Coty (COTY) Q4 2024 (Q&A) earnings summary

Executive summary

• Fiscal 2024 delivered double-digit like-for-like growth in sales, adjusted EBITDA, and adjusted EPS, outpacing the global beauty market, with strong performance in prestige fragrances and color cosmetics across all regions.

• Innovation pipeline remained active, with major launches in prestige and consumer beauty, and a focus on accelerating product development cycles.

• Maintained strong marketing support, premiumization, and expansion into high-growth markets and channels, while reducing leverage.

• Outpaced leading global beauty companies in 8 of the last 12 quarters.

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

Financial highlights

• FY24 net revenues grew 10% reported and 11% LFL to $6,118.0M, with adjusted EBITDA up 12% to $1,091.1M and adjusted EPS (excluding equity swap) up 26% to $0.48.

• Gross margin improved by 50bps to 64.4%, operating margin by 80bps, and EBITDA margin by 30bps.

• Free cash flow for FY24 was ~$370M, with some non-recurring items impacting the figure.

• Leverage reduced to ~3.3x, down from ~4.1x in FY23, with a target of ~2x by end of CY25.

• Market share gains in Brazil: #1 in nails, #2 in body lotions, and #6 in mass fragrances.

Outlook and guidance

• FY25 guidance targets 6-8% like-for-like revenue growth, 9-11% adjusted EBITDA growth to $1,186-1,208M, and 15-20% adjusted EPS growth to $0.54-0.57.

• Free cash flow for FY25 is guided to low to mid $400M, with leverage targeted to fall to ~2.5x by end CY24 and ~2x by end CY25.

• EBITDA margin expansion is expected, with guidance focused on dollar value and margin growth.

• Sequential improvement expected in the second half due to easier comps; Q1 LFL growth of ~6%.

• Deleveraging remains the top capital allocation priority, targeting 2x leverage by end of calendar 2025, excluding any Wella divestiture.