Coty (COTY) Q4 2024 Prepared Remarks earnings summary

Executive summary

• Fiscal 2024 saw sustained outperformance with double-digit Like-for-Like sales, Adjusted EBITDA, and Adjusted EPS growth, outpacing the global beauty market's 9% growth, with balanced gains in Prestige and Consumer Beauty across all regions and categories.

• Strategic transformation, strong marketing investment, and robust innovation pipeline fueled leadership in fragrances, core cosmetics, and growth channels.

• Gross margin reached 64.4% in FY24, up 50 bps YoY, supported by supply chain savings, pricing, and premiumization.

• Adjusted EBITDA grew 12% to $1.091 billion, with margin at 17.8%, at the high end of guidance.

• FY25 guidance targets 6-8% LFL revenue growth, 9-11% adjusted EBITDA growth, and 15-20% adjusted EPS growth, with sequential improvement expected in Q1 and 1H25.

Financial highlights

• FY24 net revenues: $6,118.0M (+10% YoY, +11% LFL); 4Q24: $1,363.4M (+1% YoY).

• Adjusted gross margin expanded by 50 bps to 64.4%, hitting the mid-sixties target a year early.

• Adjusted operating margin rose 80 bps to 14.1%; Adjusted EBITDA margin up 30 bps to 17.8%.

• Adjusted EBITDA grew 12% to $1,091.1M, surpassing guidance.

• Free cash flow was $370M, slightly below expectations due to SAP S/4HANA transition and related inventory build.

Outlook and guidance

• FY25 like-for-like revenue growth targeted at 6%-8%, with Prestige expected to outperform.

• Adjusted EBITDA guidance for FY25 is $1.186-$1.208 billion (9%-11% growth), with margin expansion of 10-30 bps.

• Adjusted EPS (excluding equity swap) expected at $0.54-$0.57, up 15%-20% year-over-year.

• Free cash flow projected to rise to low to mid-$400M, with leverage targeted to fall to 2.5x by year-end 2024 and ~2x by end of 2025.

• Q1 FY25 like-for-like sales growth expected at ~6%, with sequential acceleration from Q4.