Good morning, ladies and gentlemen. My name is [Indiscernible] Please standby, your program about is about to -- At this time, I would like to welcome everyone to Coty's First Quarter Fiscal 2022 Results Conference Call. As a reminder, this conference call is being recorded today November 8, 2021. On today's call are Sue Nabi, Chief Executive Officer, Laurent Mercier, Chief Financial Officer. I'd like to remind you that many of the comments today may contain forward-looking statements. Please refer to Coty's earnings release and the reports filed with the SEC where the Company list factors that could cause actual results to differ materially from 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. Nabi.

Ladies and gentlemen, with our Q1 now complete, I'm very encouraged by the success we are having, further building on the strong foundation we put in place last year. The results we have delivered this quarter truly exemplify the virtual circle that we have set out to create. It's a simple one with strong revenue growth combined with growth margin and cost initiatives, synergy [Indiscernible] profit expansion and strategic investments, which in turn drive future growth momentum. That's some key takeaways that I would like to first highlight. First, our Q1 revenue growth surpassed our expectations and guidance with growth coming from both our Prestige and Consumer Beauty segments. We continue to see a very strong demand for Prestige products, particularly fragrances in the U.S. and China, with an impressive rebound in travel retail. This was further supported by our exceptional lineup of fragrance launches. Meanwhile, we continue to see a recovery and improvement in Consumer Beauty with particularly strong trends as at both CoverGirl and Max Factor. This resulted in like-for-like revenue growth of 21% above our guidance of high-teens growth. Second, we reported very strong profit growth during the quarter. This was fueled by a significant gross margin expansion of nearly 500 basis points, as well as further cost reductions. The substantial gross margin expansion we have seen, is a true testament to the strength of our business model as we double down on a creative innovation and continue to preimmunize our portfolio. Importantly, we continued to step up our investments in marketing. In fact, our working media doubled versus last year. Despite this, our adjusted EBITDA increased almost 70% equating to 550 basis points of margin expansion. Evidence that our virtual circle is now in motion. Third, we continue to execute and make progress across our strategic…

Thank you, Sue. I am very pleased with our first quarter results, which continued our very strong pace of profit growth. Importantly our [Indiscernible] cycle of growth is now in motion. Our profit was driven by strong gross margin improvements, allowing us to continue to reinvest in our strategic growth initiatives, thereby further fueling top line growth momentum. Starting with our gross margin performance, our Q1 adjusted gross margin of 63.4% increased by nearly 500 basis points from last year, and 250 basis point from last quarter. These marks our third consecutive quarter of gross margin above 60%. Our gross margin performance was driven by favorable mix, both from the outside growth of Prestige, as well as favorable product mix within the categories, lower excess and [Indiscernible], fixed costs absorption on increased sales, pricing and revenue management, supply chain productivity, and material cost reduction program. We continue to be very focused on further driving gross margin expansion, both this year and in the years to come. As such, we have a very clear, multi-pronged, multi-year gross margin attack plan in place, while we also expect we will continue to benefit from positive channel, category, and regional mix shifts. The growth margin expansion is key towards the [Indiscernible] 2 cycle we have created of sales and profit growth. While the topic of inflationary pressure, supply chain bottlenecks and component shortages are dominating conversations across all industry, I am pleased to say that so far Coty is navigating through uncertain environment quite well. This is a result of both the agility of our supply chain and procurement teams, as well as our structure and drivers of our business model, where we are over driving gross margin accretive channels, categories, and innovation. While we have seen isolated constraints in certain components, such as…

Thank you very much, Laurent. So, we continue to make strong tangible progress across our six strategic pillars in the first quarter, with many more milestones plans for fiscal 22 beyond. I will now walk you through some of these key costs of one -- sorry, highlights. And as a reminder, we will be covering each of these pillars and future initiatives in much greater detail next week, November 18, at our Investor Day in New York City. Starting with our first strategic pillar. Stabilizing our Consumer Beauty brands. This is a pyramid we hope many of you recognize. However, we believe it's important to remind each of you of our Core Consumer Beauty brands and where they stand. I'm proud to say that we have a clarified view of the portfolio with each brand position in the clear price tier and competing against a defined, competitive brand. CoverGirl, Rimmel, and the Chloe in Germany, Manhattan brand compete directly against Maybelline. Max Factor and Bourjois compete against L’Oréal Paris, and Sally Hansen holds the unique position of providing an affordable alternative to nail salon services. As you all know, CoverGirl has been our first area of focus within Consumer Beauty and I'm very pleased with the success we are seeing today. CoverGirl is the inventor of key makeup and leads this high growth area in the U.S., which is nicely accretive to our cosmetics portfolio. This has been supported by our strong launch cadence of clean, vegan, and cruelty-free beauty products, including Clean Fresh makeup and Lash Blast Clean Mascara. In fact, we believe this renewed focus on clean makeup is further supporting our gains with key demographics, as well as key retail partner such as Ultra, who is elevating CoverGirl as a leading example of an established mass brand, leading the path to clean beauty. I also want to note that clean beauty has the additional benefit of being margin accretive with these key innovations carrying a higher price point. I'm proud to say that since our reboot of CoverGirl at the end of March, the brand has gained market share in 4 of the last 7 months and we expect the momentum to continue. Importantly, CoverGirl is finally gaining shelf-space in total in the U.S., led by a key retailer where the brand is significantly outperforming the cosmetics category and also improving productivity. And just as we discussed during our strategic update in April, we are reapplying the CoverGirl turnaround playbook to other Consumer Beauty cosmetics brands. We just launched our first clean makeup brands that female called Kind and Free. This makeup line is 100% vegan, cruelty-free, free from fragrance, mineral oils, and animal derived ingredients. On this slide, you can see a brief ad showcasing the manifesto of this recent launch.

Here is the way I see it. There's a clean beauty out there, and it works. No compromise. Open to all of us, it's our new way of creating makeup that's kind to us and [Indiscernible]. Kind to skin, free from [Indiscernible] kind to animal, free from cruelty. We call it Kind & Free. Let's get behind this, the clean face of makeup. We're Kind & Free from Remo, London, where clean works.

Kind & Free is our biggest Consumer Beauty launch in fiscal '22. Along with our retail partners, we believe this will truly be a game changing innovation and we have been very excited with the recent test results. While Kind & Free is still only in pre -launch phase with a full national rollout and full media support going live in Jan, we are already beginning to see [Indiscernible] sales at key retailers picking up in recent weeks. For Max Factor, we are seeing very positive trends as the visuals and new assets have now gone live. Starting in the UK, Max Factor gained 20 basis points of market share in September. Across all customers, Max Factor is stable or gaining market share, which is a first for the brand in years. Similarly, in the Netherlands, the brand gained 50 basis points of share. With the new brand positioning and campaign with Priyanka Chopra Jonas only starting in a couple of months ago, we are really encouraged to see that the brand is already stable, or growing market share in over 75% of its markets. We plan to keep the momentum going in December as we continue to invest in media behind Max Factor. Moving to our next strategic pillar of accelerating luxury fragrances. As previously mentioned, we have some outstanding fragrance launches during the quarter, further supporting our success in this key category. Gucci Flora Gorgeous Gardenia is one of the great launches. Ultimately, our goal is to summon this fragrance within the top 15 global female fragrance icon. And the result of recent month as across geographies, channels, and customers suggest that Flora is on track to reach this. Globally, this is a first for us, with a key innovation seeing such strong immediate success across major geographies.…

At this time if you would like to ask a question, [Operator Instructions]. And we will take our first question from Steph Wissink with Jefferies. Your line is now open.

Thank you. Good day, everyone. We wanted to just unpack gross margins a bit more, came in quite a bit stronger than we would've expected. So maybe Sue, the question for you is as you look across the portfolio, can you give us a little bit more insight into where you're seeing that margin strength? And then I think as a follow-up Laurent, if you could just talk through some or help us quantify some of the key drivers that can listed 5 of 6 items that were contributing to the strength. If you could just help us contextualize and where the bigger pieces or maybe versus some of the minor pieces. Thank you.

So, let's start with the first part, thank you. So again, we're pleased very much with this gross margin performance in the quarter with -- as you've said, it's 500 basis points of improvements year-on-year and up 250 basis points from last quarter. So, these performances were driven by a number of different, I would say factors. Of course, the first one, and it's something that I've been insisting on since me joining Coty one-year ago, a more favorable mix, both from outside growth from Prestige, as well as a favorable product mix within the different categories. If you take the example of Consumer Beauty, we've been operating on makeup, on mascara, which are more accretive and more profitable categories than lip color. For example, we’ve done a good work in terms of lowering ENO and this is clearly in sync with the ability to say, these are the products behind which we're going to put our money in terms of media. So, let's to raise the volumes and we'll meet this new volume raise because we are precisely investing behind what's doing well. The other initiative that helps us a lot is the high era initiatives as Laurent mentioned. Fixed cost absorption on the increased sales, this is another element. Pricing and revenue management, supply chain productivity, and of course, material cost reduction programs. So, all these elements altogether, helped us to do this strong improvement on gross margin. Laurent, maybe?

Yeah, if I can add a few words [Indiscernible] Sue explained where -- we are very disciplined in this gross margin and in deed there are 2 big categories. So, number 1 is exactly what Sue has explained. So, it's really what we are doing on ENO, on productivity, on fixed costs. And -- and you saw already the result last year, because last year we were already back even better versus Fiscal '19 and above 60%. So, we are really continuing this dream. But where we are really [Indiscernible [Indiscernible] is what I will call is video on the value part of the gross margin, which is really [Indiscernible] --the part above, where exactly we're to expand within the mix, and this is really something to continue and which we will amplify is the revenue management. And obviously is also pricing, so the recipe on the [Indiscernible] the gross part remains the same. But definitely on the value part, this is what we are really amplifying. We studied and we would do even more in H2. Just one last statement to keep in mind is that we are going to continue this gross margin expansion all across the Europe. Keep in mind that gross margin in H2 is always lower versus H1 which is, the typical seasonal pattern that we have in the industry.

We will take our next question from Rob Ottenstein with Evercore. Your line is now open.

Great. Thank you very much and congratulations on a terrific quarter. I was wondering if you could talk a little bit about what -- how not -- how 11 11 is shaping up, a lot of seasonality in China and despite that, you did extremely well. So, how's that shaping up as well as travel retail. And then just on the cash flow side, perhaps talk about the seasonality of the cash flow and the fact that even in Q1 the cash flow was so strong, do you expect that to continue throughout the year? Thank you.

Good morning, Robert. Thank you for the question. So again, you've seen the results we've posted around China, 50% of growth. This is really a great, I would say, demonstration and KPI in terms of -- we have put in place, in terms of the number of brands we're going to focus on, in terms of our ability to take a significant number of sales on Tmall, creating the right content behind the right brands with the right media investments. What I can tell you is that the sales momentum that we've seen during the first quarter is tracking in line to better than Q1 in the second quarter. So clearly this will help us to do a strong execution into 11/11 in China. So, on the free cash flow, Laurent, maybe you can take this one, please.

Yeah. Absolutely. So [Indiscernible] you're right, we need to focus on these. And as I mentioned indeed, usually Q1 I would say is a weaker quarter in terms of cash flow generation because indeed this is a quarter where we are building inventory for Q2. And yet, this is what we are doing, that and the same time, you've seen Q1 the results of all the initiatives that we have kicked off or redeemed a year ago, which is really a full program on cash flow optimization. Where we are working on 10 [Indiscernible] fixed streams. So, I will not go in all the detailed, but is really that greens will only work in capital [Indiscernible]. One of them is inventories. Where now, we've better tracking and then a better monitoring is the forecast accuracy on the demand by doing that, in fact, we were able to optimize our inventory level while keeping at the same time very good service levels. So, this is really something -- we are doing the same on the receivable with optimization on overdues. So really -- and also on all the working capital. So, this is really that you see very -- you see the reserve in Q1 of these initiatives. I mean, you could see very great output, and it confirms that's why we're confirming that our target to look towards the 5 times leverage by end of calendar '21. We are fully confident and this objective we're actually confident, and this objective is going to be rich. Now on total year of fiscal year '22, we are not giving guidance on free cash flow, but definitely based on what I've just explained and combine of course with the growth and combining so with EBITDA that we are delivering. We see good that fiscal year '22 free cash flow, should be nicely higher than fiscal '21.

And we will take our next question from Q - Andrea Teixeira with JPMorgan. Your line is open.

I thank you. Good morning. So just a clarification on the gross margin bridge. I remember we were talking about pricing as you saw opportunity to take more actions even prior to COVID with these [Indiscernible] initiatives. How much least pricing did you take in the quarter and will you -- when you start to lap those price increases? And my other real question is the SG&A ratio that they've come in below expectations. Understanding that the team has emphasized that branding reinvestment remains a key focus for the Company, is that any seasonality we should be thinking of as you guide us for the at least $900 million in EBITDA? And what is driving these SG&A leverage overall, please? Thank you.

So definitely yes. On pricing, so these are indeed the initiatives that we kicked off already last year, because earning these with the commodity inflation is not coming as a surprise. So, we flagged it already a few quarters ago. So that's why we initiated definitely there were some price increases as those to explain several times. And we are really no industry, we're highly desirable brands and all-source all the investment that we are doing and all the great assets. Thanks to that, I mean, we can afford and we can implement in the same price increase, definitely in our business. So, we continue this and we're on track to take even more pricing initiatives in [Indiscernible]. And again, all this is really plan. As I said, we knew that there will be some material inflation and we know also that it's still to continue H2. So, we have all sorts of plans ready to intensify and to accelerate this price increase in H2. On SG&A, so ratio below expectations, I will really make it in 2 -- into 2 parts. So, number 1 is really the continuity that -- of the work we kicked off last year. So, it means that we have very strict plans, and [Indiscernible] to win. So really optimizing a lot of our fixed cost, our non-people costs or so, like business services. So here we are continuing. At the same time, we are making sure that even in the G&A, that we are reallocating some resources and we are still investing in the gross pillars either market. I mean, we mentioned about China for example. So, we are making sure that we are investing also in a G&A in China. Or also in the key strategic pillars that Sue has explained. So again, it's not only when you go with G&A, it's not only 1 bucket. We are making sure that we have different areas, and we're keeping good discipline but at the same time, investing where we need to invest. So, this is definitely the way we monitor our fixed costs, and on A&CP, the plan is to maintain roughly similar to Q1 mid to high 20s score through the year.

Thanks. We will take our next question from Steve Powers with Deutsche Bank. Your line is now open.

Yes, hey. Good morning. Thank you very much. Maybe picking up on that for a little bit. So, the momentum on the top line is very evident, fantastic. It's a positive mix, you talked about is also evident. Making progress on productivity. So those on the plus side of the ledger. On the other hand, contemplation is real the cost of, I'm assuming. bolstering your supply chain has also picked up a bit. So, when you talk about investing incrementally for your brands in the year, can you frame for us how much additional flexibility and incrementality you have in the plan as it stands today versus where you were when the plan started given the momentum? I'm a little bit -- just trying to understand how much incremental -- again, incremental flexibility you have to invest behind brands to fuel further growth. Thank you.

I can start really to give you a frame and indeed Sue can build on these things. Again, to give you the frame, and you see the Q1 reserves that we are over-delivering on EBITDA, we are over-delivering on profit. Because as we have just explained, thanks to gross margin and thanks to SG&A discipline. So, we are delivering a very strong quarter, but we are not giving guidance quarter by quarter, we are giving the guidance on the fiscal year on the total year. And we say that we will deliver on $900 million EBITDA at minimum because we are very intentional on reinvesting behind our brands and where we have stronger [Indiscernible]. So, what I'm telling you is really to answer your point is that, yes, we have to the flexibility, and we are creating ourselves our own flexibility. And you see it in Q1 and then we decide with the management team on a regular basis where -- we have this strong at Hawaii and we are allocating the resources when there is very strong at Hawaii. And I can tell you, of course and this is what Sue was explaining that now we have a lot more and non-initiatives with a very strong at Hawaii and where on the venue we -- sometimes we can see that some tests and so are not at the level we are expecting. We're also very disciplined that we keep the money and then we reallocate to activities where there is a better return on investment. So, yeah, let's be very clear, we have the flexibility, we're creating our flexibility and we're very intentional on reinvesting behind our brands.

And we'll take our next question from Lauren Lieberman with Barclays, your line is now open.

Great. Thanks. Good morning. You've run through a bunch of the recent successes in Consumer Beauty and the success you are seeing early indications with the relaunch of the major brands and repositioning. But sales are still tracking like I think it's 80 - is percent of where they were in the first quarter of '20, while Prestige is comfortably above where you were back then. So just curious if you could share whether recent performance of some of the other brands that are not growing as fast as those that have been repositioned or is it market recovery related but what you see as the impediment to getting back up to that fiscal '20 benchmark for Consumer Beauty? Thanks.

Good morning, Lauren. Thank you for the question. And in fact, what I would like to say is that I think we are in a way having figures that are imperative with what appears with Consumer Beauty businesses and Masco dockers, mitigant businesses have been posting. What we're seeing today is that the momentum on behind CoverGirl, which is the largest brand of Consumer Beauty is holding. And I would even say is accelerating. CoverGirl is growing both in sell-in and sell-out during the quarter. And the recent weeks of nuisance that you may have seen post-quarter are showing for weeks of market share gain, including the strong 0.8 market share gain recently. And there is a lot more to come behind CoverGirl for Q2 and probably for the remainder of the year. On Max Factor again, I've been describing the success we are seeing [Indiscernible] just the beginning because we are just starting to see the visibility in stores and online and on TV of the new, I would say repositioning. And already with this, we're seeing market share improvement in 70% of our markets. And Rimmel, which has secured its number 1 position in U.K. already with prior to the relaunch of the brand, has been doing a fabulous [Indiscernible] with Wonder Extension and Mascara, that's 1 of the bestselling Mascara sons Rimmel since many years. And we've just put on the market few weeks ago, Kind & Free, which is the -- I would say the implementation of the recipe of success of CoverGirl into Rimmel, which is the number 1 brand in UK and in many countries and Kind & Free starting outstandingly well. We just received the test results of the advertising that I've been sharing with you a few minutes ago. And again, we are constantly and that's the good news breaking I would say the records in terms of beating the best KPIs. So, we're super confident that we're going to see an acceleration in Q2. In Consumer Beauty, that's for sure. So, there is nothing today that I can share with you that would be in a way a disappointment versus what we have envisioned or versus the work that we have been putting behind the brands. Every time we put the repositioning, advertising, immediate pressure, etc. we see it delivers. It's just a question of time and you will see an acceleration in Q2.

[Operator Instructions] We will take our next question from Olivia Tong with Raymond James. Your line is now open.

Great, thank you. So, innovation really progressed well to drive your coverage particularly in Prestige. So, can you just talk a little bit about the innovation pipeline and how the development process has changed in recent years? And then I just want to follow up on Steve's question a little bit. Can you just quantify how much cost -- how much higher our costs versus your plans going into the year? And then to the extent there are profit upsides as the year progresses, are there -- do you have bigger projects planned for that upside, because you're already at 26% of sales on A&CP so I'd imagine it's not going to go much higher than that? Thanks.

Yeah. Good morning, Olivia. So, let me talk to the first part of the question around the innovation pipeline and how the process has changed in the recent year. As you know, we've been putting in place to 60 strategies. The 2 first points of this strategy were number 1, stabilizing our Consumer Beauty business starting with our cosmetics brands in Europe and in the U.S. And the second part was to how can we accelerate the growth in the Prestige division, which we have demonstrated during this first quarter at over 30% of growth. And this had three parts. Number 1, accelerating our fragrance momentum and building a female top 10, top 15 fragrance, which seems going to be the case with Gucci Flora, confirming our leadership position in male Prestige fragrances. And this seems to be also the case with the Hero Burberry Hero, and Calvin Klein define big successes. Adding a new growth and gene which is Gucci Makeup, Burberry Makeup, Kylie Cosmetics, and the three brands are outstandingly growing. If you think about Gucci makeup is triple-digit growth. So, in a way, what you are seeing today in terms of growth and the way we are operating behind innovation is very, very easy to understand if you look back at the 2 key first points of the strategic pillars. So, we are really delivering behind what we have been describing in April, and that we'll be describing in much more detail next week in New York on November 18. So, this was for the first part of the question around how we are dealing with innovation into the Company. Maybe Laurent you want to take the second part which is around our inflation -- inflationary impact on costs?

Yes. Absolutely. So, in there -- sorry. Indeed, on the -- again, I explained a few times. So, a few quarters ago so what we raised is that indeed we were assuming a 50 basis points impact related to cost in our gross margin. And this is what I explained before, so that's why we already implemented some price increase already in H1 because we knew that this headwind will come. Now what we have seeing in this is that there is some amplification as we all know on this inflation and now it's about the size of 1.100 basis points in our gross margin equation. The tier thin story. We have all depending place and what I explained before is that we have proactively faults on pricing that we are going to implement in niche to fiscal '22 to keep mitigating inflation. But also, you know, completely consistent with our journey of value creation with a creative innovation. And you know, building a better enhance your business.

And to compliment Laurent's point, I would really say that the pricing power of the Company has been very well demonstrated during the quarter. As most of the innovations be behind the Clean Beauty in mass or behind the new fragrance launches makeup, they're all very, very strongly accretive to the profitability of the Company, and really, they're even sometimes being very, very premium to the market. The innovations are highly delivering in terms of sellouts, which really is a great confirmation of the desirability and the ability to price up our brands.

And we will take our last question from Carla Casella with JPMorgan. Your line is now open.

Hi, I'm just wanting to see how much for the cost savings that you achieved in the quarter. And if you've got any update on the time frame of the $609 million cost-saving achievement. And then also, does your leverage target by the end of calendar '21 and '22, do those include the add back for the go-forward, the remaining cost savings?

Thank you, Carla. So, on cost savings, indeed, so the 600 -- the saving, is that -- so we deliver it last year, as you remember stranded $14 million savings. This year we are confirming to deliver the $19 million savings. And the rest will be in fiscal '23. So, the $600 million savings will be delivered by end fiscal '23. So, this is the plan, we announced more than a year ago. As you could see, we are perfectly on truck, even better on these savings. With a very strong Q1. We delivered $60 million in Q1, and we are confirming the 94 for this year. What I want to say also related to the savings, is also with one-off costs, which are lower versus the initial plan and this season so big labor to optimize our cash. So perfectly on track. And with very strong actions on fixed costs, on trade terms and also on all the items on [Indiscernible] ready to -- and it's part of the gross margin. So, on number 2, which is the leverage target. So very good question to -- when we have things to work 5 times, we see just an -- in EBITDA and net debt. So, there is no add-back in this calculation. The add-back is something that we are using only for the [Indiscernible] calculation and then the [Indiscernible] number. But I'm insisting here that it's 2- or 5-times end of calendar '21, and to work 4 times the end of calendar '22 in excluding add-backs from these savings plans.

Thank you.

And we have no further questions on the line at this time. I will turn the call back over to Ms. Nabi for any additional or closing remarks.

Thank you very much, everyone for your questions and we are super, super excited to see you next week in New York on the 18th, lots and lots of things that are new that you would be super happy to discover about our potential growth in the coming months and in years. Thank you very much.