Good morning, everyone. My name is Indiscernible. Please hold on, your program is about to start. I would like to welcome you all to Coty's First Quarter Fiscal 2022 Results Conference Call. This call is being recorded today, November 8, 2021. Joining me on the call are Sue Nabi, Chief Executive Officer, and Laurent Mercier, Chief Financial Officer. I want to remind you that some of the comments today may include forward-looking statements. Please refer to Coty's earnings release and the reports filed with the SEC for factors that could cause actual results to differ significantly from these statements. Additionally, unless noted otherwise, the discussion of Coty's Financial Results and expectations reflects specific adjustments outlined in the non-GAAP financial measures section of the Company's release. I will now hand the call over to Ms. Nabi.

Ladies and gentlemen, as we complete our first quarter, I am very pleased with the success we are achieving, building on the solid foundation established last year. The results this quarter are a clear demonstration of the virtuous cycle we aim to create, which combines strong revenue growth with margin improvements, cost initiatives, synergy enhancements, profit expansion, and strategic investments that drive future growth momentum. First, I want to highlight that our Q1 revenue growth exceeded our expectations and guidance, driven by both the Prestige and Consumer Beauty segments. Demand for Prestige products remains robust, especially for fragrances in the U.S. and China, alongside a remarkable recovery in travel retail, bolstered by our outstanding fragrance launches. Additionally, Consumer Beauty has shown recovery and improvement, particularly strong trends in CoverGirl and Max Factor, leading to a 21% like-for-like revenue growth that exceeded our high-teens growth guidance. Second, we experienced significant profit growth during the quarter, driven by nearly 500 basis points of gross margin expansion alongside further cost reductions. This notable gross margin increase reflects the strength of our business model as we focus on creative innovation and portfolio optimization. Furthermore, we have increased our marketing investments significantly, with our working media doubling compared to last year. Despite these increased expenses, our adjusted EBITDA rose by nearly 70%, resulting in a 550 basis points margin expansion, demonstrating that our virtuous cycle is in full motion. Third, we continue to make progress on our strategic growth pillars. While I will share some milestones today, I am particularly excited about our upcoming Investor Day, where I will be joined by additional Coty leadership team members to provide a detailed update on our strategic progress and medium-term outlook. Fourth, we expect this momentum to carry on into the year, as we are on track for a strong fiscal year 2022. Our growing confidence in this momentum has led us to raise our sales guidance for the year, especially supported by our initiatives in fragrance and cosmetics. Now, let me briefly discuss our revenue trends for the quarter before Laurent reviews our financials. Our Q1 revenues increased by 21% on a like-for-like basis, with the prestige segment growing 34%. We continue to phase out sales from lower-quality channels, which had a minor impact in the quarter. Prestige fragrance trends remain strong, particularly in the U.S., China, and travel retail, with nearly all brands experiencing significant growth. Our growth was further enhanced by a robust launch calendar that included Gucci, Burberry, Calvin Klein, and the relaunch of Kylie Cosmetics. Meanwhile, our prestige cosmetic sales more than doubled. In Consumer Beauty, we saw a 3% like-for-like increase as the global mass beauty category rebounded, and our market share stabilized, led by strong growth from CoverGirl and Max Factor due to new brand positioning. By region, we observed growth across all areas, with particularly strong performances from the U.S. and China, alongside a remarkable resurgence in travel retail. The Americas region grew by 23% on a like-for-like basis, driven by double-digit growth in the U.S. and contributions from Latin America, Canada, and Brazil. EMEA saw a 17% increase, largely from the UK, Russia, and local travel retail. The Asia-Pacific region grew by 29%, with local travel retail tripling year-on-year, and China achieved nearly 50% growth, confirming that our efforts to strengthen this market are successful. We are particularly pleased with these results in China and beyond, especially given some additional COVID-related restrictions during the quarter. Now, I will hand the call over to Laurent for the financial results.

Thank you, Sue. I am very pleased with our first quarter results, which continued our strong profit growth. Importantly, our growth cycle is now underway. Our profit was driven by significant gross margin improvements, enabling us to reinvest in our strategic growth initiatives and further drive top-line growth momentum. Starting with our gross margin performance, our Q1 adjusted gross margin of 63.4% increased by nearly 500 basis points from last year and 250 basis points from last quarter. This marks our third consecutive quarter of gross margin above 60%. Our gross margin performance was supported by a favorable mix, including the external growth of Prestige, product mix within the categories, lower costs, fixed cost absorption from increased sales, pricing and revenue management, supply chain productivity, and our material cost reduction program. We remain focused on driving further gross margin expansion both this year and in coming years. We have a clear, multi-faceted, multi-year plan for gross margin improvement, and we expect to continue benefitting from positive shifts in channel, category, and regional mixes. The expansion of gross margins is crucial to the sales and profit growth cycle we have established. While inflationary pressures, supply chain issues, and component shortages are prevalent across many industries, I am pleased to report that Coty is effectively navigating this uncertain landscape. This success is a result of our agile supply chain and procurement teams, as well as our business model, which emphasizes gross margin-enhancing channels, categories, and innovation. Although we have experienced isolated constraints with certain components like fragrance pumps, silicone, and paper, our teams have proactively increased safety stocks for peak consumption periods and implemented dual sourcing strategies, which are proving effective. Most of our freight is under contract, shielding us from recent market price spikes. Additionally, our teams have proactively increased transportation lead times and secured freight capacity in advance to avoid potential constraints. Given the global supply chain challenges and port congestion, it’s significant that most of our inventory is produced in the regions where it is sold, providing further protection for our business. The net result of these proactive measures is a strong service level in Q1, achieving mid-90s percentages and surpassing the prior year. This allowed us to exceed our sales guidance for the quarter and achieve close to 500 basis points of year-on-year gross margin expansion. Our outlook for Q2 service levels remains similar despite greater than expected demand, allowing us to raise our full-year sales guidance. While we anticipate higher inflation impacts on materials and freight in H2 '22, those impacts remain manageable, and we continue to expect our gross margin to expand in fiscal year '22. This growth is driven by revenue management initiatives in both Prestige and Consumer Beauty, the increasing proportion of Prestige in our mix, better absorption from rising production volumes, and broader productivity efforts. During Q1, we maintained heightened marketing investments, with A&CP at about 26% of sales, consistent with Q4 and significantly above 20% from a year ago. This increase was mainly driven by a doubling of working media year-on-year. We remain focused on investing in high ROI opportunities and are agile in our resource allocation. Sue will provide more details on our progress and success in driving growth this quarter. I want to highlight a few areas where we allocated our marketing dollars during the quarter. We had a busy launch calendar, especially in Prestige, with successful launches like Gucci Floral Gardenia, Burberry Hero, Calvin Klein Defy, and the revamp of Kylie Cosmetics. These launches contributed significantly to our strong performance. We continue to expand into new categories and markets, including Prestige makeup and Asia overall. Furthermore, we are investing in the repositioning of CoverGirl, Rimmel, and Max Factor, which is expected to support stabilization in our Consumer Beauty segment. At Coty, we carefully balance marketing investments while driving profit growth through ongoing cost reductions. In Q1, our fixed costs decreased by 8% year-over-year. We achieved around $60 million in cost savings during this quarter, front-loading our fiscal '22 savings target to allow for flexibility in the P&L to maintain profits while reinvesting in our brands during this crucial holiday season. The key contributors to these savings were lower fixed costs and trade investments, and we remain on track to achieve over $19 million in savings for fiscal '22. This excludes our planned reinvestment in A&CP. To date, we have nearly completed $400 million in savings, and we are well-positioned to reach our fiscal '23 target of $600 million while also identifying savings projects beyond that timeframe. Regarding our profit delivery in Q1, we experienced exceptional adjusted EBITDA performance with a 67% year-on-year increase to $279 million, resulting in a margin exceeding 20%, which is up 550 basis points from the previous year. This notable increase was fueled by strong sales growth, solid gross margin expansion, and fixed cost leverage. We believe that this quarter's performance reflects the strength of our strategy and business model, and we aim for continued revenue and profitability growth in the future. Looking at our EPS, it included adjusted EBITDA for Q1 of $279 million, depreciation of $78 million, and an income tax expense of $40 million, which translates to a tax rate around 29%, consistent with our expectations. We anticipate a higher tax rate this year due to our main jurisdictions now being in Amsterdam and the U.S. There were also $8 million in other items and $29 million in adjusted preferred dividends, which were elevated compared to typical figures for Q1 due to accounting requirements related to KKR's conversion of accrued dividends into common shares from their first transaction in September. Consequently, our Q1 diluted adjusted EPS was $0.8. While not factored into our adjusted EPS, Wella's fair market value increased by $390 million during the quarter. For Q2 and fiscal '22, I’d like to outline some drivers of our adjusted EPS. First, as I mentioned last quarter, we expect interest expenses to be in the mid $200 million range for fiscal '22, reflecting a lower net debt balance but a higher cost of debt after the recent refinancing. Second, we expect an adjusted effective tax rate in the high 20s percentage for fiscal '22, but we recognize the uncertainty surrounding projections in the current environment. Third, regarding preferred dividends post today's announcement with KKR, we expect a quarterly run rate of about $7 million following this transaction, assuming no further issuance of preferred shares. Moving to Q1 free cash flow, we saw a strong positive result despite this quarter typically being weaker as we build inventory for the key holiday season. Importantly, working capital showed significant improvement during the quarter, and we maintained strict management of CapEx and one-time costs, resulting in Q1 free cash flow of $241 million. Looking ahead to Q2 and beyond, we are focused on enhancing cash flow and steadily reducing our net debts. Our capital structure at the end of Q1 showed a financial net debt balance of approximately $4.96 billion, down over $200 million from Q4, largely due to our strong free cash flow and reflecting a 40% stake in Zeta at quarter-end, valued around $1.65 billion. Our economic net debt was approximately $3.3 billion. Following the recent sale of about a 9% stake in Zeta to KKR and today's sale of over 4%, we now hold 26% of Zeta. Our retained 26% stake in Zeta is a financial strength, as the recent transactions indicate a valuation upside, offering liquidity while reducing leverage. We are also working to improve our debt maturity profile, having secured commitments to extend our revolver maturity to fiscal '25 and decrease revolver capacity to $2 billion from $2.75 billion. Our recent issuance of over $1.6 billion in senior secured notes reflects our strong efforts to minimize refinancing risk. We have made tactical decisions to monetize some non-core assets to aid in deleveraging, with several real estate divestitures planned for Q2 expected to yield approximately $150 million in cash proceeds, primarily flowing into Q2. This transaction alongside Q1's strong free cash flow supports our confidence in achieving a financial net debt to EBITDA ratio of up to 5 times by the end of calendar year '21 and approximately 4 times by the end of calendar '22. We remain committed to the partial IPO of our Brazil business and are monitoring market conditions due to current economic volatility to identify an opportune moment to execute it, though local regulations prevent us from sharing further details at this time. Before I return the call to Sue, I want to briefly discuss the recent transactions regarding our Prestige share and their impact on our capital structure. We have made strides in unlocking shareholder value through sales and profit growth and deleveraging our balance sheet while simplifying our capital structure. Our capital structure has become significantly simplified thanks to KKR's conversion of about $50 million in preferred shares and the subsequent redemption of approximately $75 million in KKR preferred shares in exchange for roughly a 14% stake in Zeta. These developments are positive for Coty. We understand that these transactions, especially the secondary offering in early September, raised questions and caused volatility. However, they ultimately represent a net positive for Coty and our shareholders by significantly reducing KKR's preferred shares ownership and confirming the increased valuation of our assets. The appreciation in value of approximately 40% compared to initial evaluations, paired with the liquidity of the asset, has freed about $65 million from lower preferred dividends for reinvestment or management purposes. The redemption of convertible shares implies several cents of annual EPS accretion. I will now turn it back to Sue.

Thank you very much, Laurent. We continue to make strong tangible progress across our six strategic pillars in the first quarter, with many more milestones planned for fiscal '22 beyond. I will now walk you through some of these key highlights. And as a reminder, we will be covering each of these pillars and future initiatives in much greater detail next week, November 18, at our Investor Day in New York City. Starting with our first strategic pillar: stabilizing our Consumer Beauty brands. This is a pyramid I hope many of you recognize. However, we believe it's important to remind each of you of our core Consumer Beauty brands and where they stand. I'm proud to say that we have a clarified view of the portfolio with each brand positioned in a clear price tier and competing against a defined, competitive brand. CoverGirl, Rimmel, and the Chloe in Germany, Manhattan brand compete directly against Maybelline. Max Factor and Bourjois compete against L’Oréal Paris, and Sally Hansen holds the unique position of providing an affordable alternative to nail salon services. As you all know, CoverGirl has been our first area of focus within Consumer Beauty, and I'm very pleased with the success we are seeing today. CoverGirl is the inventor of key makeup and leads this high growth area in the U.S., which is nicely accretive to our cosmetics portfolio. This has been supported by our strong launch cadence of clean, vegan, and cruelty-free beauty products, including Clean Fresh makeup and Lash Blast Clean Mascara. In fact, we believe this renewed focus on clean makeup is further supporting our gains with key demographics, as well as key retail partners such as Ulta, who is elevating CoverGirl as a leading example of an established mass brand, leading the path to clean beauty. I also want to note that clean beauty has the additional benefit of being margin accretive with these key innovations carrying a higher price point. I'm proud to say that since our reboot of CoverGirl at the end of March, the brand has gained market share in four of the last seven months, and we expect the momentum to continue. Importantly, CoverGirl is finally gaining shelf space in total in the U.S., led by a key retailer where the brand is significantly outperforming the cosmetics category and also improving productivity. And just as we discussed during our strategic update in April, we are reapplying the CoverGirl turnaround playbook to other Consumer Beauty cosmetics brands. We just launched our first clean makeup brand called Kind & Free. This makeup line is 100% vegan, cruelty-free, free from fragrance, mineral oils, and animal-derived ingredients. On this slide, you can see a brief ad showcasing the manifesto of this recent launch. Ad: Here is the way I see it. There's clean beauty out there, and it works. No compromise. Open to all of us, it's our new way of creating makeup that's kind to us and the environment. Kind to skin, free from toxic ingredients, kind to animals, and free from cruelty. We call it Kind & Free. Let's get behind this, the clean face of makeup. We're Kind & Free from Rimmel, London, where clean works. Kind & Free is our largest Consumer Beauty launch in fiscal '22. Together with our retail partners, we believe this represents a transformative innovation, and we have been thrilled with the recent test results. While Kind & Free is still in the pre-launch phase, with a full national rollout and media support set to begin in January, we are starting to notice increasing consumer interest and sales at key retailers in recent weeks. For Max Factor, we are observing very positive trends since the visuals and new assets have been launched. In the UK, Max Factor gained 20 basis points of market share in September. Overall, Max Factor has either maintained or increased its market share across all customers, marking a significant achievement for the brand after several years. Additionally, in the Netherlands, the brand gained 50 basis points of share. The new brand positioning and campaign featuring Priyanka Chopra Jonas, which started just a few months ago, is already showing encouraging results, with the brand stabilizing or growing market share in over 75% of its markets. We aim to sustain this momentum in December by continuing to invest in media for Max Factor. Moving on to our next strategic focus on accelerating luxury fragrances, we have had exceptional fragrance launches this quarter, enhancing our success in this important category. Gucci Flora Gorgeous Gardenia stands out as a remarkable launch. Our ultimate objective is to position this fragrance among the top 15 global female fragrance icons. The recent results across different markets, channels, and customers indicate that Flora is on the path to achieve this. This is a first for us, with a significant innovation quickly gaining success in major markets. In the U.S., it has already reached the top spot among many of our key retail partners. In the UK, the fragrance ranks third among female fragrances since its launch and has helped make Gucci Flora the eighth overall female fragrance line in the country. In important Continental European markets like Germany and Italy, Flora is also performing strongly, ranking eighth in Germany, while Gorgeous Gardenia is the top female fragrance in Italy. The fragrance is also gaining significant traction in China, appearing as a top 10 CMS fragrance and performing well with our key brick-and-mortar retail partners and on Tmall. Within men's fragrances, we introduced Burberry Hero in the first quarter, and it is similarly experiencing great success across all key regions, staying on track to become a global iconic scent. In the U.S., Hero has been the number 1 men's fragrance launch at numerous key retail partners since its debut, with its sellout results far outpacing our initial expectations. In Italy, Hero is among the top 10 men's fragrance launches, ensuring that it is in the top ten overall men's fragrance lines. In Germany, Hero is already in the top 20 men's fragrance lines. In China, Hero has also made it into the top 10 male fragrances since its launch at many of our key retail partners and on Tmall, and it is encouraging to see it ranking among the top 3 in key travel retail locations. Shifting to our Prestige Mega portfolio, we relaunched Kylie Cosmetics in July. Together with Kylie, we revamped all cosmetic products to ensure they are vegan, cruelty-free, and have clean formulations. We have been very happy with Kylie’s performance across channels and geographies since this relaunch. Notably, we've launched several collections that have surpassed our initial targets. The Birthday Collection was one of the most successful ever, and the recently launched Nightmare on Elm Street Collection is also among the best-ever Kylie Cosmetics collections. Kylie introduced her much-anticipated baby line during the quarter, which saw strong sell-out trends right after it became available online, exceeding our initial plans. Importantly, these launches attracted many new consumers to the brand. This relaunch has made Kylie Cosmetics significantly more productive compared to the initial range, with fewer SKUs but much higher sellout. The success of Kylie extends to performance in brick-and-mortar, both in the U.S. and European markets. Kylie Cosmetics is thriving in the UK with our retail partners, and the recent launches in several Scandinavian markets have also shown strong sales. In U.S. physical stores, both skincare and cosmetic sellout have grown strong double-digits year-over-year, confirming the true omnichannel nature and global appeal of the Kylie brand. Meanwhile, our growth in Gucci Beauty continues to be exceptional, with Gucci makeup sales tripling year-on-year this quarter. Sellout figures in the U.S. and China are continuing to show triple-digit growth. As we expand the Gucci makeup assortment, this phase represents a significant opportunity for the brand. Recently, we launched the Gucci cushion foundation with beautiful and distinctive packaging. This launch solidifies Gucci Beauty in the most loyal and profitable largest makeup category across Asia. In China, the cushion foundation has been one of the top luxury cushions on Tmall and among key vegan mascara retailers. Turning to our strategic priority of expanding our skincare portfolio, our revitalization strategy for Lancaster is proceeding as planned. We did experience a slowdown in Hainan due to a COVID resurgence as cross-border restrictions eased in September, but we have seen a rebound in both traffic and sales. I am pleased to report that we are seeing a further strengthening in the skincare portfolio, which now constitutes the majority of Lancaster's sellout in Hainan. This indicates that our repositioning of Lancaster as a comprehensive skincare brand is gaining traction in this crucial Prestige skincare market. Moving to our fourth strategic priority of building e-commerce and direct-to-consumer, we continue to see strong growth with e-commerce increasing 23% year-over-year. Both Prestige and Consumer Beauty experienced growth exceeding 20%. Overall, eCommerce accounted for a mid-teens percentage of revenue at the end of the first quarter, up from a low teens percentage in the same quarter last year. A key highlight during Q1 was our performance at Ulta, particularly boosted by luxury fragrances. Our Prestige fragrances saw significant online sellout growth, and Ulta reported strong double-digit results. Marc Jacobs Perfect performed exceptionally well, being recognized as the fragrance crush in August and achieving triple-digit sellout growth despite last year's comparable launch. As we build on our e-commerce momentum, our focused strategies on growth through select partners and DTC are producing positive results. Now moving to our fifth strategic priority of expanding in China. Despite a resurgence of COVID in the country towards the end of July and August, with improvements seen in September, our China sales grew nearly 50% in Q1. Among the top 10 Prestige beauty companies in China, Coty was the fastest growing, fueled by the success of Gucci and Burberry on Tmall, which led to a sevenfold increase in our Tmall revenues. Additionally, Chloe continues to shine, with sellout doubling year-over-year, driven by our new premium fragrance collection. This success is particularly impressive given the limited media support Chloe has received; however, we are committed to building upon this achievement to strengthen our presence in the ultra-premium and seasonal fragrance markets in China and globally. Now, I will share our outlook for the year, starting with our view on the first half of fiscal '22. We saw impressive Prestige revenue growth in Q1 at 34% like-for-like growth, driven by key fragrance launches. However, we estimate our Prestige sell-out growth in Q1 was more in the mid-teens. In Consumer Beauty, we think sell-in and sell-out were closely aligned in the low to mid-single-digits. Therefore, total Coty sell-out in Q1 was just over 10%. Given the strong cost reductions and profits in Q1, we plan to reinvest more in marketing in Q2 to enhance our sell-out during this crucial holiday season, leveraging the strong momentum of our brands. Consequently, we expect our Prestige sell-out in Q2 to accelerate to high-teens growth, while sell-in may lag a bit behind sell-out due to the Q1 inventory sale. We anticipate Consumer Beauty sell-out to increase to mid to high single-digits, with sell-in matching or exceeding it. Overall, this should lead to low-teens like-for-like growth in Q2, with sell-out slightly higher. From a profitability standpoint, our strong gross margin and profit growth in Q1 enable us to increase our investment in growth initiatives in Q2. As a result, we expect to achieve first half of fiscal '22 EBITDA growth in the low-20s year-on-year, with EBITDA margins improving by about 100 basis points compared to the first half of fiscal '21. It’s crucial to highlight that our key brands in both Prestige and Consumer Beauty are gaining momentum, a rare opportunity for market share growth. We intend to invest strategically for our near and mid-term growth, which will be increasingly profitable due to the high-margin nature of these new ventures, and our strong Q1 profit delivery allows us to do so. Regarding full-year guidance, we now expect low to mid-teens like-for-like growth for fiscal '22, which is above our previous low-teens forecast. This guidance assumes no significant deterioration due to COVID resurgences or resulting restrictions. While we've managed inflation and supply chain challenges well so far, we will continue to monitor these factors closely. We are confident in our gross margin strategy, the new innovations we are introducing, and the premiumization of our portfolio will drive gross margin expansion relative to fiscal '21. Overall, we anticipate a minimum adjusted EBITDA of $900 million for fiscal '22, as we reinvest our gross margin gains and cost savings in our brands to maximize value and maintain momentum into the second half and beyond. I'm also excited to announce that we have made significant progress in simplifying our capital structure, and we can now provide EPS guidance. We've focused on better understanding our underlying EPS and believe that offering this guidance is an important milestone as we strive for a more streamlined company. We aim for adjusted EPS of 0.19 to 0.23 for fiscal '22. Finally, we expect to finish calendar '21 with leverage around 5 times and aim to reduce this to around 4 times by the end of calendar 2022. In conclusion, we entered fiscal '22 with the intention of building on the success of the previous year. We completed Q1 with sales exceeding our expectations while also achieving strong gross margin growth amid inflationary and supply chain challenges. This has allowed us to reinvest in our growth initiatives and drive adjusted EBITDA growth. Q1 exemplifies our strategy for this year, as we continue to see strong sales and gross margin fueling our profits and reinvestment. We are committed to maintaining our progress and aggressively executing our strategic priorities, demonstrating the advancements we are making in each area. Our brands are uniquely positioned for success, and we intend to invest in them to capitalize on the current momentum. I look forward to sharing more about our strategy and objectives at our Investor Day on November 18 at the New York Stock Exchange. Thank you for your time, and we are now ready to take your questions.

At this time, if you would like to ask a question, we will take our first question from Steph Wissink with Jefferies. Your line is now open.

Thank you. Good day, everyone. We wanted to just unpack gross margins a bit more, which came in quite a bit stronger than we would've expected. So maybe Sue, the question for you is as you look across the portfolio, can you give us a little bit more insight into where you're seeing that margin strength? And then I think as a follow-up Laurent, if you could just talk through some or help us quantify some of the key drivers that you listed, 5 of 6 items that were contributing to the strength. If you could just help us contextualize and where the bigger pieces or maybe versus some of the minor pieces. Thank you.

Thank you. We are very pleased with our gross margin performance this quarter, showing a 500 basis point improvement year-on-year and a 250 basis point increase from last quarter. This strong performance is the result of several factors. First, we have a more favorable mix, both from the growth in Prestige and a positive product mix across our categories. For instance, in Consumer Beauty, we have focused on makeup and mascara, which are more profitable than lip color. We've also successfully reduced fees, allowing us to invest in our top-performing products in terms of media, which will help us increase sales volumes. Additionally, high operational initiatives and fixed cost absorption from increased sales have contributed significantly. Other key areas contributing to our success include pricing and revenue management, supply chain productivity, and material cost reduction programs. All of these factors collectively helped us achieve a strong improvement in our gross margin. Laurent, would you like to add anything?

Yeah, if I can add a few words to what Sue explained. We are very disciplined in this gross margin and indeed there are two big categories. So, number 1 is exactly what Sue has explained; it's really what we are doing on productivity, on fixed costs. And you saw already the result last year because last year, we were already back even better versus fiscal '19 and above 60%. So, we are really continuing this trend. But where we are really seeing is what I will call the additional part of the gross margin, which is really where we aim to expand within the mix. This is something we will continue and amplify through revenue management. And obviously is also pricing, so the recipe for the gross part remains the same. But definitely on the value part, this is what we are really amplifying. We studied and we will do even more in H2. Just one last statement to keep in mind is that we are going to continue this gross margin expansion all across Europe. Keep in mind that gross margin in H2 is always lower versus H1 which is the typical seasonal pattern that we have in the industry.

We will take our next question from Rob Ottenstein with Evercore. Your line is now open.

Great. Thank you very much, and congratulations on a terrific quarter. I was wondering if you could talk a little bit about how the upcoming 11.11 shopping festival is shaping up. There's a lot of seasonality in China, and despite that, you did extremely well. So, how's that shaping up as well as travel retail? And then just on the cash flow side, perhaps talk about the seasonality of the cash flow and the fact that even in Q1 the cash flow was so strong, do you expect that to continue throughout the year? Thank you.

Good morning, Robert. Thank you for the question. So again, you've seen the results we've posted around China, 50% of growth. This is really a great, I would say, demonstration and KPI in terms of we have put in place, in terms of the number of brands we're going to focus on, in terms of our ability to take a significant number of sales on Tmall, creating the right content behind the right brands with the right media investments. What I can tell you is that the sales momentum that we've seen during the first quarter is tracking in line to better than Q1 in the second quarter. So clearly this will help us to do a strong execution into 11.11 in China. So, on the free cash flow, Laurent, maybe you can take this one, please.

Yeah. Absolutely. So you're right, we need to focus on these. And as I mentioned indeed, usually Q1 is a weaker quarter in terms of cash flow generation because indeed this is a quarter where we are building inventory for Q2. And yet, this is what we are doing, that at the same time, you've seen Q1 the results of all the initiatives that we have kicked off or redeemed a year ago, which is really a full program on cash flow optimization. We're working on various streams. One of them is inventories where now, we've better tracking and monitoring with the forecast accuracy on demand. By doing that, we have been able to optimize our inventory levels while keeping very good service levels. So, this is something we're doing the same on receivables with optimization on overdues. So really, and also on all the working capital. You see very great output, and it confirms that's why we're confirming our target to look towards 5 times leverage by the end of calendar '21. We are fully confident we will reach this objective. Now on full fiscal year '22, we are not giving guidance on free cash flow, but definitely based on what I've just explained and in combination with the growth and the EBITDA we are delivering, we see that fiscal '22 free cash flow should be nicely higher than fiscal '21.

And we will take our next question from Andrea Teixeira with JPMorgan. Your line is open.

Thank you. Good morning. So just a clarification on the gross margin bridge. I remember we were talking about pricing as you saw the opportunity to take more actions even prior to COVID with these initiatives. How much pricing did you take in the quarter, and when do you expect to start to lap those price increases? My other real question is the SG&A ratio that they've come in below expectations. Understanding that the team has emphasized that branding reinvestment remains a key focus for the Company, is there any seasonality we should be thinking of as you guide us for at least $900 million in EBITDA? And what is driving these SG&A leverage overall, please? Thank you.

So definitely yes. On pricing, these are indeed the initiatives that we kicked off already last year because, earning these with commodity inflation is not coming as a surprise. So, we flagged it already a few quarters ago. So that's why we initiated definitely there were some price increases that we implemented across several products in our portfolio. And I can confirm that our unique position as a company with desirable brands allows us to continue to justify and implement price increases, given the investments we are making. So, we continue this and we are on track to take even more pricing initiatives in the second half of fiscal '22. As for SG&A, ratio below expectations, I will really make it in two parts. First, it's the continuity of the work we kicked off last year. We have very strict plans and initiatives in place focused on optimizing our fixed costs and non-people costs, like business services. At the same time, we are ensuring that even in G&A, we are reallocating some resources and continuing our investment in growth pillars. We are making sure that we are monitoring all aspects of fixed costs while still strategically investing where we are seeing the best growth potential.

Thanks. We will take our next question from Steve Powers with Deutsche Bank. Your line is now open.

Yes, hey. Good morning. Thank you very much. Maybe picking up on that for a little bit. The momentum on the top line is very evident, fantastic. It's a positive mix, which you talked about is also evident. Making progress on productivity. So those on the plus side of the ledger. On the other hand, the contemplation is real regarding the cost of, I'm assuming, bolstering your supply chain has also picked up a bit. So, when you talk about investing incrementally for your brands in the year, can you frame for us how much additional flexibility and incrementality you have in the plan as it stands today versus where you were when the plan started given the momentum? I'm just trying to understand how much incremental flexibility you have to invest behind brands to fuel further growth. Thank you.

I can start really to give you a frame, and indeed Sue can build on these things. Again, to give you the frame, and you see the Q1 results, we are over-delivering on EBITDA, we are over-delivering on profit. Because as we have just explained, thanks to gross margin and thanks to SG&A discipline, we are delivering a very strong quarter. But we are not giving guidance quarter by quarter, we are giving the guidance for the fiscal year on the total year. And we say that we will deliver on $900 million EBITDA at minimum because we are very intentional about reinvesting behind our brands and where we have stronger performance. What I'm telling you is really to answer your point is that, yes, we have the flexibility, and we are creating our own flexibility. And you see it in Q1, and we decide with the management team on a regular basis where we have the strongest needs and allocate the resources accordingly. I can tell you that we have many initiatives with strong growth expectations, and often it's the case that with tests and initiatives, we might see they are not producing the level we expect. We're also very disciplined to keep the budget and reallocate to activities where there is a better return on investment. So, yes, let's be very clear. We have the flexibility, we are creating our flexibility, and we're very intentional about reinvesting behind our brands.

And we'll take our last question from Lauren Lieberman with Barclays. Your line is now open.

Great. Thanks. Good morning. You've run through a bunch of the recent successes in Consumer Beauty and the success you are seeing, early indications with the relaunch of the major brands and repositioning. But sales are still tracking, I think, at 80% of where they were in the first quarter of '20, while Prestige is comfortably above where you were back then. So just curious if you could share whether recent performance of some of the other brands that are not growing as fast as those that have been repositioned, or if it is market recovery related, what you see as the impediment to getting back up to that fiscal '20 benchmark for Consumer Beauty? Thanks.

Good morning, Lauren. Thank you for the question. In fact, what I would like to say is that I think we are in a way having figures that are imperative with what appears with Consumer Beauty businesses and mass-market businesses have been posting. What we're seeing today is that the momentum behind CoverGirl, which is the largest brand of Consumer Beauty, is holding. And I would even say it is accelerating. CoverGirl is growing both in sell-in and sell-out during the quarter, and the recent weeks' insights show market share gains, including a strong 0.8 market share gain recently. There is a lot more to come behind CoverGirl for Q2 and probably for the remainder of the year. On Max Factor, again, I've been describing the success we are seeing; however, it's just the beginning because we are just starting to see visibility in stores and online and on TV of the new branding. We are seeing market share improvement in 70% of our markets. Rimmel, which has secured its number 1 position in the UK prior to the relaunch of the brand, has been doing fabulously with Wonder Extension Mascara, one of the bestselling mascaras for Rimmel in years. We also just launched few weeks ago, Kind & Free, which follows the success recipe of CoverGirl. It's starting to perform outstandingly well too. We just received the test results of the advertising, and again, we are breaking records in terms of beating the best KPIs. So, we're super confident that we will see continued acceleration in Q2. In Consumer Beauty, that's for sure. So, there is nothing today that I can share with you that would be a disappointment versus what we have envisioned or versus the work that we have been putting behind the brands. Every time we put the repositioning, advertising, immediate pressure, etc., we see it delivers. It's just a question of time and you will see an acceleration in Q2.

We will now take our last question from Olivia Tong with Raymond James. Your line is open.

Great, thank you. Innovation has made significant strides in enhancing your coverage, especially in Prestige. Could you elaborate on the innovation pipeline and how the development process has evolved in recent years? Additionally, I would like to follow up on Steve's question regarding costs. Can you quantify how much our costs are exceeding your plans for the year? Moreover, if there are potential profit increases as the year unfolds, do you have larger projects in mind for that upside? Given that you're already at 26% of sales on A&CP, it seems unlikely to rise much higher than that. Thanks.

Yeah. Good morning, Olivia. So, let me talk to the first part of the question around the innovation pipeline and how the process has changed in recent years. As you know, we've been putting in place two clear strategies. The first two points of this strategy were number 1: stabilizing our Consumer Beauty business starting with our cosmetics brands in Europe and in the U.S. And the second part was: how can we accelerate the growth in the Prestige division, which we have demonstrated during this first quarter at over 30% of growth. This had three parts. Number 1, accelerating our fragrance momentum and building a female top 10, top 15 fragrance, which seems going to be the case with Gucci Flora, confirming our leadership position in male Prestige fragrances. This seems to be also the case with Burberry Hero and Calvin Klein Defy—big successes. Adding a new growth gene, which is Gucci Makeup, Burberry Makeup, Kylie Cosmetics, and the three brands are experiencing outstanding growth. If you think about Gucci makeup, it is showing triple-digit growth. So, in a way, what you are seeing today in terms of growth and the way we are operating behind innovation is straightforward if you look back at the two key first points of the strategic pillars. We are really delivering behind what we have been describing in April, and that we'll be describing in much more detail next week in New York on November 18. So, this was for the first part of the question around how we are dealing with innovation in the Company. Maybe Laurent, you want to take the second part, which is around our inflationary impact on costs?

Yes. Absolutely. So, in there – sorry. Indeed, on the again, I explained a few times. So, a few quarters ago, we raised, we were assuming a 50 basis points impact related to cost in our gross margin. This is what I explained before, so that's why we already implemented some price increases already in H1 because we knew that this headwind was coming. Now what we have seen is that there is some amplification as we all know on this inflation and now it's about the size of about 100 basis points in our gross margin equation. As for the overall strategy, we have plans in place and what I've explained before is that we have proactively thought about pricing, and we are going to implement initiatives in H2 of fiscal '22 to mitigate inflation but also, you know, it’s completely consistent with our journey of value creation with creative innovation, building a better and stronger business.

And we have no further questions on the line at this time. I will turn the call back over to Ms. Nabi for any additional or closing remarks.

Thank you very much, everyone for your questions, and we are super, super excited to see you next week in New York on the 18th, with lots and lots of new things about our potential growth in the coming months and years. Thank you very much.