Q2 2021 Oatly Group AB Earnings Call

[music].

Greetings and welcome to <unk> second quarter, 2021 earnings conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Katie Turner with the Investor Relations. Thank you you may begin.

Good morning, Thank you for joining us I know at least 2021 novel that inquire earnings conference call and webcast on today's call are Tony Peterson, Chief Executive Officer, Peter Berg, Chief Operating Officer, and Christian Yankee Chief Financial Officer before we begin please remember that during the course of this call management may make forward looking statements within the meaning.

Of the federal Securities laws.

Statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward looking statements. Please refer to the company's final prospectus filed pursuant to rule 424, B three on May 21st 2021 and other reports filed from time to time with it.

Securities and Exchange Commission for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today. Please note on today's call management will first are in.

Non I F. R S financial measures, including EBITDA, adjusted EBITDA and adjusted EBITDA margin, while the company believes these non F I R.

Financial measures will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with Ifr. Please refer to today's release for a reconciliation of non <unk> financial measures. The most comparable measures prepared in accordance with IRS.

In addition, <unk> posted a supplemental presentation on its website for reference.

It is now my pleasure to turn the call over to Tony Peterson.

Thanks, David Good morning, everyone. It's great to speak with you today on our first earnings call as a public company.

Today's call I will briefly review, our second quarter financial highlights provide an overview of our business performance during the quarter, including the continued strong momentum for the category.

And when you had raised the key reasons, we believe <unk> is uniquely positioned for long term growth and to be the leading dairy alternatives brand globally.

Peter will provide and.

And update on our global manufacturing capacity footprint.

Christian will review our financial results in more detail before we open the call to take your questions.

Now 2021 represents the most transformational year.

<unk> history with the completion of our successful IPO in May which has provided us with the capital to fuel new production capacity globally as we scale our business across three continents to meet the robust consumer demand for our leading brands we are pushed too.

Of the support from our investors and I look forward to this exciting journey together.

We continue to invest heavily in our business establishing structure personality innovation capabilities.

Policy shifts to maintain and grow our category leadership position.

We are incredibly pleased with the opening of two new facilities in Utah and Singapore.

Do you see your marks the first time, we will have local production in Asia, and we've recently double production capacity at our facility in Michigan. Nevertheless, we're also excited to open our second manufacturing facility. Easter later this year in mind, Sean China, representing a tremendous opportunity for our future growth.

And we expect to gain increased operating efficiencies.

Efficiencies reduce the environmental impact and increased profitability of the region begins to reduce production reliance on EMEA.

We are incredibly proud of our global teams operational execution and the continued strong growth in both new and existing customers.

All of this quite remarkable to call to ship any time and we are doing it on multiple continents joined global pandemic.

As we discussed during the IPO.

We continue to prioritize growth investments over profitability in the next few years to best position, our fleet to serve customers and consumers like to focus on paid nutrition sustainability transparency and trust with the strong emotional connection to our brands.

We believe these priorities are critical for accelerating conversion from the global dairy market, which we estimate to be worth approximately $600 billion in the retail channel value alone as of 2020 with the large foodservice footprint and growing e-commerce opportunity.

Our record all time high second quarter revenue increased 53% to $146 million from the second quarter last year.

Second the strength of our diversified business across multiple geographies and sales channels as well as the momentum we have in the global market.

This further provides evidence of the continued consumer integration away from traditional dairy and the conversion to plant based alternatives, including me.

Our finished good volumes with 106 million leaders for the second quarter as compared to 74 million leaders for the same period last year and increased 43%.

However, global demand for OTT products continued to outpace our supply.

To be constraining our growth in the second quarter, and certain COVID-19, and startup manufacturing headwinds impacted our revenue by approximately.

$12 million to $14 million importantly, these are behind us and we are expanding global production capacity every month to support long term growth again I can't tell you how pleased I am with our achievements.

Scale at which our team is executing and achieving strong results is impressive.

And as we continue to scale, we have significant opportunity to satisfy unmet demand and leverage our brand success to expand across geographies and sales channels and product categories.

June was the highest production month in company history, and we have started off the third quarter strong in July with a consecutive record setting production months.

S Pizza will elaborate on this is a trend we expect to continue and it gives us confidence in our 2021 outlook for revenue to exceed $690 million, an increase of greater than 64% year over year, representing an exploration.

In our rate of growth in the second half of 2021 from the first half of 'twenty one.

For those of you neutral Okay, I will take a little more time on this first call to provide an overview of our business model and global growth strategy.

We launched the world's first opening product in 1995 and being the only company focused solely on liquid Oh technology for more than 25 years.

We're working to put forward the best possible version of milk.

Search has made clear that an estimated two thirds of the global population tend not processed due to elect hosting tolerance according to Alaska.

So our commitment to <unk>, we have developed a proprietary outpaced production technology the beverages patented enzymatic process.

Both into nutritional great tasting liquid product.

Our more than 95 patents filed and pending are supplemented with the protected by three decades, so production process ship commit.

Commitment to continuous innovation and of course sustainability and our consumer centric brand.

Our mission at core believes in driving <unk>.

A shift towards plant based foods system Junior class accompany markwest or purpose driven growth.

Humanity faces massive challenges of climate change in lifestyle disease, our mission is even more relevant and powerful.

Well, we do seem to inspire people to make small changes in their lives that are beneficial to themselves and the planet are in house trading team placement growth that you have an emotional bond with consumers, while already becoming more health conscious and more environmentally cautious.

Our approach has turned out to be incredibly successful driving a revenue CAGR of 82% from 2018 through our second quarter ended June 32021.

It's very penetration of data retail sales globally is only approximately 3%, but growing rapidly based on consumer insights. We've found a 35% quarter percent of the adult population is now purchasing dairy milk alternatives in our key markets.

Indicating that the penetration of <unk>.

And familiarity with the categories high trading growth opportunities from increased frequency of usage.

Nearly 70% of plant based milk consumers have joined the category in the last two years in our key markets. This conversion demonstrates the accelerating trajectory of the category and growth potential for further penetration.

Oh categories rapidly gaining market share and surpassing other cross categories.

Geography, with Oakley, helping to accelerate the overall or the non dairy category growth with active market.

We believe a majority of the market is wide open for the tasting and Ot, we're approaching major tipping point of conversion to plant based alternatives and this creates a significant runway of long term growth.

We have proven global significance with commercial success in more than 20 markets across multiple channels and segments.

Retail foodservice and E Commerce partners.

The range of our growth and success is one of our most impressive accomplishment and we expect it to continue to fuel our growth versus the competition.

June 32021, or both of these products were available across 65000 retail doors and over 60000 foodservice locations income.

<unk> coffee and tea shops here to date, we've added more than 30000 total doors across all of our sales channels globally with additional upside in all of our key markets.

And our products are sold through a variety of channels from independent coffee shop to continent wide partnerships with established franchises like Starbucks.

For food retailers like target from Tesco to premium natural grocers in our corner stores as well as through commercial channels.

Alibaba Tmall.

It's a new market, we use our foodservice net expansion strategy to build awareness and loyalty for our brand through the specialty coffee market and drive increased sales organically to retail and e-commerce channels.

Take the strategic and deliberate approach in all of our markets to build consumer demand organically, we are trough in foodservice.

And then expanding into other channels.

<unk> has positioned us to be a category leader in not only the oat and plant based categories, but also within the broader dairy category.

We have tailored this strategy in many successful international market launches, including the United Kingdom, Germany, the United States and China.

Our brand has continued to excel in scale as evidenced by the following market statistics.

For the last 52 weeks ended for the latest July 2021 refresh according to Nielsen and IRI data.

Hopefully contributed the highest amount of SaaS growth to the dairy alternatives category across our key markets in the UK and Germany and.

And we're the number two in the U S and Sweden only as a direct result of our supply constraint. This is in line with what we expect the near term as we ramp up added capacity in EMEA.

Our Ogden, Utah facility increases capacity.

In the U K, Germany and Sweden.

One of the highest selling brand in the <unk> category by retail sales value, which is the largest category within dairy alternatives in all these markets.

In the U S, where the second selling brand for the last 52 weeks and there was no.

Category, which is the fastest growing category by far in dairy alternative.

In the U S. Okay, it's the highest velocity skus and highest dollar per TDP or total distribution points.

Brands in the total dairy categories dairy, including Talis milk. According to Nielsen <unk> for the last 12 week period ended June 19th 2021, excluding private label.

Based on the same ex AC Nielsen data, we're the only dairy alternatives brand.

Top 10 fastest turning new skus for both traditional dairy and plant based milk.

And we have two skus of the top 10, skus, including our original and full first 64 hours.

This illustrates the strength of our brand at retail and the Halo effect from our multichannel distribution strategy.

And at recent pressures on our market share velocity measured channel.

<unk> and directly correlate the capacity constraints and lack of inventory to fulfill demand across sales channels.

As we've seen in the past on supply improves we can increase the loss of fees and growth as well as the backlog of orders to propel.

Keep in mind, we have accomplish a growth in measured channels, while having to prioritize cape rates for existing customers with only very limited distribution expansion and 19 in 2021 with strong demand for increased loan growth.

Hopefully, it's one of the most profitable.

<unk> for retailers and plant based milk with it winning combo premium price points and velocity. According to Nielsen in total U S. Ex ASC data for the 12 week period ended June 19.2021.

According to spins for the last 12 weeks ended July 11.2021.

We were the number one OTC brand are the number one velocity plant basically president Trump of dollar sales. This continued growth and leadership position is impressive considering the natural channels, where we first started distribution in the U S.

Both described the vast majority of the total dairy alternatives category growth and is quickly take your market share up to approximately 30% market share for the same time period. This leap X Aoc OPEC market share by over 10 percentage points.

Keep in mind.

In the U S approximately <unk> <unk>.

Percentage of our sales are generated in the foodservice channel and 50% in the retail channel in total only approximately 35% of our sales in the Americas a representative in domestic.

<unk> channels.

Okay.

For example, if we say we also have strong presence in the natural channel, which is not fully captured in the Nielsen data and we are strategically building distribution in the convenience store channel.

In EMEA.

Our most mature market, 10% of our sales are in the foodservice channel and 90% in the retail channel of which approximately 80% are recorded and measured.

Sales channels.

So while we track the measured sales channels across geographies, it's not fully representative of our regional or total revenue results specifically in the U S.

In terms of foodservice, we generated strong growth in the U S. During the quarter last year, we shifted volumes away from foodservice to retail as a result of COVID-19 related on premise.

This year, we've been able to strategically increase sales back into foodservice to drive consumer trial and brand awareness, which helps us create an exploration conversion across all sales channels not just foodservice.

Very pleased with our successful launch and growth in Starbucks as their exclusive <unk> Parker.

Growth of Odeon Ultimate test exceeded both of our expectations to date.

Sample.

You're aligned on our estimated volume per month and half.

<unk> consistently been shipping double the original projection.

This is the result of the incredible consumer demand and accelerating rate of conversion from Terry.

And other plant based alternatives.

Generating exponential growth.

This is exciting for us because as our capacity increases in the second half of this year, we will be back to propelling 100% of the OTC. This fall.

Currently providing to source of volume and this continues to grow.

Starbucks is the strong collaborative partner and we look forward to growing with them across existing and new geographies together, we're able to reach many more people with beverages and in doing so we can continue to do great things for the planet.

Focusing on Asia, a growth in this region demonstrates the effectiveness of our proven multi channel expansion strategy.

We have built a new generation of client base, new consumers in Asia by converting traditional dairy milk drinkers totally by attracting new bridges to the category altogether.

We successfully entered the Chinese market in 2008 into the coffee and tea channel, which we have since scaled nationally to over 13000 doors at the end of the second quarter of 2021.

Warehouse and trial achieved into specialty coffee and tea channel was critical to educate the market about plant based dairy and establish a leadership in Asia.

As a result of the consumer excitement that we built around the brand we were able to rapidly scale, our regional presence through a strategic E Commerce partnership with Alibaba Tmall and an exclusive branded partnership with Starbucks in China.

Even a very competitive market place with limited supply we continue to maintain our market leading position on tmall and with increased revenue in Asia, 333% from 2018 through the last 12 months ended June 32021.

Our feet in Asia successfully added many new foodservice and retail when the second quarter, including brand partnerships, where our ultimate brings to any other old based food products are sold together, including both Kirk.

Key coffee chain customer that's just one example.

This is an exciting development that demonstrates the strength of our product portfolio across multiple categories and the increasing consumer appetite for Oakley proving our brand's ability to travel to Europe chooses to shop.

A few additional highlights in Asia. During the second quarter include we extended our partnership with Mcdonald's in mainland China, and we launched partnership with U K coffee in KFC in mainland China.

Our retail sales challenge only being a low single digit contributor to our growth and our team has recently achieved important customer wins with a tremendous upside for future distribution growth in new and existing customers as we scale our local production capabilities later this year and more meaningfully in 2022.

Customers are Walmart or T mark on.

On the convenience store side, we launched an expanded distribution nationally and 711 with both retailer.

E Commerce and also we added metro cash and carry and in the first quarter, we added Sam's club.

This is a strong breakthrough retail distribution for us in Asia, and we've already seen growth in velocity is demonstrating the continued success of our multichannel strategy and ability to drive growth organically.

Conversion across sales channels from foodservice to retail and E com.

First at the highest rate in Asia, and our team is doing an excellent job to ensure our products are available where Asian consumers shop and consume plant based products. Looking ahead, we expect to drive continued industry, leading growth and strong financial performance with further extending and executing on our existing strategies.

We have a tremendous opportunity to accelerate build brand awareness consumer trial for example in the U S. Our household penetration less than 3%. According to Nielsen panel data. This represents a significant runway for growth in not only the U S. As we add production, but globally as they expand.

In both existing and new geographies.

And each of our markets, we can fuel our growth through distribution velocity in market share gains, especially if we improve fill rate.

Today on average at only approximately 70% on a global basis.

Just improving our fill rates alone will generate substantial incremental revenue for our business.

We are accomplishing this through investing in global production capacity to capture the immense consumer demand, we have today and well into the future.

And we have a proven disciplined and thoughtful multichannel strategy that we believe tests, thus par from the competition since we're already building our brand successfully across three continents.

With a tremendous amount of white space to add new markets in the second quarter, we added new countries with distribution in Switzerland and Ireland.

Today, only Sweden, feeling carryover its full product range, we will look to continue to strategically roll out our existing product portfolio across global regions and pioneer new product categories with innovation.

You mentioned there the success, we had in China and the U S is another Great example, with a strong contribution from frozen and of course, the trust health food products now accounts for 10% of our total U S sales today.

And finally in terms of our core ingredients in both their contract and supply in place to grow revenue at the rate, we expect for 2021 and beyond.

In summary, we believe openness incredibly well positioned for long term global growth will be the fundamentals of our business are stronger than ever and consumer demand continues to accelerate.

And we are increasing production capacity globally to meet that growing demand.

Before I turn the call over to Peter I would like to get to report published last month by a third party and then associated publicity campaign MCC plant doubt about our company.

We believe the report to be false and misleading if someone makes an allocation. It is our responsibility to take it seriously and we're dead.

A special committee of our independent Board of Directors reviewed report with the help of independent legal counsel and forensic Accountants. The Special Committee has completed the review and I'm pleased to say that we continue to fully stand by the accuracy and efficacy of our reporting.

I will now turn the call over to Peter.

Thanks, Tony I will start by elaborating on how we are increasing production capacity globally.

Production capacity has been a major constraint on our growth and we have made substantial investments to scale, our production capacity and address supply shortages due to the massive demand for our products globally.

We believe a significant acceleration is underway for dairy alternatives.

Okay is well positioned to continue to generate strong growth based on these compelling industry tailwind.

And our unique brand positioning in more than 20 countries globally.

As Tony mentioned, approximately 60% to 72% of plant based meals consumer joined the category in the last few years.

Today, we utilized a total of five self manufacturing in hybrid facilities globally.

These include two self manufacturing and three hybrid facilities as well as co packing facility.

We have poor factories planned or under construction.

In 2019, we opened one production facility in the United States and one in the Netherlands.

In March 2021, we opened our second U S facility in Ogden, Utah.

This is our first self manufacturing facility in the region.

As you think about capacity ramp it takes between eight to 12 months to reach full production.

In the first quarter of this year, we also completed our planned capacity build out in the Netherlands.

Giving us the ability to produce an estimated 300 million liters and increase from 150 million liters of finished good capacity previously.

In Singapore, we now have a hybrid facility, representing our first local production available in Asia.

This is an important corporate milestone.

The facility is estimated to produce 75 million liters of annual finished goods capacity at full production.

To date since 2018, we have been shipping our products from Europe to support the growth in Asia.

We are excited about the operating efficiencies, we expect to gain from our new state of course.

Along with our own.

Sales manufacturing facility, which is on track to open later this year in <unk> China.

We expect our EMEA manufacturing combined with our two facilities in the U S and two in Asia to help us achieve approximately 1 billion liters of finished goods capacity by the end of the calendar year 2022.

This represents a 200% increase in our production output from the end of 2020.

In addition, we continue to expand capacity of our existing facilities.

We are currently in the planning stage to open additional facilities in the U S and U K in 2023.

These two facilities are estimated to add an incremental 400 million liters of finished goods from 'twenty to 'twenty three to support the demand for our products globally.

June and July this year represent our highest consecutive production month in the company's history.

We expect a similar trend as we progressed through the third and the fourth quarter of this year, which support our strong revenue outlook for 2021.

As we grow.

We believe owning and controlling our global operating footprint is paramount to addressing the significant consumer demand promoting the product.

We expect our planned capex investments in self manufacturing will expand our margin profile.

So if manufacturing enable us to apply our own standards of quality and sustainability.

And flexibility for innovation.

And to protect our IP, while achieving significantly more attractive production economics.

As demonstrated by a fully owned manufacturing capabilities in Sweden.

Using an end to end self manufacturing model, we produce the old space makes sense build the product as the single only owned operated facilities.

We supplement our own manufacturing facility with a diversified network of deeply bedded third party co manufacturing partners to help us drive growth by providing the necessary speed and flexibility to help us meet consumer demand.

<unk> pilot projects.

And support new product launches.

When we utilize the co packing model, we transport our old space through tanker trucks.

Our strategically chosen third party.

Filler for mixing and filling.

When we utilize a hybrid model of manufacturing, we transport our oat base through pipeline to a physical adjacent plants operated by a third party partners fulfilling and mixing.

Our long term goal is to have 50% to 60% of our total volume to come from self manufacturing.

Jus, a co packing to 10% to 20%.

With 30 to 40 from hybrid manufacturing.

For the first six months of 2021 self manufacturing was 20% of our total volume compared to co packing at 53% and hybrid at 27%.

We expect to drive profit growth through increasing ourself and hybrid manufacturing model.

As well as localizing production.

Which will improve our economics of scale and our service level.

Giving a strong outlook for revenue growth, we expect to achieve greater operating leverage from our capital investments to help fuel our significant margin improvement across our global operations.

Going forward, we intend to continue to invest in our innovation capability build our manufacturing footprint.

And expand our consumer base.

Supporting our growth trajectory.

I'll now turn the call over to Christine to review our financials.

Okay.

Thanks, Peter and good morning, everyone.

It's great to be joining you today on our first earnings call as a public company.

Turning to the political revenue for the second quarter of 2021 was 104 to $6.2 million, an increase of $58 million or 53, 3% compared to revenue of nine to $5.3 million in the second quarter of 2020.

In the second quarter of 2021, we experienced broad based growth across retail and foodservice channels. The.

The revenue increase was primarily driven by additional supply coming from the company's existing and to a smaller extent, our new facilities to meet the growing global demand for our products, partially offset by approximately $12 million to $14 million of COVID-19 and startup.

The manufacturing headwinds to sales that we experienced in the quarter, a dollar of listing in Netherlands, and Ogden, Utah facilities.

The estimated foreign exchange benefit to revenue was approximately $10.2 million in the quarter.

The foodservice channel continued to increase in the second quarter of 2021 compared to the prior year period with the continued reopening of on premise outlets from the relaxation of COVID-19 restrictions in our key markets.

In the second quarter last year, the retail channel experienced a significant increase in sales more than offsetting the decline in the foodservice channel primarily noticeable in the Americas all as a result of COVID-19 restriction.

For the second quarter of 2021, the foodservice channel accounted for 33, 2% of revenue compared to 21, 6% in the same period last year.

Retail channel accounted for 61, 5% of second quarter of 2021 revenue compared to 74, 5% in the second quarter of 2020.

Net sales per liter.

Our $1.54 comp.

Compared to $1.42 in the second quarter of 2020, primarily driven by regional channel and customer mix in the Americas, while in EMEA and Asia. The net sales per liter increased primarily is foreign exchange driven.

With our highest regional net sales per liter in Asia, followed by the Americas and EMEA.

Our sales globally are achieved with much lower promotional rate than competition. For example in the U S. Approximately 10% of sales are driven on promotion and this rate is similar across our key geographies.

Gross profit in the second quarter was $38.6 million compared to $30.8 million in the prior year period.

Gross margin decreased 590 basis points to 26, 4% compared to 32, 3% in the prior year period.

The gross margin decline in the second quarter of 2021 compared to the prior year period was primarily due to higher logistics expenses in EMEA and the Americas as well as higher container rates for our shipments from EMEA to Asia.

Change in segment channel and customer mix.

A higher share of co packing production and minor negative effect from foreign exchange.

We have noticed an increase in freight costs driven by the effects of the pandemic.

The shortage in capacity, primarily primarily in the Americas and EMEA. We have also experienced price increases related to our shipments from EMEA to Asia, we expect that the localization and expansion of our production capacity within the regions will help to offset.

Some of these freight cost headwinds.

To date, we have experienced limited material cost inflation compared to the prior year period.

We benefited from volume growth.

<unk> four rapeseed oil, which accounts for approximately three to four percentage points of our total cost of goods sold we expect rapeseed oil prices to continue to increase during the second half of 2021 offset by other anticipated cost efficiency.

Keep in mind.

We continue to expect variability in our gross margin quarter to quarter based primarily on the mix of revenue by geography, and sales channel as well as the mix of our manufacturing output.

On an annualized basis, we expect them to.

To continue to see improvement in our gross margin year over year, starting in 2022 with a long term goal of 40%.

Research and development development expenses in the second quarter of 2021 increased $2.6 million to $4 million compared.

Compared to $1.3 million in the prior year period. This increase was primarily due to an increase of $1.8 million in employee related expenses due to the higher head count.

<unk> include <unk> $3 million in costs for the 2021 long term incentive plan.

And <unk> $4 million and consult.

They are professional fees.

Selling general and administrative expenses in the second quarter of 2021 increased $49.8 million to $83.1 million compared to $33.3 million in the prior year period.

Other operating income and expenses were <unk> 4 million gain compared to a <unk> 5 million loss in the prior year period.

The increase in SG&A expenses was primarily due to an increase of $22.3 million in employee related expenses of which $4 million were noncash costs for the company's long term incentive plan.

All as a result of increased head count as we continue to invest in our growth and also added head count for being a public company.

We also incurred $12.5 million and increased cost related relating to external consultants contractors and other professional fees due to the growth of the business and costs associated with being a public company of which $7.1 million were nonrecurring costs related.

Added to the company's initial public offering.

$5.3 million of increased branding and marketing expenses as compared to lower branding and marketing activities in the prior year second quarter of 2020 due to the COVID-19 pandemic.

In total SG&A included nonrecurring costs related to our initial public offering and the noncash <unk> charge of $11.1 million.

Customer distribution costs increased $4.7 million mainly.

Mainly as a result of higher revenue.

Other operating income for second quarter of 2021 included a net foreign exchange gain of <unk> 3 million compared to other operating expense in the second quarter of 2020 that included a net foreign exchange loss of <unk> $5 million.

Now focusing and focusing on the balance sheet and cash flow as of June 32021, we had cash and cash equivalents of $524.2 million.

322, 7 million and short term investments and total outstanding debt to credit institutions of sub $1 million net.

Net cash used in operating activities was seven $2.5 million for the six months ended June 30, 'twenty, one compared to $20.1 million during the prior year period.

Capital expenditures were $134.4 million for the six months ended June 32021, compared to $52 million in the prior year period.

Cash flow from financing activities were $969 million.

Reflecting the proceeds from the IPO net of repayment of the liabilities to credit institutions and repayment of the shareholder loan the company invested a portion of the IPO proceeds and secure short term investment.

Finally, turning to the guidance for fiscal year 'twenty.

One we expect revenue to exceed $690 million, an increase of greater than 64% compared to fiscal year 2020, with accelerating growth across regions and balanced contribution from each of them. This.

This revenue outlook assumes very nominal contribution from our <unk> China facility that is on track to open later this year any upside to our outlook will be a result of our ability to ramp production at a faster rate than we anticipate.

Assuming no significant changes from where we are today, we expect the second half of 2021 exchange rates to be a single digit tailwind compared to the second half of 2020.

We expect the capital expenditures to be on the low end of the 350 million to $400 million range. We provided at the time of the IPO.

We expect production capacity to be approximately 600 million liters of finished goods by the end of fiscal 2021, a sufficient amount of capacity to reach our annual revenue outlook.

Long term, we would expect to generate gross margin greater than 40%.

And adjusted EBITA margin approaching 20% as we benefit from a much larger self manufacturing footprint globally greater economies of scale and continued strong revenue growth with that I'd like to turn the call back over to Tony.

Thanks Christian.

The last six months have been remarkable for opening I'd like to thank our entire global team at first in helping us achieve our results every day they work to help create an old nuc phenomenon across Europe.

I can state with China with a brand that is the primary growth driver of dairy alternatives.

The effort and dedication of our employees continues to advance the reach and impact of Otis mission on a global scale.

In summary, we're very pleased with our accomplishments year to date.

The balance of the year as we focus on executing a global broker protected.

Because that overview piece of question and I are now available for a question.

Later.

Thank you at this time, we will conduct a question and answer session.

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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for our first question.

Our first question comes from Andrew Lazar with Barclays. Please proceed.

Great. Thanks for the question.

I'll start with you during the IPO process only discussed its on shelf productivity metrics versus other oat milk brands and our key retail customers metrics, such as shelf philosophy, and price premium and promotional depth and frequency and they were all as you mentioned this morning far better than peers I guess, how has this shelf productivity held up.

As more oat milk brands continue to gain distribution on the shelf some of which have greater capacity than do you at least at this stage.

And is your anticipation that we would continue to see this type of on shelf advantage play out moving forward.

Hi, Andrew This is Tony. Thank you. So my question is one.

Good do three a voice again.

Yes, I mean.

As expected.

We knew that we're gonna be pressured.

Retail channel.

If you have capacity and we believe these market share losses are temporary right. We are building the capacity to go and if you look at this big data for instance, but we are the solid number one.

As you look at the partners we started the.

The partnership long ago, with like whole foods market targets and wegmans.

The clear market leader in the non dairy category, where we have a little bit of a higher fill rates not holding average still 70% globally with even lower MBS has been lower in the U S. At.

50, 50% by continuously increasing now having only been onboard here are producing commercial product.

A lot of confidence in the progress going forward. So we accepted two to increase the fill rate over the course of the last two quarters of the year an increase.

As time goes.

Great and then that's a good segue into market share. Obviously, there has been plenty of discussion about about share losses in the U S, which would seem to be primarily if not completely about capacity constraints.

Maybe you can get into a little bit more detail around market share trends more recently with with those key customers with whom you've sort of prioritize supply and how thats impacted your expectations for the business once the company can supply.

Key customers more fully thank.

Thank you.

Yes, so if you look at the.

So some of the long term positive partnership that I mentioned earlier, we have 50, 70% market share in <unk>, which is significantly higher right.

For the rest of the measured retail channel so.

Therefore, we expect we'd see the performance data and what we said earlier in the call that you are the best performing brand dollars per PDP in the total Dan.

Carry crude and milk.

Precedents that brings us a lot of confidence going forward as we can bring more capacity onboard the same thing in Europe, as well best selling skus in the key markets.

Best velocity, so a great platform and great progress in terms of production.

Thank you.

Our next question comes from Dara <unk> Hussain with Morgan Stanley. Please proceed.

Hey, guys good morning.

Good afternoon, Hey, Darren.

Can you give us just a bit more detail around the plans to expand.

What exactly do you commence production there should we think about that as upside to your prior revenue goals was that embedded in you just announced the project how should we think about that.

And then I guess second to take it out broader.

Given you have a lot of new facilities coming online for example, Singapore and Sean maybe you can just talk about holistically your ability to expand capacity.

Quickly beyond what you've announced meaning adding incremental capacity on top of the original plant coming online and how quickly that can be done in some of these newer facilities that are up and running similar to what we're seeing in Oregon.

Thanks.

Thanks, Dara great question.

And when you speak about all of that you are referring to the new expansion that we announced recently.

Yes, I meant the new expansion of the plans for the newest yet.

Yes, I will let Peter speak about it but yes that is incremental volumes to the plants and basically as we were doing what we said we were.

I'm going to do.

During the IPO right. When we said that we want to we have expandable plan and because of that.

We can we can probably.

<unk> expense faster and Peter maybe you can speak more about it.

Yeah.

Thanks for the question and we can start with the state of Oregon, because the starting point was.

150 million liter on annual basis.

150 million liter doesn't mean hundreds of percent sufficient line.

<unk> hundred.

150 million liter. It gives us the monthly output of 12 to 15 million liters.

July we produced 5 million liters filled internally or co Packers so.

The 5 million liter. We produced in July gives us approximately 30% to 40% of total expected output at full capacity on a monthly basis.

Where we stand today, so we expect to increase the output quarter by quarter. So we can get closer to the $12 million to $15 million by the end of the year.

And now we announced a new investment.

And that gives us additional capacity $75 million leader on an annual basis of oat based capacities. So already next year, we expect to get 15 million meter more from that facility and in $2023.75 million a year or more so that in <unk>.

<unk>.

It's on top what we already communicated.

And that's the plan all of the new sites. We are building today, we do them expandable from day, one so we can move past, we'd add new capacity.

Okay.

Okay, great. So just to follow up I guess it sounds like that timeframe for Ogden is is something that could be similar for other new facilities in terms of if you decided to expand them beyond what you've announced.

And then second.

Should we infer from this with the incremental capacity that there's incremental revenue to what you guys have communicated previously or is it more of this was sort of in the plans for you just weren't ready to announce discrete project.

No the incremental $15 million in 2022, and then sort of a.

Two five beyond 2022, but that is expected to be on top of what we already communicated.

And to the question we are considering.

Sleep looking for new opportunities to expand our footprint. So we can grow beyond the plan because there are massive opportunities out there.

So that's our job right now is how can we expand faster quicker more efficient.

Great.

And if I could just slip one more in on foodservice.

In the U S.

Any sense guidance for how much of the incremental revenue that's coming from the Starbucks relationship of foodservice growth in general how much of that is from new customers versus existing customers.

I know that the numbers are a little more difficult to track in foodservice, but just any sense there would be helpful. Thanks.

So I don't know Christian if you have more detailed numbers around that.

Any portion of that comes from new customers.

Especially answering to the.

The partnership with Starbucks.

But we know that we're going to continue I mean, if you look at the coffee shop channel in general.

We know that.

From a specific pipeline that the manager is multiples of what we can deliver right and it goes well beyond what we registered at the orders, though so this is a tremendous upside for us in the car shopping channel.

That will be captured simply by delivering volumes.

And we have devoted to building built.

Solid relationship, but on top of that we actually added Dara additional 10000 foodservice doors through wholesale centers to the first half of the here. So a lot of these come from new customers.

Yes, I think I mentioned to EMEA.

Airbus piece.

Accounting for.

A large share of our sales in the second quarter.

<unk> is definitely performing much better than our expectations.

And accounted for approximately 27 of our sales in the second quarter just wanted to add.

It's a great performance.

Yeah.

Thanks.

Our next question comes from Ken Goldman with J P. Morgan. Please proceed.

Hi, Thank you just to follow up on the Starbucks there was a bit of noise last week.

On another producer mentioned that would also supplies Starbucks in the U S. With some oat milk is it fair to assume that you're still the exclusive branded provider there and at the other producers just filling in some spots that maybe you can't reach right now with your supplier maybe you could just clarify that a little bit for us if possible.

Absolutely, yes, we confirm that we are the exclusive wholesale brand at Starbucks.

And you know we have consistently been shipping double the original projection as a result of that the magnitude of the success of the launch here and the consumer demand.

And at this accelerating rate of conversion from Barrick Q2, Okay, and the oat milk.

We think this is really exciting for us.

As our capacity increases in the second half of this year, we'll get back to fulfill 100% of there that ultimately this fall and we are currently providing about two thirds of their ultimate volume and it continues to grow now Starbucks leveraging products and able to deliver on.

On our opening of demand that far exceeded again again far exceeded everyone's expectation and we are behind is 100% and is in line with the purpose of the Starbucks partnership that we have to drive the conversion from dairy to plant based automate some things down so to.

Two to your point there I guess on both of those questions I can.

It's temporary rate and we're the exclusive the ultimate brand.

Great. That's good to hear and then quick follow up.

Anything we should think about in terms of modeling the back half of the year, whether it's the cadence of sales or any particular.

<unk> expenses that we should think about just you know.

I know you don't want to give too much guidance, but just in the name of no surprises necessarily in the third quarter.

No sure and I think.

Peter maybe that is something you can elaborate around or yeah, I cant elaborate on the top climate.

I can elaborate on the topline.

And I think Chris that you can add.

If you want.

So again the demand is strong and it continues to accelerate every region. So if you look at the page 21 in our presentation.

We are on a strong trajectory for production output with June and July being our largest production months.

In quarter, two we sold an average of 32 million liter per month.

In quarter, three we expect to sell on average 40 million meter per month.

Therefore, we expect to sell on average 50 million liter per month.

On page 21 of the presentation you can see in July we produced approximately $46 million either.

Ogden lifting in Singapore.

In a ramp up phase.

And it takes two to three quarters for a new facility to fully ramp.

Also remember there is a time lag from when we produce the product to when it's sold.

Two to three weeks, except for ACO, we where we have a longer lead time gate to ship them from Europe to Asia.

So we think we have a very straightforward trajectory for all production output going forward and we have built in conservative.

And our outlook for 2021 includes minimal contribution from our second facility in Asia, which is on track to open in the second half of this year.

The marshawn plant in China.

Incremental upside to our stated revenue will be a result of our ability to add production capacity at the faster rate than we expected.

So that's the top line.

Guidance.

Christian do you want to add something about.

Yeah sure.

On the gross margin variability as well in terms of how we expect them to perform in second half. So in line, what we communicated pre IPO.

To do.

Q2 will be better than Q2, and Q4 slightly better than Q3 and on an overall basis in terms of 2021 gross margin not significantly improved like we sort of indicated.

One is the transition year, and we Shouldnt expect to see an annual improvement.

The percentage of tumor underwater.

Previously communicated in terms of EBITDA, we expect us to be an EBITDA adjusted EBITDA loss of $108 million for the year.

This is again a transition year, we are investing in our organization.

Terms of people in terms of IC operations standing up the company.

Future growth.

Very helpful.

Well thank you.

Yeah.

Our next question comes from Kwame cause of Waller with credit Suisse. Please proceed.

Thank you Hey, everybody congratulations on your first earnings call.

A couple of things I'd like to try to square the ink.

Increase in <unk>.

Production of the incremental increase in production production plans and such.

And obviously, we're all hearing about quite substantial inflation across a whole number of things.

But curious on how the Capex guidance is now expected to be towards the lower end given those two.

Given us given those two items.

Or is it just as.

Simple last timing, where you might be at the lower end for this year and we would expect that to just kind of roll into next year.

And on the capital.

Do you want me to take that quickly.

For you Ed.

No I don't think Christina do go Yugo.

On the Capex.

More timing as you were moving.

So.

Sort of.

Okay, perfect and one of the comments in your prepared remarks, just want to make sure I understand it properly is.

Unlike I think.

Most other folks in this industry and other industry, we're seeing a lot of raw material inflation.

You mentioned that with the exception of one item youre not seeing as much but I think he is linked to that volume.

So did you mean that you're not seeing as much gross margin pressure because of perhaps volume leverage and that the raw material prices are indeed higher for your business or is there something.

About the way that you procured or something about what you.

Are you seeing in the market that you're just not feeling that same degree of inflation.

Yes, I think thats driven first of all.

We are continuing to prioritize growth over profitability and near term.

This is sort of a transformational year for us.

With the build out of the two self manufacturing facilities are one hybrid and lithium.

This is sort of the highest capacity build out that we've had in a single year ever in terms of coming back to your question on inflation.

And our expectations for the second half.

To see some minor increases ROI for us in terms of material cost and the one to two percentage range and about a half a percentage point related to trade, but that's built into our projections for the second half of the year.

So we have noticed an increase in freight costs driven by the SEC makeup.

As noted in our remarks.

Driven by shortage in capacity, primarily in the Americas and EMEA are willing to talk about the shipments growing from EMEA up to his ratio as well in terms of containers.

Physical <unk> seen there.

And related to material inflation.

We noted ratio.

Along with that we are seeing sort of an insignificant.

This increased double digits, and we expect that in the second half of the year as well, but again accounted for 3% to 4% of our of our goods sold and <unk>.

The other.

Dissipated cost efficiencies that we're working on to offset some of that headwind.

But it shouldnt be significant part.

Part of our model is one sort of uncertainty.

In terms of votes.

That's a scenario I think we have the supply secure into 'twenty one 'twenty two.

We will see the harvest.

Is doing.

In Canada.

We all know it's been quite a draw situation there.

Again this represents 89% of our Cogs is to keep that in mind.

So it's not a super big component, we have security of supply for the next few years.

Okay, great that's useful thank you.

Our next question comes from Michael Lavery with Piper Sandler. Please proceed.

Good morning, Thank you.

Just looking at your in.

In Asia, the distribution gains you've called out it seems pretty significant and you've got some some big players in national exposure for for China, I guess, how do we think about the how quickly this ramps and the trajectory does this kind of depend on my Sean coming online later in the year or are you ready to serve.

It is it is significant as it seems and could pick up pretty quickly or is this really more going to impact 2022.

Yeah, No [laughter] hi, there.

Good to speak to you again does that.

Yes, I mean, China is China.

The nature of that market is so different from from Europe to U S study.

Going so much faster there you have a bigger players jumping aboard a way sooner you're going to see some effects.

The most of the effect going to be seen next year, but we are really pleased with the partnership that we have we've got to you got maybe one.

See some effects during the course of this year, but but but main portion is going to come next year.

Yes, we're gonna supply, we're going to continue to supply a portion of the supply product from Europe, and EMEA as we've been ramping up Singapore, bringing marshwan live here.

And as deeper and I appreciate that.

Marshawn, we haven't they haven't really counted on any bigger volumes coming from that facility. This year, but you are right.

It's a great significance to the doors that we have.

Added here I mean, we have you know probably.

If you look at the <unk> in China, we can lock them down.

I think and also if you look at the retail.

Entering the retail here now without and I Wanna add like with great velocity performance without any promotion. So you can see that the strategy. The multichannel strategy works and driving that organic demand also in China.

I didn't mention young play, but you don't pay it's one of the biggest retailers are and where.

Well, we have 80% distribution in their stores.

Walmart is also one of the biggest retailers in China all the good performance. So yeah, it's really hard to predict predict the magnitude in China at all because it's so big it's moving so fast.

Like we said like we all we have to do is to try to look at additional capacity. During the course of 2022.2023 here.

That's really helpful and just a quick follow up on the top line you called out the 12 to 14 million.

Sales opportunity missed from from Covid restrictions and the delay ramping up.

Eyeballing.

21, and in looking at the capacity dip in May it would it be right to think that that split is maybe about half and half of those and I guess, what risk do you see of either one of those ahead is there more.

More COVID-19 restrictions that might impact production.

Looking ahead as far as you can tell now or do you feel like you're in the clear there.

Should we think about this.

You know what might be on the horizon.

Tommy It's a great question.

Or maybe you can speak more about the split I just wanted to add that yeah, Kobe COVID-19, it very much Gary here to state right.

I think we have manage it.

Excellently during the year and a half, but it's been going on but it's income unpredictable right.

The events in lithium with one another.

All the best in terms of production.

And COVID-19, but.

I think leasing and what was the big hit for Us.

The Q2 here that's about Peter do you want to speak more about the split here I just want to say the Covid is here I think we have manage the excellently through through the course of the last one year and a half we're going to continue to have this strict protocol to ramp up production facilities, we have strong local regional piece of it.

Could not have grown without the regional teams that we have because we cannot travel and I'm extremely pleased to see the performance that we have and how we are managing this throughout this.

Tons here and again, it's here to stay right.

But it's hard to say yet benefit.

And to your point, Michael Youre, correct, if it slips a fifth.

The drop in in May was because of the.

Covid situation is missing and then also.

Some headwind when we were ramping up some production facilities and it.

A 50.50 split.

But that's the reason why it dropped in May.

That's the answer to that question.

Okay, great. Thanks, so much.

Our next monkey income from Laurent granted with Guggenheim. Please proceed.

Hey, good morning, or rather good afternoon, everyone.

I'd like to better understand how you are making trade offs are.

And I've got so many three sub questions here. The first one is so you you managed to get 75 million liters of additional capacity that's great. So.

Why is the U S and China. So if I can just to understand because you were you pick one or the other.

One would be more in the U S. When you all cause some constraining some of our capacity why Starbucks versus some of the re Saturday wherever and some could say that you are losing shelf space, but I'm sure you're at risk of losing some shelf space.

And then the last one is you had decided to enter to two new countries Island on Skus on 100 Sandoz on those major countries. That's why entering into new countries, where you can't see yet the the demand of a consumer in existing countries. So elektron, just saying more than the thinking process on those three.

Different so questions. Thanks.

Absolutely.

Well still you asked is the bigger market versus China, right and and we entered China later than we did in the U S.

And we see a tremendous demand.

For our product in the U S.

We see fantastic performance in terms of velocity, we have these strong.

Stablish partnership so I would say that the platform.

It's rock solid for us to grow from.

So it's not that we are deep prioritizing China like it is.

I mean, you assume China are the most substantial markets in the world.

We are adding and marshawn China now.

And we are going to try to ramp up as quickly as possible and to optimize our costs as much as we can but we know too little to say that we're going to expand faster in China.

Then we are planning, we want to see a little bit more before we do that and remember one thing we got to have the third plant that where the second and third kind of in Asia that can find mainland China up and running in 2023 right.

So when it comes to Starbucks I think that hey.

Yeah.

We didn't expect the success rate I don't think anybody expected. This magnitude of success of Starbucks right, but it is really important for us. This multi channel strategy that we have sets us apart from competition. So again, 35% of our business in the U S comes from measured channel.

So 65% is something else and that is really really important for us to maintain to drive that organic growth now Starbucks I mean is it.

Fantastic partner.

Committed to ESG, and we're reaching a lot of people and we wanted to drive conversion right again, when we spoke when we talked to you in the IPO, what's driving conversion and we see the evidence here and the performance data right. So that is what we want to achieve.

With the partnership lifestyle about spring snow when it comes to new countries. So remember Ireland as part of the U K.

Switzerland as part of Duck.

Germany, Austria, and Switzerland, so the window for adding retail door to small and these launches were planned well ahead. So as we add we have added new distribution oriented into new partnership the growth in demand accelerates beyond our expectation and that's what happened here.

And we have a very deliberate strategy strategic and disciplined approach of adding distribution across sales channels.

And the challenge has always been to strike the right balance between opportunity on the volumes, you're right, but again if that.

It's when he goes better thing you expect like you are on the aggressive side of normal when you beyond the aggressive side of normal in terms of demand, it's something else, it's really hard to predict but those four planned well ahead.

Thanks, and if I may squeeze something on the U S extra capacity, we'd have been priority for Nick.

<unk>.

Expansion into more ice cream and.

Yogurts.

Peter do you want to.

Yeah the investments.

Oh space capacity could we have the flexibility to choose but of course.

Most of it will go to <unk> milk, but we can use that oat based report for ice cream and gertz as well.

So that's the flexibility we will have with that additional 75 million liter of both base capacity.

Thank you I'll pass it on thank you very much.

Thanks, Laura Thank you.

Next question comes from Bryan Spillane with Bank of America. Please proceed.

Thank you operator Hello, everyone.

Just to two quick follow up questions. One just on one of the Ron's question is about the I guess foodservice versus retail in measured channels in the U S.

Would we expect to see or how should we expect to see.

I guess in stock levels and more production.

Begin to show up more in measured channels I think one of the one of the questions. We got quite a bit from from investors is just a concern that consumers are draw are being driven to oat milk at retail and if they are finding some other brand right. They may choose that brand and it's hard to to convert them over so just trying to understand with COVID-19.

With capacity additional capacity coming on.

Would we expect to see market share should that show up in some of the measured channel data as we move through the balance of the year.

Okay.

Hey, Brian.

Good to speak with you again.

Yes, Youre right.

We are going to see improvements as we bring more capacity in terms of market share in retail foodservice wherever we are aiming to build that so we have clear line of sight of some expansion in the U S. But you really want to bridge the gap here.

Because the demand is so high and it's really hard to say exactly when right because.

If you look at the fill rates we are expanding we are building more capacity, but if demand continues to accelerate the way. It does you know it.

It's going to have the hockey to exactly say, what I'm going to close that gap completely but definitely we aim to breach that close to GAAP dilutive at least closer.

During the course of this year.

Okay. Thanks.

Can I just add to that quickly.

<unk> is the first generic so we are beginning to see improvement in our fill rates as our production capacity is ramping up.

But there is a about three to four week lag on average from production to consumption at retail so I just wanted to add that.

Okay. That's helpful. And then just one follow up I think it was Michael labors question about around Covid and just can you just I guess the question I had was just in terms of how it impacted us.

Capacity.

Or production in May.

Is it related to you know.

Like infection rate in the plants and absenteeism or is it related to some delays and expanding capacity just trying to understand what exactly happened and then.

Are you taking any other additional actions, whether its vaccinations or testing or other.

Sort of actions to try to kind of limit the impact that that you could have on your manufacturing.

Okay.

I mean, yes, I think we're extremely disciplined there.

Not even I am allowed into the factory.

Not even in Sweden, just go there. So we have we have protocols set up everywhere because we know.

How difficult it's been to be honest with you.

Really happy to be where we are right to actually to have broad had brought all the feedlots into the factories.

Starting to ramp up producing commercial product.

With people sitting in hotel rooms per week, if you look at Singapore, who are redistrict life.

You see needed to Ashley for government and stuff like that so we understand the importance of the.

Total costs and have them, there and execute them at 100% now in terms of effect the impact maybe teachers that or or Christian is that something that you wanted to say.

I mean EMEA specifically.

You can chime in we did have.

Planned maintenance stop enough krone as we have for our plans every now and.

Right.

So that occurred in May.

Explanation of <unk>.

It was planned.

Shutdown and then we also have the listing and Covid impact that occurred in April that had sort of a lagging EMEA as well. So those are the two points.

<unk> for the dip in May, but Peter you want to add something.

Yes, that's correct.

That's correct.

Okay. Thank you.

And Brian just just going back to your question.

Christian pointed out now fill rate has increased continuously.

Seems march right. So so definitely going to see the fill rate improving during the course of this year that's great. Thanks Tony.

Yes.

Our next question comes from Bill Chapell, which with please proceed.

Thanks, Good morning, good afternoon.

Okay.

Just make sure I understand the numbers a lot of the questions have been on.

The market share losses, the competitive nature in the U S in tracked channels.

That's up 7% to 8% of your total sales.

Doing the math correct.

I'm sorry, what did.

Did you say seven.

You said, 35% of the Americas has tracked channels and I think Americans was about 77% of total sales. So I think I'm doing the math right, where we're talking about seven 8% of total sales correct.

Christian is that do you have that Mike can you repeat the question again, because I didn't quite follow you said America accounts. So I mean, when we're talking about.

U S track channels, yes.

You have been losing share that's about 7% to 8% of your total sales.

Correct.

I can jump in.

Just maybe.

Yes.

Hum.

The reason I ask that is is that we actually haven't talked that much about Europe and could you talk a little bit more about any competitive entrants competitive activity and actually how that market is progressing because kind of going into the IPO.

Oat milk, it really overtaken almond and soy and in was kind of expanding even further in the plant based side. So I'm kind of interested if you're seeing an onslaught of competition kind of like you have in the U S or if if.

That's kind of a steady as she goes.

No. Okay got it no that's not that's a really good question I remember one thing Youre opinions. The most volume constrained region that we have because it is supplying it has supplied Asia for a very long period of time in Asia has really boomed.

So Europe has been the weekend, but we have like with most constraints on now that said like.

Still we are the best selling skus with the highest velocity across our key markets. While we've seen principal competition is the normal kind of stuff sort of when you are promoting heavily and we don't see you know.

You may be you see Aman.

Because we are such that we have been such a significant growth driver in the categories across our key markets. So when we don't supply enough you're going to see that category is also dropping slightly in terms of growth rate like that will change when we bring best supply when they are briefing and now up and running like remember like leasing units.

Significant.

It's the biggest plant will be double the cabinet capacity from 150 to 300 million liters ramping up of course right. So you don't see the 300 millimeter wave is coming up right now, but you're going to see everything changed when we start to supply again. So there was a question earlier about are we like the concern about leaving the space for competition.

Well, that's the nature of the business our brand is so strong and we see that we are regaining every single time, when we are off shelf and get back again.

Costs were all playing a different game than than competitors are right. So.

Really good question around Europe is still our biggest region.

But to be honest with you we are happy where we are there because it could have been so much worse given all the supply.

I think you have the production up and running now.

Got it thanks, and then a follow up on the Covid question was that across all three regions or was that primarily in Europe, where was that where was the biggest impact of kind of the what you could have gotten but impacted by COVID-19.

Peter is that something you know that.

The COVID-19 the Covid issue was related to our listing and type only so we have to close that down and then started up a couple of days later.

That's for me the first one five but but but in general terms during the last 12 to 24 months.

The challenge the biggest challenge with Covid has been.

Setting up the new facilities.

Now that most of that work has been done. So so so and we are in a ramp up phase in most of them. So that the biggest challenge for us with Covid. So far has been keeping the new production.

Our new projects.

The right speed.

And then coming back to your original question.

So finally, I think beyond that.

Yes, so in terms of our total U S sales that's been 20% of that is something that we've been measuring that.

Would be the 35% of decision.

Retail.

Okay. Thanks, so much.

Our next question comes from Rob Dickerson with Jefferies. Please proceed.

Alright, great. Thank you so much.

So I just have a higher.

And about.

Hey, how are you.

Go ahead.

Incremental new business win opportunity in the U S.

Kind of vis vis what we've seen in Asia right. You said you know Asia is a much different beast.

Things can ramp a lot more quickly.

Right now you're trying to just meet demand.

Off the incremental capacity in the U S. But then I'm curious like as you go into these retailers and also food foodservice providers.

How are those conversations now.

Now you know.

With respect to new business win opportunities given that capacity constraints, you say look.

Here's the evidence how we've done so well because of the reasons these retailers and at Starbucks.

If you bear with US right, we're going to have incremental capacity that we can partner with you. So I'm just curious kind of how that plays out in those talks now if we think into next year also compared to what your competition might be doing.

Yeah, I think obviously I mean Q2 S. S. We knew entering Q2 would be the difficult most difficult period of time in the history of the company in terms of capacity versus demand right. So all of this of course, and but but if you look at for instance.

Listing right you haven't seen any material impact from delisting and it's a testament of how strong.

Our contribution to the category and our sales performance when we're on shelf and how important all brand as it is for the growth of the retail business.

The oldest comment we could've done that without the strong partnership so I think won't walk T counts and distributing the regionally our regional managers of English.

It is really really make sure that those relationship remains strong now entering the second half of this year, we're going to it's going to become better and better and better right. So it's going to be more of those conversations.

Be easier not I would say is never easy right, but but more on the positive tone every single time going for them. So we feel really confident about where we are bringing these plants up and running.

Okay Fair enough and then just a quick clarification question just regarding your your comment earlier around potential EBITDA for the year I'm not sure if I heard you correctly, but it seems like it could imply some ramp expenses and the SG&A area.

In the back half relative to the first half. So one I guess is that right and if so.

What would be driving that lets say outside of freight.

Thank you.

Christian.

Yeah, I mean, I think in terms of.

SG&A in adjusted EBITDA, and I think that is progressing and demand will be communicated as part of the.

The roadshows.

And we this is sort of a transitional year and we are investing in our organization.

And the <unk> operations and the likes to take them to the next level. So there's nothing there that's sort of out of the ordinary.

And again, we expect adjusted EBITDA to be around revenue.

<unk>.

Got it okay, great. Thank you.

Okay.

Our next question comes from Nik Modi with RBC capital. Please proceed.

Thank you and good morning, everyone I'll keep it quick.

You've talked a lot about.

Hey, how are you Tony.

I just wanted to add context on the capacity and talking about the year end guidance.

Now with capacity or of your production line.

Fill rates have been better than we expected that there could be some upside and I'm just curious on what the swing factors. There are just so we can monitor and poor pumps and a little bit more closely.

It's a good question Peter maybe you want to repeat some of the things that they're in.

Yes.

It's all about if we can.

Our ability to add production capacity excess rate is like.

Ramping Ogden faster ramping Singapore.

And lifting and faster and then get.

Sean.

Life faster so so.

That's the potential upside and it's hard to value a swing of that they pick up. They are also a lag between production and when it can be sold.

But we feel very comfortable with our guidance.

Yes.

Asking more about what are some of the optical drivers that would.

I'll get you to that point, meaning it was really about hiring finding the right workers.

Potential COVID-19 risk I mean, I'm, just trying to understand what's kind of embedded in your existing expectations.

Yeah, it's about.

Like to stick to the plan our ramp up plan for a facility like getting more and more volumes every month. So as I said, we produce 5 million leader in July and August and we expect that to increase and in quarter four we expect that to be.

Closer to 10 million $9 million to $10 million or so so that's what gave us extra volume. We also expect leasing and to get more volumes and we expect Singapore to get one to 2 million liter per month.

Going forward. So so just by adding these volumes, we feel comfortable about comfortable about our guidance.

I guess it is more or less it's more or less sticking back to make sure that we execute and stick with the plan.

And and if we can do that faster.

Great and maybe that potential swing the opposite.

Direction would be of Covid hit somehow.

That would hit US I don't know people maybe.

Travel or.

Certain region is locked down completely people can't go outside their homes, you know, they're more they're more they're more strict in Asia than anywhere else in the world in terms of locking down things right.

I mean COVID-19 is it is there we manage it.

But as Peter said, we feel we feel good about the numbers that we have provided to you guys.

So it's mainly about execution make sure that we followed the protocols and all that.

Excellent I'll pass it on thank you.

Thank you.

Our next question comes from Jon Andersen with William Blair. Please proceed.

Good morning, good afternoon, everybody.

Hey, John.

I had a question about kind of priorities as well.

When you think about getting to 600 million liters of capacity by the end of the year.

Presumably that's going to allow you to improve your fill rates improve the supply demand imbalances.

Is your goal or would your priorities be to get existing customers up to say, 98% service levels.

Or will you continue to add new customers.

And accept kind of lower fill rate in aggregate I'm, just trying to understand how you're balancing that focus again on driving higher fill rates are very high fill rates with existing customers versus expanding say at retail in the U S, where you're HCV is much lower than.

A certain competitor in the in the OBL category. Thanks.

Yeah, just just bridging that fill rate with existing customers.

Customers will add incremental sales to our business right.

And we do we need to honor the relationships that we have now we have a very disciplined manner in how we expense. So we have a couple of clear line of sight in terms of expansion, but it's not going to be anything crazy.

I think the most difficult part when you speak about the fill rate if your ability to.

To supply versus demand right and as demand continues to accelerate you know even if we bring everything we have there and we will also work with retail.

We wouldn't know would hit the fill rates right or the service levels with customers. The cost demand is increasing but in terms of priorities, we're not doing anything crazy.

Super disciplined in how we are expanding and we have great relationships great partnership where we are that's why also why we feel so confident we have the doors right. We do have the doors. So it's it just start to produce and ship.

And so we've got a very much stick to that as much as we can and must do anything crazy, but we are going to add some very limited number of doors. During the course of this year.

Okay. That's helpful and then just.

Shifting gears to think about the product portfolio and the potential evolution of the portfolio beyond milk into gertz frozen desserts, which I know you're already doing but has.

Has your thought on the your ability to shape the portfolio are moving in the direction with higher contributions from <unk> and other products has that changed at all because I think those are higher margin products in some cases as well.

Yeah.

And given kind of the demand and the supply situation right now how should we think about again your ability to kind of evolve the portfolio over time. Thanks.

No I mean, that's a great question and I remember one thing Oh, what was said during the IPO is that we don't have the same structure as David we count when it comes to different categories right. The cost milk is the most commoditized.

Category into the world of food.

Subsidizing the screen like no one is making money out of cows milk price.

So you have to produce your yogurt you have producers choose to get any margins whatsoever. Now we're not in that position here right. We use the same old time type of Osage and mainly we use co manufacturers when it comes to two other categories.

So yes, if we would have produced them in house fully we would have a slightly better margin, but they are equal because you feel both both are all healthy margins.

So if you look at the product and I mean.

I'll see if the generics. This is about conversion is driven by mail like we have to monitor that closely but in the U S. We had great success already now 10% of our portfolio. It's food right you look at the when it comes to <unk> and ice cream frozen items in retail, but also if you look at software.

Our sales and self serve is 10 X what we expected it to be.

In the collaborations with the with our with NBL team's done and the 16 handles.

If you can handle.

So.

We feel that if we expand into the category, we're gonna be immensely successful as well right. So we have to prioritize there and I think they have to be prepared.

And we have to monitor the development as as time goes that's how we look at it but we will never lose innovation power.

And our ability to expand across the different categories that like we have like.

Devoted to this 30 years, we're not going to throw that away right. Like you said during the IPO, we expect two distinct ourselves even further versus competition with expertise, we're bringing in an expanding across the world fight. So it's a very long answer but it is a very interesting question.

That we are also following closely.

But I can't give you like a direct answer on that but yeah. That's the thought process that we have.

John that's helpful. Tony I appreciate it.

Yeah.

Thank you at this time I would like to turn the call back to management for closing comments.

I just wanted to thank everybody. This was our first earnings call and and we have been waiting for these guys to choose to be able to meet and speak with you again and we appreciate your questions and interest in the company and all of US look forward to meeting more of you when we attend investor events. This year.

Thank you so much quick questions your participation and have a great and catastrophe everybody.

<unk>.

Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and thank you for your participation.

[music].

[music].

Good morning, Thank you for joining us I know at least that 2021 novel second quarter earnings conference call and webcast.

Today's call are Tony Peterson, Chief Executive Officer, Peter Berg, Chief Operating Officer, and Christian Yankee Chief Financial Officer before we begin please remember that during the course of this call management may make forward looking statements within the meaning of the federal Securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties.

Is that could differ materially from actual events or those described in these forward looking statements.

Refer to the company's final prospectus filed to swim in a rural or 2043 on May 21st 2021 and other reports filed from time to time with the Securities and Exchange Commission for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today. Please note on today.

His call isn't it.

Birth or in <unk>.

Non ifr financial measures, including EBITDA, adjusted EBITDA and adjusted EBITDA margin, while the company believes these non F. I R. S financial measures will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute.

All information presented in accordance with IRS. Please refer to today's release for a reconciliation of non <unk> financial measures. The most comparable measures prepared in accordance with IRI. In addition, it was supposed to be a supplemental presentation on its website for reference.

Now my pleasure to turn the call over to Tony Jensen.

Thanks, Katie and good morning, everyone. It's great to speak with you today on our first earnings call as a public company.

On today's call I will briefly review, our second quarter financial highlights provide an overview of our business performance during the quarter, including the continued strong momentum on the old category and reiterate the key reasons, we believe uniquely position for long term growth attributes of leaving Dan.

Cherokee's brand globally.

Peter will provide an.

And update on our global manufacturing capacity footprint.

Christian will review our financial results in more detail before we open the call to take your questions.

Now 2021 represents the most transformational year.

History with the completion of our successful IPO in May which has provided us with the capital to fuel new production capacity globally.

Scale, our business across three continents to meet the robust consumer demand for our leading brands we are pushed too.

The support from our investors and I look forward to this exciting journey together.

We continue to invest heavily in our business establishing structure personality innovation capabilities.

Partnerships to maintain and grow our category leadership position.

We are incredibly pleased with the opening of two new facilities in Ogden, Utah and Singapore.

Do you see your marks the first time, we will have local production in Asia, and we've recently double production capacity at our facilities in Michigan. Nevertheless, we're also excited to open our second manufacturing facility shall later this year in MA, Sean China, representing a tremendous opportunity for our future growth.

And we expect to gain increased operating efficiencies.

Efficiencies would you stay environmental impact increased profitability as we can be used to reduce production reliance on EMEA.

We are incredibly proud of our global teams operational execution and the continued strong growth in both new and existing customers.

All of this is quite remarkable to call to ship any time and we are doing it on multiple continents joined global pandemic.

As we discussed during the IPO.

We continue to prioritize growth investments of our profitability in the next few years to best position to serve customers and consumers like to focus on paid you Christian sustainability transparency and trust with the strong emotional connection to our brand.

We believe these priorities are critical for accelerating conversion from the global dairy market, which we estimate to be worth approximately $600 billion in the retail channel value alone as of 2020 with the large foodservice footprint and growing e-commerce opportunity.

Our record all time high second quarter revenue increased 53% to $146 million from the SEC.

Second quarter last year.

Let me the strength of our diversified business across multiple geographies and sales channels as well as the momentum we have in the global market.

This further provides evidence of the continued consumer migration away from traditional dairy and the conversion to plant based alternatives, including me.

Our finished good volumes with 106 million leaders for the second quarter as compared to 74 million leaders for the same period last year and increased 43%.

However, global demand for Otis products continued to outpace our supply.

To be constraining our growth in the second quarter and certain COVID-19, and start up manufacturing headwinds impacted our revenue by approximately.

$12 million to $14 million importantly, these are behind us and we are expanding global production capacity every month to support our long term growth again I can't tell you how pleased I am with our achievements.

Scale at which our team is executing and achieving strong results is impressive.

And as we continue to scale, we have significant opportunity to satisfy unmet demand and leverage our brand success to expand across geography sales channels and product categories.

June was the highest production mountain company's history, and we have started off the third quarter call in July.

<unk> record setting production months.

S Pizza will elaborate on this is a trend we expect to continue and it gives us confidence in our 2021 outlook for revenue to exceed $690 million, an increase of greater than 64% year over year representing <unk>.

<unk> in our rate of growth in the second half of 2021 from the first half of 'twenty one.

For those of you mutual Oakley I would take a little more time on this first call to provide an overview of our business model and global growth strategy.

We launched the world's first OTT product and 995 and being the only company focused solely on liquid Oh technology for more than 25 years.

Working to put forward the best possible version of milk.

Research had made clear that an estimated two thirds of the global population tend not processed due to lactose intolerance. According to landscape.

Through our commitment to <unk>, we have developed a proprietary outpaced production technology the beverages patented enzymatic process, the Osage and nutritional great tasting liquid product.

Our more than 95 patents filed and pending are supplemented with the protected by three decades, our production cost per ship.

Men to continuous innovation and of course sustainability and our consumer centric brand.

Our mission at core believes in driving just thoughtful.

Shift towards plant based foods system Junior class, a company not quest or purpose driven growth.

As humanity faces massive challenges of climate change in lifestyle disease, our mission is even more relevant and powerful.

Well, we used to inspire people to make small changes in their lives that are beneficial to themselves and the planet.

Our in house trading team placement proceeds do you have an emotional bond with consumers, while already becoming more health conscious and more environmentally cautious.

Our approach has turned out to be incredibly successful driving a revenue CAGR of 82% from 2018 through our second quarter ended June 32021.

Thanks, He's very penetration of data retail sales globally is only approximately 3%, but growing rapidly based on consumer insights. We've found that 35% to 400% of the adult population is now purchasing carry milk alternatives in our key markets.

Indicating that the penetration.

And familiarity with the categories high trading growth opportunities from increased frequency of usage.

Nearly 70% of plant based milk consumers have joined the category in the last two years in a key market. This conversion demonstrates the accelerating trajectory of the category and growth potential for further penetration.

The old categories rapidly gaining market share and surpassing other crop categories.

Geography, with Oakley, helping to accelerate the overall over the non dairy category growth with active market.

We believe a majority of the market is wide open for the taking and Ot, we're approaching major tipping point of conversion to plant based alternatives and this creates a significant runway of long term growth.

We have proven global significance with commercial success in more than 20 markets across multiple channels and segments.

Retail foodservice and E Commerce partners.

The range of our growth and success is one of our most impressive accomplishment and we expect it to continue to fuel our growth versus the competition.

June 32021, or both of these products were available across 65000 retail doors and over 60000 foodservice locations.

The coffee and tea shops year to date, we've added more than 30000 total gross across all of our sales channels globally with additional upside in all of our key markets.

And our products are sold through a variety of channels from independent coffee shop to continent wide partnerships with established franchises like Starbucks.

For food retailers like target and Tesco to premium natural growth stressed and corner stores as well as E Commerce channel.

Alibaba Tmall.

It's a new market, we use our foodservice net expansion strategy that builds awareness and loyalty for our brand through the specialty coffee market and drive increased sales, so Danny Kelly to retail and e-commerce channels.

Take this strategic deliberate approach in all of our markets to build consumer demand organically, we are trough in foodservice and.

And then expanding into other channel.

It has positioned us to be a category leader in not only the olefin plant based categories, but also within the profit dairy category.

We have standard this strategy and managed successfully Nashville market launches, including the United Kingdom, Germany, the United States and China.

Our brand has continued to excel in scale as evidenced by the following market statistics.

For the last 52 weeks and of course, the latest July 2021 refresh according to Nielsen and IRI data.

Hopefully contributed the highest amount of sales growth to the dairy alternative drink category across our key markets in the UK and Germany and we're the number two in the U S and Sweden only as a direct result of our supply constraint. This is in line with what we expect the near term as we ramp up added capacity in EMEA.

And now our.

Our Ogden, Utah facility increases capacity.

In the U K, Germany and Sweden.

The highest selling brand in the old category by retail sales value, which is the largest category within dairy alternatives in all these markets.

In the U S, where the second selling brand for the last 52 weeks and there was no.

Category, which is the fastest growing category by far and dairy alternatives.

And did you at Otis the highest velocity skus and highest dollar per TDP or total distribution points or.

Brands in the total dairy category dairy, including Cal smelt According to Nielsen.

For the last 12 week period ended June 19th 2021, excluding private label.

Based on the same ex AC Nielsen data, we're the only dairy alternatives brand in the top 10 fastest turning new skus for both traditional dairy and plant based milk.

And we have two skus all of the top 10, skus, including our original and full first 64 ounce.

This illustrates the strength of our brand at retail and the Halo effect from our multichannel distribution strategy.

And at recent pressures on our market share velocity measured channel.

<unk> and directly correlate the capacity constraints and lack of inventory to fulfill demand across sales channels.

As we've seen in the past on supply improves we can increase the loss of fees and growth as well its backlog of orders took a pill.

Keep in mind.

We have accomplished our growth in measured channels, while having to prioritize gateways for existing customers with only very limited distribution expansion and 19 in 2021 with strong demand for increased door growth.

Hopefully, it's one of the most profit Brad.

But we tell us and plant based milk with it winning combo premium price points and velocity. According to Nielsen in total U S. Ex phase two data for the 12 week period ended June 19.2021.

According to spins for the last 12 weeks ended July 11th 2021.

We were the number one brand of the number one the loss of the plant based trend and Trump dollar sales. This continued growth in the <unk> position is impressive considering the natural channels, where we first started distribution in the U S.

<unk> got the vast majority of the total dairy alternatives category growth and quickly take your market share up to approximately 30% market share for the same time period. This leap X Aoc opaque market share by over 10 percentage points.

Keep in mind.

In the U S. Approximately 80% of our sales are generated in the foodservice channel.

8% in the retail channel.

Total only approximately 35% of upheld in the Americas represented I think domestic sales channels.

Yes.

For example, if we take we also have strong presence in the natural channel, which is not fully captured in the Nielsen data and we are strategically building distribution in the convenience store channel.

In EMEA are.

Most metro market, 10% of our sales are in the foodservice channel and 90% in the retail channel of which approximately 80% are recorded and measured.

<unk> sales channels.

Not only are representative of our regional or total revenue results specifically in the U S.

In terms of foodservice, we generated strong growth in the U S. During the quarter last year, we shifted volumes away from foodservice to retail as a result of COVID-19 related on premise.

This year, you've been able to strategically increase sales back into foodservice to drive consumer trial and brand awareness, which helps us create an acceleration in conversion across all sales channels not just foodservice.

So very pleased with our successful launch and growth of Starbucks as their exclusive <unk> Parker.

Okay. Okay.

As both of our expectations to date.

For example.

Get aligned on our estimated volume per month and had.

Consistently been shipping double the original projection.

This is the result of the incredible consumer demand and accelerating rate of conversion from dairy.

And other plant based alternatives.

Generally the exponential growth.

This is exciting for us because if our capacity increases in the second half of this year, we will be back to fulfilling 100% of the OTC. This fall.

Currently providing two thirds of volume and this continues to grow.

Starbucks is a strong collaborative partner and we look forward to growing with them across existing and new geographies.

Together, we're able to reach many more people with beverages and in doing so we can continue to do great things for the planet.

Focusing on Asia, a growth in this region demonstrates the effectiveness of our proven multi channel expansion strategy.

We have built a new generation of plant based milk consumers in Asia by converting traditional dairy milk drinkers totally by attracting new drinks to the category altogether.

We successfully entered the Chinese market in 'twenty into the coffee and tea channel, which we have since scaled nationally to over 13000 doors at the end of the second quarter of 2021.

Ernest and trial achieved into specialty co.

<unk> E channel was critical to educate the market about plant based dairy and establish our leadership in Asia.

As a result of the consumer excitement that we built around the brand we were able to rapidly scale, our regional presence through a strategic E Commerce partnership with Alibaba Tmall and an exclusive branded partnership with Starbucks in China.

Even a very competitive market place with limited supply we continue to maintain our market JV position on Tmall and with increased revenue <unk>, 333% from 2018 through the last 12 months ended June 32021.

Athene in Asia.

We added many new foodservice and retail when the second quarter, including brand partnerships.

Great.

The old based food products are sold together, including both Kurt in the key coffee chain customer.

One example.

This is an exciting development that demonstrates the strength of our product portfolio across multiple categories and the increasing consumer appetite for oatley, proving our brand's ability to travel to Europe chooses to shop.

A few additional highlights and eastern during the second quarter include we extended our partnership with Mcdonald's in mainland China, and we launched partnership would take coffee in KFC in mainland China.

Retail sales challenge only being a low single digit comp.

<unk> growth and our team has recently achieved important customer wins with a tremendous upside.

<unk> distribution growth in new and existing customers as we scale our local production capabilities later this year and more meaningfully in 2022.

Customers are raw.

Mark <unk> Mark on.

On the convenience store side, we launched an expanded distribution nationally in 711 with both retailer.

E Commerce and also we added metro cash and carry and in the first quarter, we added Sam's club.

This is a strong breakthrough retail distribution Preston Asia.

<unk> already seen growth in velocity, demonstrating the continued success of our multichannel strategy and ability to drive growth organically.

Conversion across sales channels from foodservice to retail and e-commerce at the highest rate in Asia and our team is doing an excellent job to ensure our products are available or Asian consumers shop, and consume client based product.

Looking ahead, we expect to drive continued industry, leading growth and strong financial performance to further expanding and executing on our existing strategies.

We have a tremendous opportunity to accelerate both brand awareness and consumer trial for example in the U S. Our household penetration less than 3% According to Nielsen panel data.

This represents a significant runway for growth in not only the U S. As we add production, but globally, expanding both existing and new geographies.

And each of our markets, we can fuel our growth through distribution velocity in market share gain.

Pension if we improve kittiwake.

Today on average at only approximately 70% on a global basis.

Just improving our fill rates alone will generate substantial incremental revenue for our business.

We are accomplishing this through investing in global production capacity to capture the immense consumer demand, we have today and well into the future.

And we have a proven disciplined and thoughtful multichannel strategy that we believe sets us apart from the competition since we're already building our brand successfully across three continents.

With a tremendous amount of white space to add new markets in the second quarter, we added new countries with distribution in Switzerland and Ireland.

Today, only Sweden, feeling carryover its full product range, we will look to continue to strategically roll out our 16 product portfolio across global regions and pioneer new product categories with innovation pardon.

I already mentioned there and the success, we had in China and the U S is another Great example, with a strong contribution from frozen and of course, the trust health food products now accounts for 10% of our total U S sales today.

And finally in terms of our core ingredients in both we have contract and supply in place to grow revenue at the rate, we expect for 2021 and beyond.

In summary, we believe openness incredibly well positioned for long term global growth will be the fundamentals of our business are stronger than ever.

The bank continues to accelerate.

And we are increasing production capacity globally to meet that growing demand.

Before I turn the call over to Peter I would like to get to report published last month by a third party and then associated publicity campaign MTT plant doubt about our company.

We believe the report to be false and misleading.

Makes an allocation it is our responsibility to take it seriously and we're dead.

A special committee of our independent Board of Directors reviewed report with the help of independent legal counsel and forensic Accountants. The special Committee has completed their review.

Pleased to say that we continue to fully stand by the accuracy and efficacy of our reporting.

I will now turn the call over to Peter.

Thanks, Tony.

I will start by elaborating on how we are increasing production capacity globally.

Production capacity has been a major constraint on our growth and we have made substantial investments to scale our production capacity.

Address supply shortages due to the massive demand for our products globally.

We believe a significant acceleration is underway for dairy alternative.

<unk> is well positioned to continue to generate strong growth.

Just on these compelling industry tailwind and argue unique brand positioning in more than 20 countries globally.

As Tony mentioned, approximately 60% to 72% of plant based meals consumer joined the category in the last few years.

Today, we utilized a total of five self manufacturing these hybrid facilities globally.

These include two self manufacturing and sweet hybrid facilities as well as co packing facility.

We have poor factories planned or under construction.

In 2019, we opened one production facility in the United States and one in the Netherlands.

In March 2021, we opened our second U S facility in Ogden, Utah. This is our first self manufacturing facility in the region.

As you think about capacity ramp it takes between eight to 12 months to reach full production.

In the first quarter of this year, we also completed our planned capacity build out in the Netherlands.

Giving us the ability to produce an estimated 300 million leader and increase from 150 million liters of finished good capacity previously.

In Singapore, we now have a hybrid facility, representing our first local production available in Asia.

This is an important corporate milestone.

The facility is estimated to produce 75 million liters of annual finished goods capacity at full production.

To date since 2018, we have been shipping our products from Europe to support the growth in Asia.

We are excited about the operating efficiencies, we expect to gain from our newest speaking of course.

Along with our own.

Sales manufacturing facility, which is on track to open later this year in my trunk China.

We expect our EMEA manufacturing combined with our two facilities in the U S and two in Asia to help us achieve approximately 1 billion liters of finished good capacity by the end of the calendar year 2022.

This represents a 200% increase in our production output from the end of 2020.

In addition, we continued to expand capacity of our existing facilities.

We are currently in the planning stage to open additional facilities in the U S and U K in 20 countries suite.

These two facilities are estimated to add an incremental 400 million liters of finished goods from 'twenty to 'twenty.

To support the demand for our products globally.

June and July this year represent our highest consecutive production month in the company's history.

We expect a similar trend as we progressed through the third and the fourth quarter of this year, which support our strong revenue outlook for 2021.

As we grow we believe owning and controlling our global operating footprint is paramount to addressing the significant consumer demand proposal b product.

We expect our planned Capex investment in self manufacturing, we will expand our margin profile.

Self manufacturing enable us to apply our own standards of quality and sustainability and flexibility for innovation.

And to protect our IP, while achieving significantly more attractive production economics.

As demonstrated by a fully owned manufacturing capabilities in Sweden.

Using an end to end self manufacturing model, we produced the old space makes them feel the product as the single only owned operated facility.

We supplement our own.

Manufacturing facility with a diversified network of deeply bedded third party co manufacturing partners to help us drive growth by providing the necessary speed and flexibility to help us meet consumer demand commenced pilot project and support new <unk>.

Product launches.

When we utilize a co packing model, we transport our own space through tanker trucks.

Our strategically chosen third party.

Taylor.

Mixing and filling.

When we utilize a hybrid model of manufacturing, we transport our own true.

Through pipeline to a physical adjacent plants.

Operated by a third party partners fulfilling and mixing.

Our long term goal is to have 50% to 60% of our total volume to come from self manufacturing, reducing co packing to 10% to 20%.

30 to 40 from hybrid manufacturing.

For the first six months of 2021 self manufacturing was 20% of our total volume compared to co packing at 53% and hybrid at 27%.

We expect to drive profit growth through increasing ourself and hybrid manufacturing model as well as localizing production footprint.

Which will improve our economics of scale and our service levels.

Given our strong outlook for revenue growth, we expect to achieve greater operating leverage from our capital investments to help fuel our significant margin improvement across our global operation.

Going forward, we intend to continue to invest in our innovation capabilities build our manufacturing footprint.

And expand our consumer base.

Supporting our growth trajectory.

I'll now turn the call over to Christine to review our financials.

Okay.

Thanks, Peter and good morning, everyone.

To be joining you today on our first earnings call as a public company.

Turning to the political revenue for the second quarter of 2021 was 104 to $6.2 million, an increase of $58 million or 53, 3% compared to revenue of nine to $5.3 million in the second quarter of 2020.

In the second quarter of 2021, we experienced broad based growth across retail and foodservice channel.

The revenue increase was primarily driven by additional supply coming from the company's existing and to a smaller extent, our new facilities to meet the growing global demand for our products, partially offset by approximately $12 million to $14 million of COVID-19 and startup.

The manufacturing headwinds to sales that we experienced in the quarter a dollar of lifting in Netherlands in Ogden, Utah facilities.

The estimated foreign exchange benefit to revenue was approximately $10.2 million into quarter.

The foodservice channel continued to increase in the second quarter of 2021 compared to the prior year period with the continued reopening of on premise outlets from the relaxation of COVID-19 restrictions in our key markets.

In the second quarter last year, the retail channel experienced a significant increase in sales more than offsetting the decline in the foodservice sales channel primarily noticeable in Americas, all as a result of COVID-19 restriction.

For the second quarter of 2021, the foodservice channel accounted for 33, 2% of revenue compared to 21, 6% in the same period last year.

Retail channel accounted for 61, 5% of second quarter of 2021 revenue compared to 74, 5% in the second quarter of 2020.

Net sales per liter.

$1.54, compared to $1.42 in the second quarter of 2020, primarily driven by regional channel and customer mix in the Americas, while in EMEA and Asia. The net sales per liter increased primarily is foreign exchange driven.

Our highest regional net sales per liter in Asia, followed by the Americas and EMEA.

Our sales globally are achieved with much lower promotional rate competition. For example in the U S. Approximately 10% of sales are driven on promotion and this rate is similar across our key geographies.

Gross profit in the second quarter was $38.6 million compared to $38 million in the prior year period gross margin decreased 590 basis points to 26, 4% compared to 32, 3% in the prior year period.

The gross margin decline in the second quarter of 2021 compared to the prior year period was primarily due to higher logistics expenses in EMEA and the Americas as well as higher container rates for our shipments from EMEA to Asia.

Asia is change in segment channel and customer mix, a higher share of co packing production and minor negative effect from foreign exchange.

We have noticed an increase in freight costs driven by the effects of the pandemic and the shortage in capacity, primarily primarily in the Americas and EMEA. We have also experienced price increases related to our shipments from EMEA to Asia, we expect that the localization.

An expansion of our production capacity within the region will help to offset some of these freight cost headwind.

To date, we have experienced limited material cost inflation compared to the prior year period, as we benefited from volume growth, except for rapeseed oil, which accounts for approximately three to four percentage points of our total cost of goods sold we expect rapeseed oil prices too.

Continued to increase during the second half of 2021 offset by other anticipated cost efficiency.

Keep in mind.

We continue to expect variability in our gross margin quarter to quarter based primarily on the mix of revenue by geography, and sales channel as well as the mix of our manufacturing output.

On an annualized basis, we expect them to.

To continue to see improvement in our gross margin year over year, starting in 2022 with a long term goal of 40%.

Research and development development expenses in the second quarter of 2021 increased $2.6 million to $4 million compared.

Compared to $1.3 million in the prior year period. This increase was primarily due to an increase of $1.8 million in employee related expenses due to the higher head count.

<unk> include <unk> $3 million in costs for the 'twenty to 'twenty, one long term incentive plan.

And <unk> $4 million and consulting and other professional fees.

Selling general and administrative expenses in the second quarter of 2021 increased $49.8 million to $83.1 million.

Compared to $33.3 million in the prior year period.

Other operating income and expense.

Seven 4 million gain compared to a <unk> 5 million loss in the prior year period.

The increase in SG&A expenses was primarily due to an increase of $22.3 million in employee related expenses of which $4 million were noncash costs for the company's long term incentive plan.

All as a result of increased head count as we continue to invest in our growth and also added head count for being a public company.

We also incurred $12.5 million and increased cost related relating to external consultants contractors and other professional fees due to the growth of the business and costs associated with being a public company.

$7.1 million were nonrecurring costs related to the company's initial public offering.

$5.3 million of increased branding and marketing expenses as compared to lower branding and marketing activities in the prior year second quarter of 2020 due to the COVID-19 pandemic.

In total SG&A included nonrecurring costs related to our initial public offering and the noncash <unk> charge of $11.1 million.

Customer distribution costs increased $4.7 million, mainly as a result of higher revenue.

Other operating income for second quarter of 2021 excluded a net foreign exchange gain of <unk> 3 million.

Compared to other operating expense in the second quarter of 2020 that included a net foreign exchange loss of <unk> $5 million.

Now focusing and focusing on the balance sheet and cash flow as of June 32021, we had cash and cash equivalents of $524.2 million.

322, $7 million in short term investments and total outstanding debt to credit institution of sub $1 million.

Net cash used in operating activities was seven $2.5 million for the six months ended June 32, 1%.

One compared to $21 million during the prior year period.

Capital expenditures were $134.4 million for the six months ended June 32021, compared to $52 million in the prior year period.

Cash flow from financing activities were $969 million.

Reflecting the proceeds from the IPO net of repayment of the liabilities to credit institutions and repayment of the shareholder loan the company invested a portion of the IPO proceeds in secure short term investments.

Finally, turning to the guidance for fiscal year 'twenty, one we expect revenue to exceed $690 million, an increase of greater than 64% compared to fiscal year 2020, with accelerating growth across regions and balanced contribution from each of them.

This revenue outlook assumes very nominal contribution from our <unk> China facility that is on track to open later this year any upside to our outlook will be a result of our ability to ramp production at a faster rate than we anticipate.

Assuming no significant changes from where we are today, we expect the second half of 2021 exchange rates to be a single digit tailwind compared to the second half of 2020.

We expect capital expenditures to be on the low end of the 350 million to $400 million range. We provided at the time of the IPO.

We expect production capacities to be approximately 600 million liters of finished goods by the end of fiscal 'twenty to 'twenty, one a sufficient amount of capacity to reach our annual revenue outlook.

Long term, we would expect to generate gross margin greater than 40%.

And an adjusted EBITA margin approaching 20% as we benefit from a much larger self manufacturing footprint globally greater economies of scale and continued strong revenue growth with that I'd like to turn the call back over to Tony.

Thanks Christian.

Last six months have been remarkable for OTT I'd like to thank our entire global team at first in helping us achieve our results every day.

Work to help create an OPEC phenomenon across Europe, the United States and China with a brand that is the primary growth driver of dairy alternatives.

The effort and dedication of our employees continues to advance the reach and impact of Otis mission on a global scale.

In summary, we're very pleased with our accomplishments year to date and excited about the balance of the year as we focus on executing our global growth objectives.

Because that overview piece of your question and I are now available for your questions operator.

Thank you at this time, we will conduct a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

We ask that you limit your questions to one question and then a follow up so we have opportunity to ask questions.

Any time, if you wish to remove your question. Please press star two for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for our first question.

Our first question comes from Andrew Lazar with Barclays. Please proceed.

Great. Thanks for the question.

I'll start with you during the IPO process only discussed its on shelf productivity metrics versus other oat milk brands and our key retail customers metrics, such as shelf philosophy, and price premium and promotional depth and frequency and they were all as you mentioned this morning far better than peers I guess, how has this shelf productivity held up.

There's more oat milk brands continue to gain distribution on the shelf some of which have greater capacity than do you at least at this stage.

And is your anticipation that we'd continue to see this type of on shelf advantage play out moving forward.

Hi, Andrew This is Tony Thank you. So I'm wondering if your question.

Morning.

Three of them once again.

Yes, I mean as expected.

We knew that we're going to be pressured.

Measured retail channel.

Due to capacity and we believe these market share losses are temporary right. We are building the capacity to go and if you look at this big data for instance, where we are the solid number one.

Look at the partners we started there.

The partnership long ago, with like whole foods market targets and wegmans.

Are the clear market leader in the non dairy category.

We have a little bit of a higher fill rate not holding average still 70% globally. It's even lower MBS has been lower in the U S. A 50, 50%, but continuously increasing now having all of them on board here.

The commercial product.

Product.

A lot of confidence in.

And the progress going forward. So we accepted two to increase the fill rate over the course of the last two quarters of the year an increase.

Congo.

Great and then that's a good segue into market share. Obviously, there has been plenty of discussion about about share losses in the U S, which would seem to be primarily if not completely about capacity constraints.

You can get into a little bit more detail around market share trends more recently with with those key customers with whom you've sort of prioritize supply and how thats impacted your expectations for the business once the company can supply.

Key customers more fully.

Thank you.

Yes, so if you look at the.

So some of the larger pockets of partnership that I mentioned earlier, we have a 50, 70% market share in oats, which is significantly higher right.

For the rest of the measured retail channel. So that's what we expect we would see the performance data.

We said earlier in the call that we are the best performing brand.

For PDP.

Total Devry total carry crude and milk. So I mean, it's unprecedented that brings us a lot of confidence going forward as we can bring more capacity on board.

Same thing in <unk>.

In Europe, as well best selling skus in the key markets.

Best velocity.

So a great platform and great progress in terms of production.

Thank you.

Our next question comes from Dara <unk> Hussain with Morgan Stanley. Please proceed.

Hey, guys good morning.

Good afternoon, Hey, Darren.

Can you give us just a bit more detail around the plans to expand and.

When exactly do you commence production there should we think about that as upside to your prior revenue goals was that embedded in you just announced the project how should we think about that and then I guess second to take it out broader.

Given you have a lot of new facilities coming online for example, Singapore Sean.

Maybe you could just talk about holistically your ability to expand capacity quicker.

Quickly beyond what you've announced meaning adding incremental capacity on top of the original coming online and how quickly that can be done in some of these newer facilities that are up and running similar to what we're seeing in Ogden.

Thanks.

Thanks, Tara Great question.

When you speak about all of that you are referring to the new expansion that we announced recently.

Yes, I meant the new expansion of the plans for the new it yes.

Yes, I will let Peter speak about it but yes that is incremental volumes to the plants.

And basically we're doing what we said we were.

Going to do.

During the IPO right. When we said that we want to we have expandable plan.

And because of that.

We can we can probably.

Expense faster.

But Peter maybe you can speak more about it.

Yeah. Thanks for the question and we can start with the state.

That's the starting point was 150 million liter on annual basis.

150 million liter doesn't mean hundreds preterm sufficient line.

But hundreds 150 million liter it gives us the monthly output of 12 to 15 million liters.

In July we produced 5 million liters filled internally or it's co Packers.

So the 5 million liter. We produced you like gives us approximately 30% to 40% of total expected output at full capacity on a monthly basis, that's where we stand today. So we expect to increase the output quarter by quarter. So we can get closer to the $12 million to $15 million by the end of the year.

And now we announced a new investment and that gives us additional capacity $75 million leader on an annual basis oat base capacity. So.

Already next year, we expect to get 15 million meter more from that facility and in $2023.75 million a year or more so that investment.

It's on Cup, what we already communicated.

And that's the plan all of the new sites. We are building today, we do them expandable from day, one so we can move past, we'd add new capacity.

Yes.

Okay, great. So just to follow up I guess, it sounds like that timeframe for Ogden.

Is something that could be similar for other new facilities in terms of if you decided to expand them beyond what you've announced.

And then second.

Should we infer from this with the incremental capacity that there's incremental revenue to what you guys have communicated previously or is it more this was sort of in the plans for you just weren't ready to announce this discrete project.

No the incremental $15 million in 2022, and then put them in.

Two five beyond 2022, but that is expected to be on top of what we already communicated.

And to the question we are considering.

Continuously looking for new opportunities to expand our footprint. So we can grow beyond the plan because there are massive opportunities out there.

So that's our job right now is how can we expand faster quicker more efficient.

Great.

Could just slip one more in on foodservice.

In the U S.

Any sense guidance for how much of the incremental revenue that's coming from the Starbucks relationship of foodservice growth in general how much of that is from new customers versus existing customers.

I know that the numbers are a little more difficult to track in foodservice, but just any sense there would be helpful. Thanks.

So I don't know Christian if you have more detailed numbers around that.

Any portion of that comes from new customers.

Especially entering the entered into partnership with Starbucks.

But we know that we're going to continue I mean, if you look at the coffee shop channel in general.

We know that.

This new pipeline that the manager is multiples of what we can deliver right and it goes well beyond what we registered at the orders, though so this is a tremendous upside for us in the coffee shop channel.

That will be captured simply by delivering volumes.

And we have devoted to building those are solid relationship but on top of that we actually added Dara additional 10000 foodservice doors through it through wholesale centers to the first half of the year. So a lot of this comes from new customers.

Yes, I think I mentioned.

To Starbucks.

Accounting for.

A large share of our sales in the second quarter.

<unk> is definitely performing much better than our expectations.

And that accounted for approximately 27 of our sales in the second quarter. So just wanted to add.

It's a great performance.

Yes.

Thanks.

Our next question comes from Ken Goldman with J P. Morgan. Please proceed.

Hi, Thank you just to follow up on the Starbucks there was a bit of noise last week.

On another producer mentioned it would also supplies Starbucks in the U S. With some oat milk is it fair to assume that you are still the exclusive branded provider there and at the other producers just filling in some spots that maybe you can't reach right now with your supplier maybe you could just clarify that a little bit for us if possible.

Absolutely, yes, we confirm that we are the exclusive new brand at Starbucks.

And you know we have consistently been shipping double the original projection as a result of that the magnitude of the success.

The launch here and the consumer demand.

And as this accelerating rate of conversion from Barry Q2, Okay and oat milk.

We think this is really exciting for us.

As our capacity increases in the second half of this year, we'll be back to fulfilling 100% of there that ultimately this fall and we are currently providing about two thirds of their ultimate volume and it continues to grow.

Now.

Starbucks is leveraging products and able to deliver.

On our opening of demand that far exceeded again again far exceeded everyone's expectations and we are behind is 100% and it's in line with the purpose of the Starbucks partnership that we have to drive the conversion from dairy to plant based automate some things too.

Two to your point there I guess on both of those questions are can.

It's temporary and we're the exclusive ultimate brands.

Great. That's good to hear and then quick follow up.

Anything we should think about in terms of modeling the back half of the year, whether it's the cadence of sales or any particular.

<unk> expenses that we should think about just you know I know you don't want to give too much guidance, but just in the name of no surprises necessarily in the third quarter.

No sure and I think.

Peter maybe if that is something you can elaborate around or yeah I can't elaborate.

On the top line.

Can elaborate on the topline.

And I think Chris that you can add.

If you want.

So again the demand is strong and it continues to accelerate every region.

If you look at the page 21 in our presentation.

We are on a strong trajectory for production output with June and July being our largest production months.

In quarter, two we sold an average of 32 million liter per month equal.

In quarter, three we expect to sell on average 40 million meter per month.

In quarter, four we expect to sell on average 50 million liter per month.

On page 21 of the presentation you can see in July we produced approximately $46 million either.

Ogden lifting in Singapore.

<unk> in a ramp up phase.

And it takes two to three quarters for a new facility to fully ramp.

So remember there is a time lag from when we previewed the product to when it's sold all but about two to three weeks, except for ACO, we where we have a longer lead time to ship them from Europe to Asia.

So we think we have a very straightforward trajectory for all production output going forward and we have built in conservative.

And our outlook for 2021 includes minimal contribution from our second facility in Asia, which is on track to open in the second half.

This year.

The marshawn plant in China.

Incremental upside to our stated revenue will be a result of our ability to add production capacity at the faster rate than we expected.

So that's the top line.

Guidance.

Christian do you want to add something about it.

Yeah sure.

On the gross margin variability as well in terms of what we expect them to perform in the second half. So in line with what we communicated pre IPO.

Two.

Q2 will be better than Q2, and Q4 slightly better than Q3 and on an overall basis in terms of 2021 gross margin.

Significantly improved like we sort of indicated in 'twenty, one as a transition year and we shouldn't expect to see an annual improvement.

20% of tumors underwater.

As communicated in terms of EBITDA, we expect to see an EBITDA adjusted EBITDA loss of $108 million for the year.

This is again a transition year, we are investing in our organization.

In terms of people in terms of IC operations are preparing.

Standing up the company for future growth.

Very helpful. Thank you.

Yeah.

Our next question comes from Colombia, Costa Waller with Credit Suisse. Please proceed.

Thank you Hey, everybody congratulations on your first earnings call.

A couple of things I'd like to try to square the.

Increase in <unk>.

Production of the incremental increase in production production plans and such.

And obviously, we're all hearing about quite substantial inflation across a whole number of things.

But curious on how the Capex guidance is now expected to be towards the lower end given those two.

Given those given those two items.

Or is it just as simple as timing, where you might be at the lower end for this year and we would expect that to just kind of roll into next year.

And on the capital.

Do you want me to take that quickly so any before you add.

No I don't think Kristina do you go.

On the Capex.

More timing as you were moving.

So.

Yes.

Okay, perfect and one of the comments in your prepared remarks, I just want to make sure I understand it properly is.

Unlike I think Moe.

Most other folks in this industry and other industry, we're seeing a lot of raw material inflation you.

You mentioned that with the exception of one item youre not seeing as much but I think you'd linked to that to volume.

So did you mean that you're not seeing as much gross margin pressure because of perhaps volume leverage and that the raw material prices are indeed higher for your business for.

Is there something about the way that you procured or something about what youre seeing in the market that you're just not feeling that same degree of inflation.

Yes, I think thats going to do first of all we.

We continue to prioritize growth over profitability in near term. So this is sort of a transformational year for us with that.

Build out of the two self manufacturing facilities.

One hybrid facility in lithium.

And this is sort of the highest capacity to build out that we've had in a single year ever in terms of coming back to your question on inflation.

And our expectations for the second half we expect to see.

Minor increases ROI for us in terms of material cost and the one to two percentage range and about a half a percentage point related to freight.

Built into our projections for the second half of the year.

We have noticed an increase in freight costs driven by the SEC makeup sort of noted in our remarks.

Given by shortage in capacity, primarily in the Americas, and EMEA growth and talk about the shipments from from EMEA up too.

In terms of containers in the visit.

We have seen there.

And in the related to material inflation, yes, we noted ratio.

Is the one that we are seeing sort of an insignificant.

Price increased double digits, and we expect that in the second half of the year as well, but again accounted for 3% to 4% of our of our goods sold.

And we had other.

Anticipated cost efficiencies that we're working on to offset some of that headwind.

But it shouldnt be significant.

Part of our model as well.

In terms of boats.

That's a scenario I think we have the supply secure and for 'twenty one 'twenty two.

We will see the harvest.

Is doing.

Canada.

We all know it's been quite a draw situation there.

Again this represents 89% of our Cogs is to keep that in mind.

It's not a super big component that we have secured the supply for the next few years.

Okay, great that's useful thank you.

Our next question comes from Michael Lavery with Piper Sandler. Please proceed.

Good morning, Thank you.

Just looking at your in the in Asia that distribution gains you've called out there it seems pretty significant and you've got some some big players in national exposure for China, I guess, how do we think about the how quickly this ramps and the trajectory does this kind of depend on my Sean.

Coming online later in the year or are you ready to serve that isn't as significant as it seems and couldn't pick up pretty quickly or is this really more going to impact 2022.

Yeah, No hi, there.

Good 50 again does that.

Yes, I mean, China is China.

The nature of that market is so different from Europe to U S study.

Going so much faster there you have bigger players jumping on board way sooner you're going to see some effects are the most of the effect is going to be seen next year, but we are really pleased with that partnership that we have we've got to you got maybe one.

See some effects during the course of this year, but but but main portion is going to come next year.

Yes, we're going to supply is going to continue to supply a portion of the supply product from Europe, and EMEA as we've been ramping up Singapore, bringing marshawn live here.

And as.

Appreciate that.

<unk>, we haven't we haven't really counted on any bigger volumes coming from that facility this year, but youre right.

It's a great significance to the doors that we have.

<unk> added here I mean, we have.

Probably.

If you look at the <unk> in China, we can lock them down.

I think and also if you look at the retail.

Entering the retail here now without and I wanted to add like with GAAP.

Great velocity performance without any promotion. So you can see that the strategy the multichannel strategy works and driving that organic demand also in China.

Didn't mention young play, but you don't play it's one of the biggest retailers.

Well, we have 80% distribution in their stores.

Walmart is also one of the biggest retailers in China all the good performance. So yeah, it's really hard to predict predict the magnitude in China at all because it's so big it's moving so fast.

Like we said like we all.

Well, we have to do is to try to look at additional capacity during the course of 2022.2023 here.

That's really helpful and just a quick follow up on the top line you called out the 12 to 14 million.

The sales opportunity missed from from some COVID-19 restrictions and the delay ramping up.

Just eyeballing slide 21, and looking at the capacity dip in May it would it be right to think that that split is maybe about half and half of those and I guess, what risk do you see of either one of those ahead is there more COVID-19 restrictions that might impact production.

Looking ahead as far as you can tell now or do you feel like you're in the clear there well how should we think about this.

You know what might be on the horizon.

I mean, it's a great question and Peter maybe you can speak more about the split I just wanted to add that yeah. Kobe COVID-19 is very much Gary here to state right.

I think we have manage it.

Excellently deals a year and a half that has been going on.

Income unpredictable right.

The events in lithium with one another.

All the best in terms of production.

And COVID-19, but.

I think listening on what was a big hit for us.

The Q2 here that's about Peter do you want to speak more about the split here I just wanted to say the Covid is here I think we have managed the excellently through through the course of the last one year and a half we're going to continue to have this strict protocol to round up the all production facilities, we have strong local regional teams.

We could not have grown without the regional teams that we have because we cannot travel and I'm extremely pleased to see the performance that we have and how we are managing this throughout these are tough.

Tough times here and again.

To state right.

But it's hard to say benefit.

And to your point, Michael you are correct.

The drop in in May was because of that.

Covid situation is missing and then also.

Some headwinds.

One thing up some production facilities.

It's a 50.50 split so.

But that's the reason why it dropped in May.

I don't think that that question.

Okay, great. Thanks, so much.

Our next <unk> income from Laurent <unk> with Guggenheim. Please proceed.

Hey, good morning, or rather good afternoon, everyone.

To better understand how you are making trade offs are.

And I've got so many three sub questions here.