash flow to repay,
refinance or recapitalize debt and otherwise comply with its debt
instruments, and changes in the manner in which the Company
finances its debt and future capital needs;
- increasing dependency on information technology, including as a
result of remote working 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 the Brazil General Data
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 Transformation Plan as well as the Wella
Transaction on the Company’s relationships with key customers and
suppliers and certain material contracts;
- 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 affiliates KKR
Rainbow Aggregator L.P. and KKR Bidco are respectively a
significant stockholder in Coty and an investor in the Wella
Business, and any related conflicts of interest or litigation;
- future sales of a significant number of shares by the Company’s
majority stockholder or the perception that such sales could occur;
and
- other factors described elsewhere in this document and in
documents that the Company files with the SEC from time to
time.
When used herein, the term “includes” and “including” means,
unless the context otherwise indicates, “including without
limitation”. More information about potential risks and
uncertainties that could affect the Company’s business and
financial results is included under the heading “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in the Company’s Quarterly Report on Form
10-Q for the period ended March 31, 2021 and annual report on Form
10-K for the year ended June 30, 2021 and other periodic reports
the Company has filed and may file with the SEC from time to
time.
All forward-looking statements made in this release are
qualified by these cautionary statements. These forward-looking
statements are made only as of the date of this release, and the
Company does not undertake any obligation, other than as may be
required by applicable law, to update or revise any forward-looking
or cautionary statements to reflect changes in assumptions, the
occurrence of events, unanticipated or otherwise, or changes in
future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance unless expressed as such, and should only be viewed as
historical data.
Non-GAAP Financial
Measures
The Company operates on a global basis, with the majority of net
revenues generated outside of the U.S. Accordingly, fluctuations in
foreign currency exchange rates can affect results of operations.
Therefore, to supplement financial results presented in accordance
with GAAP, certain financial information is presented excluding the
impact of foreign currency exchange translations to provide a
framework for assessing how the underlying businesses performed
excluding the impact of foreign currency exchange translations
(“constant currency”). Constant currency information compares
results between periods as if exchange rates had remained constant
period-over-period, with the current period’s results calculated at
the prior-year period’s rates. The Company calculates constant
currency information by translating current and prior-period
results for entities reporting in currencies other than U.S.
dollars into U.S. dollars using constant foreign currency exchange
rates. The constant currency calculations do not adjust for the
impact of revaluing specific transactions denominated in a currency
that is different to the functional currency of that entity when
exchange rates fluctuate. The constant currency information
presented may not be comparable to similarly titled measures
reported by other companies. The Company discloses the following
constant currency financial measures: net revenues, like-for-like
(LFL) net revenues, adjusted gross profit and adjusted operating
income.
The Company presents period-over-period comparisons of net
revenues on a constant currency basis as well as on an (LFL) basis.
The Company believes that (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 (LFL) period-over-period, see
the table entitled “Reconciliation of Reported Net Revenues to
Like-For-Like Net Revenues”.
The Company presents operating income, operating income margin,
gross profit, gross margin, effective tax rate, net income, net
income margin, net revenues, EBITDA, and EPS (diluted) on a
non-GAAP basis and specifies that these measures are non-GAAP by
using the term “adjusted” (collectively the Adjusted Performance
Measures). The reconciliations of these non-GAAP financial measures
to the most directly comparable financial measures calculated and
presented in accordance with GAAP are shown in tables below. These
non-GAAP financial measures should not be considered in isolation
from, or as a substitute for or superior to, financial measures
reported in accordance with GAAP. Moreover, these non-GAAP
financial measures have limitations in that they do not reflect all
the items associated with the operations of the business as
determined in accordance with GAAP. Other companies, including
companies in the beauty industry, may calculate similarly titled
non-GAAP financial measures differently than we do, limiting the
usefulness of those measures for comparative purposes.
Adjusted operating income/Adjusted EBITDA from continuing
operations excludes restructuring costs and business structure
realignment programs, amortization, acquisition- and
divestiture-related costs and acquisition accounting impacts, asset
impairment charges and other adjustments as described below. For
adjusted EBITDA, in addition to the preceding, we adjust for
non-cash stock-based compensation expense and depreciation. 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 implement divestitures of
components of our business, and fluctuate based on specific facts
and circumstances. Additionally, Adjusted net income attributable
to Coty Inc. and Adjusted net income attributable to Coty Inc. per
common share are adjusted for certain interest and other (income)
expense as described below and the related tax effects of each of
the items used to derive Adjusted net income as such charges are
not used by our management in assessing our operating performance
period-to-period.
Adjusted Performance Measures reflect adjustments based on the
following items:
- Costs related to acquisition and divestiture activities: The
Company excludes 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
excludes 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, management
believes that the adjustment of these items supplement the GAAP
information with a measure that can be used to assess the
sustainability of the Company’s operating performance.
- Asset impairment charges: The Company excludes 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 supplement the GAAP information with a
measure that can be used to assess the sustainability of our
operating performance.
- Amortization expense: We have 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
supplement 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.
- Loss/(Gain) on divestitures: The Company excludes the impact of
Loss/(gain) on divestitures as such amounts are inconsistent in
amount and frequency and are significantly impacted by the size of
divestitures. Our management believes that the adjustment of these
items supplement the GAAP information with a measure that can be
used to assess the sustainability of our operating
performance.
- Non-cash stock-based compensation: Although non-cash
stock-based compensation is a key incentive offered to our
employees, we have excluded the effect of these expenses from the
calculation of adjusted EBITDA. This is primarily due to their
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: We have excluded
adjusted depreciation from our adjusted operating income and
depreciation from our adjusted EBITDA. We have excluded from
depreciation the impact of accelerated depreciation for costs
related to certain restructuring projects that impacts the expected
useful lives of Property, Plant and Equipment as such charges vary
significantly based on the size and timing of the programs. Our
management believes that the adjustment of these items supplement
the GAAP information with a measure that can be used to assess the
sustainability of our operating performance.
- Interest (income) expense: We have excluded debt financing
transaction costs, including deferred financing fee write-offs and
similar costs, as the nature and amount of such charges are not
consistent and are significantly impacted by the timing and size of
such transactions.
- Other (income) expense: We have excluded the impact of costs
incurred for legal and advisory services rendered in connection
with the tender offer that was in fiscal 2019 initiated by certain
of our shareholders. Additionally, we have excluded the write-off
of deferred financing fees and discounts that resulted from the pay
down of our term debt from the proceeds of the Wella sale, due to
the requirements of the 2018 Coty Credit Agreement, as amended. Our
management believes these costs do not reflect our underlying
ongoing business, and the adjustment of such costs helps investors
and others compare and analyze performance from period to period.
We have also 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.
- Loss on early extinguishment of debt: We have excluded loss on
extinguishment of debt as this represents a non-cash charge, and
the amount and frequency of such charges is not consistent and is
significantly impacted by the timing and size of debt financing
transactions.
- 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
non-controlling interest percentage.
- Tax: This adjustment represents the impact of the tax effect of
the pretax items excluded from Adjusted net income. The tax impact
of the non-GAAP adjustments is based on the tax rates related to
the jurisdiction in which the adjusted items are received or
incurred. Additionally, adjustments are made for the tax impact of
any intra-entity transfer of assets and liabilities.
The Company has provided a quantitative reconciliation of the
difference between the non-GAAP financial measures and the
financial measures calculated and reported in accordance with GAAP.
For a reconciliation of adjusted gross profit to gross profit,
adjusted EPS (diluted) to EPS (diluted), and adjusted net revenues
to net revenues, see the table entitled “Reconciliation of Reported
to Adjusted Results for the Consolidated Statements of Operations.”
For 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 -
COTY INC.
SUPPLEMENTAL SCHEDULES
INCLUDING NON-GAAP FINANCIAL MEASURES
RESULTS AT A GLANCE
Three Months Ended June 30,
2021
Year Ended June 30,
2021
(in millions, except per share data)
Change YoY
Change YoY
CONTINUING OPERATIONS
Reported Basis
(LFL)
Reported Basis
(LFL)
Net revenues
$
1,062.4
90
%
81
%
$
4,629.9
(2
%)
(4
%)
Operating income (loss) - reported
1.8
>100
%
(48.6
)
96
%
Operating income - adjusted*
44.3
>100
%
409.4
>100
%
EBITDA - adjusted
127.3
>100
%
760.4
>100
%
Net (loss) attributable to common
shareholders - reported**
(221.1
)
68
%
(166.3
)
85
%
Net income (loss) attributable to common
shareholders - adjusted* **
(67.2
)
81
%
9.6
>100
%
EPS attributable to common shareholders
(diluted) - reported
$
(0.29
)
68
%
$
(0.22
)
85
%
EPS attributable to common shareholders
(diluted) - adjusted*
$
(0.09
)
80
%
$
0.01
>100
%
COTY, INC.
Net (loss) attributable to common
shareholders - reported **
(210.2
)
73
%
(303.6
)
70
%
Net (loss) income attributable to common
shareholders - adjusted* **
(67.2
)
83
%
152.6
>100
%
EPS attributable to common shareholders
(diluted) - reported
$
(0.27
)
73
%
$
(0.40
)
70
%
EPS attributable to common shareholders
(diluted) - adjusted*
$
(0.09
)
82
%
$
0.20
>100
%
* 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. 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.
** Net income (loss) for Continuing
Operations and Coty Inc. are net of the Convertible Series B
Preferred Stock dividends.
FOURTH QUARTER BY SEGMENT (CONTINUING OPERATIONS)
Three Months Ended June
30,
Net Revenues
Change
Reported Operating Income
(Loss)
Adjusted Operating Income
(Loss)
(in millions)
2021
2020
Reported Basis
LFL
2021
Change
Margin
2021
Change
Margin
Americas
$
447.2
$
264.8
69
%
67
%
$
(18.8
)
85
%
(4.2
%)
$
8.0
>100
%
1.8
%
EMEA
471.4
211.0
>100
%
>100
%
0.1
>100
%
0.0
%
29.4
>100
%
6.2
%
Asia Pacific
143.8
84.6
70
%
59
%
(2.3
)
96
%
(1.6
%)
3.3
>100
%
2.3
%
Other
—
—
—
%
—
%
—
N/A
N/A
—
N/A
N/A
Corporate
—
—
—
%
—
%
22.8
>100
%
N/A
3.6
>100
%
N/A
Total
$
1,062.4
$
560.4
90
%
81
%
$
1.8
>100
%
0.2
%
$
44.3
>100
%
4.2
%
Year Ended June 30,
Net Revenues
Change
Reported Operating Income
(Loss)
Adjusted Operating Income
(Loss)
(in millions)
2021
2020
Reported Basis
LFL
2021
Change
Margin
2021
Change
Margin
Americas
$
1,866.9
$
1,771.0
5
%
6
%
$
36.5
>100
%
2.0
%
$
141.5
>100
%
7.6
%
EMEA
2,183.7
2,308.6
(5
%)
(10
%)
129.8
>100
%
5.9
%
251.9
>100
%
11.5
%
Asia Pacific
579.3
582.7
(1
%)
(5
%)
(13.2
)
82
%
(2.3
%)
10.9
>100
%
1.9
%
Other
—
55.5
(100
%)
0
%
—
100
%
N/A
—
100
%
N/A
Corporate
—
—
—
—
(201.7
)
73
%
N/A
5.1
>100
%
N/A
Total
$
4,629.9
$
4,717.8
(2
%)
(4
%)
$
(48.6
)
96
%
(1.0
%)
$
409.4
>100
%
8.8
%
Adjusted EBITDA
Three Months Ended June
30,
Year Ended June 30,
(in millions)
2021
2020
2021
2020
Americas
$
47.6
$
(58.8
)
$
301.1
$
56.1
EMEA
63.8
(150.7
)
400.2
124.2
Asia Pacific
15.9
(37.1
)
59.1
(6.5
)
Other
—
—
—
0.8
Total
$
127.3
$
(246.6
)
$
760.4
$
174.6
FOURTH QUARTER FISCAL 2021 BY CHANNEL
Continuing Operations
Three Months Ended June
30,
Year Ended June 30,
Net Revenues
Change
Net Revenues
Change
(in millions)
2021
2020
Reported Basis
(LFL)
2021
2020
Reported Basis
(LFL)
Prestige
$
570.2
$
219.4
160
%
147
%
$
2,718.6
$
2,606.4
4
%
(1
)%
Mass
492.0
340.7
44
%
38
%
1,910.7
2,111.0
(10
)%
(7
)%
Corporate
0.2
0.3
N/M
N/M
0.6
0.4
N/M
N/M
Total
$
1,062.4
$
560.4
90
%
81
%
$
4,629.9
$
4,717.8
(2
)%
(4
)%
COTY INC. &
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
Three Months Ended June
30,
Year Ended June 30,
(in millions, except per share data)
2021
2020
2021
2020
Net revenues
$
1,062.4
$
560.4
$
4,629.9
$
4,717.8
Cost of sales
421.1
336.2
1,861.7
1,991.2
as % of Net revenues
39.6
%
60.0
%
40.2
%
42.2
%
Gross profit
641.3
224.2
2,768.2
2,726.6
Gross margin
60.4
%
40.0
%
59.8
%
57.8
%
Selling, general and administrative
expenses
592.7
638.9
2,363.2
3,120.0
as % of Net revenues
55.8
%
114.0
%
51.0
%
66.1
%
Amortization expense
61.8
62.5
251.2
233.1
Restructuring costs
(26.1
)
4.7
63.6
130.2
Acquisition-and divestiture- related
costs
11.1
72.0
138.8
157.3
Asset impairment charges
—
393.6
—
434.0
Loss (gain) on divestitures
—
(27.0
)
—
(111.5
)
Operating income (loss)
1.8
(920.5
)
(48.6
)
(1,236.5
)
as % of Net revenues
0.2
%
(164.3
%)
(1.0
%)
(26.2
%)
Interest expense, net
63.5
57.4
235.1
242.7
Other ( income) expense, net
6.8
(15.6
)
(43.9
)
(11.6
)
Loss from continuing operations before
income taxes
(68.5
)
(962.3
)
(239.8
)
(1,467.6
)
as % of Net revenues
(6.4
%)
(171.7
%)
(5.2
%)
(31.1
%)
Provision (benefit) for income taxes on
continuing operations
132.9
(260.7
)
(172.0
)
(377.7
)
Net loss from continuing
operations
(201.4
)
(701.6
)
(67.8
)
(1,089.9
)
as % of Net revenues
(19.0
%)
(125.2
%)
(1.5
%)
(23.1
%)
Net income (loss) from discontinued
operations
10.9
(76.6
)
(137.3
)
87.2
Net loss
(190.5
)
(778.2
)
(205.1
)
(1,002.7
)
Net (loss) income attributable to
noncontrolling interests
(4.6
)
(4.8
)
(16.1
)
4.7
Net income (loss) attributable to
redeemable noncontrolling interests
0.1
(7.1
)
12.3
(0.7
)
Net loss attributable to Coty
Inc.
$
(186.0
)
$
(766.3
)
$
(201.3
)
$
(1,006.7
)
Amounts attributable to Coty
Inc.
Net loss from continuing
operations
$
(196.9
)
$
(689.7
)
$
(64.0
)
$
(1,093.9
)
Convertible Series B Preferred Stock
dividends
(24.2
)
(6.5
)
(102.3
)
(6.5
)
Net loss from continuing operations
attributable to common stockholders
$
(221.1
)
$
(696.2
)
$
(166.3
)
$
(1,100.4
)
Net income (loss) from discontinued
operations
10.9
(76.6
)
(137.3
)
87.2
Net loss attributable to common
stockholders
$
(210.2
)
$
(772.8
)
$
(303.6
)
$
(1,013.2
)
Net loss attributable to Coty Inc. per
common share:
Basic for Continuing Operations
$
(0.29
)
$
(0.91
)
$
(0.22
)
$
(1.45
)
Diluted for Continuing Operations(a)
$
(0.29
)
$
(0.91
)
$
(0.22
)
$
(1.45
)
Basic for Coty Inc
$
(0.27
)
$
(1.01
)
$
(0.40
)
$
(1.33
)
Diluted for Coty Inc.(a)
$
(0.27
)
$
(1.01
)
$
(0.40
)
$
(1.33
)
Weighted-average common shares
outstanding:
Basic
765.4
763.3
764.8
759.1
Diluted(a)
765.4
763.3
764.8
759.1
Depreciation - Continuing Operations
$
87.4
$
82.9
$
334.1
$
351.7
(a)
Diluted EPS is adjusted by the effect of
dilutive securities, including awards under our equity compensation
plans and the convertible Series B Preferred Stock. We use the
if-converted method for calculating any potential dilutive effect
of the convertible Series B Preferred Stock, which requires an
adjustment to reverse the impact of the preferred stock dividends,
including deemed dividends, of $24.2 million and $102.3 million on
income applicable to common stockholders during three and twelve
months ended June 30, 2021.
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 June 30,
2021
CONTINUING OPERATIONS
(in millions)
Reported (GAAP)
Adjustments(a)
Adjusted (Non-GAAP)
Net revenues
$
1,062.4
$
—
$
1,062.4
Gross profit
641.3
5.2
646.5
Gross margin
60.4
%
60.9
%
Operating (loss) income
1.8
42.5
44.3
as % of Net revenues
0.2
%
4.2
%
Net (loss) income
(221.1
)
153.9
(67.2
)
as % of Net revenues
(20.8
%)
(6.3
%)
Adjusted EBITDA
127.3
as % of Net revenues
12.0
%
COTY INC.
Net income (loss) attributable to Coty
Inc.
(210.2
)
143.0
(67.2
)
EPS (diluted)
$
(0.27
)
$
(0.09
)
Three Months Ended June 30,
2020
(in millions)
Reported (GAAP)
Adjustments(a)
Adjusted (Non-GAAP)
Discontinued Operations Adjusted
(Non-GAAP)
Net revenues
$
560.4
$
—
$
560.4
$
361.7
Gross profit
224.2
3.3
227.5
231.8
Gross margin
40.0
%
40.6
%
64.1
%
Operating (loss) income
(920.5
)
585.2
(335.3
)
16.9
as % of Net revenues
<(100
%)
(59.8
%)
4.7
%
Net (loss) income
(696.2
)
342.5
(353.7
)
(33.0
)
as % of Net revenues
<(100
%)
(63.1
%)
(9.1
%)
Adjusted EBITDA
(246.6
)
24.2
as % of Net revenues
(44.0
%)
6.7
%
COTY INC.
Net (loss) income attributable to Coty
Inc.
(772.8
)
386.1
(386.7
)
EPS (diluted)
$
(1.01
)
$
(0.51
)
(a) See “Reconciliation of Reported
Operating (Loss) Income 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 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.
Year Ended June 30,
2021
CONTINUING OPERATIONS
DISCONTINUED
OPERATIONS(b)
(in millions)
Reported (GAAP)
Adjustments(a)
Adjusted (Non-GAAP)
Adjusted (Non-GAAP)
Net revenues
$
4,629.9
$
—
$
4,629.9
$
986.3
Gross profit
2,768.2
8.3
2,776.5
663.8
Gross margin
59.8
%
60.0
%
67.3
%
Operating (loss) income
(48.6
)
458.0
409.4
220.2
as % of Net revenues
(1.0
%)
8.8
%
22.3
%
Net income (loss)
(166.3
)
175.9
9.6
143.0
as % of Net revenues
(3.6
%)
0.2
%
14.5
%
Adjusted EBITDA
760.4
222.4
as % of Net revenues
16.4
%
22.5
%
COTY INC.
Net loss (income) attributable to Coty
Inc.
(303.6
)
456.2
152.6
EPS (diluted)
$
(0.40
)
$
0.20
Year Ended June 30,
2020
(in millions)
Reported (GAAP)
Adjustments(a)
Adjusted (Non-GAAP)
Adjusted (Non-GAAP)
Net revenues
$
4,717.8
$
—
$
4,717.8
$
2,020.1
Gross profit
2,726.6
14.5
2,741.1
1,330.4
Gross margin
57.8
%
58.1
%
65.9
%
Operating (loss) income
(1,236.5
)
1,074.8
(161.7
)
323.1
as % of Net revenues
(26.2
%)
(3.4
%)
16.0
%
Net (loss) income
(1,100.4
)
736.2
(364.2
)
171.5
as % of Net revenues
(23.3
%)
(7.7
%)
8.5
%
Adjusted EBITDA
174.6
367.8
as % of Net revenues
3.7
%
18.2
%
COTY INC.
Net (loss) income attributable to Coty
Inc.
(1,013.2
)
820.5
(192.7
)
EPS (diluted)
$
(1.33
)
$
(0.25
)
(a) See “Reconciliation of Reported
Operating (Loss) Income to Adjusted Operated Income” and
“Reconciliation of Reported Net (Loss) Income to Adjusted Net
Income” for a detailed description of adjusted items.
(b) Discontinued operations for the fiscal
year 2021 includes activity only through November 30, 2020, the
date of the sale of the Wella Business.
RECONCILIATION OF REPORTED OPERATING
(LOSS) INCOME TO ADJUSTED OPERATING INCOME (LOSS) AND ADJUSTED
EBITDA
CONTINUING OPERATIONS
Three Months Ended June
30,
Year Ended June 30,
(in millions)
2021
2020
Change
2021
2020
Change
Reported Operating Income
(loss)
1.8
(920.5
)
>100
%
(48.6
)
(1,236.5
)
96
%
% of Net revenues
0.2
%
<(100
%)
(1.0
%)
(26.2
%)
Asset impairment charges (a)
—
393.6
(100
%)
—
434.0
(100
%)
Amortization expense (b)
61.8
62.5
(1
%)
251.2
233.1
8
%
Restructuring and other business
realignment costs (c)
(30.4
)
84.1
<(100
%)
68.0
361.9
(81
%)
Acquisition- and divestiture-related costs
(d)
11.1
72.0
(85
%)
138.8
157.3
(12
%)
Gain on divestitures (e)
—
(27.0
)
100
%
—
(111.5
)
100
%
Total adjustments to reported Operating
(loss) income
42.5
585.2
(93
%)
458.0
1,074.8
(57
%)
Adjusted Operating (loss)
income
$
44.3
$
(335.3
)
>100
%
$
409.4
$
(161.7
)
>100
%
% of Net revenues
4.2
%
(59.8
)%
8.8
%
(3.4
)%
Non-cash stock-based compensation (f)
0.8
6.2
(87
%)
25.2
2.0
>100
%
Adjusted depreciation (g)
82.2
82.5
0
%
325.8
334.3
(3
%)
Adjusted EBITDA
$
127.3
$
(246.6
)
>100
%
$
760.4
$
174.6
>100
%
% of Revenues
12.0
%
(44.0
%)
16.4
%
3.7
%
(a)
In the three months ended June 30, 2021,
we did not incur any asset impairment charges. In the three months
ended June 30, 2020, we incurred asset impairment charges of $393.6
primarily due to other indefinite-lived intangible assets in
Corporate, and goodwill in the EMEA segment.
In fiscal 2021, we did not incur any asset
impairment charges. In fiscal 2020, we incurred asset impairment
charges of $434.0 primarily due to other indefinite-lived
intangible assets in Corporate, and goodwill in the EMEA
segment.
(b)
In the three months ended June 30, 2021,
amortization expense of $26.8, $29.3 and $5.7 was reported in the
Americas, EMEA and Asia Pacific segments, respectively. In the
three months ended June 30, 2020, amortization expense of $25.6,
$30.6 and $6.3 was reported in the Americas, EMEA and Asia Pacific
segments, respectively.
In fiscal 2021, amortization expense of
$105.0, $122.1 and $24.1 was reported in the Americas, EMEA and
Asia Pacific segments, respectively. In fiscal 2020, amortization
expense of $75.3, $125.4, $25.0, and $7.4 was reported in the
Americas, EMEA, Asia Pacific and Other segments, respectively.
(c)
In the three months ended June 30, 2021,
we incurred restructuring and other business structure realignment
costs of $(30.4). We incurred restructuring costs of $(26.1)
primarily related to the Transformation Plan, included in the
Condensed Consolidated Statements of Operations; and business
structure realignment costs of $(4.3) primarily related to the
Transformation Plan and certain other programs. This amount
includes $(9.5) reported in selling, general and administrative
expenses, and $5.2 reported in cost of sales in the Condensed
Consolidated Statement of Operations. In the three months ended
June 30, 2020, we incurred restructuring and other business
structure realignment costs of $84.1. We incurred restructuring
costs of $4.7 primarily related to the Transformation Plan,
included in the Condensed Consolidated Statements of Operations;
and business structure realignment costs of $79.4 primarily related
to the Global Integration Activities and our Transformation Plan.
This amount includes $76.1 reported in selling, general and
administrative expenses, and $3.3 reported in cost of sales in the
Condensed Consolidated Statement of Operations.
In fiscal 2021, we incurred restructuring
and other business structure realignment costs of $68.0. We
incurred restructuring costs of $63.6 primarily for charges related
to the Transformation Plan, included in the Condensed Consolidated
Statements of Operations; and business structure realignment costs
of $4.4 primarily related to the Transformation Plan and certain
other programs. This amount includes $(3.9) reported in selling,
general and administrative expenses, and $8.3 reported in cost of
sales in the Condensed Consolidated Statement of Operations. In
fiscal 2020, we incurred restructuring and other business structure
realignment costs of $361.9. We incurred restructuring costs of
$130.2 primarily related to the Transformation Plan, included in
the Condensed Consolidated Statements of Operations; and business
structure realignment costs of $231.7 primarily related to our
Global Integration Activities and Transformation Plan. This amount
includes $217.2 reported in selling, general and administrative
expenses, and $14.5 reported in cost of sales in the Condensed
Consolidated Statement of Operations.
(d)
In the three months ended June 30, 2021,
we incurred acquisition and divestiture related costs of $11.1.
These costs were principally associated with the Wella Transaction.
In the three months ended June 30, 2020, we incurred acquisition
and divestiture related costs of $72.0.
In fiscal 2021, we incurred acquisition
and divestiture related costs of $138.8. These costs were
principally associated with the Wella Transaction. In fiscal 2020,
we incurred acquisition and divestiture related costs of
$157.3.
(e)
In the three months ended June 30, 2021,
there were no gains on divestitures. In the three months ended June
30, 2020, as a result of the divestiture of Younique in the first
quarter, we recorded income of $27.0 included in Gain on sale of
business in the Condensed Consolidated Statements of
Operations.
In fiscal 2021, there were no gains on
divestitures. In fiscal 2020, we completed the divestiture of
Younique resulting in income of $111.5 included in Gain on sale of
business in the Condensed Consolidated Statements of
Operations.
(f)
In the three months ended June 30, 2021,
non-cash stock-based compensation of $0.3, $0.4 and $0.1 was
reported in the Americas, EMEA and Asia Pacific segments,
respectively. In the three months ended June 30, 2020, non-cash
stock-based compensation of $2.9, $2.3 and $1.0 was reported in the
Americas, EMEA and Asia Pacific segments, respectively.
In fiscal 2021, non-cash stock-based
compensation of $10.2, $11.9 and $3.1 was reported in the Americas,
EMEA and Asia Pacific segments, respectively. In fiscal 2020,
non-cash stock-based compensation of $0.8, $1.0 and $0.2 was
reported in the Americas, EMEA and Asia Pacific segments,
respectively.
(g)
In the three months ended June 30, 2021,
adjusted depreciation expense of $37.8, $32.4 and $12.0 was
reported in the Americas, EMEA and Asia Pacific segments,
respectively. In the three months ended June 30, 2020, adjusted
depreciation expense of $41.0, $29.3 and $12.2 was reported in the
Americas, EMEA and Asia Pacific segments, respectively.
In fiscal 2021, adjusted depreciation
expense of $147.3, $134.0 and $44.5 was reported in the Americas,
EMEA and Asia Pacific segments, respectively. In fiscal 2020,
adjusted depreciation expense of $145.5, $142.0, $42.5 and $4.3 was
reported in the Americas, EMEA, Asia Pacific and Other segments,
respectively.
RECONCILIATION OF REPORTED INCOME
(LOSS) BEFORE INCOME TAXES AND EFFECTIVE TAX RATES TO ADJUSTED
INCOME (LOSS) BEFORE INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATES
FOR CONTINUING OPERATIONS
Three Months Ended June 30,
2021
Three Months Ended June 30,
2020
(in millions)
(Loss) income before income
taxes
(Benefit) Provision for income
taxes
Effective tax rate
(Loss) income before income
taxes
(Benefit) provision for income
taxes
Effective tax rate
Reported Income (Loss) before income
taxes - Continuing Operations
$
(68.5
)
$
132.9
(194.0
)%
$
(962.3
)
$
(260.7
)
27.1
%
Adjustments to Reported Operating Income
(a)(b)
42.5
(12.9
)
585.2
224.8
Change in fair value of investment in
Wella Business (b) (e)
(10.0
)
4.7
—
—
Post Divestiture Restructuring (c)
—
(130.0
)
—
—
Tax impact from intra-entity transfer of
assets (d)
—
13.9
—
—
Other adjustments(b) (f)
1.4
0.4
(16.3
)
(3.1
)
Adjusted Income (Loss) before income
taxes - Continuing Operations
$
(34.6
)
$
9.0
(26.0
%)
$
(393.4
)
$
(39.0
)
9.9
%
The adjusted effective tax rate was
(26.0%) for the three months ended June 30, 2021 compared to 9.9%
for the three months ended June 30, 2020. The difference was
primarily due to the jurisdictional mix of income.
Year Ended June 30,
2021
Year Ended June 30,
2020
(in millions)
(Loss) income before income
taxes
(Benefit) Provision for income
taxes
Effective tax rate
(Loss) income before income
taxes
(Benefit) provision for income
taxes
Effective tax rate
Reported (Loss) before income taxes
- Continuing Operations
$
(239.8
)
$
(172.0
)
71.7
%
$
(1,467.6
)
$
(377.7
)
25.7
%
Adjustments to Reported Operating
income(a)(b)
458.0
109.3
1,186.3
210.3
Gain on divestitures (a)(b)
—
—
(111.5
)
110.5
Post Divestiture Restructuring (c)
—
(130.0
)
Tax impact from intra-entity transfer of
assets (d)
—
234.4
—
—
Change in fair value of investment in
Wella Business (b) (e)
(73.5
)
(11.2
)
—
—
Other adjustments(b) (f)
7.2
2.0
(16.3
)
(3.1
)
Adjusted Income (Loss) before income
taxes - Continuing Operations
$
151.9
$
32.5
21.4
%
$
(409.1
)
$
(60.0
)
14.7
%
(a)
See a description of adjustments under
“Adjusted Operating (Loss) Income 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 benefit/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)
Tax expense relates to an internal
restructuring following the Wella divestiture, primarily intended
to create a more efficient structure to hold its remaining 40%
equity investment in Wella.
(d)
Tax benefit of $234.4 is the result of a
tax rate differential on the deferred taxes recognized on the
transfer of assets and liabilities, following the relocation of our
main principal location from Geneva to Amsterdam in first fiscal
quarter. The overall value of the assets and liabilities
transferred was negotiated with both the Swiss and Dutch Tax
Authorities and per terms of the agreements, will be reevaluated
after three years.
(e)
The amount represents the unrealized
(gain) loss recognized for the change in the fair value of the
investment in Wella.
(f)
For the three months ended June 30, 2021,
this primarily represents adjustments for pension curtailment
gains. For the year ended June 30, 2021, this primarily represents
the write-off of deferred financing fees related to the Wella sale
and adjustments for pension curtailment gains.
RECONCILIATION OF REPORTED NET INCOME
(LOSS) TO ADJUSTED NET INCOME (LOSS) FOR CONTINUING
OPERATIONS
Three Months Ended June
30,
Year Ended June 30,
(in millions)
2021
2020
Change
2021
2020
Change
Net income (loss) from Continuing
Operations, net of noncontrolling interests
$
(196.9
)
$
(689.7
)
71
%
$
(64.0
)
$
(1,093.9
)
94
%
Convertible Series B Preferred Stock
dividends (c)
(24.2
)
(6.5
)
<(100
%)
(102.3
)
(6.5
)
<(100
%)
Reported Net income (loss) attributable
to Continuing Operations
$
(221.1
)
$
(696.2
)
68
%
$
(166.3
)
$
(1,100.4
)
85
%
% of Net revenues
(20.8
%)
<(100
%)
(3.6
%)
(23.3
%)
Adjustments to Reported Operating Income
(a)
42.5
585.2
(93
%)
458.0
1,074.8
(57
%)
Change in fair value of investment in
Wella Business (d)
(10.0
)
—
N/A
(73.5
)
—
N/A
Adjustments to other (income) expense
(e)
1.4
(16.3
)
>100
%
7.2
(16.3
)
>100
%
Adjustments to noncontrolling interest
expense (b)
(3.9
)
(4.7
)
17
%
(11.3
)
(4.6
)
<(100
%)
Change in tax provision due to adjustments
to Reported Net income (loss) attributable to Continuing
Operations
123.9
(221.7
)
>100
%
(204.5
)
(317.7
)
36
%
Adjusted Net income (loss) attributable
to Continuing Operations
$
(67.2
)
$
(353.7
)
81
%
$
9.6
$
(364.2
)
>100
%
% of Net revenues
(6.3
%)
(63.1
%)
0.2
%
(7.7
%)
Per Share Data
Adjusted weighted-average common
shares
Basic
765.4
763.3
764.8
759.1
Diluted (c) (f)
765.4
763.3
764.8
759.1
Adjusted Net income (loss) attributable
to Continuing Operations per Common Share
Basic
$
(0.09
)
$
(0.46
)
$
0.01
$
(0.48
)
Diluted (c)
$
(0.09
)
$
(0.46
)
$
0.01
$
(0.48
)
(a)
See a description of adjustments under
“Adjusted Operating Income (loss) for Continuing Operations.”
(b)
The amounts represent the after-tax impact
of the non-GAAP adjustments included in Net income attributable to
noncontrolling interest based on the relevant noncontrolling
interest percentage in the Condensed Consolidated Statements of
Operations.
(c)
Diluted EPS is adjusted by the effect of
dilutive securities, including awards under our equity compensation
plans and the convertible Series B Preferred Stock. We use the
if-converted method for calculating any potential dilutive effect
of the convertible Series B Preferred Stock, which requires an
adjustment to reverse the impact of the preferred stock dividends,
including deemed dividends, of $24.2 million and $102.3 million for
the three and twelve months ended June 30, 2021 on income
applicable to common stockholders during the period.
(d)
The amount represents the unrealized
(gain) loss recognized for the change in the fair value of the
investment in Wella.
(e)
For the three months ended June 30, 2021,
this primarily represents adjustments for pension curtailment
gains. For the year ended June 30, 2021, this primarily represents
the write-off of deferred financing fees related to the Wella sale
and adjustments for pension curtailment gains.
(f)
As of June 30 2021, 171.1 million shares
of outstanding stock options and Series A/A-1 Preferred Stock with
purchase or conversion rights to purchase shares of Common Stock,
RSUs and Convertible Series B Preferred Stock were excluded in the
computation of adjusted weighted-average diluted shares because
their effect would be anti-dilutive.
RECONCILIATION OF REPORTED NET INCOME
(LOSS) TO ADJUSTED NET INCOME (LOSS) FOR COTY INC.
Three Months Ended June
30,
Year Ended June 30,
(in millions)
2021
2020
Change
2021
2020
Change
Net income (loss) from Coty Inc. net of
noncontrolling interests
$
(186.0
)
$
(766.3
)
76
%
$
(201.3
)
$
(1,006.7
)
80
%
Convertible Series B Preferred Stock
dividends (c)
(24.2
)
(6.5
)
<(100
%)
(102.3
)
(6.5
)
<(100
%)
Reported Net income (loss) attributable
to Coty Inc.
$
(210.2
)
$
(772.8
)
73
%
$
(303.6
)
$
(1,013.2
)
70
%
% of Net revenues
(19.8
%)
(83.8
%)
(5.4
%)
(15.0
%)
Adjustments to Reported Operating income
(a)
42.5
602.5
(93
)%
457.4
1,179.7
(61
)%
(Gain) loss on sale of business
(0.2
)
—
N/A
246.4
—
N/A
Change in fair value of investment in
Wella Business (d)
(10.0
)
—
N/A
(73.5
)
—
N/A
Adjustments to other (income) expense
(e)
1.4
(16.3
)
>100
%
7.2
(16.3
)
>100
%
Adjustments to noncontrolling interest
expense (b)
(3.9
)
(4.7
)
17
%
(11.3
)
(4.6
)
<(100
%)
Change in tax provision due to adjustments
to Reported Net income (loss) attributable to Coty Inc.
113.2
(195.4
)
>100
%
(170.0
)
(338.3
)
50
%
Adjusted Net income (loss) attributable
to Coty Inc.
$
(67.2
)
$
(386.7
)
83
%
$
152.6
$
(192.7
)
>100
%
Per Share Data
Adjusted weighted-average common
shares
Basic
765.4
763.3
764.8
759.1
Diluted (c) (f)
765.4
763.3
764.8
759.1
Adjusted Net income (loss) attributable
to Coty Inc. per Common Share
Basic
$
(0.09
)
$
(0.51
)
$
0.20
$
(0.25
)
Diluted (c)
$
(0.09
)
$
(0.51
)
$
0.20
$
(0.25
)
(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)
Diluted EPS is adjusted by the effect of
dilutive securities, including awards under our equity compensation
plans and the convertible Series B Preferred Stock. We use the
if-converted method for calculating any potential dilutive effect
of the convertible Series B Preferred Stock, which requires an
adjustment to reverse the impact of the preferred stock dividends,
including deemed dividends, of $24.2 million and $102.3 million for
the three and twelve months ended June 30, 2021, respectively, on
income applicable to common stockholders during the period.
(d)
The amount represents the unrealized
(gain) loss recognized for the change in the fair value of the
investment in Wella.
(e)
For the three months ended June 30, 2021,
this primarily represents adjustments for pension curtailment
gains. For the year ended June 30, 2021, this primarily represents
the write-off of deferred financing fees related to the Wella sale
and adjustments for pension curtailment gains.
(f)
As of June 30 2021, 171.1 million shares
of outstanding stock options and Series A/A-1 Preferred Stock with
purchase or conversion rights to purchase shares of Common Stock,
RSUs and Convertible Series B Preferred Stock were excluded in the
computation of adjusted weighted-average diluted shares because
their effect would be anti-dilutive.
RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
COTY INC.
Three Months Ended June
30,
Year Ended June 30,
(in millions)
2021
2020
2021
2020
Net cash (used in) provided by operating
activities
$
32.3
$
(255.4
)
$
318.7
$
(50.9
)
Capital expenditures
(30.2
)
(61.0
)
(173.9
)
(267.4
)
Free cash flow
$
2.1
$
(316.4
)
$
144.8
$
(318.3
)
RECONCILIATION OF TOTAL DEBT TO
ECONOMIC NET DEBT
COTY INC.
As of
(in millions)
June 30, 2021
Total debt
$
5,481.5
Less: Cash and cash equivalents
253.5
Financial Net debt
$
5,228.0
Less: Value of Wella stake
1,260.0
Economic Net debt
$
3,968.0
IMMEDIATE LIQUIDITY
COTY INC.
As of
(in millions)
June 30, 2021
Cash and cash equivalents
$
253.5
Unutilized revolving credit facility
2,069.7
Immediate Liquidity
$
2,323.2
RECONCILIATION OF ADJUSTED OPERATING
INCOME (LOSS) TO ADJUSTED EBITDA
Twelve Months Ended
June 30, 2021
CONTINUING
(in millions)
OPERATIONS
Adjusted operating income (loss) (a)
$
409.4
Add: Adjusted depreciation(b)
325.8
Add: Non-cash stock-based compensation
25.2
Adjusted EBITDA
$
760.4
(a)
For a reconciliation of adjusted operating
income (loss) to operating income (loss) for each of those periods,
see the tables entitled “Reconciliation of Reported Operating
Income (loss) to Adjusted Operating Income (loss)” and
"Reconciliation of Reported Operating Income (loss) to Adjusted
Operating Income (loss) by Segment" for each of those periods.
(b)
Adjusted depreciation for the twelve
months ended June 30, 2021 represents depreciation expense for
continuing operations for the period, excluding accelerated
depreciation.
FINANCIAL NET DEBT/ADJUSTED
EBITDA
(in millions)
June 30, 2021
Financial Net Debt - Coty Inc.
$
5,228.0
Adjusted EBITDA - Continuing
operations
760.4
Financial Net Debt/Adjusted
EBITDA
6.88
RECONCILIATION OF REPORTED NET REVENUES
TO LIKE-FOR-LIKE NET REVENUES
Three Months Ended June 30,
2021 vs. Three Months Ended June 30, 2020 Net Revenue
Change
Net Revenues Change YoY
Reported Basis
Constant Currency
Impact from Acquisitions and
Divestitures
LFL
Americas
69
%
67
%
—
%
67
%
EMEA
>100
%
>100
%
—
%
>100
%
Asia Pacific
70
%
59
%
—
%
59
%
Other
—
%
—
%
—
%
—
%
Total Continuing Operations
90
%
81
%
—
%
81
%
Year Ended June 30, 2021 vs.
Year Ended June 30, 2020 Net Revenue Change
Net Revenues Change YoY
Reported Basis
Constant Currency
Impact from Acquisitions and
Divestitures1
LFL
Americas
5
%
8
%
2
%
6
%
EMEA
(5
)%
(10
)%
—
%
(10
)%
Asia Pacific
(1
)%
(5
)%
—
%
(5
)%
Other
(100
)%
(100
)%
(100
)%
—
%
Total Continuing Operations
(2
)%
(4
)%
—
%
(4
)%
1 Like for Like (LFL) impact excludes the
net revenue contribution from King Kylie for the first and second
quarters of fiscal 2021 (due to the acquisition of King Kylie
during the third quarter of fiscal 2020), and the net revenues of
Younique for the twelve months ended June 30, 2020 (due to the
divestiture of Younique the first quarter of fiscal 2020).
COTY INC. &
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
June 30, 2021
June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
253.5
$
308.3
Restricted cash
56.9
43.7
Trade receivables, net
348.0
440.1
Inventories
650.8
678.2
Prepaid expenses and other current
assets
473.9
411.6
Current assets held for sale
—
4,613.1
Total current assets
1,783.1
6,495.0
Property and equipment, net
918.1
1,081.6
Goodwill
4,118.1
3,973.9
Other intangible assets, net
4,463.0
4,372.1
Equity investments
1,276.2
—
Operating lease right-of-use assets
318.5
371.4
Other noncurrent assets
814.4
434.8
TOTAL ASSETS
$
13,691.4
$
16,728.8
LIABILITIES, MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
1,166.1
$
1,190.3
Short-term debt and current portion of
long-term debt
24.2
188.3
Other current liabilities
1,225.1
1,250.4
Current liabilities held for sale
—
956.7
Total current liabilities
2,415.4
3,585.7
Long-term debt, net
5,401.0
7,892.1
Long-term operating lease liabilities
269.3
317.4
Other noncurrent liabilities
1,423.1
909.9
TOTAL LIABILITIES
9,508.8
12,705.1
CONVERTIBLE SERIES B PREFERRED
STOCK
1,036.3
715.8
REDEEMABLE NONCONTROLLING
INTERESTS
84.1
79.1
Total Coty Inc. stockholders’
equity
2,860.7
3,004.6
Noncontrolling interests
201.5
224.2
Total equity
3,062.2
3,228.8
TOTAL LIABILITIES, MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY
$
13,691.4
$
16,728.8
COTY INC. &
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Year Ended June 30,
(in millions)
2021
2020
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
(205.1
)
(1,002.7
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization
585.3
716.5
Deferred income taxes
(218.1
)
(342.7
)
Share-based compensation
29.9
29.8
Gain on divestiture
—
(111.5
)
Loss on sale of business in discontinued
operations
246.4
—
Asset impairment charges
—
434.0
Unrealized gains from equity investments,
net
(70.3
)
—
Other
182.5
270.5
Change in operating assets and
liabilities, net of effects from purchase of acquired
companies:
Trade receivables
10.5
424.5
Inventories
81.2
124.4
Prepaid expenses and other current
assets
(136.5
)
25.9
Accounts payable
(49.7
)
(373.5
)
Accrued expenses and other current
liabilities
(45.8
)
(36.3
)
Operating lease liabilities
(125.3
)
(106.6
)
Other assets and liabilities, net
33.7
(103.2
)
Net cash provided by (used in)
operating activities
318.7
(50.9
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(173.9
)
(267.4
)
Proceeds from sale of discontinued
business, net of cash disposed
2,374.1
—
Payments for business combinations and
asset acquisitions, net of cash acquired
—
(592.2
)
Return of capital from equity
investments
448.0
—
Proceeds from sale of business, net of
cash disposed
27.0
25.6
Payment for equity investment and related
asset acquisition
(200.0
)
—
Termination of currency swaps designated
as net investment hedges
(37.6
)
—
Other investing activities
4.3
0.6
Net cash provided by (used in)
investing activities
2,441.9
(833.4
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
(Repayments) proceeds from debt, net
(2,979.2
)
446.2
Dividend payment on Class A Common
Stock
(1.5
)
(196.9
)
Dividend payment on Convertible Series B
Preferred Stock
(24.2
)
—
Proceeds from issuance of Convertible
Series B Preferred Stock
227.2
724.5
Purchase of remaining mandatorily
redeemable noncontrolling interest
—
(45.0
)
Other financing activities
(17.4
)
(51.5
)
Net cash (used in) provided by
financing activities
(2,795.1
)
877.3
EFFECT OF EXCHANGE RATES ON CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
(7.1
)
(21.4
)
NET DECREASE IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
(41.6
)
(28.4
)
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH—Beginning of period
352.0
380.4
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH—End of period
$
310.4
$
352.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210826005250/en/
Investor Relations Olga
Levinzon, +1 212 389-7733 olga_levinzon@cotyinc.com
Media Antonia
Werther, +31 621 394495 / Antonia_Werther@cotyinc.com
Coty (NYSE:COTY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Coty (NYSE:COTY)
Historical Stock Chart
From Apr 2023 to Apr 2024