# Coty Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Coty Inc.](/companies/coty.md) (CIK 1024305)
- Form: 10-Q
- Filed: 2024-11-06
- Accepted by EDGAR: Nov 6, 2024, 21:46 ET
- Period: 2024-09-30
- Accession: 0001024305-24-000071
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1024305/000102430524000071/coty-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1024305/000102430524000071/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $1.67bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $576.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $1.09bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $808.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $237.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $60.4m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $42.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $82.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.09 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.09 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 875,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-07-01 to 2024-09-30 | $67.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-07-01 to 2024-09-30 | $75.3m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2024-07-01 to 2024-09-30 | $3.3m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $283.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $2.23bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $12.52bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $2.64bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $8.04bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $3.93bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $3.3m | us-gaap:DebtCurrent |
| Short-term borrowings | at 2024-09-30 | $0 | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-30 | $4.05bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 82,122 characters.

The following discussion and analysis of the financial condition and results of operations of Coty Inc. and its consolidated subsidiaries, should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements and related notes included elsewhere in this document, and in our other public filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (“Fiscal 2024 Form 10-K”). When used in this discussion, the terms “Coty,” the “Company,” “we,” “our,” or “us” mean, unless the context otherwise indicates, Coty Inc. and its majority and wholly-owned subsidiaries. Also, when used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation. The following report includes certain non-GAAP financial measures. See “Overview—Non-GAAP Financial Measures” for a discussion of non-GAAP financial measures and how they are calculated.

All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.

More information about potential risks and uncertainties that could affect our 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 this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time.

### Forward-looking Statements

Certain statements in this Form 10-Q are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, strategic planning, targets and outlook for future reporting periods (including the extent and timing of revenue, expense and profit trends and changes in operating cash flows and cash flows from operating activities and investing activities), the Company’s future operations and strategy (including the expected implementation and related impact of its strategic priorities), ongoing and future cost efficiency, optimization and restructuring initiatives and programs, expectations of the impact of inflationary pressures and the timing, magnitude and impact of pricing actions to offset inflationary costs, strategic transactions (including their expected timing and impact), expectations and/or plans with respect to joint ventures (including Wella and the timing and size of any related divestiture, distribution or return of capital), the Company’s capital allocation strategy and payment of dividends (including suspension of dividend payments and the duration thereof and any plans to resume cash dividends on common stock or to continue to pay dividends in cash on preferred stock) and expectations for stock repurchases, investments, licenses and portfolio changes, product launches, relaunches or rebranding (including the expected timing or impact thereof), plans for growth in growth engine markets, channels and other white spaces, synergies, savings, performance, cost, timing and integration of acquisitions, future cash flows, liquidity and borrowing capacity (including any refinancing or deleveraging activities), timing and size of cash outflows and debt deleveraging, the timing and extent of any future impairments, and synergies, savings, impact, cost, timing and implementation of the Company’s ongoing strategic transformation agenda (including operational and organizational structure changes, operational execution and simplification initiatives, fixed cost reductions, continued process improvements and supply chain changes), the impact, cost, timing and implementation of e-commerce and digital initiatives, the expected impact, cost, timing and implementation of sustainability initiatives (including progress, plans, goals and our ability to achieve sustainability targets), the wind down of the Company’s operations in Russia (including timing and expected impact), the expected impact of geopolitical risks including the ongoing war in Ukraine and/or the armed conflict in the Middle East (including the Red Sea conflict) on our business operations, sales outlook and strategy, expectations regarding economic recovery in Asia, consumer purchasing trends and the related impact on our plans for growth in China, the expected impact of global supply chain challenges and/or inflationary pressures (including as a result of the war in Ukraine and/or armed conflict in the Middle East including the Red Sea conflict) and expectations regarding future service levels and inventory levels, and the priorities of senior management. 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”, “temporary”, “target”, “aim”, “potential”, “goal” and similar words or phrases. These statements are based on certain assumptions and estimates that we consider reasonable, but are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual events or results (including our financial condition, results of operations, cash flows and prospects) to differ materially from such statements, including risks and uncertainties relating to:

- our ability to successfully implement our multi-year strategic transformation agenda and compete effectively in the beauty industry, achieve the benefits contemplated by our strategic initiatives (including revenue growth, cost control, gross margin growth and debt deleveraging) and successfully implement our strategic priorities (including stabilizing our consumer beauty brands through leading innovation and improved execution, accelerating our prestige fragrance brands and ongoing expansion into prestige cosmetics, building a comprehensive skincare portfolio, enhancing our organizational growth capabilities including digital, direct-to-consumer (“DTC”) and research and development, expanding our presence in growth channels, in China and other growth engine markets, and establishing Coty as an industry leader in sustainability) in each case within the expected time frame or at all;
- our ability to anticipate, gauge and respond to market trends and consumer preferences, which may change rapidly, and the market acceptance of new products, including new products in our skincare and prestige cosmetics portfolios, any relaunched or rebranded products and the anticipated costs and discounting associated with such relaunches and

rebrands, and consumer receptiveness to our current and future marketing philosophy and consumer engagement activities (including digital marketing and media), and our ability to effectively manage our production and inventory levels in response to demand;

- use of estimates and assumptions in preparing our financial statements, including with regard to revenue recognition, income taxes (including the expected timing and amount of the release of any tax valuation allowance), the assessment of goodwill, other intangible and long-lived assets for impairments, the market value of inventory, and the fair value of the equity investment;
- the impact of any future impairments;
- managerial, transformational, operational, regulatory, legal and financial risks, including diversion of management attention to and management of cash flows, expenses and costs associated with our transformation agenda, our global business strategies, the integration and management of our strategic partnerships, and future strategic initiatives, and, in particular, our ability to manage and execute many initiatives simultaneously including any resulting complexity, employee attrition or diversion of resources;
- the timing, costs and impacts of divestitures and the amount and use of proceeds from any such transactions;
- future divestitures and the impact thereof on, and future acquisitions, new licenses and joint ventures and the integration thereof with, our business, operations, systems, financial data and culture and the ability to realize synergies, manage supply chain challenges and other business disruptions, reduce costs (including through our cash efficiency initiatives), avoid liabilities and realize potential efficiencies and benefits (including through our restructuring initiatives) at the levels and at the costs and within the time frames contemplated or at all;
- increased competition, consolidation among retailers, shifts in consumers’ preferred distribution and marketing channels (including to digital and prestige channels), distribution and shelf-space resets or reductions, compression of go-to-market cycles, changes in product and marketing requirements by retailers, reductions in retailer inventory levels and order lead-times or changes in purchasing patterns, impact from COVID-19 or similar public health events on retail revenues, and other changes in the retail, e-commerce and wholesale environment in which we do business and sell our products and our ability to respond to such changes (including our ability to expand our digital, direct-to-consumer and e-commerce capabilities within contemplated timeframes or at all);
- our and our joint ventures’, business partners’ and licensors’ abilities to obtain, maintain and protect the intellectual property used in our and their respective businesses, protect our and their respective reputations (including those of our and their executives or influencers) and public goodwill, and defend claims by third parties for infringement of intellectual property rights;
- any change to our capital allocation and/or cash management priorities, including any change in our dividend policy and any change in our stock repurchase plans;
- any unanticipated problems, liabilities or integration or other challenges associated with a past or future acquired business, joint ventures or strategic partnerships, which could result in increased risk or new, unanticipated or unknown liabilities, including with respect to environmental, competition and other regulatory, compliance or legal matters, and specifically in connection with the strategic partnerships with Kylie Jenner and Kim Kardashian, risks related to the entry into a new distribution channel, the potential for channel conflict, risks of retaining customers and key employees, difficulties of integration (or the risks associated with limiting integration) and management of the partnerships, our relationships with Kylie Jenner and Kim Kardashian, our ability to protect trademarks and brand names, litigation, investigations by governmental authorities, and changes in law, regulations and policies that affect King Kylie LLC (“King Kylie”) and/or KKW Holdings, LLC’s (“KKW Holdings”) business or products, including risk that direct selling laws and regulations may be modified, interpreted or enforced in a manner that results in a negative impact to King Kylie and/or KKW Holdings’ business model, revenue, sales force or business;
- our international operations and joint ventures, including enforceability and effectiveness of our joint venture agreements and reputational, compliance, regulatory, economic and foreign political risks, including difficulties and costs associated with maintaining compliance with a broad variety of complex local and international regulations;
- our dependence on certain licenses (especially in the fragrance category) and our ability to renew expiring licenses on favorable terms or at all;
- our dependence on entities performing outsourced functions, including outsourcing of distribution functions, and third-party manufacturers, logistics and supply chain suppliers, and other suppliers, including third-party software providers, web-hosting and e-commerce providers;
- administrative, product development and other difficulties in meeting the expected timing of market expansions, product launches, re-launches and marketing efforts, including in connection with new products in our skincare and prestige cosmetics portfolios;
- changes in the demand for our products due to declining or depressed global or regional economic conditions, and declines in consumer confidence or spending, whether related to the economy (such as austerity measures, tax increases, high fuel costs, or higher unemployment), wars and other hostilities and armed conflicts, natural or other disasters, weather, pandemics, security concerns, terrorist attacks or other factors;
- global political and/or economic uncertainties, disruptions or major regulatory or policy changes, and/or the enforcement thereof that affect our business, financial performance, operations or products, including the impact of the war in Ukraine and any escalation or expansion thereof, armed conflict in the Middle East, the outcome of U.S. elections, changes in the U.S. tax code and/or tax regulations in other jurisdictions where we operate (including recent and pending implementation of the global minimum corporate tax (part of the “Pillar Two Model Rules”) that may impact our tax liability in the European Union (“EU”)), and recent changes and future changes in tariffs, retaliatory or trade protection measures, trade policies and other international trade regulations in the U.S., the EU, and Asia and in other regions where we operate, potential regulatory limits on payment terms in the EU, future changes in sanctions regulations, regulatory uncertainty impacting the wind-down of our business in Russia, recent and future changes in regulations impacting the beauty industry, including regulatory measures addressing products, formulations, raw materials and packaging, and recent and future regulatory measures restricting or otherwise impacting the use of web sites, mobile applications or social media platforms that we use in connection with our digital marketing and e-commerce activities;
- currency exchange rate volatility and currency devaluation and/or inflation;
- our ability to implement and maintain pricing actions to effectively mitigate increased costs and inflationary pressures, and the reaction of customers or consumers to such pricing actions;
- the number, type, outcomes (by judgment, order or settlement) and costs of current or future legal, compliance, tax, regulatory or administrative proceedings, investigations and/or litigation, including product liability cases (including asbestos and talc-related litigation for which indemnities and/or insurance may not be available), distributor or licensor litigation, and compliance, litigation or investigations relating to our joint ventures or strategic partnerships;
- our ability to manage seasonal factors and other variability and to anticipate future business trends and needs;
- disruptions in the availability and distribution of raw materials and components needed to manufacture our products, and our ability to effectively manage our production and inventory levels in response to supply challenges;
- disruptions in operations, sales and in other areas, including due to disruptions in our supply chain, restructurings and other business alignment activities, manufacturing or information technology systems, labor disputes, extreme weather and natural disasters, impact from public health events, the outbreak of war or hostilities (including the war in Ukraine and armed conflict in the Middle East, including the Red Sea conflict, and any escalation or expansion thereof), the impact of global supply chain challenges or other disruptions in the international flow of goods, and the impact of such disruptions on our ability to generate profits, stabilize or grow revenues or cash flows, comply with our contractual obligations and accurately forecast demand and supply needs and/or future results;
- our ability to adapt our business to address climate change concerns, including through the implementation of new or unproven technologies or processes, and to respond to increasing governmental and regulatory measures relating to environmental, social and governance matters, including expanding mandatory and voluntary reporting, diligence and disclosure, as well as new taxes (including on energy and plastic), new diligence requirements and the impact of such measures or processes on our costs, business operations and strategy;
- restrictions imposed on us through our license agreements, credit facilities and senior unsecured bonds or other material contracts, our ability to generate cash flow to repay, refinance or recapitalize debt and otherwise comply with our debt instruments, and changes in the manner in which we finance our debt and future capital needs;
- increasing dependency on information technology, including as a result of remote working practices, and our ability or the ability of any of the third-party service providers we use to support our business, to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, including ransomware attacks, costs and timing of implementation and effectiveness of any upgrades or other changes to information technology systems, and the cost of compliance or our failure to comply with any privacy or data security laws (including the European Union General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act and similar state laws, the Brazil General Data Protection Law, and the China Data Security Law and Personal Information Protection Law) or to protect against theft of customer, employee and corporate sensitive information;
- our ability to attract and retain key personnel and the impact of senior management transitions;
- the distribution and sale by third parties of counterfeit and/or gray market versions of our products;
- the impact of our ongoing strategic transformation agenda and continued process improvements on our relationships with key customers and suppliers and certain material contracts;
- our relationship with JAB Beauty B.V., as our majority stockholder, and its affiliates, and any related conflicts of interest or litigation;
- our relationship with KKR, whose affiliate KKR Bidco, is an investor in the Wella Business, and any related conflicts of interest or litigation;
- future sales of a significant number of shares by our majority stockholder or the perception that such sales could occur; and
- other factors described elsewhere in this document and in documents that we file with the SEC from time to time.

More information about potential risks and uncertainties that could affect our 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 this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time.

All forward-looking statements made in this document are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable 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.

### Industry, Ranking and Market Data

Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning our industry and the markets in which we operate, including our general expectations about our industry, market position, market opportunity and market sizes, is based on data from various sources including internal data and estimates as well as third-party sources widely available to the public, such as independent industry publications, government publications, reports by market research firms or other published independent sources and on our assumptions based on that data and other similar sources. We did not fund and are not otherwise affiliated with the third-party sources that we cite. Industry publications and other published sources generally state that the information contained therein has been obtained from third-party sources believed to be reliable. Internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and management’s understanding of industry conditions, and such information has not been verified by any independent sources. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we generally believe the market, industry and other information included in this Quarterly Report on Form 10-Q to be the most recently available and to be reliable, such information is inherently imprecise and we have not independently verified any third-party information or verified that more recent information is not available.

Our fiscal year ends on June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2025” refer to the fiscal year ending June 30, 2025. Any reference to a year not preceded by “fiscal” refers to a calendar year.

### OVERVIEW

We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, skincare, and body care. Our brands empower people to express themselves freely, creating their own visions of beauty and we are committed to making a positive impact on the planet. Our strategic priorities include stabilizing and growing our Consumer Beauty brands through leading innovation and improved execution, accelerating our Prestige fragrance business and ongoing expansion into Prestige cosmetics, building a comprehensive skincare portfolio over the mid-to-long term leveraging existing brands, enhancing our organizational growth capabilities including digital and research and development, expanding our presence in growth channels such as the Travel Retail channel, in China and other growth engine markets (Latin America, including Brazil, the Middle East, North and South East Asia, Africa, and India), and establishing Coty as an industry leader in sustainability.

We have been making progress on our strategic priorities. In Consumer Beauty, we have implemented the relaunch of our top brands. We are now focusing on accelerating our digital advocacy strategy to amplify our brand and product innovations and leveraging consumer analytics and insights to improve the return on investment of our marketing activities. In Prestige, we are accelerating our fragrance business with exceptional new launches and expanding our premium and ultra-premium categories, while also enhancing the assortment of our Prestige cosmetic products. We are continuing to thoughtfully expand our skincare portfolio (which contributed a low single digit percentage of our first quarter fiscal 2025 net revenue), with our focus on winning over the most discerning skin care consumers in our areas of excellence – UV protection and photoaging prevention and repair, biotech-enhanced longevity science, and micro-dose formulations. We have successfully expanded our e-commerce capabilities, through best-in-class online launches, our digital advocacy strategy and active participation in key online shopping events, and increasing digital media competitiveness.

Our products are sold in approximately 121 countries and territories. As a geographically diverse company we are susceptible to global economic trends, geopolitical conflicts, domestic and foreign governmental policies, and changes in foreign exchange rates. In particular, economic conditions in China have had, and are expected to continue to have, an impact on our strategic initiatives, including our growth agenda in the region for Prestige products and our skincare growth priorities. Within the China market we continue to monitor and take actions to address the impact to our Consumer Beauty brands which have experienced sales declines as retailers and distributors continue to deplete their existing inventory. We remain attentive to economic and geopolitical conditions that may materially impact our business.

Changing market trends may impact sales of our products across and within product categories and regions. Tight order and inventory management by retailers in the first quarter has resulted in our sell-in tracking well below sell-out in a number of markets, including in the U.S. This trend was also present in Australia, China and Travel Retail Asia as well, each of which account for a low single digit percentage of our business. Also, Travel Retail Asia's sales were negatively impacted by the impact of regulatory restrictions in Asia reducing *daigou* (surrogate shopping) purchases. Within our Consumer Beauty segment, first quarter sales volume was impacted by negative market trends in the U.S. in the mass color cosmetics category. In addition, competitive pricing action within the body care category in Brazil negatively impacted the segment's sales volumes during the first quarter.

We expect that our net revenue for fiscal year 2025 will grow in the low to mid-single digits versus the prior year, excluding the impact of foreign exchange and the early termination of the Lacoste fragrance license. We anticipate that our annual gross margin will remain in the mid-sixties, providing us with opportunities to fund new product initiatives and support our brands through advertising and consumer promotional investments. In anticipation of a more uncertain demand backdrop, including cautious retailer behavior and a complex macroeconomic environment, we are re-accelerating our cost reduction efforts across to deliver savings well above approximately $75.0. We continue to target advertising and consumer promotional spending in the high-twenties percentage of net revenues. However, our level of advertising and consumer promotional spending will depend on various factors, including seasonality, the timing of product launches, and budgetary considerations.

#### Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures for continuing operations and Coty Inc. including Adjusted operating income (loss), Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) attributable to Coty Inc. to common stockholders (collectively, the “Adjusted Performance Measures”). The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in tables below. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies, including companies in the beauty industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Despite the limitations of these non-GAAP financial measures, our management uses the Adjusted Performance Measures as key metrics in the evaluation of our performance and annual budgets and to benchmark performance of our business against our competitors. The following are examples of how these Adjusted Performance Measures are utilized by our management:

- strategic plans and annual budgets are prepared using the Adjusted Performance Measures;
- senior management receives a monthly analysis comparing budget to actual operating results that is prepared using the Adjusted Performance Measures; and
- senior management’s annual compensation is calculated, in part, by using some of the Adjusted Performance Measures.

In addition, our financial covenant compliance calculations under our debt agreements are substantially derived from these Adjusted Performance Measures.

Our management believes that Adjusted Performance Measures are useful to investors in their assessment of our operating performance and the valuation of the Company. In addition, these non-GAAP financial measures address questions we routinely receive from analysts and investors and, in order to ensure that all investors have access to the same data, our management has determined that it is appropriate to make this data available to all investors. The Adjusted Performance Measures exclude the impact of certain items (as further described below) and provide supplemental information regarding our operating performance. By disclosing these non-GAAP financial measures, our management intends to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We provide disclosure of the effects of these non-GAAP financial measures by presenting the corresponding measure prepared in conformity with GAAP in our financial statements, and by providing a reconciliation to the corresponding GAAP measure so that investors may understand the adjustments made in arriving at the non-GAAP financial measures and use the information to perform their own analyses.

Adjusted operating income/Adjusted EBITDA from continuing operations excludes restructuring costs and business structure realignment programs, amortization, acquisition- and divestiture-related costs and acquisition accounting impacts, stock-based compensation, and asset impairment charges and other adjustments as described below. For adjusted EBITDA, in addition to the preceding, we exclude adjusted depreciation as defined below. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. They are primarily incurred to realign our operating structure and integrate new acquisitions, and implement divestitures of components of our business, and fluctuate based on specific facts and circumstances. Additionally, Adjusted net income attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common share are adjusted for certain interest and other (income) expense items and preferred stock deemed dividends, as described below, and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period.

Adjusted Performance Measures reflect adjustments based on the following items:

- Costs related to acquisition and divestiture activities: We have excluded acquisition- and divestiture-related costs and the accounting impacts such as those related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business combinations because these costs are unique to each transaction. Additionally, for divestitures, we exclude write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The nature and amount of such costs vary significantly based on the size and timing of the acquisitions and divestitures, and the maturities of the businesses being acquired or divested. Also, the size, complexity and/or volume of past transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions or divestitures.
- Restructuring and other business realignment costs: We have excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance. In addition, the nature and amount of such charges vary significantly based on the size and timing of the programs. By excluding the referenced expenses from our non-GAAP financial measures, our management is able to further evaluate our ability to utilize existing assets and estimate their long-term value. Furthermore, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
- Asset impairment charges: We have excluded the impact of asset impairments as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
- Amortization expense: We have excluded the impact of amortization of finite-lived intangible assets, as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance. Although we exclude amortization of intangible assets from our non-GAAP expenses, our management believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.
- Gain on sale and early license termination: We have excluded the impact of gain on sale and early license termination as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale and early license termination.
- Costs related to market exit: We have excluded the impact of direct incremental costs related to our decision to wind down our business operations in Russia. We believe that these direct and incremental costs are inconsistent and infrequent in nature. Consequently, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
- Gains on sale of real estate: We have excluded the impact of gains on sale of real estate as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
- Stock-based compensation: Although stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted operating income and adjusted EBITDA. This is due to their primarily non-cash nature; in addition, the amount and timing of these expenses may be highly variable and unpredictable, which may negatively affect comparability between periods.
- Depreciation and Adjusted depreciation: Our adjusted operating income excludes the impact of accelerated depreciation for certain restructuring projects that affect the expected useful lives of Property, Plant and Equipment, as such charges vary significantly based on the size and timing of the programs. Further, we have excluded adjusted depreciation, which represents depreciation expense net of accelerated depreciation charges, from our adjusted EBITDA. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
- Other (income) expense: We have excluded the impact of pension curtailment (gains) and losses and pension settlements as such events are triggered by our restructuring and other business realignment activities and the amount of such charges vary significantly based on the size and timing of the programs. Further, we have excluded the change in fair value of the investment in Wella, as well as expenses related to potential or actual sales transactions reducing equity investments, as our management believes these unrealized (gains) and losses do not reflect our underlying

ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period. Such transactions do not reflect our operating results and we have excluded the impact as our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

- Noncontrolling interest: This adjustment represents the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage.
- Tax: This adjustment represents the impact of the tax effect of the pretax items excluded from Adjusted net income. The tax impact of the non-GAAP adjustments is based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred. Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities.

#### Constant Currency

We operate on a global basis, with the majority of our net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented in “constant currency”, excluding the impact of foreign currency exchange translations to provide a framework for assessing how our underlying businesses performed excluding the impact of foreign currency exchange translations. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate 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 prior year 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 we present may not be comparable to similarly titled measures reported by other companies.

#### Basis of Presentation of Acquisitions, Divestitures, Terminations and Market Exit from Russia

During the period when we complete an acquisition, divestiture, early license termination, or market exit, the financial results of the current year period are not comparable to the financial results presented in the prior year period. When explaining such changes from period to period and to maintain a consistent basis between periods, we exclude the financial contribution of: (i) the acquired brands or businesses in the current year period until we have twelve months of comparable financial results, and (ii) the divested brands or businesses or early terminated brands or markets exited in the prior year period, to maintain comparable financial results with the current fiscal year period. Acquisitions, divestitures, early license terminations, and market exits that would impact the comparability of financial results between periods presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations are shown in the table below.

| Period of acquisition, divestiture, termination | Acquisition, divestiture, termination | Impact on basis of first quarter 2025/2024 presentation |
| --- | --- | --- |
| **Third quarter fiscal 2024** | Termination: Lacoste | First quarter fiscal 2024 net revenue excluded. |

### THREE MONTHS ENDED SEPTEMBER 30, 2024 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2023

NET REVENUES

In the three months ended September 30, 2024, net revenues increased 2%, or $30.1, to $1,671.5 from $1,641.4 in the three months ended September 30, 2023. Excluding net revenue from the first quarter of the prior period from Lacoste, net revenues increased 3% or $52.9 to $1,671.5 from $1,618.6 in the three months ended September 30, 2023, reflecting a positive price and mix impact of 5% (primarily due to positive pricing impact as a result of prior period price increases and in line with the overall premiumization strategy), partially offset by a decrease in unit volume of 1% (primarily due to color cosmetics in the United States as a result of ongoing retailer caution and negative market trends) and negative foreign currency exchange translation impact of 1%. The overall increase in net revenues reflects growth of prestige and mass fragrances, as a result of innovation from new launches including *Gucci Flora Gorgeous Orchid, Burberry Goddess Intense, Chloe Signature Intense, Boss Bottled Absolu*. The increase in net revenues was partially offset by negative performance in the color cosmetics category and certain brands in the body care category in Brazil.

The overall increase in net revenues reflects the continued success of our pricing and revenue management strategies, including the implementation of price increases across our product portfolio in the prior period. The overall increase in net revenues related to pricing is partially offset by volume declines primarily related to the Consumer Beauty product portfolio, specifically from *Monange* and the color cosmetics category.

Digital and e-commerce channel sales growth also contributed to the increase in net revenues.

### Net Revenues by Segment

*(in millions)*

| NET REVENUES | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| Prestige | $1,114.1 | $1,064.7 | 5% |
| Consumer Beauty | 557.4 | 576.7 | (3)% |
| **Total** | **$1,671.5** | **$1,641.4** | **2%** |

#### Prestige

In the three months ended September 30, 2024, net revenues from the Prestige segment increased 5%, or $49.4 to $1,114.1 compared to $1,064.7 in the three months ended September 30, 2023. Excluding net revenue from the first quarter of the prior period from Lacoste, net revenues from the Prestige segment increased 7% or $72.2 to $1,114.1 from $1,041.9 in the three months ended September 30, 2023, reflecting a positive price and mix impact of 5% (primarily due to the positive pricing impact as a result of price increases in the prior period, in line with the overall premiumization strategy), and an increase in unit volume of 2% (primarily due to innovation in prestige fragrance). The increase in net revenues primarily reflects:

- Prestige fragrance sales growth of $83.2, due to successful performance of *Burberry, Chloe*, and *Hugo Boss* from existing fragrance lines. In addition, continued brand innovation such as *Gucci Flora Gorgeous Orchid, Burberry Goddess Intense, Chloe Signature Intense*, and *Boss Bottled Absolu* contributed to the category sales growth . The category sales growth can also be attributed to positive market trends in most major markets.

These increases were partially offset by:

- Prestige cosmetics and skincare declines of $6.0 and $5.0, respectively.

#### Consumer Beauty

In the three months ended September 30, 2024, net revenues from the Consumer Beauty segment decreased 3%, or $19.3, to $557.4 from $576.7 in the three months ended September 30, 2023, reflecting a negative foreign currency exchange translation impact of 3%, a decrease in unit volume of 1% (primarily due to color cosmetics brands in the United States), partially offset by a positive price and mix impact of 1% (primarily due to positive pricing impact as a result of price increases in the prior period). The decrease in net revenues primarily reflects:

- Color cosmetics sales decline of $29.7, primarily due to negative market trends in the color cosmetics market in the United States which impacted net revenues from *Covergirl* and through increased returns and markdowns compared to the prior period. *Sally Hansen* also declined despite gaining market share in the current period; and
- Mass bodycare decline of $15.8, primarily due to declines in sales volumes from *Monange* in Brazil. The decline can also be attributed to continued lower sales volumes for *adidas* as a result of category slowdown in China which resulted in higher trade inventory levels.

These decreases were partially offset by:

- Mass fragrance sales growth of $23.1, due to brand innovation and geographical expansion of existing products into growth-engine markets; and
- Mass skincare growth of $3.1.

COST OF SALES

In the three months ended September 30, 2024, cost of sales decreased 4%, or $22.6, to $576.9 from $599.5 in the three months ended September 30, 2023. Cost of sales as a percentage of net revenues decreased to 34.5% in the three months ended September 30, 2024 from 36.5% in the three months ended September 30, 2023, resulting in a gross margin increase of approximately 200 basis points, primarily reflecting:

(i) approximately 110 basis points related to a decrease in manufacturing and material costs as a percentage of net revenues, driven by increased manufacturing efficiencies, improvements in productivity, as well as procurement and material cost optimization; and

(ii) approximately 80 basis points related to decreased excess and obsolescence costs primarily associated with the Prestige product portfolio.

The above reflects a positive impact from pricing net of inflation of approximately 130 basis points.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In the three months ended September 30, 2024, selling, general and administrative expenses increased 5%, or $40.6, to $808.0 from $767.4 in the three months ended September 30, 2023. Selling, general and administrative expenses as a percentage of net revenues increased to 48.3% in the three months ended September 30, 2024 from 46.8% in the three months ended September 30, 2023, or approximately 150 basis points. This increase primarily reflects:

(i) 110 basis points due to an increase in administrative costs as a percentage of net revenues due to higher compensation expense from increased headcount;

(ii) 40 basis points due to an increase in advertising and consumer promotional costs as a percentage of net revenues primarily due to increases in in-store merchandising execution and education, partially offset by declines in working media investment as a percentage of net revenues;

(iii) 40 basis points due to unfavorable transactional impact from our exposure to foreign currency as a percentage of net revenues; and

(iv) 40 basis points due to other miscellaneous operating expenses.

These increases were partially offset by the following decrease:

(i) 80 basis points due to a decrease in stock-based compensation cost primarily related to a reduction in expense recognized in connection with awards granted to the CEO.

OPERATING INCOME

In the three months ended September 30, 2024, operating income was $237.8 compared to income of $197.5 in the three months ended September 30, 2023. Operating income as a percentage of net revenues, increased to 14.2% in the three months ended September 30, 2024 as compared to 12.0% in the three months ended September 30, 2023. The increase in operating margin is primarily driven by a decrease in cost of goods sold as a percentage of net revenues (approximately 200 basis points), a decrease in restructuring costs as a percentage of net revenues (approximately 170 basis points), a decrease in stock-based compensation expense (approximately 80 basis points) primarily related to a reduction in expense recognized in connection with a prior year's grant made to the CEO, partially offset by an increase in fixed costs as a percentage of net revenues (approximately 100 basis points) primarily related to people costs, an increase in advertising and consumer promotional costs as a percentage of net revenues (approximately 40 basis points), an increase in losses from our exposure to foreign currency (approximately 40 basis points), and an increase in expense related to other miscellaneous operating expenses (approximately 40 basis points). Our consolidated operating income margin was negatively impacted by a greater proportion of net revenues generated by the lower margin brands from our Brazilian business, and lower sales of the higher margin color cosmetics in the United States compared to the prior year.

### Operating Income (Loss) by Segment

*(in millions)*

| Operating income (loss) | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| Prestige | $241.5 | $221.6 | 9% |
| Consumer Beauty | 14.0 | 32.0 | (56)% |
| Corporate | (17.7) | (56.1) | 68% |
| **Total** | **$237.8** | **$197.5** | **20%** |

#### Prestige

In the three months ended September 30, 2024, operating income for Prestige was $241.5 compared to income of $221.6 in the three months ended September 30, 2023. Operating margin increased to 21.7% of net revenues in the three months ended September 30, 2024 as compared to 20.8% in the three months ended September 30, 2023, driven by a decrease in cost of goods sold as a percentage of net revenues (approximately 260 basis points), a decrease in amortization expense as a percentage of net revenues (approximately 20 basis points), partially offset by an increase in fixed costs as a percentage of net revenues (approximately 100 basis points) primarily related to people costs, an increase in losses from our exposure to foreign currency (approximately 80 basis points), and an increase in advertising and consumer promotional costs as a percentage of net revenues (approximately 20 basis points).

#### Consumer Beauty

In the three months ended September 30, 2024, operating income for Consumer Beauty was $14.0 compared to income of $32.0 in the three months ended September 30, 2023. Operating margin decreased to 2.5% of net revenues in the three months ended September 30, 2024 as compared to 5.5% in the three months ended September 30, 2023, driven by an increase in advertising and consumer promotional costs as a percentage of net revenues (approximately 120 basis points), an increase in fixed costs as a percentage of net revenues (approximately 110 basis points), an increase in losses from our exposure to foreign currency (approximately 80 basis points). Our Consumer Beauty operating income margin was negatively impacted by a greater proportion of Consumer Beauty net revenues generated by the lower margin brands from our Brazilian business, and lower sales by the higher margin color cosmetics brands in the United States compared to the prior year.

#### Corporate

Corporate primarily includes income and expenses not directly relating to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.

In the three months ended September 30, 2024, the operating loss for Corporate was $17.7 compared to a loss of $56.1 in the three months ended September 30, 2023, as described under “Adjusted Operating Income for Coty Inc.” below. The decrease in the operating loss for Corporate was primarily driven by a $27.7 decrease in restructuring costs and a $12.7 decrease in stock-based compensation expense.

### Adjusted Operating Income by Segment

We believe that adjusted operating income by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income to adjusted operating income is presented below, by segment:

*(in millions)*

| Operating income | Three Months Ended September 30, 2024 Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) |
| --- | ---: | ---: | ---: |
| Prestige | $241.5 | $38.2 | $279.7 |
| Consumer Beauty | 14.0 | 9.9 | 23.9 |
| Corporate | (17.7) | 17.7 | — |
| **Total** | **$237.8** | **$65.8** | **$303.6** |
|  | **Three Months Ended September 30, 2023** |  |  |
| **(in millions)** | **Reported (GAAP)** | **Adjustments (a)** | **Adjusted (Non-GAAP)** |
| **Operating income** |  |  |  |
| Prestige | $221.6 | $38.7 | $260.3 |
| Consumer Beauty | 32.0 | 9.9 | 41.9 |
| Corporate | (56.1) | 56.1 | — |
| **Total** | **$197.5** | **$104.7** | **$302.2** |

(a) See a reconciliation of reported net income to operating income (loss) to adjusted operating income (loss) and adjusted EBITDA for Coty Inc. and reconciliations of segment operating income (loss) to segment adjusted operating income (loss) and segment adjusted EBITDA for the Prestige, Consumer Beauty and Corporate segments with a description of the adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.” and “Segment Operating Income (Loss), Segment Adjusted Operating Income (Loss) and Segment Adjusted EBITDA”, below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments.

### Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.

We believe that adjusted operating income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported net income to adjusted operating income and adjusted EBITDA is presented below:

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| **Net income** | **$90.7** | **$10.2** | **\>100%** |
| Net income margin | 5.4% | 0.6% |  |
| Provision (benefit) for income taxes | 42.0 | 40.9 | 3% |
| **Income before income taxes** | **$132.7** | **$51.1** | **\>100%** |
| Interest expense, net | 61.8 | 69.8 | (11)% |
| Other expense, net | 43.3 | 76.6 | (43)% |
| **Reported operating income** | **$237.8** | **$197.5** | **20%** |
| Reported operating income (loss) margin | 14.2% | 12.0% |  |
| Amortization expense | 48.1 | 48.6 | (1)% |
| Restructuring and other business realignment costs | 0.7 | 27.3 | (97)% |
| Stock-based compensation | 17.0 | 29.7 | (43)% |
| Gain on sale of real estate | — | (1.7) | 100% |
| Early license termination and market exit costs | — | 0.8 | (100)% |
| Total adjustments to reported operating income | $65.8 | $104.7 | (37)% |
| **Adjusted operating income** | **$303.6** | **$302.2** | **—%** |
| Adjusted operating income margin | 18.2% | 18.4% |  |
| Adjusted depreciation | 56.5 | 58.1 | (3)% |
| **Adjusted EBITDA** | **$360.1** | **$360.3** | **—%** |
| Adjusted EBITDA margin | 21.5% | 22.0% |  |

In the three months ended September 30, 2024, adjusted operating income increased $1.4 to $303.6 from $302.2 in the three months ended September 30, 2023. Adjusted operating margin decreased to 18.2% of net revenues in the three months ended September 30, 2024 from 18.4% in the three months ended September 30, 2023. In the three months ended September 30, 2024, adjusted EBITDA decreased $0.2 to $360.1 from $360.3 in the three months ended September 30, 2023. Adjusted EBITDA margin decreased to 21.5% of net revenues in the three months ended September 30, 2024 from 22.0% in the three months ended September 30, 2023.

### Segment Operating Income (Loss), Segment Adjusted Operating Income (Loss) and Segment Adjusted EBITDA

#### Operating Income, Adjusted Operating Income and Adjusted EBITDA - Prestige Segment

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| **Reported operating income** | **$241.5** | **$221.6** | **9%** |
| Reported operating income (loss) margin | 21.7% | 20.8% |  |
| Amortization expense | 38.2 | 38.7 | (1)% |
| Total adjustments to reported operating income | $38.2 | $38.7 | (1)% |
| **Adjusted operating income** | **$279.7** | **$260.3** | **7%** |
| Adjusted operating income margin | 25.1% | 24.4% |  |
| Adjusted depreciation | 27.9 | 27.3 | 2% |
| **Adjusted EBITDA** | **$307.6** | **$287.6** | **7%** |
| Adjusted EBITDA margin | 27.6% | 27.0% |  |

#### Operating Loss, Adjusted Operating Loss and Adjusted EBITDA - Consumer Beauty Segment

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| **Reported operating income** | **$14.0** | **$32.0** | **(56)%** |
| Reported operating income margin | 2.5% | 5.5% |  |
| Amortization expense | 9.9 | 9.9 | —% |
| Total adjustments to reported operating income | $9.9 | $9.9 | —% |
| **Adjusted operating income** | **$23.9** | **$41.9** | **(43)%** |
| Adjusted operating income margin | 4.3% | 7.3% |  |
| Adjusted depreciation | 28.6 | 30.8 | (7)% |
| **Adjusted EBITDA** | **$52.5** | **$72.7** | **(28)%** |
| Adjusted EBITDA margin | 9.4% | 12.6% |  |

#### Operating Loss, Adjusted Operating Loss and Adjusted EBITDA - Corporate Segment

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| **Reported operating loss** | **$(17.7)** | **$(56.1)** | **68%** |
| Reported operating income (loss) margin | N/A | N/A |  |
| Restructuring and other business realignment costs | 0.7 | 27.3 | (97)% |
| Stock-based compensation | 17.0 | 29.7 | (43)% |
| Gain on sale of real estate | — | (1.7) | 100% |
| Early license termination and market exit costs | — | 0.8 | (100)% |
| Total adjustments to reported operating income | $17.7 | $56.1 | (68)% |
| **Adjusted operating income** | **$—** | **$—** | **N/A** |
| Adjusted operating income margin | N/A | N/A |  |
| Adjusted depreciation | — | — | N/A |
| **Adjusted EBITDA** | **$—** | **$—** | **N/A** |
| Adjusted EBITDA margin | N/A | N/A |  |

43

#### Amortization Expense

In the three months ended September 30, 2024, amortization expense decreased to $48.1 from $48.6 in the three months ended September 30, 2023. In the three months ended September 30, 2024, amortization expense of $38.2 and $9.9 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended September 30, 2023, amortization expense of $38.7 and $9.9 was reported in the Prestige and Consumer Beauty segments, respectively.

#### Restructuring and Other Business Realignment Costs

In the three months ended September 30, 2024, we incurred a credit in restructuring and other business structure realignment costs of $0.7, primarily related to the Current Restructuring Actions, included in the Condensed Consolidated Statements of Operations.

In the three months ended September 30, 2023, we incurred restructuring and other business structure realignment costs of $27.3 as follows:

- We incurred restructuring costs of $28.4 primarily related to the Current Restructuring Actions, included in the Condensed Consolidated Statements of Operations; and
- We incurred a credit in business structure realignment costs of $(1.1), which is reported in selling, general and administrative expenses.

#### Stock-Based Compensation

In the three months ended September 30, 2024, stock-based compensation was $17.0 as compared with $29.7 in the three months ended September 30, 2023. The decrease in stock-based compensation is primarily related to a reduction in expense recognized in connection with awards granted to the CEO.

#### Gain on Sale of Real Estate

In the three months ended September 30, 2024, we recognized no gain related to sale of real estate.

In the three months ended September 30, 2023, we recognized a gain of $1.7 related to sale of real estate.

#### Early License Termination and Market Exit Costs

In the three months ended September 30, 2024 and 2023, we incurred costs of $0.0 and $0.8, respectively related to the early termination of a license and our decision to wind down our business in Russia.

#### Adjusted Depreciation Expense

In the three months ended September 30, 2024, adjusted depreciation expense of $27.9 and $28.6 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended September 30, 2023, adjusted depreciation expense of $27.3 and $30.8 was reported in the Prestige and Consumer Beauty segments, respectively.

INTEREST EXPENSE, NET

In the three months ended September 30, 2024, net interest expense was $61.8 as compared with $69.8 in the three months ended September 30, 2023. The decrease in interest expense is primarily due to lower debt balances in the current period as well as lower interest rates.

OTHER INCOME/EXPENSE

In the three months ended September 30, 2024, other expense was $43.3 as compared with other expense of $76.6 in the three months ended September 30, 2023.

Other expense of $43.3 in the three months ended September 30, 2024 was principally comprised of net losses on forward repurchase contracts of $42.1.

Other expense of $76.6 in the three months ended September 30, 2023 was principally comprised of net losses on forward repurchase contracts of $75.7 and deferred financing fees of 5.2, partially offset by a favorable adjustment for the unrealized gain in the Wella investment of $4.0.

The decrease in Other expense of $33.3 is primarily due to lower net losses on forward repurchase contracts of $33.6 compared to the prior year period.

INCOME TAXES

The effective income tax rate for the three months ended September 30, 2024 and 2023 was 31.7% and 80.0%, respectively. The decrease in the effective tax rate was primarily attributable to the impact of a higher effective tax rate in the prior year period related to the revaluation of the Company's deferred tax liabilities due to a tax rate increase enacted in Switzerland resulting in an expense of $24.3. The effective tax rate of 31.7% for the three months ended September 30, 2024, was higher than the Federal statutory rate of 21% primarily due to the limitation on the deductibility of executive stock compensation and the limitation on the deductibility of interest expense.

The effective tax rate of 80.0% in the three months ended September 30, 2023, was higher than the Federal statutory rate of 21% primarily due to an expense of $24.3 recognized on the revaluation of the Company's deferred tax liabilities due to a tax rate increase enacted in Switzerland as well as the limitation on the deductibility of executive stock compensation.

The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, including impacts of rate changes, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.

### Reconciliation of Reported Income Before Income Taxes to Adjusted Income Before Income Taxes and Effective Tax Rates:

*(in millions)*

|  | Three Months Ended September 30, 2024 Income Before Income Taxes | Provision for Income Taxes | Effective Tax Rate | Three Months Ended September 30, 2023 Income Before Income Taxes | Provision for Income Taxes | Effective Tax Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Reported income before income taxes** | **$132.7** | **$42.0** | **31.7%** | **$51.1** | **$40.9** | **80.0%** |
| Adjustments to reported operating income (a) | 65.8 |  |  | 104.7 |  |  |
| Change in fair value of investment in Wella Business (c) | — |  |  | (4.0) |  |  |
| Other adjustments (d) | (0.3) |  |  | 3.9 |  |  |
| Total Adjustments (b) | 65.5 | 15.3 |  | 104.6 | 27.1 |  |
| **Adjusted income before income taxes** | **$198.2** | **$57.3** | **28.9%** | **$155.7** | **$68.0** | **43.7%** |

(a) See a description of adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc.”

(b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability.

(c) The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.

(d) For the three months ended September 30, 2024, this primarily represents recovery of previously written-off non-income tax credits and the amortization of basis differences in certain equity method investments. For the three months ended September 30, 2023, this primarily represents divestiture-related costs related to our equity investments and the amortization of basis differences in certain equity method investments.

The adjusted effective tax rate was 28.9% for the three months ended September 30, 2024 compared to 43.7% for the three months ended September 30, 2023. The differences were primarily due to an expense of $24.3 recognized in the prior period on the revaluation of the Company's deferred tax liabilities due to a tax rate increase enacted in Switzerland.

NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.

Net income attributable to Coty Inc. was $82.9 in the three months ended September 30, 2024 as compared to net income of $1.6 in the three months ended September 30, 2023. The increase in the income was primarily driven by higher operating income of $40.3 in the current period and lower net losses from forward repurchase contracts of $33.6 in the current period.

We believe that adjusted net income attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”

*(in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change % |
| --- | ---: | ---: | ---: |
| **Net income attributable to Coty Inc.** | **$82.9** | **$1.6** | **\>100%** |
| Convertible Series B Preferred Stock dividends (a) | (3.3) | (3.3) | —% |
| **Reported net income (loss) attributable to common stockholders** | **$79.6** | **$(1.7)** | **\>100%** |
| % of net revenues | 4.8% | (0.1)% |  |
| Adjustments to reported operating income (b) | 65.8 | 104.7 | (37)% |
| Change in fair value of investment in Wella Company (c) | — | (4.0) | 100% |
| Adjustment to other expense (d) | (0.3) | 3.9 | \<(100%) |
| Adjustments to noncontrolling interests (e) | (1.7) | (1.7) | —% |
| Change in tax provision due to adjustments to reported net income (loss) attributable to Coty Inc. | (15.3) | (27.1) | 44% |
| **Adjusted net income attributable to Coty Inc.** | **$128.1** | **$74.1** | **73%** |
| % of net revenues | 7.7% | 4.5% |  |
| **Per Share Data** |  |  |  |
| Adjusted weighted-average common shares |  |  |  |
| Basic | 867.9 | 854.3 |  |
| Diluted (a) | 899.0 | 867.3 |  |
| Adjusted net income attributable to Coty Inc. per common share |  |  |  |
| Basic | $0.15 | $0.09 |  |
| Diluted (a) | $0.15 | $0.09 |  |

(a) Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the three months ended September 30, 2024 and 2023, no dilutive shares of the Forward Repurchase Contracts were included in the computation of adjusted diluted EPS as their inclusion would be anti-dilutive. Accordingly, we did not reverse the impact of the fair market value losses/(gains) for contracts with the option to settle in shares or cash of $24.6 and $44.3, respectively. For the three months ended September 30, 2024, as the Convertible Series B Preferred Stock was dilutive, an adjustment to reverse the impact of the preferred stock dividends of $3.3 was required. For the three months ended September 30, 2023, convertible Series B Preferred Stock (23.7 million weighted average dilutive shares) were anti-dilutive. Accordingly, we excluded these shares from the diluted shares and did not adjust the earnings for the related dividend of $3.3.

(b) See a description of adjustments under “Net Income, Adjusted Operating Income and Adjusted EBITDA for Coty Inc."

(c) The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.

(d) For the three months ended September 30, 2024, this primarily represents recovery of previously written-off non-income tax credits and the amortization of basis differences in certain equity method investments. For the three months ended September 30, 2023, this primarily represents divestiture-related costs related to our equity investments and the amortization of basis differences in certain equity method investments.

(e) The amounts represent the after-tax impact of the non-GAAP adjustments included in net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.

### FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

### Overview

Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and lines of credit provided by banks and lenders in the U.S. and abroad.

Our cash flows are subject to seasonal variation throughout the year, including demands on cash made during our first fiscal quarter in anticipation of higher global sales during the second fiscal quarter and strong cash generation in the second fiscal quarter as a result of increased demand by retailers associated with the holiday season.

Our principal uses of cash are to fund planned operating expenditures, capital expenditures, interest payments, dividends, share repurchases, any principal payments on debt, and from time to time, acquisitions, and business structure realignment expenditures. Working capital movements are influenced by the sourcing of materials related to the manufacturing of products.

Cash and working capital management initiatives, including the phasing of vendor and tax payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our operating cash flows.

We remain focused on deleveraging our balance sheet using cash flows generated from our operations and other targeted initiatives. We continue to take steps to permanently reduce our debt to reduce interest costs and improve our long-term profitability and cash flows. Our 25.84% investment in Wella continues to give us the opportunity for further permanent debt reductions when our equity position is divested.

We have substantially completed the exit of our commercial activities in Russia. However, we anticipate that the process related to the liquidation of the Russian legal entity will take an extended period of time. We anticipate that we will incur future net cash costs of $10.0 to $15.0, which will be funded by our Russian subsidiary. The amount of future costs, including cash costs, will be subject to various factors, such as additional government regulation and the resolution of legal contingencies.

### Debt Financing

We are in the process of deleveraging our company and improving the maturity mix of our debt, including through refinancing or repayment of a portion of our debt. We expect to continue to take actions to improve the maturity mix of our debt, including through redemptions and/or tender offers for near-dated maturities, from time to time as market conditions permit.

We have taken action to reduce variability in our interest payments including paying down variable interest rate debt outstanding under our 2018 Coty Term B Facility and issuing fixed rate bonds. While our revolving credit facility, which we draw on from time to time, is subject to variable interest rates, all of our long-term debt outstanding as of September 30, 2024 is fixed rate debt.

### Share Repurchases

In connection with our Share Repurchase Program, we entered into forward repurchase contracts in June 2022, December 2022, and November 2023 with three large financial institutions to hedge for $200.0, and a potential $196.0 and $294.0 of share repurchases in 2024, 2025 and 2026, respectively. We physically settled the June 2022 forward repurchase contracts by delivering approximately $200.0 cash in exchange for 27.0 million shares of our Class A Common Stock during fiscal 2024.

Our remaining forward repurchase contracts permit a net cash settlement alternative in addition to the physical settlement. We may elect net cash settlement of all, or some of the remaining forward repurchase contracts based on factors such as timing, the market value of the underlying shares at the settlement date and other internal cash management considerations. We will continue to incur costs associated with the remaining forward repurchase contracts before settlement. Cash costs incurred in the current fiscal year to date for all forward repurchase contracts amounted to $6.7.

Our forward repurchase contracts include a provision for a potential true-up in cash upon specified changes in the price of Coty’s Class A shares relative to the counterparties’ initial purchase price (“Hedge Valuation Adjustment”). After the September 30, 2024 balance sheet date, the price of Coty’s Class A shares declined resulting in an increase in the liability to the counterparties to our forward repurchase contracts. The cash settlement liability under our outstanding forward repurchase contracts, based on Coty’s share price as of November 4, 2024 totaled approximately $135.0, a $91.0 increase from September 30, 2024. The share price decline also resulted in a potential Hedge Valuation Adjustment event under the forward repurchase contracts maturing in 2026, with a corresponding potential cash true-up obligation. In November 2024, we entered into agreements with the applicable counterparties for a temporary contractual amendment to the Hedge Valuation Adjustment mechanism, which is effective from October 2024 through February 2025. This amendment does not apply to our forward repurchase contracts maturing in 2025. Declines in Coty’s stock price that result in a Hedge Valuation Adjustment event for the 2025 and/or 2026 forward repurchase contracts can trigger related cash true-up payments to the counterparties. See Footnote 13— Equity for additional information on the Company's forward repurchase contracts.

### Factoring of Receivables

From time to time, we supplement the timing of our cash flows through the factoring of trade receivables. In this regard, we have entered into factoring arrangements with financial institutions.

The net amount utilized under the factoring facilities was $191.3 and $195.3 as of September 30, 2024 and June 30, 2024, respectively. The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $393.9 and $430.0 during the three months ended September 30, 2024 and 2023, respectively.

### Cash Flows

| Condensed Consolidated Statements of Cash Flows Data: (in millions) | Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $67.4 | $186.2 |
| Net cash used in investing activities | (77.3) | (62.2) |
| Net cash used in financing activities | (10.4) | (78.6) |

#### Net cash provided by operating activities

Net cash provided by operating activities was $67.4 and $186.2 for the three months ended September 30, 2024 and 2023, respectively. The decrease in cash provided by operating activities of $118.8 was primarily the result of higher cash outflows from working capital, partially offset by higher cash-related net income. Working capital accounts were primarily impacted by higher outflows from changes in trade receivables, which was the result of net revenues phasing later in the first quarter and lower collections from factoring in the current period. Additionally, lower cash flows from changes in accounts payables and accrued expenses and other current liabilities were due to a mix of timing of spend and changes in vendor payment terms, as well as higher cash payments for interest due to a change in the timing of interest payments. Higher cash-related net income was due to higher overall first quarter net revenues from Prestige, partially offset by an increase in selling, general, and administrative expenses.

#### Net cash used in investing activities

Net cash used in investing activities was $77.3 and $62.2 for the three months ended September 30, 2024 and 2023, respectively. The increase in cash used in investing activities of $15.1 was primarily due to timing of payments associated with capital expenditures.

#### Net cash used in financing activities

Net cash used in financing activities during the three months ended September 30, 2024 and 2023 was $10.4 and $78.6, respectively. The decrease in cash used in financing activities of $68.2 was primarily driven by the impact from debt-related transactions in the first quarter of the prior year which did not reoccur in the current year and lower cash outflows for deferred financing costs.

### Dividends

On April 29, 2020, the Board of Directors suspended the payment of dividends on Common Stock. As previously disclosed, we expect to suspend the payment of dividends until we approach a Net debt to Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) target of 2x. We expect to consider any future resumption of dividends in line with that target while continuing to pursue our deleveraging agenda and implementing our strategic initiatives. Any determination to pay dividends in the future will be at the discretion of our Board of Directors.

Dividends on the Convertible Series B Preferred Stock are payable in cash, or by increasing the amount of accrued dividends on Convertible Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company. We expect to pay such dividends in cash on a quarterly basis, subject to the declaration thereof by our Board of Directors. The terms of the Convertible Series B Preferred Stock restrict our ability to declare cash dividends on our common stock until all accrued dividends on the Convertible Series B Preferred Stock have been declared and paid in cash.

For additional information on our dividends, see Note 13—Equity and Convertible Preferred Stock in the notes to our Condensed Consolidated Financial Statements.

### Treasury Stock - Share Repurchase Program

For information on our Share Repurchase Program, see Note 13—Equity and Convertible Preferred Stock in the notes to our Condensed Consolidated Financial Statements.

### Commitments and Contingencies

See Note 16—Redeemable Noncontrolling Interests in the notes to our Condensed Consolidated Financial Statements for information on our subsidiary in the Middle East.

### Legal Contingencies

For information on our litigation matters and Brazilian tax assessments, see Note 17—Commitments and Contingencies in the notes to our Condensed Consolidated Financial Statements. In relation to the appeal of our Brazilian tax assessments, we have entered into surety bonds of R$452.4 million (approximately $83.2) as of September 30, 2024.

### Off-Balance Sheet Arrangements

We had undrawn letters of credit of $4.1 and $4.1 and bank guarantees of $18.5 and $18.4 as of September 30, 2024 and June 30, 2024, respectively.

### Contractual Obligations

Our principal contractual obligations and commitments as of June 30, 2024 are summarized in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations and Commitments,” of our Fiscal 2024 Form 10-K. Refer to Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Share Repurchases” above for discussion of the obligations related to our announced share repurchase during fiscal 2024. For the three months ended September 30, 2024, there have been no other material changes in our contractual obligations outside the ordinary course of business.

### Critical Accounting Policies

We believe that the critical accounting policies listed below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our Condensed Consolidated Financial Statements:

- Revenue Recognition;
- Equity Investments;
- Goodwill, Other Intangible Assets and Long-Lived Assets;
- Inventory; and
- Income Taxes.

As of September 30, 2024, there have been no material changes to the items disclosed as critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II—Item 7 of our Fiscal 2024 Form 10-K.

## Market risk

As filed, 303 characters.

See Note 12—Derivative Instruments for updates to our foreign currency risk management and interest rate risk management. There have been no material changes in market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Fiscal 2024 Form 10-K.

## Controls and procedures

As filed, 3,535 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer (the “CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) of the Exchange Act during the first fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on Effectiveness of Controls

Our management, including our CEO and CFO, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving our objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 196 characters.

We have disclosed information about the risk factors that could adversely affect our business in Part I, Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for fiscal 2024.

Filed Nov 6, 2024.
Source: SEC EDGAR, the filing index for accession 0001024305-24-000071. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.