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|Coty Inc. Reports Third Quarter Fiscal 2018 Results|
Positive Net Revenue Performance
Strong Growth in Reported and Adjusted Operating Profit
Third Quarter Fiscal 2018 Summary
Nine Months Fiscal 2018 Summary
"Our results were generally in line with our expectations, as we delivered steady performance with modest positive organic top line growth and healthy adjusted operating profit improvement. The Luxury division continued to deliver very strong results, while our Professional Beauty division once again demonstrated consistent solid growth. The Consumer Beauty division continued its uneven performance, but with encouraging signs of stability.
We continued to reshape our growth profile by strengthening our iconic global brands, supported by recent relaunches. We are also fueling smaller brands with high growth potential and stabilizing the remaining portfolio including the conclusion of our previously communicated portfolio rationalization program. This streamlining of our portfolio is an important milestone that will allow us to focus on those brands where we believe we are particularly suited to drive long term revenue growth.
Though there is still much work to be done, including the continued
integration of the P&G Beauty business, I am encouraged by how far we
have come since embarking on our journey to transform
As we have said, recovery will not be a straight line, but we continue to aim to deliver modest organic net revenue growth for the second half of the year. For adjusted operating margin, we continue to aim for a healthy improvement in the second half of the year versus the prior year, with most of the impact coming in Q4, as we continue to deliver on our merger synergies."
To supplement financial results presented in accordance with GAAP,
certain financial information is presented in this release using the
non-GAAP financial measures described in this section. The term
“combined company” describes net revenues of
Net revenues for the three months ended
Operating income, net income, operating income margin, gross margin, effective tax rate, and earnings per diluted share (EPS (diluted)) are presented on a reported (GAAP) basis and an adjusted (non-GAAP) basis. Adjusted EPS (diluted) is a performance measure and should not be construed as a measure of liquidity. Net revenues on a constant currency basis, net revenues on a combined company basis, net revenues on a combined company constant currency basis, adjusted operating income, adjusted operating income on a constant currency basis, adjusted operating income margin, adjusted effective tax rate, adjusted net income, adjusted gross margin, adjusted EPS (diluted) and free cash flow are non-GAAP financial measures. Refer to "Non-GAAP Financial Measures" below for additional discussion of these measures. A reconciliation between GAAP and non-GAAP results can be found in the tables and footnotes at the end of this release.
To the extent that
Net revenues of
Gross margin of 63.4% increased significantly from 59.8% in the prior year, while adjusted gross margin increased 100bps to 64.3% from 63.3% with strength in all three divisions and mainly due to the realization of benefits from our synergy program.
Reported operating income increased to
Adjusted operating income increased 9.4% to
Reported effective tax rate was (7.9)% compared to 36.9%.
Adjusted effective tax rate was 23.8% compared to 22.2%.
Reported net loss decreased to
Adjusted net income of
Total debt of
Other noteworthy company developments include:
For additional information about
Certain statements in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company’s current views with respect to, among other things, establishing the Company as a global leader and challenger in beauty, the Company’s future operations and financial performance (including brand relaunches, revenue and profit trends, and any outlook for the remainder of the fiscal year and future reporting periods), synergies from, performance of and integration of (including costs associated therewith) the Company’s recent acquisitions (including the P&G Beauty business), ongoing and future cost-efficiency initiatives and the timing, presentation and cost of future cost saving and/or restructuring plans, strategic transactions (including mergers and acquisitions, joint ventures, divestitures, licenses and portfolio rationalizations), future liquidity, future performance in digital and e-commerce, future performance of the Company’s key brands and the Company’s Consumer Beauty division, dividends, and fiscal year and subsequent effective tax rates (including the future impact of the Tax Act). These forward-looking statements are generally identified by words or phrases, such as “anticipate”, “are going to”, “estimate”, “plan”, “project”, “expect”, “believe”, “intend”, “foresee”, “forecast”, “will”, “may”, “should”, “outlook”, “continue”, “target”, “aim”, “potential” and similar words or phrases. These statements are based on certain assumptions and estimates that the Company considers reasonable, but are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual events or results (including its financial condition, results of operations, cash flows and prospects) to differ materially from such statements, including:
When used herein, the term “includes” and “including” means, unless the
context otherwise indicates, “including without limitation”. More
information about potential risks and uncertainties that could affect
the Company’s business and financial results is included under the
heading “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Company’s Annual
Report on Form 10-K for the fiscal year ended
All forward-looking statements made in this release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this release, and the Company does not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such, and should only be viewed as historical data.
The Company operates on a global basis, with the majority of net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented excluding the impact of foreign currency exchange translations to provide a framework for assessing how the underlying businesses performed excluding the impact of foreign currency exchange translations (“constant currency”). Constant currency information compares results between periods as if exchange rates had remained constant period-over-period, with the current period’s results calculated at the prior-year period’s rates. The Company calculates constant currency information by translating current and prior-period results for entities reporting in currencies other than U.S. dollars into U.S. dollars using constant foreign currency exchange rates. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies. The Company discloses the following constant currency financial measures: net revenues, combined company net revenues, gross profit and adjusted operating income.
The Company presents period-over-period comparisons of net revenues on a
constant currency basis, on a combined company, combined company
constant currency, and combined company constant currency excluding the
impact of acquisitions other than the acquisition of the P&G Beauty
Business ("combined company organic (LFL)") basis. The Company believes
that combined company period-over-period and combined company constant
currency period-over-period better enable management and investors to
analyze and compare the Company's net revenues performance from period
to period, as the total business and individual divisions are being
managed on a combined company basis. In the periods described in this
release, combined company period-over-period and combined company
constant currency period-over-period give effect to the completion of
the Merger for purposes of the nine months ended
The Company presents operating income, operating income margin, gross profit, gross margin, effective tax rate, net income, net income margin, net revenues and EPS (diluted) on a non-GAAP basis and specifies that these measures are non-GAAP by using the term “adjusted”. The Company believes these non-GAAP financial measures better enable management and investors to analyze and compare operating performance from period to period. In calculating adjusted operating income, operating income margin, gross profit, gross margin, effective tax rate, net income, net income margin and EPS (diluted), the Company excludes the following items:
The Company has provided a quantitative reconciliation of the difference between the non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. For a reconciliation of adjusted gross profit to gross profit, adjusted EPS (diluted) to EPS (diluted), and adjusted net revenues to net revenues, see the table entitled “Reconciliation of Reported to Adjusted Results for the Consolidated Statements of Operations.” For a reconciliation of adjusted operating income to operating income and adjusted operating income margin to operating income margin, see the tables entitled “Reconciliation of Reported Operating Income to Adjusted Operating Income” and "Reconciliation of Reported Operating Income to Adjusted Operating Income by Segment." For a reconciliation of adjusted effective tax rate and adjusted cash tax rate to effective tax rate, see the table entitled “Reconciliation of Reported Income (Loss) Before Income Taxes and Effective Tax Rates to Adjusted Income Before Income Taxes, Effective Tax Rates and Cash Tax Rates.” For a reconciliation of adjusted net income and adjusted net income margin to net income, see the table entitled “Reconciliation of Reported Net Income to Adjusted Net Income.”
The Company also presents free cash flow. Free cash flow is defined as net cash provided by operating activities, less capital expenditures. Management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for debt repayment and other strategic measures, after making necessary capital investments in property and equipment to support the Company's ongoing business operations, and provides them with the same measures that management uses as the basis for making resource allocation decisions. For a reconciliation of Free Cash Flow, see the table entitled “Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow.”
These non-GAAP measures should not be considered in isolation, or as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP.
RECONCILIATION OF REPORTED OPERATING INCOME TO ADJUSTED OPERATING INCOME
RECONCILIATION OF REPORTED INCOME (LOSS) BEFORE INCOME TAXES AND
EFFECTIVE TAX RATES TO
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
NET REVENUES AND ADJUSTED OPERATING INCOME BY SEGMENT
NET REVENUES BY GEOGRAPHIC REGION
RECONCILIATION OF REPORTED OPERATING INCOME TO ADJUSTED OPERATING INCOME BY SEGMENT
RECONCILIATION OF REPORTED NET REVENUES TO COMBINED COMPANY AND LIKE-FOR-LIKE NET REVENUES