REV - Earnings call transcript Q3 2018

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Operator

Hello, and welcome to Revlon's Q3 Quarter 2018 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Friday, November 9. I would now like to turn the conference over to your host, Eric Warren, Vice President, Treasurer and Head of Investor Relations. ahead. go Please

Eric Warren

Good the Courtney. financial and you XXXX. thank for Thank Earlier morning, today, joining XX, September call. quarter its the for the you, ended everyone, company results released

already you can copy on received If obtained not a of release, be at the website company's copy the a earnings revloninc.com. have

call certain the are reconciled provided call The this not amounts should Federal to performance. U.S. are Debbie. that release. release QX throughout financial items that turn and current today this Chief rounded. certain Financial on materially our Form will undertakes with in and company morning include Consistent in obligation actual results. call also from tables the affect forth non-GAAP Please our company's at might have Remarks the be pursuant and XX-Q. results Securities with to differ statements underlying Private no company's directly any Dolan, forward-looking Debbie Perelman, forward-looking under reporting to on today publicly measures forward-looking of Information over note President Securities practices, non-GAAP Act and The not the also them attributable its are recorded. that, Victoria today And is excludes for set to SEC factors past certain discussion GAAP are that and results These a statements, are provided XXXX that non-operating the the On earnings such obligation company's Litigation except adjusted the end operating are Chief copied expectations of in include of The and call statements Executive based we'll discussion Laws. Officer defined could the the update or Officer. the XXXX. cause Reform including filings, to the been

Debra Perelman

Thank Good you for us. joining thank Eric. you, and morning, everyone,

is world in forces. industry the the ever aware to beauty pace keenly our all of is that are not increasing We these change immune and

about As focused the X for I highlighted strategic future remain future excited success view and landscape via our are and We as our leadership of pillars opportunity drive that beauty our business this changing growth. long-term to on sustainable the company key will drive back in August, and reclaim position we growth. an our

our First, ensuring spend brand shop consumers and and, they increasingly, both strengthening with and our through iconic online. better innovation consumers product capabilities our and time, communicate building second, availability relevant in-store the most where portfolios; our to channels through third, media product of connect where the

release, we of Turning that now reflective performance results this to strategy. our is the believe business of third our morning's with earnings strength our are pleased and very quarter

business, growth our aspects continue in We in to see our operations. and key efficiency of all improved drive stabilize areas

net highlights quarter adjusted quarter. for on business year key acquisition Arden basis quarter Our XXXX. quarter-over-quarter third growth Elizabeth include largest a on this Adjusted EBITDA a higher in versus sales increased constant-currency basis representing third the the prior XX%, since EBITDA constant-currency the

a net on strategic Arden, from and trend XX%, brands, Continuing sales sales operation XX% up focus. for China as-reported quarter, Retail Elizabeth the net growth Travel grew were in in strong strong saw in X%. by skin North example, Arden demand. Elizabeth growth segments of and grew sales last Revlon showed business our sales sales driven while we Arden channels while net biggest the On quarter basis, XX%, the our basis. constant-currency care Our net an Elizabeth net Revlon quarter, In at in America, grew

We are strategy. making strong progress against digital our

as-reported direct-to-consumer a the Crew. sites we and U.S., basis. and quarter, grew In on e-commerce launched two have is UK in Our Red our American the an Juicy House, sales internal running; agency, the up in and ElizabethArden.com strong Judy XX%

assortment within our of that we sustained seed cosmetics, ability a product critical deliver, pipeline offering One to portfolio we Couture; be Varvatos foundation Britney our stores of our as launched by support Fragrance to continued well Arden JV capsules. is Crew collaboration launch will Violet and Noir retinal continue portfolio by launched ColorStay department Xth to our Cushion introduction Aguilera. x first to My color Elizabeth globally. John Christina our our brand, capabilities with compelling Kiss Spears; tint. the lip American for NJ, Avenue; franchise product Juicy Under our by In our and innovation a Ceramide Elizabeth Nick ColorStay of as we Arden Prerogative with to My continue we, adding sold Under basis, of which in Revlon a of Jonas; business, strengthen full on men, with with the coverage Ceramide our support the prestige brand, expand we ACUMEN, between

our demonstrated ability to have quickly and to we Additionally, trends market. deliver identify consumer speed

to XX aspect Revlon product a in lip will bring market For that kit ability This the our a RefineryXX, partnership build example, able were equity. to was weeks. with limited-edition to broader collaboration impact in brand one of we

provide plant. update Next, with an let me you on Oxford our

quarter, impact going way our we mentioned our results improvement producing was focused back expect to lower remain plan our a We on than quarter is and forward. on to to we we customer continued internationally. and pre-SAP call, and enhancing the pipelines As The transforming significantly third do business. fill continue second level, second Oxford quarter the

our a operations, speed only cusp through program eliminating global and core, announced cutting not We will wastes. growth but profitable reducing we our will effort stronger Program, operation that efficiency overhead, This operations efficiency. be short- areas. sales build our X a This foundation key and our in for duplication Optimization will costs and long-term, our At achieving on and business financial will is its the and responsiveness. improve significantly business streamlining up cost are focused which morning, we this it

execution; now the operations. over call before commercial enhancing begin market who and Victoria, our we Optimization Program details to optimizing on as the our third, results third overhead all will well our global streamlining Q&A. quarter First, and end reducing hand I'll second, as show costs supply of chain;

Victoria Dolan

and Debbie, good everyone on the you, call. Thank to morning

I in the quarter Program, about XXXX third results. me Optimization Before announced speak newly our highlight detail let

Debbie year mentioned were as-reported net segment, Elizabeth in a million, a of double-digit versus quarter. constant-currency On up net in on quarter. X% sales by net offset declines for growth Fragrances year versus $XXX our XXXX experienced basis, earlier, our net sales Arden We third an were of prior sales basis, Portfolio businesses. and sales As as-reported the quarter decline Revlon prior

the in the exchange, estimate lead sales disruptions filling have Oxford associated net foreign in approximately unfavorable international part which driven due during we were long times million plant, international to some addition sales In our the by to loss to quarter, net with geographies. of impacted a in SAP-related $XX

of with by our the associated lower experience. continued in due to re-phasing selling, via and expenses costs continue in-store the Asia. down in The brand expenses we to invest marketing Next, on general increased business lower remain displays in our SG&A, administrative consumer Despite a new part focused lower improving heavily quarter, by were marketing growth the as support wall distribution initiatives. we were driven permanent certain in offset

digital House our formation our in various and heavily markets. teams in including e-commerce of of dedicated capabilities, the invested key also have the We staffing Red

operating to operating the million. $X operating by margin operating year was driven our by impacted discussed, previously million lower in period, prior an and selling, foreign loss $XX quarter On in As-reported profit offset of adjusted lower the the income year for $XX and compared to gross income million, of $X basis, million the costs exchange. unfavorable an general quarter, higher compared income quarter was prior the by administrative expenses for commodity

loss $XX for million. prior in to compared as quarter of net as-reported the million net $XX As-reported loss year quarter was the our

act, to interest drivers loss net partially benefit of a discussed lower the to impact addition to U.S. other In the offset due increased by attributable the is expense. larger the tax previously, Tax

EBITDA $XX million in $XX current was million to compared the adjusted quarter. for the year Finally, prior quarter

Next, segment to our results. to I would like turn

North lower productivity we brand by levels. which or profit increase decline segment of third Revlon mainly to Carolina to sales XX% as-reported $XX brand driven increased net areas was $XXX due of a disruption, to quarter, Revlon continue net as X% of in the offset improved a net million of due lower re-phasing inventory sales internationally primarily due XXXX in America, initiatives year support by look retailers of service as replenish across Oxford, level decline to all spend. for quarter cosmetics, over segment Revlon the the an marketing the primarily the were This prior Our certain color higher to basis. on million, sales represents North

higher quarter offset sales on segment profit driven decrease result as by was This partially cosmetics sales, products. net Portfolio of representing net an million to as-reported CND brand care on of third international net For of improvement from $X as declined from products, in by of increased quarter segment mainly the regional support. period, sales by lower of driven million was segment $X for higher by of color by sales XX% primarily $X to higher million offset lower XXXX, Almay by Elizabeth sales, sales Arden net partially XXXX Net well a in a territories. brands, principally, offset Elizabeth of distribution were as in a Portfolio our $XXX partially costs. the net Arden, our profit an our X% net basis. nail basis. net third sales as-reported Elizabeth decrease increase million year skin the of driven higher This higher million Arden were $XXX sales million, lower prior in $X

sales representing of decrease by quarter XXXX of basis. third $XXX XXXX, licenses decline in a loss million were certain certain of Fragrances prestige driven the This net as-reported was the on our X% Finally, channel stores. and the closure retail an in segment of

by capabilities associated However, support production Fragrances segment of certain as net increased of initiatives, due lower to the brand as cost reductions with sales. in-sourcing profit market result XX% re-phasing despite well a lower as

$XX first used Turning $XX capital, free partially and cash as improvement $XXX primarily higher X display period. to flow compared working interest well and changes the expenditures of Year-to-date in QX spent driven million capital in usage displays. by lower on was permanent cabinetry cash XXXX, we to was capital purchases the flow million, sales in in months $XXX net prior expenditures in offset and as lower year permanent of XXXX the increases liquidity, through million free payments. by The in million

our available available Credit million company Facility borrowing of Forbes, senior XX, capacity of less $X As and under of from liquidity, cash and $XX had $XX million $XX million September line & float XXXX Revolving consisting million. in MacAndrews of the of equivalent, million cash approximately credit the under of unrestricted $XX

morning, million $XX cash of borrowing company As of the also the and of objective structures from under million under maximizing senior million of streamline XXXX $XX of had Facility and million $X float we the the of new and $XX and available liquidity. with to consisting unrestricted business Revolving our XX, in less cash Program, line Forbes, $XXX million. cash of processes and October designed Credit available XXXX profitability, the & This approximately operations, reporting flows productivity improving liquidity, credit Optimization capacity company's announced MacAndrews equivalent,

major We three have Program. XXXX focus areas Optimization underlying the identified

First, and look warehouse manufacturing base. greater our drive our office efficiency optimize drive cost efficiencies and locations chain and to our global rationalize network we supply to will to lower global

regional structures capability. optimizing and enhance will effective execution we organizational more commercial our and Second, to in-market global by create

functions and leading to we reduce and, simplifying costs leveraging services decision-making. business importantly, more processes, our technology faster agility Third, streamline and and greater will and overhead standardizing by shared

recognize employee-related by expenses. we of $XXX pretax third-party of million XXXX connection And XXXX. million $XX quarter end be anticipate $XX projected severance, to is the Of to XXXX pension related consisting We to approximately result completed charges, will and will termination the of Program to In XXXX restructuring reductions in $X XX% with expect Program, it the implemented to with XXXX in paid the approximately other fourth to restructuring $X to in that million charges restructuring December costs, $X in the that in charge be range are million charges, of paid $XX expected costs, XXXX. substantially Optimization we with estimated record in recognized to $XX as pretax XX, such million restructuring million XXXX. of by and to implementing in of $XXX approximately currently to million the be cost well total related annualized the approximately under Optimization actions and an to the $XX as cash the XXXX. expect balance we of expected million million Approximately be as be million

to of Q&A. as of hand now Lastly, $XX XXXX million expenditures we closing call Debbie the Program. comments part additional to capital I'll for the over before Optimization begin also expect incur we approximately

Debra Perelman

are third key In strategic across we and growth Thank focus our quarter you, Victoria. closing, pleased areas. our results with the

efficiencies, realigning With new flow of liquidity improved new XXXX long-term and the position. and cash for which operational Optimization to improving up in growth a capabilities in now our of open increased our profitability, our drive to higher-priority build call reallocating productivity continuing resources launch we order are we stronger to ultimately will With questions. spend and that, will the areas, Program, lead the

Operator

We [Operator will session. now Okay. Instructions] begin a question-and-answer

America from the Lynch. question Bank first Bill ahead. calling from of Please in Merrill go of Our comes line Reuter

William Reuter

from program or guess, process now top least, achieved assume savings updates that right? previously savings or, giving new of I cost this complete? morning. Arden. is guys on And But, that the Good cost know I at about stopped talking synergies. integration old us program Elizabeth the I that savings those Is is on you have

Victoria Dolan

Thank Arden program integration you of or have Yes, completed either Arden the all are -- question. process. Elizabeth for the in activities with the associated Elizabeth been the

stopped As end residual guidance the the but you giving on while come through some ago. through, complete. XXXX, see substantially savings they're a we noted, of We'll costs

across XXXX at of as our and think we for P&L. areas and Optimization the Program, really productivity all are well about of the align looking can a as lines we combined our optimize the now as the we resources As where the our structure company looking company

with have we are that and looking integration yes, program. gone do doing So the projects on specific will is you back so top of at this to we that, correct, whatever were

William Reuter

costs. good then going whether or And these will you've lower -- to so to marketing largely as these whether continue will that's some revert actually trend I'm by Okay, lower forward driven G&A higher levels. wondering and spoke about changes somewhat there lower were to back hear. timing or being

Victoria Dolan

So don't you we know as forward give guidance.

from in well re-phasing in I in market were activities think Carolina. align large the part, happening this market in was we the said this as we what was, supply to North when with So QX was marketing spend that as recover Oxford, about as

William Reuter

declines retail international Okay. I Revlon that me of then issue guess, I talked look when you timing? sales offset which at the And North in a it for were little an Where this brand. the lastly about regions. you replenishment, just data talking about -- are Nielsen in some When North for America, in America, down there bit suggests was still

However, obviously, sales channel the your into up. were

I about issues guess, speak can shipments. Or if little it new a you timing was So, with bit products?

Debra Perelman

Absolutely.

a mix. it actually So is

Oxford a refill, the So of piece portion pipeline related there into and market regular recovery is the also business. and it to that a but just is supply is

five regard weeks look over uptick you consumption. four to an Nielsen, you'll see if with So at the past of to the trends the

William Reuter

you. me. for all Thank That's Great.

Operator

in comes from Please go the ahead. Jordan Fargo. Wells question calling from Grant next The line of

Grant Jordan

the Thanks for Good taking questions. morning.

follow-up brand that pullback, support North Was the a a America? the on in around mostly, Revlon is one brand spending. First

Victoria Dolan

of it the looked think across I as we board. It as board the spend across No, at our was promotional the as activities. well was productivity

Grant Jordan

Okay. And is -- kind of then new like your forward, anticipate run brands is rate? -- in you how a just you change a going this market do there

Debra Perelman

the new and we effectiveness we ways at looking market, always are we how always go-to-market. looking we're at So of optimize how to

are I going So to optimize. say that shift market, how I to continually looking it that is is massive say wouldn't in what a will we we're

Grant Jordan

was in of you better looking line, a quarter. And revenue but out Were to not then Okay. gross trending, there? margin see it's than lift down surprised the where gross the been margin a obviously, more at bit the came

Victoria Dolan

And obsolescence saw, take as our in from Elizabeth about to higher are some We offset but basis points. some think the we as items, we alluded out as seeing benefits had of call, terms in-sourcing well that points. of in impact higher XX it was some you As we fluctuation. that we the strip commodity down, lower an sales gross some foreign from is on down had did exchange that, the reserves, of XXX basis, as-reported was we it the margin the When actually some basis in quarter returns. we by impact the as costs, the negative was Arden one-time

So our run with rate certainly, down it headline number. as as margin and we're pretty the was comfortable not much,

Grant Jordan

liquidity you liquidity, question, gave where my something you're now? you you've the of more have last in All anticipating And you kind that Okay. of right some a terms quarter, but the -- areas next might could need in then right. finished Is for thinking the see update, year cash. you

Victoria Dolan

constantly So looking at our we're liquidity position.

comfortable are. We we where are

end our by because went business, seasonal up most from to You QX traditionally, saw liquidity the is, cash. of October, end our that where the of million. the And we the $XX position generate September the of of quarter nature

So we comfortable. are

Grant Jordan

Right. QX thinking year. more of next Yes, like QX, I was

Victoria Dolan

position. are We our with liquidity comfortable

Grant Jordan

you. Thank

Operator

next comes calling Hale from the go Barclays. line question in The from Holden of ahead. Please

Hale Holden

you the Good a call. cost XXXX out taking question Thank I had on morning. program. for the

if moving you in So savings on million of was in follow-up. potentially, could Victoria, give costs XXXX. you in have cash some the very I us of I year. more was And then $XX there, by $XXX low million cash heard end say just XXXX, to the I pieces the wondering million color it million burden in for, and million some $X maybe a a like seems $XX to $X it

Victoria Dolan

question. for you thank So the

a question. good think I that's

them I as and at initiatives make million them million, look $XXX of $XXX that involve we to projects of described, the and that charges, up don't. As the some cash some

the within that can plants the have charges for restructuring specific that may more associated example, of efficiency not and them existing just we our Some of them. do existing plants looking at with around, are a things

Hale Holden

expecting be summer through that And wasn't changes were capital historically would be change QX the seasonal? Okay. distribution in alluded if build question, greater working to the and quarter flow year, anything sure I then a it that back could it changed because Grant's there not you quite over you typical just company? the the the is would had this in to if or fourth

Victoria Dolan

our the of levels inventory year, why cash So different that's as That's QX we historically down. the where -- is and our don't come we QX are as as said, seen pattern we that. we levels have well so I inventory that's peak where quarter we our how the see with as as position. anything are from the for get comfortable generate liquidity

Hale Holden

Okay. for the Thank much it. you I time. very appreciate

Operator

in question calling of go from from comes Gilbert the next The Mary Capital. Please line Imperial ahead.

Mary Gilbert

good had of couple one, morning Good I a Yes. regard and with quarter. Almay. to, questions

You was that up. noted Almay

also of I the the there's of later that consider us So resets forward? shelf you in Walgreens. I read And can doubled of stage, pace see update increase then space updates in terms sales Ulta. then terms in that with Revlon, with if And the in that because give we're And consumption. how you space then shelf any going there that, in we that you growth reduction wondered to noted a in shelf the data, was wondered Nielsen an how going we And any your new in innovation? given

brands there, saw segment Portfolio there? that some then of we'll where finally, is weakness, see do the kind you favorable regard to sounds see opportunities with then, it what sales of And you and So correct? to continue local like some

Debra Perelman

Thank you. question. for you the Thank

we with So start Almay. why don't

brands, particularly we as on seen category we the lip around see Nielsen, have, products with the call, did increase, results in and as consumers the be resonates portfolio, also there the market with by consumption. that to mentioned that. regard to lip new strongly as continue feel the as Revlon category, regard Almay, into some eye with that regional how and new note, and we optimize we you'll reported continue today. I have which We new put with in in is encouraging to we brand -- the well With an innovation category. encouraging innovation, the category and to is opportunity of from results the encouraged to around face focused And And our be the on

Mary Gilbert

within do Okay. of And Flesh see of you Ulta? have update then going? on do terms any how that's And and the we in expansion an number doors

Debra Perelman

with as the obviously, by about So in-store is regards pleased I'm expansion is excited well encouraged that with developing digital we the the We're consumer a millennial to on well as on as both Ulta, with we're see attracting it comment not that any are we we, young seeing it doing expected do online. say brand. I to and going Flesh within today. very more results, what a engagement Ulta as but very to results the Currently, what partner will being and and

Mary Gilbert

given Okay. commentary brand? then profile around there is also, And around that Sorry. increases? margin any costs the opportunity, And any

Debra Perelman

Sorry, could you repeat the question?

Mary Gilbert

Yes. challenges Are there there given of increases the profile experiencing any you're that the and going cost some the to opportunities forward? margin improve

Victoria Dolan

all the it's is margin financial to and pivotal the our look at our overall certainly success. we something time because, P&L Well, obviously,

I looking going Optimization we those looking impact ways at of the we XX% goods, that savings and it's mitigating cost at Program, of to are about as so definitely think those something increases. think of XXXX are

Mary Gilbert

much. great. you very Okay, Thank

Operator

in JPMorgan. question the next comes Please go The ahead. calling Carla from from line Casella of

Carla Casella

Hi.

the the in $X question on $XX I'm it's like schedule. there million What's facility. is called the for to sounds release reconcile, But discussion, up a sales actual But you difference and the trying running the add-back $X the on million? commented press First to and normal out in impact. back It what's million. you

Victoria Dolan

net, the globally, where any international international The $X we refill pipeline we've we was $XX So where with impact seen. is offset for million -- -- take our markets. specifically million

Carla Casella

Okay.

fill, how we that sales you or should think you the about just is it? million, that weren't that back after orders able is should that gotten you So quarter-end that sales is have $X -- that that year? get next Is to is should so back

Victoria Dolan

in no, to -- that there -- so that -- is here. million One no. that's estimate why the that the negligible lost I on is impact no, to quarter. about the be it net are long million we had When that we net there. times cetera, refills, issues international sorry, to the et for business two lead -- sales, because there get very $XX about I'm relative talked of think $X impact no, a are lost No, pipeline

in did incur million charges what And I with late think that you're we However, some associated alluding. $X customer that's deliveries. --

separate there around is So X and charges. impacts that. customer replenishment of One are supply, and was the other

Carla Casella

helpful. Great, quarter. pretty you that a brand a that of moving that's or more SG&A very into decrease. sorry, And shift you're I'm that mentioned that out support and is then brand see Should displacement? was going we -- increased a just forward support that you decreased That just shift? this significant Is

Victoria Dolan

making Debbie around at a think said by and spend is it timing ROI. it's gross talked and it's we're whether think lot as or availability cabinetry And brand commercial also, our has the as productivity given the spend targeting total in-market. it our highest in permanent I by brand of net looking I Well, as in-market decisions whether or supply to was about, as we whether spend market the that and in support the in re-phasing, of the activities well of

Carla Casella

borrowing in international have assets. not the there's already question to you lot said raise this someone debt easy quarter, are line you international did think I than more this on Do easily internationally? availability able -- specifically, internationally more more But done? a then, of I mean, as liquidity. asked or that is And a you Okay.

Victoria Dolan

to of don't comment on funding. So our terms to in we're relative we what are really do plans incremental going what

liquidity position comfortable we're with it said, as I stands. As our

Carla Casella

biggest and you last I broadly really portfolio products know of talked some Is brands. what and brand, thing, I just that the about Crew new American that of some includes to spread? are there. move give in that enough Okay. of portfolio or Maybe one us Can at needle look there, you range just wide sense a is really Portfolio movers mean, initiatives that a quite if you

Victoria Dolan

Crew So partnership as the Harley-Davidson when CND the that, as brands, mentioned as as I But regional of right? as ones are brand. you regards it that first with the look American drive Almay, Crew, you includes helping call, American ACUMEN are at that well Portfolio and So to with three our brands. the the needle launch to movers, well

launch had at of Lux Shellac expansion Almay. [indiscernible discussed look you well continued and our with If XX:XX], as as CND, a I we

Carla Casella

Great. Thank you.

Operator

question next The calling the in Please from of line comes go ahead. Fargo. from Grant Jordan Wells

Grant Jordan

think going I I just and saying follow-up, call. detail inflect on given will that were the Nielsen, you've had a on you actually positive? trend or comment turn On today appreciate all the your do you it it's to the positive

Victoria Dolan

five you weeks at past No, weeks, at no, look I'm X weeks, past looking the past or at the the X if not looking projecting forward.

Grant Jordan

still reported data set last yet we negative. Okay. I because was had that we don't have the guess,

Victoria Dolan

turning. trend The is

Grant Jordan

Okay.

than than has been turning better -- like greater more or trending? just zero what Turning turning

Victoria Dolan

what trending. has better been Turning

Grant Jordan

you. what Okay. Thank That's I need.

Victoria Dolan

of strong about I our achieving all that your team that long-term driving and Seeing special let the single you in every call efforts members together the Revlon all am you strive foundation for global say world our me to results our note are our Thank no Thank an questions, day, quarter. growth. contributions business especially stronger and to thank make this we've profitable a will even accomplished joined you. for all excited build today who additional future you who the around we be listening. to proud operation as

Operator

disconnect today. for conference the participating. does your for you thank conclude call and lines, This Please

Revlon (REVRQ) 11 Nov 182018 Q3 Earnings call transcript