COTY - Coty Non-GAAP EPS of $0.19 beats by $0.14 revenue of $1.29B beats by $60M

2023-05-09 06:34:44 ET

• Coty press release ( NYSE: COTY ): Q3 Non-GAAP EPS of $0.19 beats by $0.14 .
• Revenue of $1.29B (+8.4% Y/Y) beats by $60M; including an approximately 3% negative impact from the exit from Russia, and 15% LFL, reflecting strong double digit LFL growth in both Prestige and Consumer Beauty.
• 3Q23 adjusted operating income increased 8% to $122.7 million and year-to-date adjusted operating income grew 15% to $633.7 million, with the year-to-date adjusted operating margin increasing by 180 bps to 15.1%
• 3Q23 adjusted EBITDA was stable at $181.9 million and year-to-date adjusted EBITDA grew 4% to $807.4 million, driving a year-to-date adjusted EBITDA margin of 19.2%, up 50 bps.
• Savings totaled approximately $60M in Q3 and approximately $130 million year-to-date, with a clear roadmap to reach savings of approximately $170 million in FY23. Coty continues to target savings of roughly $90 million and $75 million in FY24 and FY25, respectively.
• 3Q23 free cash flow was $(178.5) million, reflecting the seasonally lower free cash flow period and inventory build to support service levels. Year-to-date, free cash flow totaled $364.8 million.
• Financial Net Debt was $4.1 billion and Economic Net Debt totaled $3.1 billion at quarter end, resulting in financial leverage of approximately 4.4x.
• Outlook: Coty continues to see strong demand growth across nearly all categories and markets, particularly in Prestige fragrances, with Coty maintaining strong launch activity in both Prestige and Consumer Beauty. With FYTD core LFL revenue growth of +10%, and Q4 growth expected to be in a similar range, Coty now expects FY23 revenues for the core business, adjusting for the impact of the Russia exit, to grow 9-10% LFL which reflects a significant increase from the Company's original outlook for 6-8% core LFL growth. Coty continues to estimate a low-single-digit negative FX impact on revenues in Q4.
• Coty continues to expect modest gross margin expansion in Q4 and FY23, despite the elevated inflationary environment, aided by savings as well as solid pricing execution, including mid-single-digit pricing increases exiting Q1 and another round of mid-single-digit pricing exiting Q3. The Company is also evaluating another round of pricing in Q1 FY24, as Coty continues its portfolio transition to cleaner and more sustainable products, while simultaneously driving category value expansion.
• Coty continues to target FY23 adjusted EBITDA of $955-965M based on current FX rates, relatively in-line with its medium term growth target of +9-11%, adjusting for the impact of the Russia exit, implying ~50bps of adjusted EBITDA margin expansion and over 150 bps of adjusted operating margin expansion. The Company has maintained its FY23 EBITDA outlook at current FX rates despite incurring over $50 million of negative FX impact on EBITDA FYTD, highlighting the stronger underlying profit expansion.
• Including the benefit from the equity swap and assuming the current share price holds, Coty now expects an overall FY23 adjusted EPS of $0.52-0.53, reflecting over 85% growth. Excluding any mark-to-market adjustments on the equity swap, the Company now expects FY23 adjusted EPS growth of approximately 35% to $0.38-0.39, an increase from its previous adjusted EPS guidance of $0.35-0.36. These EPS targets assume no significant changes in the current tax regulations. The Company continues to target a mid 20s percent adjusted EPS CAGR through FY26, excluding any mark-to-market adjustments on the equity swap.
• In addition, the Company continues to target leverage towards 3x exiting CY23 and approximately 2x exiting CY25.
• Shares +1.73% PM.

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