Earnings Call: Q4 2021

Aug 26, 2021

Good morning, ladies and gentlemen. My name is Britney, and I will be your conference operator today. At this time, I would like to welcome everyone to Coty's 4th Quarter Fiscal 2021 Results Conference Call. As a reminder, this conference call is being recorded today, August 26, 2021. On today's call are Sue Habby, Chief Executive Officer and Laurent Mercier, Chief Financial Officer. I would like to remind you that many of the comments today may contain forward looking statements. Please refer to CODI's earnings release and reports filed with the SEC, where the company lists factors that could cause actual results to differ materially for these forward looking statements. In addition, except where noted, the discussion of Coty's financial results and Coty's expectations reflects certain adjustments as specified in the non GAAP Financial Measures section of the company's release. I will now turn the call over to Ms. Navi. Ladies and gentlemen, with the conclusion of our fiscal 2021 year, I'm very pleased by the progress We have made over the last 12 months and even more excited about the opportunities and momentum still ahead. This has truly been a transformational year for Coty. Over the last 12 months, we have built a leadership team of beauty And transformation expert unveiled and began executing on our multiyear strategy, Completed the divestiture of Vela, significantly improved our leverage profile and over delivered on our savings, Revenue and profit objectives. It's clear that Coty is emerging as a much stronger and more nimble organization. At the same time, Coty has clearly stepped up its beauty expertise and willing to take risk to shape the future of the beauty industry. There are a number of key points that I want to highlight today. First, our 4th quarter revenue growth was ahead of expectations, Fueled by double to triple digit growth in each region and triple digit growth in our prestige brands As we continued to see robust prestige fragrance demand in the U. S. And China, coupled with continued expansion of our prestige cosmetics footprint. At the same time, our consumer beauty brands grew close to 40%, Driven in part by the turnaround in Cote d'Or and the renewed consumer migration towards trusted brands, A trend that are underpinning the rebuilding of our consumer beauty portfolio. As a result, our fiscal 2021 revenues of €4,63,000,000 ended above the high end of our guidance range. 2nd, by accelerating our savings delivery in fiscal 2021, Ending at over $330,000,000 or over $100,000,000 higher than our original target, we were able to fuel both profit delivery and reinvestments in our business to accelerate our growth. In fact, we ended with adjusted EBITDA of $7,000,000 or $10,000,000 above our guidance and above expectations. And with an EBITDA margin of 16.4% in fiscal 2021, 300 basis points higher than pre COVID levels despite a lower sales base, it's clear That we are well advanced in making Coty into a leaner organization. 3rd, we continue to make broad based strategic progress Across each of our 6 strategic pillars, and I will cover some of the milestones on today's call. Finally, as we are now 2 months into our Q1 of fiscal 2022, it's quite clear But momentum is building in the business, propelled by a combination of strong Coty initiatives across fragrance and cosmetics, Coupled with an improving industry backdrop. Let me now take a few minutes to review our revenue trend in Q4 And in fiscal 2021, before I hand it over to Laurent to take you through our financials, then I will wrap it up with an update on our Our 4th quarter revenues nearly doubled year on year as we lapped The peak of COVID impact in the prior year. While all regions returned to year on year growth in Q4, the U. S. And China markets were standout. The Americas region grew 67% in Q4 and 6% in fiscal 2021, With the full year performance driven by double digit growth in U. S. Prestige products and growth in Brazil and Canada. The momentum we have seen in the U. S. Over the past year and continuing to date confirms our view that the U. S. Will remain a Key growth market for Coty and reinforces our investment strategy. Asia Pacific grew 59% in Q4, With China growing double digits on a quarterly and full year basis, both year on year and also versus fiscal 2019, as we focus on building China into another powerhouse market for Coty. EMEA sales more than doubled in Q4, Even as many European markets remained under restrictions through most of the quarter. In fact, In Q4, our consumer beauty brands recorded stable market share in EMEA for the first time in over 5 years, Even though our key brand initiatives only started going live at the end of the quarter. Moving on to sales by channel. Our Prestige sales more than doubled in Q4 and were nearly flat like for like in fiscal 2021, Even as we continue to reduce sales in low quality channels, which represented a low teens negative impact Prestige brand sales in Q4 and the high single digit negative impact in fiscal 2021 relative to fiscal 2019. Nearly all prestige brands were up double to triple digits in Q4 with standout performance from Gucci, Marc Jacobs, Burberry, Calvin Klein and Chloe supplemented with expansion in Coty's new growth engines, prestige cosmetics In fact, looking at the second half of our fiscal year, our prestige brands grew 43% like for like versus last year Compared to prestige beauty market growth in the 20% range, our mass beauty revenues increased 38% like for like in Q4 with growth across each region even as the mass channel was the least impacted by last year's Growth was led by CoverGirl, Remail and Max Factor As the mass beauty category returned to year over year growth. Having unveiled the new brand positioning behind each Of this key cosmetic brand, we are now also turning our focus to the body care part of our consumer beauty portfolio. Here, we intend to leverage the know how and capabilities of our key Brazilian brands like Monage And by to accelerate our global body care brands, including Adidas. On a 6 month basis, our consumer beauty brands grew like for like 7%, slightly ahead of the underlying mass beauty market. Having concluded the year and as we are now in the process of putting our new organizational structure in place, We have decided to transition to new segment reporting beginning during the Q1 of 2022 Based on 2 segments, prestige and consumer beauty, this will align with how we plan to run our business internally with dedicated Chief Brand and Commercial officers for each of these businesses. We will be publishing recast historical Financials reflect in this segment a few weeks before our next earnings call. I will now hand over the call over to Laurent to take you through our financial results. Thank you, Usual. Our 4th quarter maintained our pace of Strong profit delivery, allowing us to exceed our full year adjusted EBITDA target. I am pleased to say that this Q4 profit was driven by both gross margin And cost reduction, allowing us to meaningfully set up marketing investments behind our brands. Starting with our gross margin performance. Our Q4 adjusted gross margin of 60.9% improved by over 20 percentage points from last year, Which was significantly depressed due to the COVID crisis. This marks our 2nd consecutive quarter of gross margins Above 60% as we delivered on our strategic framework. For fiscal 2021, our gross margin reached 60%, An increase of 190 basis points from fiscal 2020 and in line with the gross margin of the RemainCo business in fiscal 2019 despite a lower sales base. Our fiscal 2021 gross margin benefited from A positive mix shift towards prestige brands, e commerce and skincare as well as material cost savings enhanced by We remain laser focused on further driving gross margin expansion in fiscal Expect to benefit from positive channel, category and regional mix shifts. This will in turn allow us As we mentioned during our last earnings call, we continued to step up our marketing investment during Q4. A and CP was approximately 26% of sales in the quarter, which is a sequential acceleration from Q3 As well as the first half of fiscal twenty twenty one with working media increasing more than 30% from Q4 'nineteen levels. I want to emphasize that while we are investing behind our brands, our philosophy remains Fewer, bigger and better, which also means that we are very focused on the return on investment of these marketing investments. Sue will soon be giving you a lot of details on the successes we have had across our growth pillars. However, I will just highlight some of the areas where we are directing media investments. First, we continue to invest behind brands and launches with proven success and market share momentum, including Marc Jacobs Perfect, CoverGirl and Sally Hansen. We also fueled our expansion into new categories, particularly Gucci makeup in China, Which is winning both online and offline. And finally, we are investing in our key fragrance icons Such as Bose Bottle, Chloe Signature, Marc Jacobs DAISY and Gucci Guilty. This is driving Strong ROI in the U. S, for example, where our icons market share grew plus 0.6 The ability to accelerate our marketing investments and deliver profit growth Continues to be enabled by our strong cost reductions. During Q4, our fixed costs declined 15% year over year And we're down 16% for fiscal 2021. We achieved approximately €70,000,000 of cost savings during the quarter, bringing our total fiscal 2021 cost savings to over €330,000,000 This is significantly ahead of our initial expectations for the year. The largest contributor of fiscal 2021 savings were Fixed cost reductions, including headcount and business services. The other buckets that made up this €330,000,000 of savings Included cost of goods sold, structural AV and CP reduction and trade investments. Given the accelerated savings we achieved this year, we now anticipate fiscal 'twenty two savings of over €90,000,000 which are net of cost inflation, reinstating bonuses, Structural organizational reinvestment behind our growth pillars, though it's important to note that This does not include our intended reinvestment in AMCP. We remain on track to reach our fiscal 'twenty three target of a total of €600,000,000 of savings. And at the same time, we are identifying savings projects beyond fiscal 2023. Equally importantly, we have been managing the one time cash cost associated with the savings program very tightly. In fiscal 2021, the cash outlay related to this one time cost was below €200,000,000 And we expect another $200,000,000 of cash outlay over the next 2 years, bringing the total budget to approximately $400,000,000 Moving to our profit delivery. Adjusted EBITDA came in ahead of expectations for Q4, Allowing us to exceed our full year adjusted EBITDA guidance. Our adjusted EBITDA Was $127,000,000 or 12 percent of sales in the quarter. And for the year, this was $760,000,000 or 16.4 percent. While this marks a very significant improvement from last year, Which was heavily impacted by the COVID crisis. Our fiscal 2021 EBITDA margin was actually 300 basis points higher Then our fiscal 2019 remained core levels despite sales being lower. Our strong profit performance this year was driven by Strong gross margin expansion, as I previously mentioned, focused marketing investments and fixed cost savings. In summary, the robust profit delivery should be the evidence that fiscal 2021 was the year We started the virtuous cycle. We do not see a trade off between sales growth and profit improvement, But see the simultaneous achievement of both as very attainable goals. Turning now to our EPS, which included the following drivers. Adjusted EBITDA for the quarter of 127,000,000 Income tax of €9,000,000 despite the negative pretax income, which reflected the true up to bring the full year adjusted effective tax Straight to 21%, in line with our previous comments. Nearly €40,000,000 of other items, Which primarily includes $24,000,000 of preferred dividends as well as 10,000,000 of deferred financing write offs related to the April June refinancing. As a result, our Q4 diluted adjusted EPS And with that negative $0.09 For the fiscal 2021 EPS based on 760 €1,000,000 of adjusted EBITDA and effective tax rate of around 21%, we ended the year with diluted adjusted EPS at 0.1 Thanks. While not included in our adjusted EPS, during the quarter, Velas' fair market value rose by £10,000,000 continuing the trend of value expansion in the last two quarters. Looking to fiscal 2022, I would like to provide Some context on the different drivers for our adjusted EPS. First, as of Q1 'twenty two, we will be excluding non cash stock compensation From our adjusted results, including adjusted EPS. 2nd, we would expect interest expense in the mid $200,000,000 a bit higher than the fiscal 2021 expense of 245,000,000 On a continuing ops basis, reflecting a lower net debt balance offset by somewhat higher cost of debt post refinancing. 3rd, on the tax side, we are anticipating an adjusted effective tax rate for fiscal 2022 In the high 20s percentage, as our global principal jurisdiction are now in Amsterdam and the U. S. However, we note there is a high degree of uncertainty with effective tax rate projections in the current environment. Finally, the convertible preferred shares on our balance sheet do introduce a number of complexities to the calculation of Coty's adjusted diluted EPS. To help investors and analysts model our EPS correctly, We have posted on the Coty Investor Relations website a short overview of the accounting treatment that you need to keep in mind. Now moving to free cash flow for the quarter, which came in roughly even despite Q4 typically being A seasonally weaker cash flow quarter. We continued our strict management of CapEx and one time cost during the quarter, With one time cash cost for fiscal 2021 coming in below €200,000,000 As a result, for fiscal 2021, we generated free cash of $145,000,000 which is in line with our expectations. Cash generation remains a very important We have identified a number of opportunities across 11 key streams, Which we believe should further bolster our cash flow in fiscal 2022 and beyond and drive a steady reduction in our net debt. Turning now to our capital structure. We ended Q4 with a financial net debt balance of approximately €5,200,000,000 which is a slight increase from Q3. This is largely the result Of the negative ForEx impact, the €24,000,000 cash payment of the convertible dividend As well, costs related to the 2 refinancing transactions completed in the quarter. Factoring in our 40% stake of Vela, Valued at approximately €1,260,000,000 we ended the year with economic net debt of around €4,000,000,000 During Q4, we successfully completed the issuance of €700,000,000 3 point 875 senior secured notes due in 2026 $900,000,000 of 5% senior secured notes due in 2026, with a strong demand for both issuance, allowing us to upsize both transactions. These transactions extended the maturity profile of our debt portfolio And significantly reduced refinancing risk. Fiscal 2021 was a pivotal year In the improvement of our capital structure through the sale of a 60% stake in Vela, and we remain on track to enter 'twenty one With the net leverage ratio moving towards 5 times and end calendar 2022 with leverage of approximately 4 times. As a reminder, we continue to view our retained 40% stake in Veolia as a financial stake with further valuation upside, And we will continue to be active and tactical in identifying opportunities to monetize This non strategic Zetta asset can further reduce our leverage. Building on this point, considering the dynamism of the beauty market, The Brasil business and Coty's personal care brands, Coty confirmed that it's pursuing a partial IPO of its Brasil business. Earlier today, Coty completed its first filing at CDM, the Securities Commission, which regulates capital markets in Brazil to commence This partial IPO process. This will also help advance Coty's deleveraging agenda. Coty intends to remain a controlling shareholder of the Brazil 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. I will now hand the call back to Sue for a discussion of our operational milestones and outlook. Thank you very much, Laurent. So in addition to our financial delivery in Q4 and for the year, The Coty organization has been moving at top speed to execute on the 6 strategic pillars we unveiled at the end of April. We've made good initial progress with even more still to come. So let me spend a few minutes on some of the tangible We have achieved already in our journey to transform Coty into a beauty powerhouse. The recent appointment of Constantin Scavenitis as Coty's new Chief Prestige Brands Officer is integral to our plans As Constantin background at MAC Cosmetics, Urban Decay, IT Cosmetics and Kiehl's Makes him the ideal leader to take our prestige makeup and prestige skincare footprint to the next level, while Further building on our Fragrance momentum. Starting with our first strategic pillar, you know it, Stabilizing our consumer beauty brands. Our first area of focus was the largest brand in the consumer beauty portfolio, CoverGirl, And we did not lose any time. Unveil a new brand repositioning campaign, disrupted advertising And highly successful launch of the clean, vegan mascara in early spring. The results Speak for themselves. In the June quarter, CoverGirl grew sellout in brick and mortar by 24% Compared to the broader color cosmetics category growing 16% with the highest brand share in 5 years. The growth was fueled by new advertising creative and fewer, bigger, better investments across media, Promotion and display on CoverGirl's key magnificent scent aid franchises. In particular, Lash Glastine Mascara is our largest mascara launch in over 5 years, while the Simply Ageless franchise is booming, Driven by the viral TikTok craze for Simply Ageless Wrinkle DeFi Foundation and media support behind the high Performing creative assets, starring Nicky Taylor. The overall market share gains, strength of innovation and powerful Advertising have given retailers renewed confidence with CoverGirl, where we retain shelf space in 2021 year to date for the 2nd year in a row. Building on this success, on the last earnings call, we introduced the new brand positioning And brand ambassadors for 2 other leading cosmetic brands, Rimmel and Max Factor. It's important to note But the new campaign and in store visuals for Remail only went live in June July, so we'll be monitoring the results Closely in the coming weeks and months. However, I can already confirm that according to the latest Nielsen data, REMEL has reached Its highest market share of the last 10 months is in the U. K, its largest market. And in Germany, where the brand is Under the name Manhattan, the newly launched Wonder extension Mascara is strongly resonating with consumers And he's already the brand's number one mascara. Similarly for Max Factor, the new visuals and assets are going live as we speak, And we will be, of course, monitoring early results. However, you can see on this slide, the new campaign for Max Factor To face Finiti 3 in-one foundation starring Priyanka Chopra Jonas, bringing back the glamour, the luxury And the transformational power that was always associated with the iconic Max Factor brand equity. The new positionings of our iconic cosmetic brands such as CoverGirl, Rimmel, Max Factor and Sally Hansen Assured that our portfolio of mass makeup is well positioned and covers the key trends across core markets. Now our second strategic pillar, which is focused on accelerating our luxury fragrances and becoming a key player In prestige makeup. For Fragrances, we are continuing to boost and strengthen our leading brands Through new innovation as well as renovations of key icons. Starting with Marc Jacobs' Perfect, which launched a year ago, Perfect's Unique bottle, juice and breakthrough campaign, which celebrates being real, being bold and being perfect as you are, has propped up this launch to be not only The biggest launch for Coty in the U. S. In over 10 years, but also the biggest launch across the whole U. S. Fragrance market in the last 3 years. For Gucci, the fragrance portfolio, including icons like Guilty and Bloom, is already in the top ten with our latest launch, which I will discuss very shortly. Finally, on Chloe, the Atelier D'ifour collection is quickly Coming a start out amongst ultra premium artisanal fragrance brands in China. Despite its relatively recent entry into Asian markets, This ultra premium collection has propelled Chloe to be a top 20 fragrance brand in China retail with sales doubling this past quarter. Turning now to prestige makeup. It's important to note But while we have introduced our strategic ambitions only a few months ago, Coty has already made good strides in building out our prestige Cosmetics presence. In fact, prestige makeup was a nonmaterial part of the portfolio only 2 years ago and is now Approximately 3% of our sales incurred in our 3 key brands, Gucci, Burberry and Kylie. I firmly believe that our portfolio of prestige makeup brands is very well positioned, comprehensive And covers the key trends per market, including personality driven new brands, which are leading in the U. S. And fashion driven brands, which are leading in Asia Pacific, China or Europe. As we continue to And the distribution and assortment behind these leading brands, we are confident in our ability to drive prestige cosmetics To a high single digit percentage of our portfolio by fiscal 25, in line with the targets we laid out in April. Focusing on Gucci makeup in particular, the brand is clearly winning wherever it's present. In the U. S, Gucci makeup sales in comparable doors doubled in fiscal 21, which supports our plans to significantly expand distribution in fiscal 2022. In Europe, We have been very selective in the doors where we have launched the line, focusing on the highest productivity doors for leading beauty retailers like Sephora And Golden Apple in Russia. And the results honestly have been exceptional. Gucci makeup is ranking in the top 10 in the Europe Cifora doors And top 5 in the Russia doors where the line is present. Finally, in China, where we are aggressively Spending Gucci makeup presence both off line and online with Tmall, the brand's ranking has improved 11 ranks versus Last year. Shifting to our 3rd strategic pillar, building our skincare Again, while much of the momentum here is still to come, we have already made some good progress. Specifically, skincare accounted for approximately 5% of the portfolio in fiscal 2019 and is now standing at 6% Led by brands such as Filosophy, Kylie Skinter and Lancaster. And as we continue to both Spend these brands and start taking some of our existing prestige and consumer beauty brands into skincare, we continue to target Skincare reaching over 10% of our sales in fiscal 2025. So now let me spend a minute on our core skincare brands. As we've discussed in the past, PHYLISOCI is a staple in the U. S. Prestige skincare market holding the number 8 position. In fact, with the brand's strength in cleansing and exfoliating while giving back to the skin, Filozofy's Purity line is the number one cleanser and the micro delivery line is the 2nd facial exfoliator in the U. S. We have continued to build our philosophy multichannel presence by bringing a unique branded philosophy presence on Amazon. And now only 1 year post launch, PHYLOOSOXY is already the 2nd prestige skincare brand on Amazon. For Lancaster, our revitalization strategy is being launched in Hainan. We opened a beautiful brand counter and temporary pop up store in Lagardere, which you can see in the video here, drawing big crowds and great consumer engagement. As a result, in this location, Lancastere ranked number 3 in June amongst niche skincare brands I'm in the top 20 amongst all skincare brands. Based on this initial success, we plan to continue to open more Lancaster doors In fiscal 'twenty two across Hainan, Mainland China and Korea. Finally, on our 3rd Skincare brand in our portfolio, Kylie Skincare, we saw good momentum with the launch of the makeup melting cleanser, Though our focus was very much on the successful relaunch of the Kylie Cosmetics line with an integrated direct to consumer website. I will, of course, discuss the results of the relaunch very shortly. In total, our portfolio of skincare brands is very well positioned And covers the key trends by market, including personality driven and niche brands leading in the U. S. And prestige brands with strong credibility from Europe, in our case, Monaco, resonating across Asia. Moving on to our 4th strategic pillar now, building our e commerce and direct to consumer expertise and capabilities. In Q4, we continued to build on the momentum of the previous quarters, recording 19% growth in our ecom sales. This brought our total ecom sales growth for the year to +34%, Including 37% growth in our prestige brands and 25% growth for our consumer beauty brands. As a result, our e com penetration reached a high teens percentage in fiscal 2021, twice the penetration level pre COVID, And our intent is, of course, to continue to accelerate this further in the coming years. As part of our strategy to continue to strengthen our ecom and direct to consumer capabilities, I wanted to share a couple of recent examples from the U. S. Specifically, as we are coming out of the pandemic where much of our e com focus was on search and conversion, We are now leaning into digital first omnichannel. By this, we mean shifting our strategy more into digital storytelling and discovery, Which is leading to product sales boosts both in store and online. Let's start with CoverGirl, recent partnership with Amazon across its Ecosystem. CoverGirl teamed with Amazon in an entertainment commerce meets social commerce initiative. On 2 episodes of Inside Making the Cut on Amazon Live, CoverGirl showed fans how to recreate the beautiful signature clean And fresh faced makeup looks from the Amazon Original Series. Viewers were able to watch The clean makeup tutorials and simultaneously shop the same CoverGirl products on Amazon to get the look they love. In the second example of our digital first omni channel approach, we identified high engagement and high quality organic re mail content Currently on TikTok. After investing and boosting these 2 organic re mail reviews over a 1 week period, We saw a clear uplift in weekly sales on the 2 REMEL products across each of our key retailers, both offline and online. Of course, we fully intend to replicate this approach and learnings across more brands and more markets. Moving now to our 5th strategic pillar, expanding in China, which is really a perfect blend of the first four Strategic pillars. Again, while Coty's exposure to China is still small, it's important to note that we have already begun to make strong strides With our sales in China growing by double digits versus fiscal 2019 and fiscal 2020. As a result, China has Standards from less than 3% of sales in fiscal 2019 to over 4% of sales in fiscal 2021, And our goal remains to boost China to over 10% of our sales by fiscal 2025. Underpinning this growth in China is the strong momentum we are seeing in our prestige brands there. In Q4, Coty as a company ranked number 9 in China's total prestige beauty market, an improvement of 1 rank from Q3, despite our limited presence in China's core skincare category. In fact, our prestige retail sales outpaced the market growth by almost 4x with our sellout growing plus 90% in Q4 compared to the market at plus 25%. This is the 2nd consecutive quarter of Coty outperforming the China beauty market. Digging deeper, of the top 20 prestige fragrance brands in China, 5 are Coty brands, Including Gucci, Burberry and Bottega Veneta. This is a great baseline for future growth as China's Prestige Fragrance market has already surpassed in size both the Prestige Fragrance markets of key countries like U. K. And Germany, And we foresee strong growth in the China Fragrance market for many years to come. And in China's prestige makeup market, Gucci and Burberry are already in the top 25 despite much more limited distribution versus established competitors. In fact, in Q4, Gucci makeup sold out grew tenfold year over year, fueled by both brick and mortar sales And the brand launch on Tmall, with Tmall sales already surfacing offline sales. As we focus on building our presence and recognition in China, we are very happy to announce that Coty will exhibit for the first time The 2021 China International Import Expo, which will be a great opportunity to showcase our beautiful brands and products. Having covered many of the progress areas to date, I'm even more excited to share details on the momentum we are already seeing in the Q1 of fiscal 2022. First, let me start with Kylie. The long awaited relaunch of the new Kylie Cosmetics together with the new integrated website happened on July 15. Together with Kylie, we took the opportunity to update All of the cosmetics products assuring that each product was vegan, cruelty free with clean formulations, Free from over a 1000 contested ingredients, while delivering top notch quality. The excitement of our fans were palpable, With 300 orders a minute coming in on the DTC website in the first 15 minutes of We saw the same kind of several Richard Recollection with thousands of orders coming in the first 15 minutes. And in both cases, we saw basket sizes and order values exceed the averages pre launch As consumers were able to bundle products across cosmetics and for the first time skincare. While most of the orders on the direct to consumer websites Came from U. S. Consumers, returning customers represented the majority. The brand we launched resonated just as Strongly in international markets. In the UK, Kaidi Beauty was a top 10 beauty brand of Selfridges. In fact, the Kylie Shade Lip Kit was the 3rd top selling SKU across all of Selfridge's products, not just beauty. Similarly for Doublas with Kylie Cosmetics now available on its website across several markets and in store presence slated for the fall, Cosmetic sellout was 2x higher than forecast and drove a clear boost to Kylie Skin Care. We saw the same kind of momentum at Ulta as well. The global momentum correlates well with Kylie's tremendous appeal online across In fact, our analysis shows that amongst other top personality led beauty brands, Kylie Cosmetics has the most likes and post interactions across Instagram and Facebook and that Kylie's live shopping event, which Accompanied the relaunch of the cosmetics line far exceeded benchmarks on order volume and conversion rates. All of this confirms the strong pull that Kylie has with the Gen Z consumers across many key markets And our goal is to fuel this momentum with more launches and more activations in the coming years. On the fragrance side of our portfolio, we have a robust launch scheduled for the first half of fiscal twenty twenty two And we are complementing this with the rollout around the globe of our first two market digitally enabled touchless fragrance testers. So let me take a few minutes to walk you through our key launches. On Gucci, we're extremely excited by the recent launch of Gucci Flora, gorgeous gardenia, Building on Gucci's iconic Flora pillar, we expect Gucci Flora Gorgeous Gardenia to be our biggest fragrance launch of fiscal 2022. The concept behind the launch is simple. Flora is driving back magic and joie de vivre in a disenchanted world. With Miley Cyrus as the face of not just the fragrance campaign, but also the Gucci brand, we are working extremely closely with the fashion house to accelerate the brand right in time for Gucci's 100 year anniversary. It's important to note that Coty's activities and support behind Gucci Beauty and Gucci's activities and support behind the fashion brand are very synergistic and fully amplify each other. We believe that the mix of different elements ranging from Gucci's 100th anniversary activations Together with our continuous work to elevate Gucci Beauty and Flora and complementary events like the House of Gucci movie release, We further propel Gucci's rankings in both fashion and beauty, and we are already seeing Strong results for FluorA. The campaign announcement has reached 1,800,000,000 impressions. While Early into the launch, we are already seeing great initial sellout results in North America, where FLORA is currently exclusive to Sephora. Flora is already the 3rd fragrance in U. S. Sephora and already the 1st fragrance in Canada, Sephora. Now on Burberry. We have launched the new mail filler called Hero, which we believe has strong potential The campaign starring Adam Driver has already reached over 2,300,000,000 impressions And the initial sales results have been equally very promising. In the U. S, Hero is currently exclusive to Bloomingdale's And has become the number one male fragrance at the retailer. Similarly in China, TiO has reached the number 3 spot In male fragrances on Tmall. On Calvin Klein, we've introduced a new male fragrance feed app called Defy with the campaign faced by actor Richard Madden. DeFi is all about facing our fears and reconquering our freedom in this post pandemic And again, our investment behind CKDify will only be amplified by the support of the fashion brand. The launch is off to a great start here again, driving market share gains for the Calvin Klein brand in the UK With the Calvin Klein male fragrance rank improving by 7 spots, similarly in the U. S, initial sellout is already almost 2 times higher than Complementing this fantastic lineup of fragrance launches are initiatives in consumer beauty. Specifically, we recently launched a wholly new concept under Sally Hansen called It Takes 2. The product combines the 2 Step process of the iconic MiracleGel line into an easy to use portable format. We are supporting the launch with highly engaging videos And content on TikTok and other social media platforms and you can see one of the videos here, We are seeing engagement rates more than double benchmark on TikTok. We are also attracting consumers and educating them On the new usage concept through disruptive in store displays such as this one, the results are here again clear. Since the launch of It Takes 2, Sally Hansen's MiracleJ franchise has reached its highest market share in 4 years. The success This innovation is something that we can clearly build across several of our other cosmetics brands. That brings me to our outlook for the year. As you have undoubtedly seen, fluctuations in COVID are driving volatility Across markets in terms of restrictions, stock traffic and of course, social mobility. Yet At the same time, we are not seeing any slowdown in fragrance momentum in key markets like the U. S. China demand continues to grow even with added temporary restrictions in certain cities. And at the same time, we are also beginning to see Times of recovery in some European markets. Similarly, while international travel is still under pressure, Local travel retail is clearly seeing improving trends even if traffic to Hainan has temporarily slowed. Finally, makeup demand is also gradually improving, though COVID impact remains a watch out. Combining this improving demand backdrop With a very strong Coty launch calendar, which I just discussed, together with the first tangible results of the execution of Coty's 6 pillar strategy, The result is very strong sales momentum in our business. Building on the very strong double digit growth in our sales in July August to date, We are anticipating a Q1 of 'twenty two like for like sales growth in the high teens percentage. Looking beyond Q1, Assuming no significant deterioration in COVID conditions globally, we expect beauty demand to continue to improve, Though base year comparisons should get more difficult. At the same time, our strong launch calendar Should extend through the year through the rest of the year. As a result, we are targeting for fiscal 'twenty two Like for like sales growth in the low teens percentage, continued expansion of our gross margin, Strong operating leverage as we maintain our fixed cost base relatively stable, which should drive fixed cost As a percentage of net revenues lower by approximately 300 basis points, continued expansion in our R and D investments, Which have grown by 10 basis points to 2.1% and should continue to expand. Adjusted EBITDA of Approximately $900,000,000 on a constant currency basis, representing roughly 100 basis points of margin improvement. And we continue to target leverage towards 5x exiting calendar 2021 and end calendar year 22 with leverage of approximately 4x. To conclude, I'm incredibly proud of what Coty has accomplished in the past year. We have ended fiscal 'twenty one with revenues, savings and EBITDA ahead of expectations. We have put our plans in motion, executing on each of our strategic pillars and already seeing positive milestones in each and every area. And building on this progress, we are starting fiscal 'twenty two on very strong footing, Expecting high teens like for like sales growth in Q1 and low teens like for like growth for the year as a whole, clearly showing that Coty He is in the driver's seat. As we move through fiscal 'twenty two, we expect our gross margin expansion And further cost reductions coupled with the flow through of the additional sales to fund both strong profit improvement And reinvestment in the business to drive our 6 pillar strategy. Our commitment remains to meaningfully reduce our leverage By end of calendar 'twenty one and beyond and continue to drive profitability growth through strong Sales acceleration. Thank you all for your time today. We are now happy to take your questions. And opportunity. And we will take our first question from Rob Ottenstein with Evercore. Your line is now open. Great. Thank you very much and terrific progress. I was wondering if you can help us maybe just focus a little bit more on the first strategic pillar, which is stabilizing the consumer beauty business. Obviously, given the comps, it's a little tricky to and difficult for us to judge your progress. You gave us some good Market share data, which is certainly indicating significant progress. But I was wondering if you could go maybe a little bit deeper In terms of repeat purchase or brand equity scores or any other metrics, and to support confidence That the stabilization and the trends that you are seeing are likely to continue in the future. Thank you. Hi, well, thanks very much for the question. That gives me a great occasion to really Speak about this, I would say, a big success that we're having on CoverGirl. This was really not Something that was easy to achieve, as you can imagine. The brand has been losing market share for years years. And in fact, we made a bold decision to bet on one Key area of the business, that's by the way the key area that's growing back the American cosmetics business, which is clean beauty. Clean beauty is clearly Over indexing the recovery of the beauty category, specifically in the U. S. Market. And CoverGirl, as you know, it is not only the inventor of Clean Beauty 60 years ago, It was the brand that was launching innovation in this area with Clean Fresh line launched last spring, Followed by LashBlast Clean that became probably our biggest mascara. And again, we've decided also to come back to another asset of the brand, which is What we call today a makeup needs skincare with Simply Ageless, which is, by the way, the best selling anti aging foundation in the U. S. And when you add these 2 together with a new way of doing advertising, you clearly see that the brand is re attracting consumers But are the ones who left the brand in the past, mainly Gen Z, millennials, but also people who are Hispanics from Hispanic community. So when you add all this together, you can understand very easily why the brand is growing again because these demographics are those who are the biggest consumers of makeup. We are also progressing, I would say, on people who are older than 40 years old, which is a key category for categories such as foundation and mascara too. When it comes to the second part of your question about the metrics, what I can tell you is that we are really, really following very, very carefully Any new assets we are producing. If I take one example, which is the Nicky Taylor Simply Ageless advertising that just restarted in the U. S. Beginning of August. This one is probably honestly, I think it's probably one of the best testing advertising that not only Coty has done on CoverGirl, But including probably in the past of Covalia, what the brand was, number 1 brand in the U. S. And the metrics we are following such as you know, Purchase intention, ability to convert people from interest to purchase, etcetera, are among the highest Ever seen into the database of the companies that does the testing for us. So we are super, super confident that the new generation of advertising Behind products that are those that people are looking for today, again, clean beauty, makeup powered by skincare, etcetera, It's the winning recipe and that's the reason why the brand has been growing market share now for 3 months in a row and has not lost any shelf Thanks for the 2nd year in a row, and you'll see a lot of new things arising in fall around Sabangare. And we will take our next question from Steve Powers with Deutsche Bank. Your line is now open. Yes. Hey, thank you very much. I guess my question is just wanted to dig into and just Frame your outlook a bit more for fiscal 2022. Starting with the Q1, you talked about strong double digit growth in July August and then Obviously, the high teens outlook for the Q1, which I think implies some September deceleration. So just maybe you could Frame that for us and any key drivers you'd call out. And similarly for the full year, While I do appreciate the base year comparisons get progressively more difficult, relative to a clean Sort of 19 days adjusting for the Welles sale, I'm not sure that they do. If anything, they make it a bit easier. So maybe just better frame The drivers there and any implied deceleration versus that pre COVID base? Thank you. Thank you, Steve. So again, when it comes to the first part of your question about what you think would be a deceleration in September, it's not a function of Selling and demand, comps do get more difficult by definition, but what we can tell you is that the Start of the new initiatives in the pipeline we have on the market today with Gucci Flora, gorgeous Gardenia, with Burberry Hero, With the relaunch of Kylie Cosmetics, honestly, the figures are absolutely outstanding. If I can give you 1 or 2 figures that we commented during the speech, Gucci Flora, for example, in Canada, we just received the information that it was the number one best selling fragrance in the market, top 3 in the U. S. Kylie Cosmetics, again, the momentum has been huge and it's continuing. CKD Psi that we launched everywhere in the world is Having the same kind of outperforming our best, I would say, estimates. So again, I don't see this I wouldn't describe it the way you describe it. We are just having still watch out just to make sure we are ready for any kind of things that could happen. We are super confident. That's the reason why we have laid out this low teens growth for the fiscal 2022 year Because these launches are going to be, of course, outperforming the market hopefully for the remaining of the year. So in fact, what I can tell you when it comes to how we are building fiscal 2022, the good news is that we are delivering on our 6 pillar strategy. So again, stabilizing consumer beauty, I just said a few words about CoverGirl, but I could say words about WEMEL Having its highest market share for the last 10 months, I could say that we've stabilized Consumer Beauty business in Europe for the first time in 5 years. Max Factor has gained market share for the first time in 4 years, and this is Prior to the big relaunch that's starting honestly right now in stores. So stabilizing consumer beauty was the number one, I would say, requirement to allow us to take full advantage of the huge potential and the huge growth we are already seeing on the prestige part of the business, Be it in the U. S, in China, but also in Europe. So these two together, coupled with a strong, I would say, e comm Expertise and capabilities that we've been building during the last year is clearly giving us strong confidence about the commitment of high of low teens growth for And we will take our next question from Chris Carey with Wells Fargo. Hi, thanks for the question. Just following up on that just a little bit. The bridge for fiscal 2022 or excuse me, fiscal 2021 revenue had included about $1,200,000,000 from COVID impact on the core business. And I wonder if you can just talk to the concept of recovering Some of those sales, and this is after accounting for M and A with Yuneec and Kylie and the low quality reductions and The reductions in low quality channels and prestige. So can you just talk to that impact of the business from COVID? How much maybe you expect to recover? How much you had done to say, streamline the improve the quality of the portfolio, exit businesses further or would you expect to over time get those sales back that Come out of the base. And then if I could just one quick question just on the fiscal 'twenty two. What are you implying for ANCP spend in your outlook. So thanks very much for those. Thank you, Chris, for the question. So let's At the end of the question, when it comes to the ANCP, as Laurent laid out during his presentation, there is a sequential acceleration of Our working media, which is clearly the key part of AMCP, 26% of growth during the last quarter. And of course, we are going to continue to invest behind the huge and early successes we are seeing today behind Gucci, behind Burberry, Calvin Klein, Kandi Cosmetics, let's also call them their alignment and Max Factor, just to name a few. So clearly, we are going to continue to step up the investment in fiscal 2022, particularly on working media. Three things I can tell you around fiscal 2022 compared to fiscal 'twenty one compared to fiscal 'nineteen, you were talking about sales recovery, etcetera. The first one is when we compare The sell ins and the sell outs we are seeing on the market, sell ins that we just shared with you and sell outs on a 6 month basis, which is clearly when we As part of the acceleration of the company, starting in June of this calendar year, you could see that Coty Prestige business is growing 2x faster Then the market. So that's also an indicator about how the health of the prestige business as Coty is compared to peers. This is the first thing. The second thing, even if we look at consumer beauty, we have seen that our consumer beauty for the last 6 months has grown by 7%, which is slightly ahead of what the market is doing. So in both divisions, we are seeing a strong, I would say, outperformance versus The sellouts of the market, which is for me the best way to assess what the market is doing and therefore what the competitors are doing. Another thing I can tell you compared to fiscal 2019 is the improvement in our EBITDA again. The EBITDA margin has been growing by 300 basis points versus 2019, and this on a lower base of sales. So again, As you can see on all metrics, specifically sellout, a progression of sales, EBITDA and working media Versus 'nineteen, we are clearly recovering much faster than what we thought at the beginning of last year, in fact. And we will take our next question from Steph Wissink with Jefferies. Your line is open. Thank you. Good morning everyone. I have a follow-up question on the ANCP. I guess maybe this is 2 part tactical and philosophical. But on the tactical side as you do invest A bit more in ANCP and demand activation. What are the 2 or 3 key metrics you're looking for beyond sales, maybe more in terms of sales quality That will continue to reinforce that investment. And then, Laurent, for you, maybe as you think about upside in the year, Is your plan to reinvest the upside into incremental working media? Or are you at a point where you feel like you can start to see some of that upside balance through and drop through to the bottom line. Thank you. Thank you. So, I will start on the second part on your question. So, Definitely, what we and this is what you are seeing already in Q4, what we explained that our level of AMCT, H1 'twenty one was 20%, Q3 grew up to 23%, and Q4 is 26% of the AMCP on net sales. So, we are not giving any guidance on A and CP for fiscal 2022, but you Easily understand that the savings we are delivering next year, that we are really using the savings on fixed cost and on gross margin To refuel the growth and to support the strategic initiatives that Sue has just explained. Now to go deeper in this The level of AMCP is really in this bucket, there are different lines. So You have media, working media and the other AMCT. We keep very strict discipline on other AMCT Where we can see if I take the example of samples, testers, I mean, all these lines, we keep optimizing and it's part of our productivity plan And at the same time, using this money to refuel and really to focus on working media. So when we are accelerating AMCT, Within AMCT, it's even much, much faster on working media and here we are very, very tight discipline on this. On your question, if we see any upside, definitely, and this is a weekly discussion we have together With Sue and the leadership team, indeed, when we get when we see additional upside in profits, We are making the decisions, okay, where to reallocate this money. This is what we did this year, for example, on CoverGirl and you see now the results. And this is definitely what we will continue in fiscal 2022. What we are doing now is a great initiative, re refueling, so it's really a daily and a weekly work, Again, managing at the same time fueling the growth and creating virtuous circle and also delivering good EBITDA. So that's really what we started to do this year and we'll continue next year. On the metrics, and Sue gave a few elements. We are very we are getting very, very professional in the way we are spending our working media. So, we are testing the copy And we have very strict KPIs about purchase intent and we are making clear decision. We have scored And this is what we are using indeed to make decisions where we allocate the money. And this is the case for consumer duty, For prestige for all categories, again, and this is what we are doing with the team. So, yes, we have very specific metrics On purchase implant, awareness and so on and all the specific KPIs to allocate the resource. And we will take our next question from Andrea Teixeira with JPMorgan. Thank you. Good morning. I wanted to go back and congrats on the results. I wanted to come back to the Kylie Cosmetics and Kylie And I think you've spoken very positive about that. What is the run rate for sales in dollar terms for this So maybe from an annual perspective, what is embedded in your guidance? And then if you can, as a follow-up for the A question before about the actual rationalization that you're including. Just to understand that common clients 2 pretty sizable chunk of your fragrance business. I just want to understand how we should be thinking of those fragrances In terms of your portfolio and how we should be thinking going forward? Thank you. Thank you for that question. So again, on Kylie, again, I'm not going to comment on individual brands, but I can tell you that the relaunch that we have done during this summer With the cosmetics lines, for the first time sold on the same brand side as the skincare line, has really been, I would say, Outpacing all the key metrics that we usually see on what we call celebrity led brands. In fact, The number of sales that we've seen, for example, during the first 15 minutes was huge, 300 orders per minute during the first 15 minutes. And when Kylie has done the live shopping session that she's been doing during the relaunch, we had KPIs that were 3x higher in terms of back And conversion versus what we monitor on the rest of the market. And last but not least, in fact, this was Not a surprise because during the last year, even if it was a quiet year for the makeup, I would say, industry, but Kylie has been gaining something like 60,000,000 followers On her different social media, and you could also see that in terms of what we call interactions, likes, comments, etcetera, It was more than 19,000,000 of these interactions, comments or likes that happened on the different channels of SkyVie, Which was a great preparation for the relaunch that we've done during the summer. And today, the feedbacks we are seeing, including qualitative feedbacks Because the line is now 100% vegan, cruelty free, of course, and we've been removing something like 1,000 fantastic ingredients from the formulations, All the feedbacks are absolutely all outstanding. So when it comes to our fiscal 2022 outlook, It's on best broad based growth across the different brands, the different markets, and of course, the different channels. And we will take our next question from Mark Astrachan with Stifel. Thanks and good morning or afternoon everyone. I wanted to ask about sales growth progression. So obviously, Strong 4Q sales, but really comparison driven, you look at the underlying or 2 year stack or CAGR Growth, I think was a little bit less strong sequentially than maybe some of your peers. But conversely, your guidance for The September quarter and then for the year would imply a pretty strong acceleration in underlying growth. So I guess the question is, what is really driving that At this point in terms of the strong acceleration, is it if you're done lapping some of the exits of these lower profile channels, brands, The AMP is really starting to work. And maybe if you could give a bit more comments there, that would be helpful. Thank you. Thank you, Mark, for the question. So again, if I understand well your question, what's driving our outlook for fiscal 2022? Clearly, the first thing is that we are seeing again strong progress on our pillar. We have multiple strong initiatives. Again, Being the number one prestige fragrance maker, when on the same year you have the relaunch of what's going to be The biggest launch at Coty this year, which is Flora, Gorgeous, Gardenia, by Gucci, Berg Re Hero, Beside, Kylie Cosmetics relaunch, Sally Hansen relaunch. Also, we are seeing that fragrance demand continues to improve very, very strongly, be it in the U. S, In China and now in Europe, again, this gives us confidence that there is something happening behind The brands prior to quarter 1, but also these launches add a new layer of confidence that they are going to probably be Best selling launches. Again, I come back to Flora by Gucci. The figures we got from Canada one day ago Show that this is 2 or 3 times bigger than what we had 1 year ago with Perfect by Marc Jacobs, which you can, of course, remember was the best Selling fragrance last year in the U. S. And Coty's biggest launch in the last 10 years. So we're building momentum on momentum As we started during the second half of fiscal twenty twenty one. And we will take our next question from Olivia Tong with Raymond James. Great. Thank you. I wanted to revisit your comment in the press release about always being on the lookout for value creation. So first, can you just talk about the genesis Your decision to IPO part of Brazil, and if there's any P and L impact of that and whether that's incorporated into your sales outlook. And then just thinking about the rest of the So are there other brands or geographies in your view that may not fit in the traditional Sensing or portfolio? You obviously I discussed quite a number of brands on the call. So should we assume that if you didn't mention the brand in your prepared remarks that maybe those are more likely to be potential candidates for strategic alternatives? And then I will. Thank you. Okay. So, let me comment on Your 4 questions on partial IPO. So, first of all, so it's really that we keep we make We keep the control and we keep majority. There is no deconsolidation of this operation. So, it's definitely a decision with the goal of supporting the growth of the Brexit business I'm Coty's personal care brand. So, it's really an important strategic decision we are making. Then I cannot I will not comment more on P and L and other elements considering the local Regulation, if you want more information about this operation, you can refer to the CDM website in Brazil. And we will take our next question from William Reuter with Bank of America. Hi. I just have one. In terms of I'm wondering where travel retail was As a percentage of historical levels in the Prestige segment, I guess I'm wondering what type of a tailwind we would still have In this segment as travel returns to pre pandemic levels. So again, on travel retail, clearly, the bright Spot has been what we call domestic strategy retail, sorry, namely Hainan. And even with the most recent We haven't seen any slowdown in this kind of distribution when it comes to our brands. More globally in terms of travel retail, now they are in low single digits, used to be high single digits. Of course, there is more growth to come. As you said, restrictions around travel are eased more and more. But the great news for us is that we've used these Key locations such as Hainan in China to test and relaunch some key brands specifically in skincare. As you can imagine, skincare is a key segment for travel retail and moreover in APAC and China travel retail. And again, we got Great news. We've seen that the line is a top 3 skincare line in Hainan now. It's a top twenty Skincare line in front of big brands that have been there for decades, etcetera, this gives us great confidence That we are going to add a new growth engines to our travel retail growth, namely skincare and specifically high end skincare In the region where we were relying mainly on fragrances. Thank you. And we will take our next question from Carla Casella with JPMorgan. Hi. So you mentioned the Brazil potential listing. I'm curious and you mentioned that that could partially help you delever. Have you or when at one point do you revisit Wella and whether you sell additional stake in that to either help delever or use For growth in the core business. And are there any restrictions on that? And I have one follow-up just in terms of the leverage. Thanks. Thanks for your questions. First of all, I want to remind that indeed, we see really some value increase in The last take, as you remember, so from 1.2, we are now 1.270. So there was a 50 value increase in Q3 and now 10 on top in Q4. So this is this 40% in our We see value increasing, and this will continue. 2nd, this is why we And that's indeed in our leverage. So we are indeed the financial net debt, but this is really an asset why we ensure our economic net debt. And our economic net debt with the last take is now about €4,000,000,000 To answer your point, there is no Specific agenda, but definitely we are contemplating that if there is opportunity, which would be interesting in terms of value, This is something that we will be ready to explore, but at this stage there is no specific agenda on this. Okay. And then you gave your net debt to EBITDA and your guidance. Where does your current covenant net debt leverage stand? Yes. So today, our covenant net debt is we are in very good situation. So we keep things And the comfort is increasing our roadmap on EBITDA and our roadmap on our leverage on net debt, We have no further questions on the line at this time. I will turn the call back over to Sue for any additional or closing remarks. Thank you, everyone. Again, we are all super proud of our great performance delivered by an amazing And I take this opportunity to say thank you to everyone at Coty. Thank you very much. This does conclude today's program.