Good morning, ladies and gentlemen. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to Coty's First Quarter Fiscal 2015 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. As a reminder, this conference call is being recorded today, Thursday, November, the 6th. Thank you. I will now turn the call over to Kevin Monaco, Coty's Senior Vice President, Treasurer and Investor Relations. Mr. Monaco, please go ahead. Thank you.

Good morning and thank you for joining us. On today's call are Bart Becht, Chairman and Interim CEO, and Patrice de Talhouët, Chief Financial Officer. Before we begin, I would like to remind you that many of our comments may contain forward-looking statements. Please refer to our press release and our reports filed with the SEC, where you will find factors that could cause actual results to differ materially from these forward-looking statements. Except where noted, the discussion of our financial results and our expectations do not reflect certain non-recurring and other charges. You can find the bridge from reported to adjusted results in the reconciliation tables in the earnings release. I will now turn the call over to Bart.

Thank you, Kevin, and good morning, everybody, to Coty's First quarter results conference call. This morning, we will take you through a summary of today's announcements and then Patrice and I will be pleased to take your questions. Q1 was a quarter of good strategic progress, but mixed financial results. Our strategy of focusing on our power brands showed good progress as power brands net revenue grew mid-single digits on a like-for-like basis behind exciting innovations. We are particularly happy with the growth contribution from Sally Hansen Miracle Gel, which not only allowed the company to regain market share in the U.S. new market that managed to restart that category growth, where Coty is clear market leader. Other noteworthy first quarter growth contributors were Rimmel, held by its wonderful mascara product and the new Marc J.D. Daisy Dream fragrance. With regard to our financial results, while power brands representing 70% of sales grew strongly, the revenues of the remaining 30% of our brand portfolio materially declined resulting in a 1% like-for-like growth rate for the total company. Consistent with Coty strategy, we increased the level of advertising and consumer promotion spend compared to the prior year reaching 22% of net revenues with the increase very much focused on power brands and supporting innovations. The productivity of our increased spend is to us clearly a concern and we will be looking at how to improve productivity in this area going forward. As a result of a materially higher support levels behind an overall revenue growth of 1%, operating income declined, which in turn contributed to an adjusted net income drop of 5% to $103 million. In contrast, adjusted EPS remained flat compared to the prior year. Thanks to Coty share repurchase program, which we commenced in fiscal 2014. In conclusion, while…

Thank you. (Operator Instructions) Your first question comes from the line of John Faucher from JPMorgan. Please proceed.

Yes. Thank you. Good morning. I wanted to talk a little bit about your comments about sort f the non-power brands. Can you go a little bit into that in terms of saying, is this a question of whether or not you guys are providing the right levels of support. Obviously, you are spending less on those brands versus your core brands or is it something where you just think the retailers moving away to a lowered number of SKUs that they are promoting etcetera, so some further color on that would be helpful. Thank you.

Yes. I don't think it is an issue of support levels, but like you said the support levels clearly are not at the same level as the power brands, there is in detail particularly on the fragrance side, there is a long list of celebrity fragrances, some of which are gradually fading away, so there are a number of brands which are late in their lifecycle and are gradually losing their position. As we are focusing harder and harder on the power brands, this issue should gradually go away over time, but it will be a very gradual process. It is not something, which is going to happen within a couple of quarters.

Okay. If I could follow up on that, you talked about the celebrity fragrance issue. As you look at the problems in fragrance, do you see that going from celebrities to designers or do you think it is purely a celebrity issue at this point, because the markets are oversaturated?

I would say, it is not just in celebrity, it's much more of a mass fragrance issue, so it is both, celebrity fragrances and other brands which are in the mass fragrance area, where there is some market weakness. You are absolutely right that on the foresee side, there are better market dynamics and this is also where we have a harder focus from our power brand point of view.

Okay. Thank you very much.

Thank you. Your next question comes from the line of Dara Mohsenian from Morgan Stanley. Please proceed.

Hey, good morning.

Bart, I was hoping if you could discuss your cash flow priorities here, particularly in terms of the share repurchases versus acquisitions. Do you think you are ready to do more acquisitions post Bourjois or given the restructuring in Bourjois, might you take a bit of a pause here to make sure you execute well in both of those areas. Then on the repurchase front, obviously there will be higher shares with the issuance of Bourjois. Do you anticipate repurchasing shares to offset that impact this upcoming year and would you go beyond that also? Thanks.

Yes. I will let Patrice answer the second point. On the first point, in terms of acquisitions, clearly, we do want to become a much stronger leader in the global beauty industry over time through a combination of organic growth and acquisitive growth. Will we do further acquisitions? Yes. We will be continuing to look at that. Are we in the best position today to do acquisitions? No, because clearly we have more work to do from a business point of view and we also have to absorb the Bourjois transaction, but if you look at the longer term, yes, we will continue to be on the acquisition front. Patrice de Talhouët: Good morning, Dara. On your second question, clearly the share repurchase program, we have $300 million authorization for the time being. This will roughly offset the issuance of shares for the Bourjois acquisition. Now, when it comes to the next step, well, first we need to execute the first $300 million. Then our next step is, you know, this is something that we will reevaluate going forward what is the right way to return cash to the shareholders, so it is solving the question of market dynamics and discussion with our shareholders as well as with the board.

Okay. Thanks.

Thank you. Your next question is from the line of Bill Schmitz from Deutsche Bank. Please proceed.

Hi. Bart, a question for you, what do you think the big differences are between running a beauty company and running the household products company? What is the same and what is different. Maybe how you would change your [management] versus your previous gig. Then my follow-up question is just on the sustainability of growth in the nail care category, because obviously it has been sort of fits in starts recently, but we have had this great period last couple of months, where the category has been very strong, so I am just wondering how long you think that that good tailwind last.

Beauty versus health is an interesting question. Clearly, the categories are different. Having said that, I have worked in many different categories, even within Reckitt Benckiser, because we had everything from food to household to personal care, so each one of those have their own consumer dynamics and competitive dynamics and you really need to dig into that in order to be successful at them. Clearly, there is one thing, which is substantially different in the beauty industry versus the household business industry, which is called licenses. In particular, in prestige fragrances, we are working with license owners and that relationship is quite important in order to be successful, so I would say that is probably other than understanding the dynamics of the individual categories, that is a substantial differences versus other consumer goods companies. I would say, the other thing in beauty, I think it is, innovations can have quite a big impact. In that respect, it is so much similar to household, but less similar to let's say a healthcare or food category. In beauty, innovations can like in households can have a quite dramatic impact on the product line. In terms of the nail category, I can't really comment in terms of sustainability of growth. We have seen the nail category grow, very, very nicely over the last five to 10 years, selling Sally Hansen, as well as Rimmel, I have been very nicely positioned and that OPI, they have all been very nicely positioned in those categories. We are clearly the global leader in nail category and we will do everything possible to make sure not only that we have good share positions, but we target growth in this category or target growth for the category over time.

Great. Thank you very much.

Thank you. Your next question is from the line of Olivia Tong from Bank of America. Please proceed.

Thank you. Good morning. You had alluded to the productivity of advertising spend in your prepared remarks. I am curious, do you believe that ad spend as a percentage of revenue, that is the right number and/or is it more a function of getting productivity and is it a function of getting productivity out of that number or you think that number is too high?

I don't think that the media investment is too high. I do think, I would agree with you that productivity of media investment could improve. Clearly, in addition to media investment, we have substantial other A&P spending levels sitting in the number. Personally, I believe we can do much better by switching some of those lines into real media investment, so what I am looking for is to take what we would call non-working dollars, which are really dollars which sit in the lines where that the consumer never sees. I will give you an example, it is the production of a print ad, so it is the development of packaging and there are many other lines like that sits in the A&P budget, and I believe we can optimize those and invest in efforts which the consumer actually does see. Within the working part, I think, we can get a return on investment. This is not just something, which could improve our top-line, but clearly also improve the bottom-line. Like we said already in the press release, we are targeting to return to profit growth and this effort is one of the efforts for us to get us there.

Got it. Then just following up on that, your comment about gradually returning to profitable growth, how gradual, because on one hand your comps are not that difficult in Q2, in fact channel trends are starting to look a little bit better in a handful of categories, but obviously emerging markets growth has slowed a bit and the dollars stronger and there's obviously concerns around the productivity of your spend. Thanks, Bart.

Yes. In terms of the market growth that we are facing, clearly, we have a different geographic and category mixed in some other companies in the beauty industry. If I look at the market growth that Coty is exposed to, we are talking 1-plus percent at the moment, so we are not looking at very strong market dynamics. Granted that color category has seen a rebound in the U.S., but we have other segments, for instance, like mass Fragrances where the dynamics of a very good as we already discussed. I think the way you got to take a look at this is that we are looking at a return to profitable over time. I think a big contributor that could be the return on investments that we just discussed as well as the cost efficiency programs we are putting in place. Even in an environment, where we might be facing headwinds from a top-line point of view, I still believe that there is the possibility to return Coty to profitable growth over time.

Thank you. Your next question is from the line of Chris Ferrara from Wells Fargo. Please proceed.

Thanks. Bart, I guess, since you have taken over as Chairman, you have now had a couple of CEO changes, CFO change, changes of head of supply chain, change in head of business development. The question is can you talk about what's going on internally culturally, maybe a higher level. Is the message changing internally? What's going on with all the change and how is I guess the employee base responding to the stuff?

Yes. Clearly, we have a number of changes. We believe that the leadership changes are there to strengthen the team and to make the team and the whole business more professional. We should not forgot, we have gone from being a private company to a public company and that requires a more disciplined approach. We are also in the midst of changing the organizational structure. We were in a business which was managed by the vision and now we have much more of a classical matrix structure like most consumer goods companies one of global categories, countries and functions and that also requires a different leadership style and different competencies. Net-net, so we believe that leadership changes are right ones and are there to strengthen the team. If you ask me how our employees are feeling at the moment. Clearly, there is a level of uncertainty, because the one Coty project is not fully implemented yet and we clearly need to work through this period of uncertainty, so we can get back to business and that is exactly what. We are focused on.

Great. Just as a follow-up to that I guess. Along with those changes in leadership, are there also greater incentives to deliver targets and hitting certain bogeys from a growth perspective?

Well, we have a very established program in place, from a remuneration point of view, which consistent of base salary annual bonus and long-term incentives. On the annual bonus side, we are very much incentivizing people to drive top-line growth, bottom-line growth and cash efficiency in the business, we are very much focused on net working capital as Patrice highlighted before, so there is a clear incentive scheme in place to deliver targets. To balance short and long-term, in addition to the annual bonus programs, we have long-term incentives to make sure that people don't just optimize the end year results, but also the long-term results. Clearly from a JAB point of view, we are very much interested in a steady improvement year-after-year to make this much more successful global beauty company and we do believe that our incentive targets are aligned to that. Having said that, we review this literally every 12 months in depth to make sure that that is the case and we will have another review on this in the next couple of months.

Thank you. Your next question is from the line of Wendy Nicholson from Citi. Please proceed.

Hi. Two questions, the first is with regard to the 30% of the business that is the non-power brand. Is there value to keeping that in the portfolio or do you think it might make sense to adopt a more aggressive strategy, but just shutting down some of those brands, because it seems to be costing you a lot in terms of your reported results, so views on that would be helpful. Then second of all, could you talk a little bit about the Avon partnership. I know you called it out in the press release as contributing to your fragrance business, but order of magnitude how big was that in the first quarter? What is your expectation there? Can you just remind us of how that works or are you shipping a whole bunch of stuff and then they work through the inventory or is there a sort of just in time inventory replenishment. I am just trying to work out how big a contributor that is going to be to your business maybe in the December quarter. Thanks.

First in terms of the portfolio strategy, clearly which is squarely focused on our power brand, so I would say I was very pleasantly surprised with the growth rate on the power brands in the quarter, which was quite strong compared to what's happening out there in particular when you look at some of the growth rate of many other CPG companies. Clearly, I was not very happy with the growth levels on the non-power brands. Having said that, I have zero interest clearly in terms of allocating substantial resources to non-power or to bottom end of the portfolio, so that clearly means we are raising the question should we discontinue and divest it. Divesting it is going to be challenging, because some of those are licensed brands and it is not that straightforward. Discontinuing is, in a lot of cases, not super interesting, because while they might be declining, they still are contributing substantial levels of profitability, so just to take them out is not super interesting, because we don't do a lot of work on them, but they still make money. As we harden our focus on our power brands over time, the portfolio should shift. As you will know, this will be a gradual process and so we are going to have to live with 30% decline, the 30% of the business continuing to decline for some time, which is a drag on growth clearly. In terms of the Avon partnership, it is progressing very well. It is quite encouraging. We are not going to discuss specific financials on the Avon partnership. Having said that, it is providing huge growth in Brazil, but from a very low raise and it is not going to make a massive dent in the total Americas' number. In terms of distribution, the products are being shipped to Avon, then they essentially ship them to their sales representatives.

In terms of extending potentially beyond Latin America, is that something you would consider doing with Avon?

Well, I think the first thing is to make as you will know, normally when you look at Latin America, Brazil represents 50% of Latin America. If we can make Brazil highly successful, I would be very, very happy and that is the first protocol.

Thank you. Your next question is from the line of Steph Wissink from Piper Jaffray. Please proceed.

Thank you. Good morning, everyone. Just a couple of follow ups on the advertising and promotional expense, could you just talk a little bit about how much of that in the quarter was related to recapturing some placement that you may have lost versus some of the conversion drivers or some of the supported discounts that you offer to the retailers? Then just secondly maybe more of a lever higher level question around that spend, you imply that productivity was below your goals, but your power brands did grow mid-single digits which was quite a bit better than the industry growth, so maybe give us some sense of the productivity hurdle rates that you would like to see to satisfy your expectations?

I can tell you what I would like to see and then the question how we get there clearly. I would like to see, when I invest more money that I have a growth rate, which generates more profit this is very straightforward, so we are going to have to manage that to get there. The question really is, how we get there. like I said, the way we should get there is take a lot of non-working dollars in A&CP either out and put them on the bottom-line or reinvest them in working dollars, which produce results, and that is what we are working on internally in terms to improve the productivity. The fact that the tail of the business is declining and therefore is depressing the overall growth of the company cannot be enough of an excuse to sit - it's like okay, behind increased investment, we are going to always have reduced profit. This kind of business is just not good enough, so we are going to have to work on that. In terms of recapturing placement, I assume you are assuming our lost distribution of brands.

Correct. Yes.

Okay, so I don't really have a good answer on that. What I can tell you that clearly the biggest hit that we had last year was from Sally Hansen., and there we didn't really lose distribution. The whole category came down and there was a huge amount of trade de-stock associated with that, so I don't think it was a really distribution question. It was much more all the category momentum and market shares issued than anything else.

Just maybe a clarification, so are you finding that your spend this quarter helped you regain maybe some of that trade distribution, not additional doors which has expanded within the doors that you already had?

Yes. The Sally Hansen success on Miracle Gel is really is an innovation success, so clearly we got distribution on the Miracle Gel. Some of that was on top of the SKU distribution that we had that very much drove the market share and drove the category, which was very exciting. While one can be disappointed with the overall 1%, I would say we should be very happy with the power brand growth and within that there are some very good success stories, Sally Hansen is one of them. Rimmel is another clear success story. Daisy Dream is a clear success story, so there are some brands, which are doing extremely well within the Coty portfolio.

Thank you. Your next question is from the line of Nik Modi from RBC Capital Markets. Please proceed.

Yes. Thanks. Good morning, everyone. Bart, just a question on Chris Ferrara's question, when we think about you as interim CEO, just curious if you have an update for us of how we should be thinking about a permanent replacement or do you plan on being the permanent replacement? Then the second kind of broader question is a lot of consumer companies this quarter have talked about the U.S. improving, so I just wanted to get your state of union on the U.S. consumer.

Yes. There is much, much to comment in terms replacement CEO. Clearly, we are working on replacement. I am very comfortable with the idea that we will have a top-quality CEO replace sometime next year. Who that will be, and on what exact timing is really is premature, and I don't really want to speculate on that. In terms of the U.S., the U.S. consumer improving, yes, in some category, we see some improvement, but the growth overall in the U.S. across our categories is still very anemic and is quite frankly not much better than Europe, which has always been considered as a very difficult anemic market. The U.S. is across the various segment is not much better.

Okay. Thank you.

Thank you. Your next question is from Connie Maneaty from BMO Capital. Please proceed. Thank you.

I was hoping you could talk a little about some of the joint ventures you have signed in the last year for emerging markets, and in particular how is the new arrangement going in China?

It is signed, so early days. Patrice de Talhouët: Yes. It is very early days. We just signed this agreement with (Inaudible) on the mass side of the business, so I think it is very early stage. As I mentioned in my script, what we can share is that the discontinuation of the TJoy brand is producing the results that were expected in terms of bottom-line, so that is a positive sign. In terms of traction on the business, you know, is a just - after the signature, so it is far too early to assess the performance, so we will come back on that in the coming quarters.

Then the growth of the emerging markets businesses you have is more organic rather than based on these newer relationships, is that the right way to look at it?

Yes. That is correct.

Okay.

Emerging market growth was quite strong if I remember it was around. Patrice de Talhouët: The growth in emerging market was 10%, which is quite good and that represents now 28% of our overall top-line, so we are happy with the progress we are making. This is above what we had in Q1 last year at 26%. For the time being, we are happy with that. The only thing I would mention is that in one of our market, we had a chance of the business model, which has impact the pro forma comparison, but in a nutshell, the 10% is true organic growth.

Okay. Is Sally Hansen Miracle Gel patented, because Revlon has got a gel-like formulation, but L'Oreal so far does not, as far as I can tell, so what kind of protection do you think you have got on Miracle Gel, because I am not expecting L'Oreal to lag in this development.

Even if there were to be protection on it, in consumer goods there is nothing really protected just - clear, so if you are asking me - You know, we have a head start. This is the way you have got to look at that, our Miracle Gel and we have done a phenomenal job in terms of the market the product, plus we have the market-leading brand in this category. You have a market-leading brand, you know, with the market-leading innovation, which is well communicated but it is going to be copied. We should count on that. That is going to happen. There is not enough protection around that is going to stop competition from coming up with similar products.

Thank you. Your next question is from the line of Lauren Lieberman from Barclays. Please proceed.

Thanks. Good morning. I was hoping if you could just talk a little bit more about the promotional environment, because obviously the commentary in the press release and the impact on gross margins was pretty clear. It sounds like fragrance is worse than color. If you could talk a little bit about regions and what you see as the path to kind of slowing that down, like we have been in a heightened promotional environment in mass fragrance now for, I don't know, 12 months to 24 months, and it is awfully tough to kind of get out of that cycle.

Yes. There continues to be, both in Europe and also to some extent in the U.S., still increase in discounts and allowances in the categories. This is not limited to fragrances. This is also in other categories. I mentioned earlier that we are looking at return on investment of our A&P budget, but quite frankly we are also will be taking a look at if there is anything that can be done in this area. Clearly, we don't want to become uncompetitive. At the same time, as like we said, we have now seen sustained period of increased discounts. The question is if that should remain, yes or no. We are in the process of looking at that, but the promotional environment we saw again in Q1 a further - deterioration, because of increased discounts.

Okay. It's the mass color business as well?

There is some in the mass power of our business for a very simple reason as the category went down last year, in particularly in the U.S. discounts increased and they have not come out, so we still have a year-on-year impact.

Thank you. Your next question is from the line of Javier Escalante from Consumer Edge Research. Please proceed.

Hi. Good morning, everyone. I have a follow-up on Brazil. My understanding is, is that prior to this joint venture with Avon, you had a distribution agreement with Jequiti, which is another direct seller, so if you can tell us based on the experience that you have with Jequiti, how that inform the brand selection, the price points, the kind of categories that you are doing with Avon. That would be my first question. The second would be more about OPI. Earlier this year, we heard of this expansion in Sally Beauty, 2,700 doors I believe. Since then, we have not heard anything about it. How that is doing? To what extent there is any channel conflict with the existing distributors, and if tell us how OPI is doing in the U.S. on a like-for-like basis. Thank you.

Yes. I have been three weeks, I am not going to claim I am an expert on every single SKU, that was launched in Avon and Jequiti. What I can tell you is that clearly Avon is a much bigger operation than Jequiti in Brazil, from a coverage point of view, there is no comparison between the two. Clearly you have would have number one, Avon number two and Jequiti being number three in terms of sales representatives coverage. We are launching on Avon, lot more mass brands with price points. We are not launching prestige brands you know through Avon. These are very much mass brands that we are launching. Some of them are power brands, some of them are celebrity fragrances. It is substantially bigger the results from a revenue point of view on Avon clearly than on Jequiti which is simply a function the type of brands we have launched as well as the fact that Avon has much better coverage. OPI was launched in Sally Beauty. It is not having any negative impact on the salon businesses that we can tell. OPI continues to do fine. In the U.S., we have seen on OPI. Actually, we saw some diversion of OPI into the mass trade, in particular which we are trying to reduce so that has had a negative impact on sales. Secondly, we had Nicole by OPI, which was launched a number of years ago, which is in our mind a mistake, which also is gradually coming down. If you take the effect of the Nicole by OPI and the diversion in the lower end of the trade, OPI is doing quite well, but short-term we are going to see a little bit of a negative impact on OPI, but overall the brand's health is still very, very good.

Thank you. Your next question is from the line of Mark Astrachan from Stifel. Please proceed.

Thanks. Good morning, everybody. I wanted to ask about the CHANEL partnership. Does that - future stake that they are going to have essentially lead to the opportunity for additional partnerships with other beauty brands? Then just more broadly thinking about the structure of the business, Bart, I am curious from your standpoint, how JAB thinks about the Coty business? More broadly what benefit does Coty get from being a public company, considering that the JAB has a lot of access to capital markets?

On the CHANEL partnership, just to be clear, so far what we have announced is an offer to acquire the Bourjois business, so this deal is not closed yet, so to have a discussion about anything, which might have been an opportunity after that. The first focus is to actually close the Bourjois deal. Clearly, we are very happy about this acquisition and we are also very happy that you know CHANEL is taking Coty Shares, because we all see this very much as a partnership. Will this result in anything else beyond this? There has been no discussion on that. We are very much focused on closing the transaction. In terms of JAB thoughts on the Coty business, for us it is very simple. What we want Coty to be, we want Coty to be a strong global leader in the beauty industry and get there through a combination of organic and acquisitive growth. What does Coty get? JAB is a public company. Being a public company provides two key benefits from a JAB point of view. First, it puts more discipline in the business being subject to public scrutiny, which we think is very, very good. Second, it gives us access to capital markets. Even in the small transaction of Bourjois view shares as Coty's part of the transaction, so there is clearly a benefit of shares as currency and that is much better handle at the Coty level than at the JAB level. It is not as JAB who can raise the money, but at the Coty level, level is much, much better to have it there than at JAB level. At the same time, clearly our view as JAB and the Coty business, we are interested in a well performing businesses year-after-year-after-year, not quarter-after-quarter. Our focus will not be quarters. Our focus should be on years. Did I answer your question.

You did. That is definitely helpful. Thank you.

Thank you. Your next question is from the line of Lauren Lieberman from Barclays. Please proceed.

…those were two power brands that my recollection has had pretty meaningful launches this quarter and neither were called out, so just any feedback on what maybe did not go so well with those launches that would be great. Thanks.

Which brand? Sorry, we missed that.

Yes. With, Chloe. I think Chloe Love Story. Was that the one that launched this quarter? Then there was an Adidas launch as well.

Yes. Chloe Love Story is just being launched as we speak, so it is just too early to comment on that.

Okay.

Adidas launch, what we referred to is the same. Adidas launched, so Chloe Love Story was launched only in France so far and was launched at end of August, early September, so I think it's too early to assess, but the current feedback we have from the Love Story is very positive, so we are very happy with the launch. It is the same story for Adidas. It is far too early. The first sight that we get from the Champions League are pre-positive, so that saw a very nice start once again. It is only a couple of weeks, so I think we need to wait before we draw any conclusion on all of these, but so far so good.

Thanks so much.

Thank you. I would now like to turn the call over to Kevin Monaco for closing remarks. Please proceed. Thank you.

Thank you, all, for joining us here on the call today. If you have any other follow-up questions, please don't hesitate to call us here in the Investor Relations department. Thank you very much.

Thank you. Patrice de Talhouët: Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a very good day.