COTY INC

Previous wording

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 wind down of the Company’s operations in Russia (including timing and expected impact), 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), 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 and goals), the impact of COVID-19 or similar public health events, 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, 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, the impact of the dual-listing of our Cla…

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Current wording

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), 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 impact of public health events, 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, 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, the impact of …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

•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 the strategic partnerships with Kylie Jenner and Kim Kardashian, 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;

Current wording

•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;

Previous wording

•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 current U.S. administration and future elections, changes in the U.S. tax code and/or tax regulations in other jurisdictions where we operate, 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 European Union, and Asia and in other regions where we operate, potential regulatory limits on payment terms in the European Union, future changes in sanctions regulations, regulatory uncertainty impacting the wind-down of our business in Russia, and recent and future changes in regulations impacting the beauty industry, including regulatory measures addressing products, formulations, raw materials and packaging;

Current wording

•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 current U.S. administration and future 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;

Previous wording

•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 COVID-19 or similar 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;

Current wording

•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;

Previous wording

•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), and the impact of such measures on our costs, business operations and strategy;

Current wording

•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;

Previous wording

We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. 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 leveraging existing brands, enhancing our e-commerce and Direct-to-Consumer (“DTC”) capabilities, expanding our presence in China and travel retail through Prestige products and select Consumer Beauty brands, and establishing Coty as an industry leader in sustainability. 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.

Current wording

We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin 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 China, the Travel Retail channel and growth markets, and establishing Coty as an industry leader in sustainability.

Previous wording

Our products are sold in over 120 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 business implementation. In addition, as the conflict in the Red Sea continues to develop, we have implemented alternate transport routes and have purchased safety stock to mitigate impacts on the flow of goods. We remain attentive to economic and geopolitical conditions that may materially impact our business. We continue to explore and implement risk mitigation strategies in the face of these unfolding conditions and remain agile in adapting to changing circumstances. Such conditions have or may have global implications which may impact the future performance of our business in unpredictable ways.

Current wording

Our products are sold in over 120 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. In addition, as the conflict in the Red Sea continues to develop, we have implemented alternate transport routes and have purchased safety stock to mitigate impacts on the flow of goods. We remain attentive to economic and geopolitical conditions that may materially impact our business. We continue to explore and implement risk mitigation strategies in the face of these unfolding conditions and remain agile in adapting to changing circumstances. Such conditions have or may have global implications which may impact the future performance of our business in unpredictable ways.

Previous wording

We expect that our net revenue for fiscal year 2024 will grow in the high single digits to low double digits versus the prior year, excluding the impact of foreign exchange, the Russia Market Exit and the early termination of the Lacoste fragrance license.

Current wording

We expect that our net revenue for fiscal year 2024 will grow in the high single digits to low double digits versus the prior year, excluding the impact of foreign exchange, the Russia Market Exit 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. 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. We anticipate that fixed costs as a percentage of our net revenues will incrementally improve annually as we continue to take steps to gradually optimize our fixed cost base.

Previous wording

Our ability to fulfill demand for our products is critical to our success. Through steps taken to improve order fill rates and mitigate the impact of supply chain constraints, we have seen sequential quarterly improvements in our order fill rates on a company-wide basis. As a result, we achieved close to pre-COVID-19 service levels across our divisions during the second quarter.

Current wording

Our ability to fulfill demand for our products is critical to our success. Through steps taken to improve order fill rates and mitigate the impact of supply chain constraints, we have seen sequential quarterly improvements in our order fill rates on a company-wide basis. As a result, beginning in the second quarter we achieved close to pre-COVID-19 service levels across our divisions.

Previous wording

Inflationary trends in certain markets and global supply chain challenges may negatively affect our sales and operating performance. The impact of inflation on material, logistical and other costs subsided during the six months ended December 31, 2023, which was primarily driven by a significant easing during the second quarter. Inflation may continue to impact certain costs, such as labor, however, we currently anticipate the overall impact of inflation to continue to ease in the upcoming quarters of fiscal 2024.

Current wording

Inflationary trends in certain markets and global supply chain challenges may negatively affect our sales and operating performance. The impact of inflation on material, logistical and other costs subsided during the nine months ended March 31, 2024, which was primarily driven by a significant easing during the second and third quarters. Inflation may continue to impact certain costs, such as labor, however, we currently anticipate the overall impact of inflation to remain muted in the fourth quarter of fiscal 2024.

Previous wording

In the three months ended December 31, 2023, net revenues increased 13%, or $204.0, to $1,727.6 from $1,523.6 in the three months ended December 31, 2022. Excluding net revenue from the second quarter of the prior period from Russia, net revenues increased 14% or $209.7 to $1,727.6 from $1,517.9 in the three months ended December 31, 2022, reflecting a positive price and mix impact of 10% and a positive foreign currency exchange translation impact of 3%, and an increase in unit volume of 1%. The overall increase in net revenues reflects growth of prestige fragrances, specifically Hugo Boss, Burberry, Calvin Klein, Chloe, Gucciand Davidoff. Net revenues increased in our Consumer Beauty segment due to positive performance in the color cosmetics category, mass fragrance category, and the skin and body care category in Brazil.

Current wording

In the three months ended March 31, 2024, net revenues increased 8%, or $96.7, to $1,385.6 from $1,288.9 in the three months ended March 31, 2023. Excluding net revenue from the third quarter of the prior period from Lacoste, net revenues increased 10% or $124.5 to $1,385.6 from $1,261.1 in the three months ended March 31, 2023, reflecting a positive price and mix impact of 6% and an increase in unit volume of 4%. The overall increase in net revenues reflects growth of prestige fragrances, specifically Burberry, as well as innovation from new launches including Marc Jacobs Daisy Wildand Cosmic Kylie Jenner, and positive performance in the prestige cosmetics category. Net revenues increased in our Consumer Beauty segment due to positive performance in the skin and body care category in Brazil, mass fragrance category, and color cosmetics category.

Previous wording

The overall increase in net revenues reflects the continued success of our pricing and revenue management strategies, including the implementation of targeted price increases across our product portfolio. Volume growth across our fragrance portfolio, as well as in skin and body care products in Brazil, helped partially offset volume declines from certain brands in China due to macroeconomic conditions.

Current wording

The overall increase in net revenues reflects the continued success of our pricing and revenue management strategies, including the implementation of targeted price increases across our product portfolio. Volume growth from certain brands in our prestige fragrance portfolio, as well as in skin and body care products in Brazil helped drive the increase in revenues. Increases were partially offset by volume declines from certain skin and body care brands in China where macroeconomic conditions have resulted in a decline in demand, and color cosmetics brands primarily in the U.S. due to negative market trends in the category.

Previous wording

Geographically, except for China, net revenues in all major markets grew, led by the United States. Additionally, there was an increase in travel retail sales in the Europe, Americas and Asia Pacific regions.

Current wording

Geographically, net revenues in all regions grew, led by the Americas. Additionally, there was an increase in the travel retail channel sales in all regions.

Previous wording

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

Current wording

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

Previous wording

(iii)an increase in net revenues due to positive pricing and mix impact as a result of global price increases and in line with the overall premiumization strategy.

Current wording

In the three months ended March 31, 2024, net revenues from the Prestige segment increased 8%, or $67.5 to $867.2 compared to $799.7 in the three months ended March 31, 2023. Excluding net revenue from the third quarter of the prior period from Lacoste, net revenues from the Prestige segment increased 12% or $95.3 to $867.2 from $771.9 in the three months ended March 31, 2023, reflecting a positive price and mix impact of 10% (primarily due to the positive pricing impact as a result of global price increases earlier in the fiscal year, in line with the overall premiumization strategy and brand innovation), an increase in unit volume of 3%, partially offset by a negative foreign currency exchange translation impact of 1%. The increase in net revenues primarily reflects:

Previous wording

(iv)an increase in net revenues due to price increases across the Consumer Beauty product portfolio.

Current wording

In the three months ended March 31, 2024, net revenues from the Consumer Beauty segment increased 6%, or $29.2, to $518.4 from $489.2 in the three months ended March 31, 2023, reflecting an increase in unit volume of 4% (primarily due to Brazilian brands) and a positive price and mix impact of 2% (primarily due to price increases across the Consumer Beauty product portfolio, earlier in the fiscal year). The increase in net revenues primarily reflects:

Previous wording

In the three months ended December 31, 2023, cost of sales increased 15%, or $78.2, to $603.5 from $525.3 in the three months ended December 31, 2022. Cost of sales as a percentage of net revenues increased to 34.9% in the three months ended December 31, 2023 from 34.5% in the three months ended December 31, 2022, resulting in a gross margin decrease of approximately 40 basis points, primarily reflecting:

Current wording

In the three months ended March 31, 2024, cost of sales increased 2%, or $9.7, to $487.8 from $478.1 in the three months ended March 31, 2023. Cost of sales as a percentage of net revenues decreased to 35.2% in the three months ended March 31, 2024 from 37.1% in the three months ended March 31, 2023, resulting in a gross margin increase of approximately 190 basis points, primarily reflecting:

Previous wording

(ii)approximately 40 basis points related to decreased freight costs.

Current wording

(ii)approximately 80 basis points related to decreased freight costs.

Previous wording

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

Current wording

(i)approximately 60 basis points related to increased excess and obsolescence costs associated with Consumer Beauty body care products in Brazil and across the Prestige product portfolio.

Previous wording

The above reflects the impact from inflation offset by a positive impact from pricing.

Current wording

The above reflects a positive impact from pricing net of inflation of approximately 200 basis points.

Previous wording

In the three months ended December 31, 2023, selling, general and administrative expenses increased 10%, or $79.1, to $833.4 from $754.3 in the three months ended December 31, 2022. Selling, general and administrative expenses as a percentage of net revenues decreased to 48.2% in the three months ended December 31, 2023 from 49.5% in the three months ended December 31, 2022, or approximately 130 basis points. This decrease primarily reflects:

Current wording

In the three months ended March 31, 2024, selling, general and administrative expenses increased 7%, or $50.2, to $770.6 from $720.4 in the three months ended March 31, 2023. Selling, general and administrative expenses as a percentage of net revenues decreased to 55.6% in the three months ended March 31, 2024 from 55.9% in the three months ended March 31, 2023, or approximately 30 basis points. This decrease primarily reflects:

Previous wording

(i)70 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;

Current wording

(i)110 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; and

Previous wording

(iii)30 basis points due to an increase in administrative costs as a percentage of net revenues due to higher compensation expense, partially offset by lower depreciation expense related to fully depreciated IT equipment.

Current wording

(i)120 basis points due to an increase in administrative costs as a percentage of net revenues due to higher compensation expense from increased headcount, partially offset by lower depreciation expense related to fully depreciated IT equipment; and

Previous wording

In the three months ended December 31, 2023, operating income was $236.7 compared to income of $199.3 in the three months ended December 31, 2022. Operating income as a percentage of net revenues, increased to 13.7% in the three months ended December 31, 2023 as compared to 13.1% in the three months ended December 31, 2022. The increase in operating margin is primarily driven by a decrease in stock compensation expense and a decrease in advertising and consumer promotional costs as a percentage of revenues , partially offset by an increase in cost of goods sold as a percentage of net revenues and an increase in restructuring costs.

Current wording

In the three months ended March 31, 2024, operating income was $77.8 compared to income of $43.5 in the three months ended March 31, 2023. Operating income as a percentage of net revenues, increased to 5.6% in the three months ended March 31, 2024 as compared to 3.4% in the three months ended March 31, 2023. The increase in operating margin is primarily driven by a decrease in cost of goods sold as a percentage of net revenues (approximately 190 basis points) primarily related to a decrease in manufacturing and material costs as a percentage of net revenues and a decrease in stock compensation expense (approximately 110 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 advertising and consumer promotional costs as a percentage of revenues (approximately 60 basis points) primarily related to increased in-store merchandising execution and non-working media spend, and an increase in restructuring costs (approximately 20 basis points). In addition, the higher proportion of Consumer Beauty sales were from lower margin Brazil brands, compared to the prior year, negatively impacted our consolidated gross margin and operating income.

Previous wording

In the three months ended December 31, 2023, the operating loss for Corporate was $24.3 compared to a loss of $14.5 in the three months ended December 31, 2022, as described under “Adjusted Operating Income for Coty Inc.” below. The increase in the operating loss for Corporate was primarily driven by a gain recognized related to our market exit from Russia in the comparative period and higher restructuring costs, partially offset by a decrease in stock compensation expense.

Current wording

In the three months ended March 31, 2024, the operating loss for Corporate was $17.6 compared to a loss of $31.0 in the three months ended March 31, 2023, as described under “Adjusted Operating Income for Coty Inc.” below. The decrease in the operating loss for Corporate was primarily driven by a $13.2 decrease in stock compensation expense.

Previous wording

(a)See a reconciliation of reported operating income to adjusted operating income and a description of the adjustments under “Adjusted Operating Income for Coty Inc.” 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.

Current wording

(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.

Previous wording

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

Current wording

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:

Previous wording

In the three months ended December 31, 2023, adjusted operating income increased $47.9 to $309.3 from $261.4 in the three months ended December 31, 2022. Adjusted operating margin increased to 17.9% of net revenues in the three months ended December 31, 2023 from 17.2% in the three months ended December 31, 2022, primarily driven by a decrease in advertising and consumer promotional costs as a percentage of net revenues, partially offset by an increase in cost of goods sold as a percentage of net revenues. In the three months ended December 31, 2023, adjusted EBITDA increased $48.8 to $366.4 from $317.6 in the three months ended December 31, 2022. Adjusted EBITDA margin increased to 21.2% of net revenues in the three months ended December 31, 2023 from 20.8% in the three months ended December 31, 2022.

Current wording

In the three months ended March 31, 2024, adjusted operating income increased $21.2 to $143.9 from $122.7 in the three months ended March 31, 2023. Adjusted operating margin increased to 10.4% of net revenues in the three months ended March 31, 2024 from 9.5% in the three months ended March 31, 2023, primarily driven by a decrease in cost of goods sold as a percentage of net revenues and a decrease in stock-based compensation expense. In the three months ended March 31, 2024, adjusted EBITDA increased $18.0 to $199.9 from $181.9 in the three months ended March 31, 2023. Adjusted EBITDA margin increased to 14.4% of net revenues in the three months ended March 31, 2024 from 14.1% in the three months ended March 31, 2023.

Previous wording

In the three months ended December 31, 2023, amortization expense increased to $48.3 from $47.6 in the three months ended December 31, 2022. In the three months ended December 31, 2023, amortization expense of $38.4 and $9.9 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended December 31, 2022, amortization expense of $37.3 and $10.3 was reported in the Prestige and Consumer Beauty segments, respectively.

Current wording

In the three months ended March 31, 2024, amortization expense increased to $48.5 from $48.2 in the three months ended March 31, 2023. In the three months ended March 31, 2024, amortization expense of $38.6 and $9.9 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended March 31, 2023, amortization expense of $38.3 and $9.9 was reported in the Prestige and Consumer Beauty segments, respectively.

Previous wording

We incurred $520.0 of cash costs life-to-date related to our previously announced and substantially completed Transformation Plan as of December 31, 2023, which have been recorded in Corporate. In addition, we continue to analyze our cost structure and evaluate opportunities to streamline operations through a range of other cost reduction activities ("Other Restructuring Actions").

Current wording

We incurred $521.1 of cash costs life-to-date related to our previously announced and substantially completed Transformation Plan as of March 31, 2024, which have been recorded in Corporate. In addition, we continue to analyze our cost structure and evaluate opportunities to streamline operations through a range of other cost reduction activities ("Current Restructuring Actions").

Previous wording

•We incurred restructuring costs of $5.7 primarily related to the Other Restructuring Actions, included in the Condensed Consolidated Statements of Operations; and

Current wording

•We incurred restructuring costs of $0.9 primarily related to the Current Restructuring Actions, included in the Condensed Consolidated Statements of Operations; and

Previous wording

•We incurred a credit in business structure realignment costs of $(1.7), which is reported in selling, general and administrative expenses.

Current wording

•We incurred a credit in business structure realignment costs of $(2.6), which is reported in selling, general and administrative expenses.

Previous wording

•We incurred a credit in restructuring costs of $(2.9) primarily related to the Transformation Plan due to the change in estimate, included in the Condensed Consolidated Statements of Operations; and

Current wording

•We incurred a credit in restructuring costs of $(1.3) primarily related to the Transformation Plan due to the change in estimate, included in the Condensed Consolidated Statements of Operations; and

Previous wording

In the three months ended December 31, 2023, stock-based compensation was $20.2 as compared with $34.2 in the three months ended December 31, 2022. The decrease in stock-based compensation is primarily related to a reduction in expense recognized in connection with awards granted to the CEO.

Current wording

In the three months ended March 31, 2024, stock-based compensation was $20.5 as compared with $33.6 in the three months ended March 31, 2023. The decrease in stock-based compensation is primarily related to a reduction in expense recognized in connection with awards granted to the CEO.

Previous wording

In the three months ended December 31, 2023, adjusted depreciation expense of $27.2 and $29.9 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended December 31, 2022, adjusted depreciation expense of $26.8 and $29.4 was reported in the Prestige and Consumer Beauty segments, respectively.

Current wording

In the three months ended March 31, 2024, adjusted depreciation expense of $25.7 and $30.3 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended March 31, 2023, adjusted depreciation expense of $28.6 and $30.6 was reported in the Prestige and Consumer Beauty segments, respectively.

Previous wording

In the three months ended December 31, 2023, net interest expense was $60.1 as compared with $61.0 in the three months ended December 31, 2022, remaining relatively flat compared to the prior period.

Current wording

In the three months ended March 31, 2024, net interest expense was $60.4 as compared with $58.8 in the three months ended March 31, 2023, remaining relatively flat compared to the prior period.

Previous wording

In the three months ended December 31, 2023, other income was $80.8 as compared with other income of $141.9 in the three months ended December 31, 2022.

Current wording

In the three months ended March 31, 2024, other expense was $14.0 as compared with other income of $156.9 in the three months ended March 31, 2023.

Previous wording

The adjusted effective tax rate was 24.6% for the three months ended December 31, 2023 compared to 25.2% for the three months ended December 31, 2022. The differences were primarily due to the jurisdictional mix of income.

Current wording

The adjusted effective tax rate was 19.3% for the three months ended March 31, 2024 compared to 20.2% for the three months ended March 31, 2023. The differences were primarily due to the resolution of foreign uncertain tax positions having a greater proportional effect in the current period.

Previous wording

Net income attributable to Coty Inc. was $180.9 in the three months ended December 31, 2023 as compared to net income of $238.3 in the three months ended December 31, 2022. The decrease in the income was primarily driven by a less favorable fair value adjustment for our investment in the Wella Company recorded in the current period.

Current wording

Net income attributable to Coty Inc. was $3.8 in the three months ended March 31, 2024 as compared to net income of $108.4 in the three months ended March 31, 2023. The decrease in the income was primarily driven by gains of $173.7 from forward repurchase contracts in the prior period that did not reoccur in the current period, partially offset by higher operating income of $34.3 in the current period.

Previous wording

(a)Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the three months ended December 31, 2023 and 2022, shares for the Forward Repurchase Contracts were excluded from the computation of adjusted diluted EPS as Coty is in the position to receive shares from the counterparties and as such their inclusion would be anti-dilutive. Accordingly, we did not reverse the impact of the fair market value gains for contracts with the option to settle in shares or cash of $44.4 and $44.3, respectively. For the three months ended December 31, 2023, 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 December 31, 2022, 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.

Current wording

(a)Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the three months ended March 31, 2024 and 2023, shares for the Forward Repurchase Contracts were excluded from the computation of adjusted diluted EPS as Coty is in the position to receive shares from the counterparties and as such 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 $7.1 and $(93.9), respectively. For the three months ended March 31, 2024, 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. For the three months ended March 31, 2023, 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.