Coty (COTY) Q1 2025 Prepared Remarks earnings summary

Executive summary

• Q1 net revenues grew 2% reported and 4.5% like-for-like, led by strong prestige fragrance and mass fragrance growth, with double-digit gains in key brands and new launches, despite FX and Lacoste license headwinds.

• Growth engine markets, representing 21% of sales, grew 15% like-for-like, offsetting sluggishness in China and Asia travel retail.

• Operating income increased 20% to $237.8 million, with margin up to 14.2% from 12.0% last year; net income attributable to common stockholders was $79.6 million, up from a $1.7 million loss.

• Strategic initiatives in innovation, digital, and ESG, including the launch of Orveda's US flagship and a Scientific Advisory Board, continue to drive momentum and market share gains.

Financial highlights

• Q1 adjusted gross margin expanded by 200 bps to 65.5%, driven by premiumization, pricing, and supply chain productivity.

• Adjusted EBITDA was $360.1 million (flat YoY), with margin at 21.5%; adjusted diluted EPS grew 20% to $0.18.

• Free cash flow was slightly negative due to tight retailer inventory management and higher receivables; free cash outflow was $7.9 million versus $124.0 million inflow prior year.

• Ended Q1 with net debt of $3.7 billion and leverage of 3.4x, down 0.4 turns year-over-year.

Outlook and guidance

• Fiscal 2025 like-for-like sales growth expected at 3%-4%, with Q2 growth slightly positive and H2 consistent with H1.

• Adjusted EBITDA growth targeted near lower end of 9%-11% prior guidance; adjusted EPS at low end of $0.54-$0.57.

• Free cash flow for FY25 targeted in the low to mid-$400 million range; leverage expected below 3x by year-end 2024, targeting 2.5x longer term.

• Annual gross margin anticipated to remain in the mid-60% range; cost reduction efforts re-accelerated to deliver savings well above $75 million.