Q4 2021 Coty Inc Earnings Call
Yeah.
Good morning, Ladies and gentlemen, my name is Britney and I'll be your conference operator today.
At this time I would like to.
Welcome everyone to Coty is fourth quarter fiscal 2021 results conference call.
A reminder, this conference call is being recorded today August 26th 2021.
On today's call are she Nabi, Chief Executive Officer, Oliver at Mercy, a chief financial Officer.
I'd like to remind you.
He's on many of our comments today may contain forward looking statements.
Please refer to Coty as earnings release, and reports filed with the SEC, where the company lists factors that could cause actual results to differ materially from these forward looking statements.
In addition, except where noted the discussion of Coty financial results.
Results.
Expectations reflect certain adjustments asbestos side and the non-GAAP financial measures section of the company's relief.
I will now turn the call over to you Mr. Nabil.
Ladies and gentlemen, with the conclusion of our fiscal 'twenty. One here I'm very pleased by the progress we have made.
Over the last 12 months.
Even more excited about the opportunities and momentum.
Ed.
This has truly been a transformational year for Coty.
Over the last 12 months as we have built a leadership team of beauty.
Transformation experts.
And they'll then began.
Executing on our multi year strategy.
Completed the divestiture of Villa significantly improved our leverage profile and over delivered on our savings revenue and profit objectives, it's clear that cookies emerging as a metric is stronger and more nimble.
Organization at.
At the same time Coty has clearly stepped up its beauty expertise and willing to take risk to shape the future of the beauty industry.
There are a number of key points that I want to highlight today.
First our fourth quarter revenue growth was ahead of.
Asians fueled by double to triple digit growth in each region and triple digit growth in our prestige brands as we continue to see robust prestige fragrance demand in the U S and China, coupled with continued expansion of our prestige cosmetics footprint.
At the same time, our consumer beauty brands grew close to 40% driven in part by the turnaround in Qatar gout and the renewed consumer migration towards trusted brands are true.
That are underpinning the rebuilding of our consumer beauty portfolio.
As a result, our Cisco.
'twenty one revenues of $4.63 billion ended above the high end of our guidance range second by accelerating our savings delivery and she's got 21, ending at over $330 million or over 100 million higher than our original target we were able.
To fuel both profit delivery and reinvestment in our business to accelerate our growth. In fact, we ended fiscal 'twenty, one with adjusted EBITDA of 760 million or 10 million above our guidance and above expectations and with an EBITDA margin of 16.
16, 4% in fiscal 'twenty, one 300 basis points higher than pre COVID-19 levels. Despite a lower sales base. It's clear that we are well advanced in making coty into a leaner organization.
Third we continue to make broad based strategic progress.
Across each of our six strategic pillars, and the way to cover some of the milestones on todays call.
Finally, as we are now two months into our first quarter of fiscal 'twenty. Two it's quite clear that momentum is building in the business propelled.
By a combination of strong coty initiatives across fragrance, and cosmetics, coupled with an improving and improving industry backdrop, let.
Let me now take a few minutes to review our revenue trend in Q4 and in fiscal 'twenty, one before I hand, it over to Laura to take you through our financials.
Then I will wrap it up with an update on our strategic progress and of course outlook for the coming year.
Our fourth quarter revenues nearly doubled year on year as we lapped the peak of Covid impact in the prior year, while all regions returned to year on year growth in Q4 the.
The U S and China markets were standouts.
The Americas region grew 67% in Q4, and 6% since fiscal 'twenty, one with the full year performance driven by double digit growth in U S prestige products and growth in Brazil and Canada.
But the momentum we have seen in the U S over the past year and continuing to date confirms our view that the U S. We remain a key growth market for Coty and reinforces our investment strategy.
Asia Pacific grew 15, 9% in Q4 with China.
Growing double digits on a quarterly and full year basis, both year on year and also versus fiscal 19, as we focus on building China into another powerhouse market for Coty.
EMEA sales more than doubled in Q4, even as many European markets.
<unk> remained under restrictions through most of the quarter in fact in Q4, our consumer beauty brands recorded stable market share in EMEA for the first time in over five years, even though our key brand initiatives only started going live at the end.
Of the quarter.
Moving on to sales by channel.
Our prestige sales more than doubled in Q4 and were nearly flat like for like in fiscal 'twenty. One even as we continued to reduce sales in low quality channels, which represented a low teens negative impact to prestige.
<unk> brand sales in Q4.
In the high single digit negative impact in fiscal 'twenty, one related to fiscal 19, nearly all prestige brands were up double to triple digits in Q4 with standout performance from Gucci, Marc Jacobs burglary cutting.
Calvin Klein and Chloe supplemented with expansion in cookies, new growth and jeans prestige cosmetics and skincare.
In fact looking at the second half of our fiscal year, our prestige brands grew 43% like for like versus last year compared to prestige beauty market.
Growth in the 20% range, our mass beauty revenues increased 38% like for like in Q4 with growth across each region, even as the mass channel was the least impacted by last year's Covid related store closures.
Growth was led by.
I'll go re mail and Max factor as the mass beauty category returned to year over year growth.
Having unveiled the new brand positioning behind each of these key cosmetic brand. We are now also turning our focus to the boutique as part of our consumer beauty portfolio here, we intend to.
Leverage the Knowhow and capabilities of our key Brazilian brands like mono and tightrope to accelerate our global body care brands, including Adidas.
On a six month basis, our consumer beauty brands grew like for like 7% slightly.
Ahead of the underlying mass beauty market.
Having concluded the year and as we are now in the process of putting our new organizational structure in place we have decided to transition to new segment reporting beginning during the first quarter of 'twenty two based on two segments.
Prestige and consumer beauty this will align with how we plan to run our business internally with dedicated chief brand and commercial officers for each of these businesses, we will be publishing recast historical financials, reflecting this segments a few weeks before.
For our next earnings call I will now hand over the call over to long haul to take you through our financial results.
Thank you Sue.
Fourth quarter maintained a base of strong profit delivery, allowing us to exceed our full year adjusted EBITDA target.
I'm pleased to say that this Q4 profit.
It was driven by both gross margin and cost reduction, allowing us to meaningfully stepped up marketing investment behind our brands.
Starting with our gross margin performance, our Q4 adjusted gross margin of 69% improved by over 20 percentage.
Points from last year, which were significantly depressed due to the Covid crisis.
This marks our second contribute consecutive quarter of gross margins above 60% as we delivered on our strategic framework.
For fiscal 'twenty, one our gross margin reached 60%.
An increase of 190 basis points from fiscal 'twenty and in line with the gross margin of the remain co business in fiscal 19, despite a lower sales base.
Our fiscal 'twenty, one gross margin benefited from the positive.
Positive mix shift towards prestige brands economics.
In skincare.
As well as material cost savings enhanced by supply chain productivity and improved excess and obsolescence.
We remain laser focused on further driving gross margin expansion in fiscal 'twenty, two and beyond.
We have a multi pronged multiyear gross margin.
And attack plan in place, while we also expect to benefit from positive channel category and regional mix shifts.
This will in turn allow us to continue reinvesting behind our brands and simultaneously deliver strong profit expansion.
As we mentioned you are.
In our last earnings call, we continued to step up our marketing investment during Q4.
<unk> was approximately 26% of sales in the quarter, which is a sequential acceleration from Q3 as well as the first half of fiscal 'twenty, one with working media increasing.
<unk> more than 30% from Q4.19 labels.
I want to emphasize that while we are investing behind our brands.
Vito is a fee remains fewer bigger and better which also means that we are very focused on the return on investment.
These marketing investments.
Sue will soon be will soon be giving you a lot of details on the successes, we have had across our growth pillars.
However, I will just highlight some of the areas, where we are directing media investments.
First we continued to invest behind.
Behind brands and launches with proven success and market share momentum, including Jacobs, perfect Codell girl and Sally Hansen.
We also fueled our expansion into new categories, particularly Gucci makeup in China, which is winning both online and offline.
And finally, we are investing in all key fragrance icons such as both bottle.
Louis signature, Marc Jacobs, Daisy and Gucci guilty.
This is driving strong NOI in the U S. For example, where our Aitken's market share grew plus zero.
<unk> six percentage point in Q4.
The ability to accelerate our marketing investments and deliver profit growth continues to be enabled by our strong cost reductions.
During Q4, our fixed costs declined 15% year over year and were down 60.
<unk> percent for fiscal 'twenty one.
We achieved approximately $70 million of cost savings during the quarter, bringing our total fiscal 'twenty, one cost savings to over $350 million.
This is significantly ahead of our initial expectations.
<unk> for the year.
So the largest contributor of fiscal 'twenty, one savings were fixed cost reductions, including headcount and business services.
Buckets that made up the $350 million of savings.
<unk> cost of goods sold structure against CPA reduction.
<unk> made investments.
Given the accelerated savings we achieved this year, we now anticipate fiscal 'twenty two savings of over $90 million, which are net of cost inflation reinstating bonus season structural organizational reinvestment behind.
<unk> pillars.
So it's important to note that this does not include our intended to investment in <unk>.
We remain on track to reach our fiscal 'twenty three target of a total of 600 million of savings and at the same time, we are intensifying savings projects.
Beyond fiscal 'twenty three.
Equally importantly, we have been managing the one time cash costs associated with the savings program very tightly.
In fiscal 'twenty, one cash outlay related to these one time cost was below $200 million and we expect hundreds of.
$200 million of cash outlay over the next two years, bringing the total budget to approximately $400 million or $100 million below our initial target.
This is a true testament to how we have been able to transform the culture to a much more cash centric culture.
Which will entail.
In turn enabled us to actively drive down our leverage.
Moving to our profit delivery.
EBITDA came in ahead of expectations for Q4, allowing us to exceed our full year adjusted EBITDA guidance.
Our adjusted EBITDA was.
$27 million of 12% of sales in the quarter and follows a year this was $760 million or 16, 4%.
While this marks a very significant improvement from last year, which was heavily impacted by the COVID-19 crisis are fixed.
Fiscal 'twenty, one EBITDA margin was actually 300 basis points higher than our fiscal 19 remain core levels, despite sales being lower.
Our strong profit performance. This year was driven by strong gross margin expansion as I previously mentioned focused marketing investments.
Wendell and fixed cost savings.
In summary, the robust profit delivery should be the evidence such fiscal 'twenty. One it was a year, we started a virtuous cycle.
We do not see a trade off between sales growth and profit improvement, but sees a simultaneous achievement.
Shipment of both is very attainable goals.
Turning now to our EPS, which included the following drivers.
Adjusted EBITDA for the quarter of $127 million.
Income tax of $9 million, despite the negative pre tax income.
Which reflected a true up to bring the full year adjusted effective tax rate to 21% in line with our previous comments.
Nearly 40 million of other items, which primarily includes $24 million of preferred dividends as well as $10 million.
Both deferred financing write offs related to the April and June refinancing.
As a result, our Q4 diluted adjusted EPS ended at negative nine cents.
For the fiscal 'twenty, one EPS based on $760 million of adjusted EBITDA.
An effective tax rate of around 21% we ended the year with diluted adjusted EPS at 1%.
While not included in our adjusted EPS.
During the quarter avail us fair market value rose by $10 million continuing the trend of.
The pension in the last two quarters.
Looking to fiscal 'twenty, two I would like to provide some context on the different drivers for our adjusted EPS.
First as of Q1 'twenty, two we will be excluding noncash stock compensation from our adjusted results including.
<unk>.
Adjusted EPS SEC.
Second we would expect interest expense in the mid $200 million.
A bit higher than the fiscal 'twenty, one expense of $245 million on a continuing ops basis, reflecting a lower net debt balance offset by.
<unk> higher cost of debt post refinancing.
Third on the tax side, we are anticipating and an adjusted effective tax rate for fiscal 'twenty, two and the high twenties percentage as our global principal jurisdiction out now in Amsterdam, and the U S.
However, we note there is a high degree of uncertainty with effective tax rate projections in the current environment.
Finally, so convertible preferred shares on our balance sheet do introduce a number of complexities to the calculation of Coty as adjusted diluted EPS.
To help investors and analysts model, our EPS correctly, we have posted on the Coty Investor Relations website, a short overview of the accounting treatment that you need to keep in mind.
Now moving to free cash flow for the quarter, which came in roughly even despite.
Four typically being a seasonally weaker cash flow quarter.
We continued our strict management of Capex and one time cost during the quarter with one time cash cost for fiscal 'twenty, one coming in below $200 million.
As a result for fiscal 'twenty, one we generated free cash.
Coupe of $145 million, which is in line with our expectations.
Cash generation remains a very important priority for us going forward.
We have identified a number of opportunities across 11 key streams, which will.
We believe she will further bolster our cash flow in fiscal 'twenty, two and beyond and derive a steady reduction in our net debt.
Turning now to our capital structure.
We ended Q4 with the financial net debt balance of approximately $5.2 billion.
Which is a sliding.
<unk> increase from Q3.
<unk> largely as a result of a negative forex impact so 24 million cash payment of the convertible dividend.
As well cost related to the two refinancing transactions completed in the quarter.
Factoring in our 40% stake.
Villa valued at approximately 126 billion, we ended the year with economic net debt over one 4 billion.
During Q4, we successfully completed the issuance of 700 million Euro three.
875 senior secured.
Cured notes due in 2026 and.
$900 million of 5% senior secured notes due in 2026 with a strong demand for both issuance, allowing us to upsize both transactions.
These transactions extended our maturity profile.
Our debt portfolio and significantly reduced refinancing risk.
Fiscal 'twenty, one was a pivotal year in the improvement of our capital structure through the sale of a 60% stake in <unk> and we remain on track to end calendar 'twenty, one with a net leverage ratio moving.
Moving towards five times, and and calendar 'twenty, two with leverage of approximately four times.
As a reminder, we continue to view our retained 40% stake in data as a financial stake, which further valuation upside and we will continue to be active and tactical.
In intensifying opportunities too.
Monetize these non strategic asset and further reduce our leverage bidding on this point considering the dynamism of the beauty market cookies always on the lookout for opportunities to leverage its assets to create value and fuel growth.
In order to support the growth of Brazil.
<unk> business and Coty personal care brands pretty concerned that is pursuing a partial IPO of <unk>, Brazil business.
Our year to date Coty completed its first filing at the CDM, So Securities Commission, which regulates capital markets in Brazil to commence these partial IPO process.
This will also help advance coty deleveraging agenda.
Coty intends to remain a controlling shareholder of the Brazil action yet.
Due to local Brazilian regulations. Following its first filing coty cannot offer further details at this time, but we'll provide updates in due course.
Additional information.
Nation, a bunch a partial IPO of the Brazil business can be accessed on <unk> website.
I will now hand, the call back to Sue for a discussion of our operational milestones and the outlook.
Thank you very much lower so in addition to our financial delivery in Q4 and for the year the Coty.
T organization has been moving at top speed to execute on the six strategic pillars. We involved at the end of April.
We've made good initial progress with even more still to come so let me spend a few minutes on some of the tangible milestones we have achieved already in our journey to transform.
Coty into a beauty powerhouse.
The recent appointment of constant as Kevin niches as Curtis New Chief Prestige brands Officer is integral to our plans as Constantine background at Mac cosmetics.
Urban decay, it cosmetics and kills mixture.
For him the ideal leader to take our prestige makeup in prestige skincare footprint to the next level, while further building on our fragrance momentum.
Starting with our first strategic pillar stabilizing our consumer beauty brands. Our first area of focus was the largest brand.
Same consumer beauty portfolio cover girl and we did not lose any time unveil a new brand repositioning campaign disruptive advertising and a highly successful launch of our clean vegan mascara in early spring.
The results speak for themselves in the.
<unk> in the June quarter, Covergirl grew sellout in brick and motor by 24%.
Compared to the broader color cosmetics category growing 16% with the highest brand share in five years.
The growth was fueled by new advertising creative and fewer.
In the bigger better investment across media promotion and display on Covergirl is key Magnificant center eight franchises.
In particular last Gluskin Mascara is our largest mascara launch in over five years, while the simply Asia. This franchise is booming.
Driven by the viral tick tock craze for simply Ageless, RIN codified foundation and media support behind the high performing creative asset starring Nikki Taylor.
The overall market share gains strength of innovation and powerful advertising have given retailers' wins.
<unk>.
Confidence with Covergirl, where we retain shelf space in 2021 year to date for the second year in a row.
Building on this success on the last earnings call, we introduced the new brand positioning and brand ambassadors for two other leading cosmetic brands.
Rimmel and Max factor.
It is important to note that the new campaign and in store visuals for retail only went live in June and July So we'll be monitoring the results closely in the coming weeks and months.
However.
I can already confirm that according to the latest Nielsen data.
Re mail has reached its highest market share of the last 10 months is in the UK its largest market and.
And in Germany, where the brand is marketed under the name Manhattan. The newly launched Wonder extension Mascara is strongly resonating with consumers and is already the brands number one.
Carol.
Similarly for Max factor, the new visuals and assets are going live as we speak and we will be of course monitoring early results. However, you can see on this slide the new campaign for Max factor Phase <unk> three in one foundation starring Priyanka Chopra Jonas.
One was bringing back the glamour luxury and the transformational power that was always associated with the iconic Max factor brand equity.
The new positioning of our iconic cosmetic brands, such as Covergirl Rimmel, Max factor and Sally Hansen assure that.
Our portfolio of mass makeup is well positioned and covers the key trends across core markets.
Now our second strategic pillar, which is focused on accelerating our luxury fragrances and becoming a key player in prestige makeup.
Fragrances, we are continuing to boost and strengthened our leading brands through new innovation as well as renovations of key icons.
Starting with Marc Jacobs, perfect, which launched a year ago, perfect unique bottle juice and breakthrough campaign, which celebrates being real.
Being.
Bold and being perfect. As you are has proper this launch to be not only the biggest launch for coty in the U S. In over 10 years, but also the biggest launch across the whole U S fragrance market in the last three years.
For Gucci, the fragrance portfolio, including icons like guilty.
<unk> Blum is already in the top 10 across key markets like U S and China, and very clearly gaining market share.
We will continue to build on the strong appeal of the Gucci brand with our latest launched which I will discuss very shortly.
Finally on <unk> the <unk> collection.
<unk> is quickly becoming a staple amongst ultra premium artisanal fragrance brands in China.
Despite its relatively recent entry into Asian markets. This ultra premium collection has propelled <unk> to be a top 20 fragrance brand in China retail with sales.
During this past quarter.
Turning now to prestige makeup it's important to note that while we have introduced our strategic ambitions only a few months ago Coty has already made good strides in building out our prestige cosmetics presence.
In fact prestige.
Detica pause and non material part of the portfolio only two years ago and is now approximately 3% of our sales.
Currently in our three key brands, Gucci Burberry and KD.
I firmly believe that our portfolio of prestige makeup brands is very well positioned comprehensive.
Prehensile and covers the key trends per market, including personality, driven need brands, which are leading in the U S and fashion driven brands, which are leading in Asia Pacific China or Europe.
As we continue to expand the distribution in assortment behind this leading brands we are confident.
Our ability to drive prestige cosmetics to a high single digit percentage of our portfolio by fiscal 'twenty five in line with the targets we laid out in April.
Focusing on Gucci makeup in particular the brand is clearly winning wherever it's present in the U S. Gucci makeup sales.
In comparable doors doubled in fiscal 'twenty, one which supports our plans to significantly expand distribution in fiscal 'twenty. Two in Europe, we have been very selective in the doors, where we have launched the line focusing on the highest productivity doors for leading beauty retailers like Sephora and.
In Coppell in Russia, and the results honestly have been exceptional Gucci makeup is ranking in the top 10 in the Europe, Sephora doors and top five in the Russia doors, where the line is present.
Lee in China, where we are aggressively expanding Gucci makeup presence both offline and.
<unk> nine with Tmall the brands ranking has improved 11 Bronx versus last year.
Shifting to our third strategic pillar building, our skincare portfolio again, while much of the momentum here is still to come we have already made some good progress.
Online specifically skincare accounted for approximately 5% of the portfolio in fiscal 19 and is now standing at 6% led by brands, such as philosophy, Katy Skincare and Lancaster.
And as we continue to both expand these brands and start taking some of our existing prestige.
In consumer beauty brands into skincare, we continue to target skincare, reaching over 10% of our sales in fiscal 'twenty five.
So now let me spend a minute on our core skincare brands.
As we've discussed in the past philosophy is a staple in the U S prestige skincare market.
<unk> holding the number eight positions.
In fact, with the brand strength and cleansing and exfoliating, while giving back to the skin.
That is purity line is the number one cleanser and the micro delivery line is the second session export nature in the U S. We have continued to.
Market <unk> multichannel presence by bringing a unique branded philosophy presence on Amazon.
And now on the one year post launch philosophy is already the second prestige skincare brand on Amazon.
Forlorn caster, our revitalization strategy has been launched in.
To build on.
We opened a beautiful brand counter and temporary pop up store in leg out there, which you can see in the video here, drawing big crowds and great consumer engagement.
As a result, and dislocation Lancaster ranked number three in June amongst.
In Heinz niche skincare brands and in the top 20 amongst all skincare brands based on this initial success. We plan to continue to open more long cast their doors in fiscal 'twenty, two across Hainan mainland, China and Korea.
Finally on our third skincare brand.
Among portfolio guidance skincare, we saw good momentum with the launch of the makeup melting cleanser, though our focus was very much on the successful relaunch of the kg cosmetics line with an integrated direct to consumer websites.
Of course discuss the results of the relaunch very shortly.
In total our portfolio of skincare brands is very well positioned.
And covers the key trends by market, including personality, driven and niche brands, leading in the U S and prestige brands with strong credibility from Europe in our case Monaco resonating across Asia.
Moving on to our fourth strategic pillar now building, our e-commerce and direct to consumer expertise and capabilities.
In Q4, we continued to build on the momentum of the previous quarters recording 19% growth in our E. Comm sales. This brought our total income.
Sales growth for the year to plus 34%, including 37% growth in our prestige brands and 25% growth for our consumer beauty brands as a result, our E comm penetration reached a high teens percentage in fiscal 'twenty, one twice the penetration.
<unk> level pre COVID-19 and our intent is of course to continue to accelerate this further in the coming years.
As part of our strategy to continue to strengthen our E com and direct to consumer capabilities I wanted to share a couple of recent examples from the U S.
Particularly as we.
Trading out of the pandemic, where much of our E. Comm focus was on search and conversion. We are now leaning into digital first omnichannel bye.
By this we mean shifting our strategy more into digital storytelling, and discovery, which is leading to product sales boosts both in store.
Come in line.
Let's start with Covergirl recent partnership with Amazon across its ecosystem covered we are teamed with Amazon in an entertainment Commerce, Mitch social commerce initiatives and two episodes of insight, making the cut on Amazon lives Covergirl showed funds have to recreate the beautiful signature.
And <unk> and fresh faced makeup looks from the Amazon original series.
Q as we're able to watch the key makeup tutorials and simultaneously shop, the same covergirl products on Amazon to get the look the laws in the second example of our digital first omnichannel.
Mr approach, we identified high engagement and high quality organic reamer content current currently antique stock offer.
Investing in boosting these two organic remade reviews over one week period, we saw a clear uplift in weekly sales on the two <unk> products across each of our key retailers.
<unk>.
Both offline and online.
Of course, we fully intend to replicate this approach and learnings across more brands and more markets.
Moving now to our fifth strategic pillar expanding in China, which is really a perfect blend of the first four strategy.
Pillars pillars again, whilst Coty has exposure to China is still small it is important to note that we have already begun to make strong strides with our sales in China growing by double digits versus fiscal 19 and fiscal 'twenty. As a result, China has expanded from less than 3% of sales.
Strategic COVID-19 to over 4% of sales in fiscal 'twenty, one and our goal remains to boost China to over 10% of our sales by fiscal 'twenty five.
Underpinning this growth in China is the strong momentum we are seeing in our prestige brands there.
In Q.
Sales and Coty is a company ranked number nine in China's total prestige beauty market and improvement of one rank from Q3, Despite our limited presence in China's core skincare category in.
In fact, our prestige retail sales outpaced the market growth by almost four times.
Four of our sellout growing plus 90% in Q4 compared to the market at plus 25%. This is the second consecutive quarter of Coty outperforming the China beauty market.
Digging deeper of the top 20 prestige fragrance brands in China.
Five a coty brands, including Gucci, Burberry and Bottega Veneta.
This is a great baseline for future growth as China's prestige fragrance market has already surpassed in size, both the prestige fragrance market of key countries like UK, and Germany, and we foresee strong growth.
Both in the China fragrance market for many years to come.
And in China, and in China Prestige makeup market Gucci and Burberry are already in the top 25, despite much more limited distribution versus established competitors. In fact in Q4 Gucci makeup sellout grew.
Tenfold year over year fueled by both brick and motor sales and the brand launch on Tmall with Tmall sales already surpassing offline sales.
As we focus on building our presence and recognition in China, we're very happy to announce that Coty will exhibit for the first.
First time at the 2021, China International import Expo, which will be a great opportunity to showcase our beautiful brands and products.
Having covered many of the progress areas to date and even more excited to share details on the momentum we're already seeing in the first quarter.
Quarter of fiscal 'twenty, two first let me start with catering the long awaited relaunch of the new KD cosmetics line together with the new integrated website happened on July 15, together with guidance, we took the opportunity to update all of the cosmetics products assuring that each product was.
Siegen cruelty free with clean formulations free from over 1000 contested ingredients, while delivering top notch quality. The excitement of our funds was palpable with 300 orders a minute coming in on the DTC website in the first.
15 minutes of launch we saw the same kind of excitement several weeks ago. When Kt launched her birthday collection with thousands of orders coming in the first 15 minutes and in both cases, we saw basket sizes and order values exceed the averages prelaunch.
Launch as consumers were able to bundle products across the aesthetics and for the first time skincare, while most of the orders on the direct to consumer websites came from U S. Consumers returning customers represented the majority the brand relaunched resonated just as strongly in international markets.
<unk> in the UK KD beauty was a top 10 beauty brand at Selfridges in fact, the KD shade lip kit was the third top selling skus across all offset fridges products not just beauty similarly for Douglas with Kylie cosmetics now available on its website across several markets.
Markets.
And in store presence slated for the fall cosmetics sellout was two times higher than forecast and drove a clear boost to Katie skincare we.
We saw the same kind of momentum at Ulta as well.
The global momentum correlates well with Kate is tremendous.
<unk> online across social media platforms. In fact, our analysis shows that amongst other top personality led beauty brands Kylie cosmetics has the most likes and post interactions across Instagram and Facebook and that guidance like shopping event, which accompanied the relaunch of the cosmetics.
Next line far exceeded benchmarks on order volume and conversion rates.
All of this confirms the strong pull that KLA has with the Gen Z consumers across many key markets and our goal is to fuel this momentum with more launches and more activations in the coming years.
On the fragrance side of our portfolio, we have a robust launch scheduled for the first half of fiscal 'twenty two and we are complementing this with the rollout around the globe of our first to market digitally enabled touch less fragrance testers. So let me take a few minutes to walk you through our key launches.
<unk> on Gucci, we're extremely excited by the recent launch of Gucci Flora gorgeous Gardenia building on Gucci is iconic flora pillar, we expect Gucci flora gorgeous gardenia to be our biggest fragrance launch of fiscal 'twenty two.
Concept behind the launch is simple flora is driving.
Impac Magic and <unk> in these enchanted world with my service as the face of not just the fragrance campaign, but also the Gucci brand. We are working extremely closely with the fashion house to accelerate the brand right in time for Gucci is 100 year anniversary.
It is important to note that cookies activities and support behind Gucci beauty, and Gucci activities and support behind the fashion brands are very synergistic and fully amplify each other we believe that the mix of different elements ranking from Gucci is one hundred's anniversary activations together with.
Continuous work to elevate Gucci beauty and flora and complementary events like the house at Gucci movie release will further propel Gucci is rankings in both fashion and beauty and we are already seeing strong results for Florida. The campaign announcement has reached one eight.
8 billion impressions, while still early into the launch we are already seeing great initial set out results in North America, where Florida is currently exclusive to Sephora Flora is already the third fragrance in U S Sephora and already the first fragrance in Canada Sephora.
Our now on <unk>, we have launched the new male pillar called hero, which we believe has strong potential to become another icon in the <unk> portfolio. Following on the success of Burberry her the concept for the launch encapsulates modern masculinity playing on the essence of primal human.
And animal instincts and embracing our singularity. The campaign starring Adam driver has already reached over $2.3 billion impressions and the initial sales results have been equally very promising in the U S. Hero is currently exclusive to bloomingdales.
And has become the number one mass fragrance at the retailer. Similarly in China Hero has reached the number three spot in May fragrances on Tmall.
Calvin Klein, we've introduced a new mens fragrance pillar called decide with the campaign faced by actual Richard Madden.
<unk> <unk> is all about facing our fears and re conquering our freedom in this post pandemic world and again, our investment behind <unk> will only be amplified by the support of the fashion brand.
The launch is off to a great start here again driving market share gains for the Calvin Klein brand.
In the UK with the Calvin Klein mass fragrance ranked improving by seven spots. Similarly in the U S. Initial sellout is already almost two times higher than forecast.
Complementing this fantastic lineup of fragrance launches our initiatives in consumer beauty, specifically with.
We recently launched the wholly new concept under Sally Hansen called it takes too.
The product combines the two step process of the iconic.
Miracle gel line into an easy to use portable formats, we are supporting the launch with highly engaging videos and content centric tuck in order.
Social media platforms, and you can see one of the videos here, which are seeing engagement rates more than double benchmark and data.
We're also attracting consumers and educating them on the new usage concept through disruptive in store displays such as this one the results are here.
Year since the launch of it takes to Sally Hansen's Miracle gel franchise has Richard its highest market share in four years. The success of this innovation is something that we can clearly build across several of our other cosmetics brands.
That brings me to our outlook for the year.
Again as you have undoubtedly seen fluctuations in COVID-19 are driving volatility across markets in terms of restrictions.
Traffic and of course, social mobility, yet at the same time, we are not seeing any slowdown in fragrance momentum in key markets like the U S.
China demand.
Continues to grow even with added temporary restrictions in certain cities.
And at the same time, we are also beginning to see signs of recovery in some European markets.
Similarly, while international travel is still under pressure local travel retail is clearly seeing improving trends even if traffic.
Vic to Hainan has temporarily slowed finally makeup demand is also gradually improving the COVID-19 impact remains a watch out combining this improving demand backdrop with the very strong coty launch calendar, which I just discussed together with the first tangible results of the execution.
<unk> of Coty six pillar strategy. The result is very strong sales momentum in our business.
Building on the very strong double digit growth in our sales in July and August to date, we are anticipating a first quarter of 'twenty two like for like sales growth in the high teens percentage.
Looking beyond Q1, assuming no significant deterioration in COVID-19 conditions globally, we expect beauty demand to continue to improve the base year compare regions should get more difficult at the same time, our strong launch calendar should extend through the year.
With the rest of the year as a result, we are targeting for fiscal 'twenty two.
Like for like sales growth in the low teens percentage.
Continued expansion of our gross margin strong operating leverage as we maintained our fixed cost base relatively stable, which should drive.
<unk> fixed costs as a percentage of net revenues lower by approximately 300 basis points.
Continued expansion in our R&D investments.
Which have grown by 10 basis points to two 1% and should continue to expand.
Adjusted EBITDA of approximately 900.
<unk> million dollars on a constant currency basis, representing roughly 100 basis points of margin improvement.
And we continue to target leverage towards five times exiting calendar 'twenty, one and calendar year 'twenty two with leverage of approximately four times.
To conclude.
Incredibly proud of what Coty has accomplished in the past year.
We have and that fiscal 'twenty, one with revenues savings and EBITDA ahead of expectations.
We have put our plans in motion executing on each of our strategic pillars.
And are already seeing positive milestones in each and every area.
And building on this progress we are starting fiscal 'twenty two on very strong footing expecting high teens like for like sales growth in Q1, and low teens like for like growth for the year as a whole clearly showing that.
Coty is in the driver's seat.
As we move through fiscal 'twenty, two we expect our gross margin expansion and further cost reductions coupled with the flow through of the additional sales to fund both strong profit improvement and reinvestment in the business.
To drive our six pillar strategy.
Our commitment remains to meaningfully reduce our leverage by end of calendar 'twenty, one and beyond and continue to drive profitability growth through strong sales acceleration. Thank you all for your time today, we are now happy to take.
Take your questions.
Okay.
To ask a question please press star and one on your Touchtone phone.
Move yourself from the queue at any time by pressing the pound key.
Again that is star Antoine to ask a question.
In the interest of time, we do ask that you are looking for Q1.
Question to allow everyone an opportunity.
We will take our first question from Rob <unk> with Evercore. Your line is now open.
Great. Thank you very much.
And terrific terrific progress.
I was wondering if you can help us maybe just.
Focus a little bit more on the first strategic pillar.
Which is stabilizing the consumer beauty business.
Obviously, given the given the comps, it's a little tricky and difficult for us to judge your progress you gave us some some good market share data, which is certainly indicating significant progress.
Dress, but I was wondering if you could go maybe a little bit deeper in terms of repeat purchase or brand equity scores or any other metrics.
And to support confidence.
The stabilization and the trends that youre seeing are likely to continue in the future. Thank you.
Hi, Rob. Thank you very much for the question that gives me a great occasion to really.
Speak about this I would say a big success that we're having on covergirl. This was really not something that was easy to achieve as you can imagine how the brand has been losing market share for years.
Years and years.
And in fact, we made the bold decision to bet on one key area of the business. That's by the way the key area. That's growing back the American cosmetics business, which is clean beauty clean beauty is clearly over indexing the recovery of the beauty category, specifically in the U S market and Covergirl as you know.
It is not only the inventor of clean beauty 60 years ago, but towards the grant that was launching innovation in this area with clean fresh line launched last spring followed by large screen that became Cadogan biggest mascara and again, we've decided also to come back to another asset of the brand which is what.
What we call today makeup skincare with simply age list, which is by the way the best selling anti aging foundation in the U S and when you add these two together with a new way of doing advertising you clearly see but the brand is re attracting consumers that are the ones, we'd let the brand.
Granted in the past, namely Gen Z millennials, but also people who are Hispanics.
Panic immunity. So when you add all this together you can understand very easily why the brand is growing again because these demographics are those who are the biggest consumers of makeup. We are also progressing I would say.
On.
People, who are older than 40 years old, which is a key category for categories, such as foundation and miscarriage.
When it comes to the second part of your question about the metrics what I can tell you is that we are really really.
Following very very carefully and in new asset we are producing if I take one example.
Which is the Nikki Taylor simply ageless advertising, but just restarted in the U S. Beginning of August. This one is probably I think it's probably one of the best testing advertising that not only the coty has done on covergirl, but including probably.
In the past of Covid.
I don't care, what the brand was a number one brand in the U S and the metrics. We are following such as you know.
Purchase intention ability to convert people from interest to purchase et cetera are among the highest ever seen into the database of the companies that does the testing for us So we're super Super.
Confidence that the new generation of advertising behind products that are those that people are looking for today again clean beauty make.
Makeup powered by skincare et cetera.
The winning recipe and that's the reason why the brand has been growing market share now for three months in a row and has not lost any shelf.
Space for the second year in a row and you will see a lot of new things arriving in fall around carbon GAAP.
And we will take our next question from Steve Powers with Deutsche Bank. Your line is now open.
Yes, hey, thank you very much.
I guess my question.
I just wanted to dig into and just frame your outlook a bit more for for fiscal 'twenty two.
Starting with the first quarter, you talked about strong double digit growth in July and August and then obviously the high teens outlook for the first quarter.
Which I think implies some sort of September deceleration. So just maybe you could just frame that for us.
Any key drivers you'd call out and similarly for the full year.
While I do appreciate the base your comparisons get progressively more difficult.
Relative to <unk>.
Clean sort of 19 basis adjusting for the Wella sale.
I'm not sure that they do if anything they may get a bit easier.
Maybe just better frame the drivers there and any implied deceleration versus.
That pre Covid base. Thank you.
Thank you Steve So again when it comes to the first part of your question about what you think would be a deceleration in September it's not a function of slowing and demand comps do get more difficult.
So it may submission, but what we can what we can tell you is that the start of the new initiatives in the pipeline we have on the market today with Gucci flora.
Just gardenia with Burberry hero with the relaunch of Kylie cosmetics history.
The figures are absolutely outstanding you know if I can give you one or two figures.
Bye.
We commenced during the speech Gucci Flora for example in Canada. We just received the information that it was the number one best selling fragrance in the market are top three in the U S. K.
<unk> cosmetics again, you know the momentum has been huge and it's continuing.
<unk> Si.
Does that answer it everywhere in the world is having the same kind of outperforming our best I would say estimates. So again I don't see this I wouldn't describe it the way you describe it we are just you know having still what child just to make sure we are.
Ready for any kind of things that could happen, but we are super confident thats the.
The reason why we have laid out this low teens.
<unk> for the fiscal 'twenty two year.
Because these launches are going to be of course are outperforming the market hopefully for the remaining of the year. So in fact, what I can tell you when it comes to how we are building fiscal 'twenty two.
The good news is that we are delivering on our six pillar strategy. So again stabilizing consumer beauty I just said a few words about Colombia, but I could say words about retail having its highest market share for the last 10 months I could say that.
We've stabilized consumer beauty.
Business in Europe for the first time in five years Max factor has gained market share for the first time in four years and this is prior to the big relaunch that stopping honestly right now in stores. So stabilizing consumer beauty was the number one I would say requirements to allow us to take full advantage of the.
A huge potential in the huge growth we are already seeing on the prestige part of the business be it in the U S. In China, but also in Europe. So these two together coupled with a strong I would say e-commerce expertise and capabilities that we've been building during the last year is clearly giving us strong.
Some confidence about the commitment of high low teens growth for the fiscal 'twenty two.
And we will take our next question from Chris Carey with Wells Fargo.
Thanks for the question.
Just.
Following up on.
Just a.
A little bit.
The bridge for fiscal 'twenty, two or excuse me fiscal 'twenty one revenue had included about.
$1.2 billion from a COVID-19 impact on the core business.
And I wonder if.
If you can just talk to.
The concept of recovering some.
Some of those sales.
After accounting for M&A with unique and Kylie and low quality reductions then.
The reduction in low quality channels for prestige.
Sure.
Can you just talk to that that impact of the business from Covid, how much maybe you expect to recover how much you had done per se.
Streamlining the portfolio improve the quality of the portfolio.
Exit businesses further or would you expect to over time get get those sales.
So keep that.
Come out of the base and then if I could just one.
Quick question just on the fiscal 'twenty, what are you implying for anti P spend in.
And your outlets. So thanks very much for those.
Thank you Chris for the question so.
Let's start at the end of the question when it comes to the <unk>.
A N C T as laid out during his presentation. You know there is a sequential acceleration of our working media, which is clearly the key part of a and <unk> 26% of growth during the last quarter and of course, we are going to continue to invest behind the huge and the early successes we are.
Seeing today behind Gucci behind Burberry, Calvin Klein Keggy cosmetics, but also cause on GAAP and Max factor just to name issue. So clearly we're going to continue to step up the investment in fiscal 'twenty, two particularly unlucky needs. All three things I can tell you around fiscal 'twenty two.
Compared to fiscal 'twenty, one compared to fiscal 19, you were talking about sales.
Our recovery et cetera. The first one is when we compare this.
Citizens and sellouts, we are seeing in the market city that we just shared with you and sellouts on a six month basis, which is clearly when we restarted the acceleration of the company.
And you're starting in Jan of this calendar year, you could see that Coty prestige business is growing two times faster than the market. So that's also an indicator about how the health of the prestige business that's good too.
He is compared to peers. This is the first thing the second thing even if we could look at.
Beauty.
We have seen that our consumer beauty for the last six months <unk> has grown by 7%, which is slightly ahead of what the market is doing so in both divisions. We are seeing a strong I would say outperformance versus the sell out of the market, which is for me you know the best way to.
Consumer what the market is doing and therefore, what the competitors are doing.
Another thing I can tell you compared to fiscal 19 is the improvement in our EBITDA again.
EBITDA margin has been growing by 300 basis points versus 2019, and this on a lower base of sales so again.
As you can see on all metrics, specifically sell out the progression of sales EBITDA and working media versus 19, we're clearly recovering much faster than you know and what we thought at the beginning of last year in fact.
Okay.
Yeah.
We will take our next question from Steph Wissink with Jefferies. Your line is open.
Thank you good morning, everyone I have a follow up question on the NCP I guess, maybe this is a two part tactical and philosophical but on the tactical side as you do invest a bit more in E&C P and demand activation.
What are the two or three key metrics youre looking for beyond sales may be more in terms of sales quality that will continue to reinforce that investment and then Loren for you maybe as you think about upside in the year is your plan to reinvest the upside into incremental working media or are you at a point, where you feel like you can start to see some.
Some of that upside balanced through and drop through to the bottom line. Thank you.
Thank you.
I will start.
Okay.
Your question so.
Basically what we see is what you are seeing already in Q4, what we explained that our level of intensity.
121 was 20% Q3 grew up to 23% in Q4 is 26% of the UTP on next week.
So we are not giving any guidance on the CP.
<unk> for fiscal 'twenty two.
Is it he understands that the savings we are delivering.
And next year.
But we are really using the savings on fixed cost and gross margin to refuel the growth and to support the strategic initiatives that Suez has just explained now to go deeper in this level of MCP.
Sure.
In these buckets.
<unk> clients. So you have media working media and user identity, we keep very strict discipline on the order of MCP, where we can see if I take the example of samples testers and all these lines, we keep optimizing and it's part of our productivity plan and at the same time using.
This money to refuel and really to focus on working media. So when we actually rating agency within the NCD is even much much faster on on working media and here, we are very very tight.
Keeping on the on your question, if we see any oxide definitely and this is a weekly.
The description we have together with <unk> leadership team is indeed, when we get when we see additional upside in.
And profit we are mid teens of decisions where to reallocate. This money. This is what we did this year for example on Google and you see now as a result and this.
This is definitely what we will continue in fiscal 'twenty two what we are doing now with a great initiative really reassuring. So it's really a daily and weekly work again managing at the same time fueling the growth increasing to support and also delivering EBITDA. So thats really what we started to do this year and we continue.
We continue next year.
The metrics.
And so we gave a few elements. We are very we are getting very very professional in the way we are spending our working media. So we are testing a copy.
And we have very strict capital purchase intent and we are making.
<unk> decision, we are scores and this is what we are using we need to make a decision where we allocate the money.
And this is a case for consumer beauty prestige for all categories again in D C, which we are doing with the team. So we have very specific metrics.
On purchase intent.
We have met and so on and all these specific kpis to allocate our resources.
And we will take our next question from Andrea Teixeira with Jpmorgan.
Thank you good morning.
How are you.
Got it.
Congrats on the results I wanted to come back to the Kylie cosmetics and fragrance can bounce back in July and I think you've spoken.
Positive about that why did you move your run rate for sales in dollar terms for themselves.
<unk>.
Some of the manual perspective, what is embedded in your guidance.
Yes.
If you kind of as a follow up.
Question, Thanks for asking the Russian or other things like that.
Uh huh.
I guess as I understand that putting clients et cetera.
Both southern company the fragrance the statements I just wanted to understand how we should be thinking.
Also fragrances.
But we're all portfolio and how we should be thinking going forward. Thank you.
<unk>.
Thank you for the question. So again on <unk> again, I'm not going to comment on individual brands, but I can tell you that the relaunch that we have done during this summer with the cosmetics clients for the first time.
So on the same brand site of the skincare line has really been.
I would say.
Outpacing all the key metrics that we usually see in what we call celebrity led brands.
In fact.
The number of sales that we've seen for example, during the first 16 minutes wasn't huge three.
300 orders per minute during the first 15 minutes.
He has done the likes shopping session that she has been doing during the relaunch we have kpis that were three times higher in terms of basket and conversion versus what we monitor on the rest of the market and last but not least in fact this was.
Not a surprise because during the last year, even if it was a quiet year for the makeup I would say industry that Kt has been gaining something like 60 million followers on her different social media and you could also see that in terms of what we call interactions likes comments et cetera, it was more than $90 million.
It is interactions comments of light that happened on the different channels of scaling which was a great preparation for the relaunch that we've done during the summer and today. The feedbacks, we are seeing including qualitative feedbacks because the line is now 100% vegan cruelty free of course, and we've been removed.
Moving something like 1000 contested ingredients from the formulations or the feedbacks are absolutely all outstanding so when it comes to our fiscal 'twenty two outlook.
And that's broad based growth across the different brands different markets and of course the different channels.
And we will take our next question from Mark asset Chen with Stifel.
Thanks, and good morning or afternoon, everyone.
I wanted to ask about sales growth progression. So obviously strong <unk> sales, but really comparison drew.
<unk>.
And you look at the underlying or two year stack or CAGR.
<unk> growth I think with a little bit less.
Strong sequentially than maybe some of your peers like Conversely, your guidance for.
The September quarter, and then for the year would imply a pretty strong acceleration in that underlying growth. So I guess the question is.
What is what is really driving that at this point in terms of.
The strong acceleration is it just you're done lapping some of the exits of these.
Lower profile channels brands.
Is it the A&P is really starting to work and maybe if you could give a bit more calm.
Comments, there that would be helpful. Thank you.
Thank you Mark for the question. So again, if I understand well your question, what's driving you know.
Our outlook for fiscal 'twenty two clearly the first thing is that we are seeing again strong progress on our pillar. We have multiple strong initiatives again, you know being the number one prestige fragrance maker.
One on the same year you have the relaunch of what's going to be the biggest launch at Coty. This year, which is Flo how gorgeous galvin.
By Gucci Burberry hero, the Si Caddy cosmetics, we launched Sally Hansen. We launched also we are seeing that fragrance demand continues to improve very very strongly.
Our fleet in the U S and China and now in Europe again. This gives us confidence that there is something happening behind the brands prior to quarter. One but also these launches add a new layer of confidence that they are going to probably be best selling luxury as you know.
Again, I come back to flora flora by Gucci, you know the figures we've got some Canada.
One day ago showed that this is two or three times bigger than what we had one year ago with perfect by Marc Jacobs, which you can of course remember was the best selling fragrance last year in the U S and cookies.
Ex launched in the last 10 years. So we're building our momentum our momentum that we started during the second half of fiscal 'twenty one.
And we'll take our next question from Olivia Tong with Raymond James.
Great. Thank you.
We appreciate your comment.
Is bigger and the pressure is not only thing on the lookout for value creation. So first can you just talk about the Genesis of their decision to IPO part of Brazil, and if there's any P&L impact of that and whether that income range South outlook and then just just thinking about the rest of them are are there other brands or geographies in your view that may not fit in international with engineered.
Well I mean, you obviously.
Discussed quite a number of brands on the call. So should we assume that if you have it.
You didn't mention the brand in your prepared remarks that maybe what was that.
More likely to be potential candidates for strategic alternatives and then alright. Thank you.
Okay. So let me comment on.
In Europe for kitchen.
On the actual IPO. So first of all so easily that we keep them makes clear that we keep the control and we keep the majority there is new.
The consolidation of these of these operation so it definitely.
The decision with the board.
We'll have some.
Supporting the growth of the Brazil business and cookies personal care brands, so and so it's really an important strategic decisions. We are making then I cannot I will not comment more on.
P&L.
Womens considering onions, a local regulation.
<unk> if you want more information about these operation you can refer to the CDM website in them in Brazil.
And we will take our next question from William Reuter with Bank of America.
Hi.
Yes.
I just have one.
In terms of I'm wondering where travel retail was as a percentage of historical levels.
The prestige segment, I guess I'm wondering what type of a tailwind we would still have.
In this segment as travel returns to pre pandemic levels.
So again on travel retail is clearly the bright spot has been what we call domestic travelers.
Retail sorry named the Hainan.
And even with the most recent restrictions we haven't seen any slowdown in this in this kind of distribution when it comes to our brands more globally.
Globally in terms of travel retail now they are in the low single digits used to be high single digits of course, there is more growth to come as you said the restrictions around travel eastern one more but the great news for US is that we've used this key locations such as Hainan in China to test.
We launched some key brands specifically in skincare as you can imagine skincare is a key segment for travel retail and Moreover, in APAC and China travel retail and again, we got Great News you know we've seen that the line is a top three skincare line in Hainan now, it's a tough <unk> skincare line.
In front us.
Big brands that had been there for decades et cetera. This gives us great confidence that we're going to add a new growth engines to our travel retail growth, namely skincare, and specifically high and skincare in the region, where we were relying mainly on fragrances.
Thank you.
And we will take our next question from Carla Cassa <unk> with J P. Morgan.
Hi, Ann So you mentioned that Brazil, potentially listing I'm curious and you mentioned that that could partially help you delever.
Have you or when at what point do you revisit wella.
And whether you sell additional.
It's taken that to either help delever use for fragrance in the core business and are there any restrictions on that.
And I have one follow up just in terms of the leverage.
Thanks, Thanks for your questions first of all I want to remind you that indeed.
We see really some value increase in the loss pick.
As you remember so from one two we are no one <unk> it was.
T value increase in Q3, and then on top in Q4. So this is this 40%.
Our balance sheet, we see value increasing and this will this will continue.
Second this is why we explain that indeed in our leverage so we are indeed, the financial net debt, but this is really an asset where we show our economic net debt and our economic net debt is with us taking about 4 billion.
Billion.
To answer your point there is no specific agenda, but definitely we are contemplating that is there is opportunity which will be interesting in terms of value.
This is something that we will be ready to explore but at this stage. There is no specific agenda lenses.
And then you gauge your net debt to EBITDA in your guidance, where does your current covenant net debt leverage stand.
Yes, so today, our covenant net debt is who we are.
Very good situations, so we keep things under control.
Increasing.
Okay, our roadmap on EBITDA and our roadmap on.
On the on our leverage on net debt puts really our covenant calculation under very good.
Inflation.
We have no further questions on the line at this time I will turn the call back over to Sue for any additional.
Our closing remarks.
Thank you everyone again, we are all Super proud of our grid performance delivered by an amazing team and I take this opportunity to say thank you to everyone. That's good. Thank you very much.
Yeah.
This does conclude today's program. Thank you for your participation.
Not only disconnect at anytime and have a wonderful day.
[music].
Yeah.