Q4 2021 Oatly Group AB Earnings Call

March 9, 2022

If 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 call over to Katie Turner of Investor Relations. Thank you you may begin good morning, and thank you for joining us on at least fourth quarter and full year 2021 earnings conference.

Call and webcast on today's call are Tony Peterson, Chief Executive Officer, and Christian Heng, Chief Financial Officer, Peter Burns Chief Operating Officer will also be available for questions.

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, including financial projections for future periods in fiscal year 2022. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual results.

Alright. Those described in these forward looking statements. Please refer to the Companys final prospectus filed pursuant to rule 424 at <unk> on May 21, 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's call management will refer to certain non <unk> financial measures, including EBITDA adjusted EBITDA and adjusted EBITDA margin, while the company believes these non <unk> 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 <unk>.

Please refer to today's release for a reconciliation of non <unk> financial measures and the most comparable measures prepared in accordance with IRS and addition of at least go hit a supplemental presentation on its website for reference with that I'd like to turn the call over to Tony Peterson.

Thanks, Katie good morning, we appreciate you joining us to discuss our 2021 fourth quarter and full year financial results on today's call I will provide an overview of our business, including the strong consumer demand. We continued to experience globally for Oakley in the old category and.

And discuss the key reasons, we believe <unk> continues to be well positioned for increased revenue growth and profitability.

Christian will then review our financial results and 2022 outlook finally, Christian Peter and I will be available for questions.

We are pleased that we achieved record sales volumes and revenue in each quarter of 2021, our annual revenue increased approximately 53% year over year to 643 million us dollars.

If foreign currency remained constant from the time, we provided 2021 guidance on our last earnings call in November our sales would have been approximately $648 million.

Globally. The Ot team did an exceptional job in a very challenging operating environment to remain focused and agile while executing on our growth strategies across more than 20 countries.

Not many companies have ever opened three production facilities in one year during a pandemic, but we did.

We added these new production capacity at an extraordinary pace to help US bridge the gap between our supply and the overall consumer demand for our products.

We're confident in the size of the category of opportunity in the future long term trajectory of our business now I'm excited to share more detail with you today on why we believe this is the case.

We're pleased to have ended the year with over 600 million liters of run rates capacity, representing an increase of 72% compared to 2020 and in line with expectations. We provided at the time of our IPO and importantly, we believe our run rate capacity provides us with required volumes to achieve our.

<unk> revenue growth for 2022.

We are continuing to prioritize growth investments over profitability to best position <unk> to serve customers and consumers as we covered their users to plant based milk.

We have invested heavily in our business establishing infrastructure, including.

Personnel innovation capabilities and partnerships to grow our category leadership position.

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

Lots of Derek consume is converted to plant based milk, you see very strong repeat purchase behaviors.

According to a consumer insight study, 60% to 70% of the consumers use plant based milk at least once every two to three days and nearly 80% consume it at least once per week.

This highlights how quickly consumers switch to incorporating plant based meal into the daily routine.

These figures also demonstrates the transformation that is taking place in the dairy category and the staying power of the plant based dairy category, including oat milk.

The syndicated scanner data shows that the old category continues to gain share over other dairy alternatives across our key markets.

And we are an important driver of this growth.

Now before I get into more details on the success, we're seeing in our key markets and our 2022 key growth drivers I'd like to review our production capacity ramp which is an important component in achieving our growth.

As we grow we believe owning and controlling our global operating footprint is paramount to addressing the significant consumer demand for Otis products.

In the fourth quarter, we achieved an all time high for our total global production and have built excess inventory, primarily in EMEA and Asia that will contribute to sales in the first half of 2022.

For perspective over the last 18 to 24 months, we've had to limit growth in the region and even back out of some markets due to supply constraints today. We're in 25 countries in EMEA and we're excited about the runway for future growth in new and existing markets, which I will provide more detail on shortly.

These 2018, we've been shipping our products from Europe to support the growth in Asia now with our two facilities to Singapore Marshawn, we expect to begin to gain operating and financial efficiencies and sustainability savings from localized production and expected phase out shipments from EMEA in the first half of this year.

We should also have the opportunity to further diversify our sales and distribution in Asia since the local production should enable us to introduce new formats and skus for future growth in retail and E Commerce.

We continue to scale up the capacity of our existing facilities and we are in the development stages to open up additional facilities in the U S U K and Asia over the next few years. However, like many companies we are experiencing longer lead times for certain required equipment related to our planned capacity investments.

2022 and 2023.

We're closely monitoring and assessing all of our projects and believe our more conservative phased approach is prudent given the dynamic operating and supply chain environment.

In the light of the overall macro environment, we're taking a very focused approach to execution of our capacity expansion projects.

And we are strategically facing the timing of certain smaller oat based project.

To follow after the completion and ramp up of a end to end facilities. This will impact the timing of Ogden and Thats Kronos based expansions.

This approach should allow our teams to have all resources focused on our greatest opportunities to add meaningful production capacity, including the upcoming manufacturing facilities in Peter's grow U K Fort worth, Texas and Asia.

Last weekend, the opportunity to spend time with our Americas team in Ogden, Utah the facility is impressive.

Work to make continuous improvements over the past year, adding additional experience to the onsite management team and hiring a team of more than 100 high quality technicians.

The factory and team have recently received the highest double eight waiting in DRC third party audit.

As we scale production, we're confident that Ogden with proved to be an amazing facility for us.

And Ah Millville, New Jersey manufacturing opening facility continues to be very high performing in terms of efficiency of output quality and safety.

Recently, the <unk> facility had an unannounced external plants audit, which resulted in a double a plus rating 100% score with zero no performances.

<unk> Global standard food safety audits.

The highest score of food production facility can obtain.

The second consecutive year.

Great job to the team for this accomplishment.

Over the next few years, we expect to drive profitable growth through increasing our self in hybrid manufacturing model as well as localizing, our production footprint, which should improve our production and supply chain economics economies of scale and our service levels.

In 2021 self manufacturing was 21% of our total volume compared to co packing at 45% in hybrid at 34%. Our gross margin was impacted in Q4 of the slower ramp up of our production and shift in mix of revenue by sales channel.

It was further exacerbated due to supply chain challenges and inflationary pressures from Covid, which Christian will discuss more in detail.

Taking price to help offset cost inflation in our key markets a target over the long term is to have 50% to 60% of our total volumes come from self manufacturing, reducing co packing to 10% to 20% and hybrid manufacturing to 30%, 40%. We believe that this manufacturing mix should increase gross.

Margins and profitability.

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

And factoring footprint and expand our consumer base, all supporting our growth trajectory.

I'd like to share a few highlights across key markets to support why we believe <unk> will continue to win significant share of the conversion to dairy alternatives globally and maintain our market leading position.

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

According to Nielsen data for the 52 weeks ended in December 2021, or at least the number one selling brand by market share in the UK, Germany, Sweden, Switzerland, and the Netherlands, we are gaining market share in the U K in Germany in the total plant based category continued to see strong velocity perform.

<unk>.

Our brand contributed and the highest amount of sales growth to the dairy alternative drinks category in the U K, Australia, Switzerland and Netherlands.

In Sweden, Germany, and UK. Arborist addition item is the number one selling SKU in plant based milk and milk.

Our brand accomplished this with limited SKU range and a fraction of the distribution point, we have a significant distribution potential for future growth in these markets with the competition, having more than three times the distribution of Oakley today.

To illustrate using the U K in Q4, <unk> total doors increased 8% compared to Q3 with 1000, new stores added in 2022, we expect to continue to add more shelf space in the U K and leading retailers within EMEA for example in a large grocery chain in the U K, we confirmed it.

10% increase in distribution and more space on shelf. In addition, this includes our first ever full permanent pallet displays.

And we have more shelf space and SKU placement plan through the spring and into the fall for both our own milk in food products in EMEA.

With our improved supply infrastructure in EMEA, we're now able to act more aggressively into deepening our footprint within the retail channel as well as widening our reach by focusing our organization on unlocking the foodservice channel.

Wish we were historically not been able to do due to supply constraints.

One early proof point of this strategy was the announcement of a major collaboration with Deutsche Bahn in Germany, which began in January Deutsche Your bond is one of the largest railway companies in Europe , they're now carrying oatley Arista edition onboard as the first ever plant based milk alternative offering for consumers.

Have a look more exciting a significant foodservice partnership expected to be announced in EMEA. During 2022. In addition to expanding our distribution coverage in our existing markets. We are also now in position to selectively we enter expand into new EMEA markets are Great example of this opportunity is Switzerland.

Which we entered in the spring of 2021 has already become the number one retail plant based milk brand.

We're also re entering markets, such as Italy, France, Spain, and Portugal through distribution partners and will expand to select other countries in Europe through 2022.

In the Americas demand for OLED products continues to be strong. According to the Nielsen data for the 52 weeks ended January 8th in 2022 old Clos remains the number one fastest turning branding total dairy.

Plant based dairy and milk.

Accomplish this with a household penetration of approximately 4% representing a lot of room for future growth.

The oatmeal category continues to gain market share in the U S growing from 15% in January 2021 to almost 21% in January 2022, but almond and soy milks both declined.

Although our market share of the total dairy alternatives category has continued to grow from 4% to 6% since the start of 2020 . One we believe that this low market share also indicates a significant distribution potential is still in front of us.

We're also very excited about the frozen business in Americas. This is a great example of how we're expanding the conversion universe.

Heading into 2021, we already had a strong core offering with ice cream pie in the course of 2020 . One we further built out our portfolio with a trial a friendly software product and a great new innovation with frozen novelties that started to hit store shelves in Q4 and Q1.

Our U S team has a robust pipeline for growth in 2022 building on our record results in 2021, we look to expand our base of retail distribution with high quality partners increased the depth of relationships with existing partners expand our footprint in foodservice and specialty coffee as well as further.

Our acceleration in frozen products with a pint and new novelty business.

And finally in Asia, our team has done very well navigating a very difficult consumer environment based on the zero Covid policy in China.

Our foodservice business represents over 70% of our Asia revenue.

Which was significantly impacted by the Covid related closures.

Yes, the resilience of our team has led to outstanding growth with added distribution in foodservice as well as establishing the infrastructure to launch our brand in the retail channel.

We also continue to maintain our market leading position on Tmall, which demonstrates <unk> ability to consistently outperform in a highly competitive marketplace in double 11 in China. The largest the most popular annual global shopping holiday in the World Hopefully ranked number three among.

All beverage brands on Tmall.

This was really exciting for us since double 11 serves as the window to observes China's latest consumer trends and brands.

Now with two new local production facilities in the region that we're ramping up our Asia team has an aggressive plan for multichannel growth strategy focused on one accelerating our expansion into the retail sales channel in major cities.

Two driving growth and maintain our leading position in the coffee and tea channel through new and existing partnerships. The teach out in Asia is larger than the coffee channels.

And three diversifying our growth in ecommerce and in new and existing product categories through the new Skus and oatmeal food product innovation, including ice cream and old Kurtz, our successes in a difficult operating environment across more than 20 different countries with varying levels of COVID-19 related restrictions.

The resilience of our global team the strength of our product portfolio across multiple categories.

And the increase in consumer appetite for Oatley cross channels that said and as we have consistently highlighted since our IPO. We expect that we would experience certain variability in our margins quarter to quarter as we rapidly scale, our global operations our performance in 2021.

As an example of this but the variability was further compounded by multiple external factors, but also impeded our growth for the year.

To start 2022, we experienced the efforts of all Mccrumb like everyone else are Christian will review our outlook. It's important to understand that we believe our growth in Q1, we continued to be impacted by heightened restrictions and lockdowns in certain countries with the risk of Covid related absenteeism.

Production facilities significantly supply chain delays and disruptions and increased inflationary pressures as a result of these factors January and February proved to be difficult from a production ramp up perspective, and this is also further impacted our revenue and gross margin in the first quarter of 2022, yet we still.

<unk> revenue to be up low to mid teens on a percentage basis year over year.

We started to see improvements across many key areas of our business in March including production in the U S and Asia as well as revenue in EMEA Americas and Asia. We believe that we have visibility into increased distribution to fuel an improvement in the amount of revenue, we expect to generate each quarter of the year.

And in total we expect 'twenty to 'twenty two to be another record year of revenue for our business.

Our global team is focused on the controllable aspects of our business and we believe that we've taken necessary steps to position ourselves for an improved rate of growth in 2022, as these macro headwinds subside and we experienced reasonable containment of any COVID-19 related infection rates globally, including the easing.

Ah colby's restrictions and Lockdowns.

We're maintaining.

They are responsible and prudent approach or our cost and expenses as we navigate this environment.

Across the regions. We operate in we believe that we have further distribution potential innovation and new market development and we plan to capitalize on them in each of our regions as we look to make ultra natural part of People's lives.

In summary, I'd like to thank our global team for their efforts in achieving our goals. We believe our strong foundation and business fundamentals should help us capture a disproportionate amount of growth in both retail and foodservice as consumer demand continues to accelerate for plant based alternatives I will now turn the call over to Christian.

Thanks, Tony and good morning, everyone. It's nice to speak with you today, turning to the financials revenue for the fourth quarter of 'twenty to 'twenty, one was 100 and made at $5 $9 million.

An increase of $58 $8 million or four to six 3% compared to revenue of $127 $1 million into the fourth quarter of 2020.

There was a minor foreign exchange headwind to revenue of approximately <unk> $2 million in the quarter.

As Tony mentioned, one foreign currency was a tailwind for the majority of 'twenty to 'twenty. One in late November currency became a headwind versus our expectation for a low single digit tailwind as a result, our revenue would have been on an estimated $5 million higher or fix.

Hundred and $48 million, if ex FX had remained constant from the time, we provided our guidance.

On the earnings call in November .

The foodservice channel in EMEA and the Americas increased in the fourth quarter of 'twenty to 'twenty one.

Paired to the prior year period with the reopening of on premise outlets from the relaxation of COVID-19 restrictions in our key markets, partially offset by Covid related foodservice location closures in Asia.

For the fourth quarter of 'twenty to 'twenty, one the foodservice channel accounted for 38, 3% of revenue compared to 31% in the same period last year on a year over year basis. The foodservice channel. It was up five 9% compared to Q4 of last year.

The retail channel accounted for 56, 2% of fourth quarter 'twenty to 'twenty, one revenue compared to 66, 3% in the fourth quarter of 2020 on a year over year basis. The retail channel was up 23, 9% compared to Q4 of last year.

In 'twenty to 'twenty. One we are pleased to have achieved our expected run rate capacity of 600 million liters into fourth quarter.

Consolidated net sales per liter was $1 50 compared to $1 48 in the fourth quarter of 2020, primarily driven by positive customer and channel mix in Asia and positive foreign exchange effect in Asia, offset by customer and channel effect in EMEA and Americas.

And a foreign exchange headwind in EMEA.

As a reminder, our or highest regional necessarily per leader is in Asia, followed by the Americas and EMEA.

Net sales per liter was in line with our expectations, except for in Asia, where it exceeded our expectations driven by channel and customer mix.

Gross profit in the fourth quarter was $29 $6 million compared to $35 $2 million in the prior year period.

Gross margin decreased by 11, 180 basis points to 15, 9% compared to 27, 7% in the prior year period.

A detailed on page 17 of our earnings presentation to show our gross margin bridge and importantly on page 18, we provide a bridge illustrating key reasons, we believe our gross margin will improve as we progress through 2022.

The primary reason for the gross profit margin in the fourth quarter of 2021 was due to additional cost as compared to the prior year period related to the startup of our three new facilities, including higher depreciation of $6 4 million.

The charge related to startup production in inventory at our new Singapore facility of $2 3 million and a higher share of the co packing production down plan.

We also experienced higher inflationary pressures, including higher logistics expenses in EMEA higher container rate for shipments from EMEA to Asia, and unusually high energy cost in EMEA due to the disruption of European energy markets.

During the latter part of the fourth quarter of $2 million.

And we recognize costs associated with the previously announced limited EMEA, a product recall of $1 $6 million and on EMEA asset impairment charge of $1, one $5 million associated with the company's long scrolling up facility in Sweden.

The gross margin also reflects a change in channel and customer mix, primarily in the America, partially offset by positive Shiloh and cost customer mix in Asia, and a minor benefit from foreign exchange.

Going forward, we continue to expect that the localization and expansion of our production capacity within the region should improve our production economics over time, although we expect inflationary pressures to impact our cost of goods more broadly.

We are seeing higher costs for raw materials logistics and energy globally as well as labor inflation, we are strategically taking price increases in EMEA and the Americas to help offset a portion of these higher cost price increases are already in effect in certain markets in EMEA.

We will begin to see the benefit of price increases in the Americas, starting in the second half of 'twenty to 'twenty two.

In addition, we are closely monitoring the current situation in Ukraine, and and any impact it may have on our business.

As a reminder, <unk> accounts for approximately 10% of our total cost of goods sold.

Or what's the challenging old crop harvest in 2021 exacerbated by drought condition in North America, but we have been working through all suppliers are facing similar effects of COVID-19, socs with longer lead times for equipment.

We have great relationships with our raw material suppliers that puts us in a position to mitigate raw material shortages, particularly of note and we are also expanding our sourcing auction.

However to start 'twenty to 'twenty, two we have experienced difficult weather conditions in North America that impacted the timing of rail transportation of oat supply from suppliers to our U S manufacturing, which is factored into our outlook, but do have <unk> and other raw material contract.

<unk> and supply in place to grow revenue at the rate, we expect for 2022 and beyond.

We continue to expect variability in our gross margin quarter to quarter based primarily on inflation and supply chain challenges timing of new capacity coming online and mix of the production model and mixed by sales channel and region.

The conflict in Ukraine brings additional uncertainty with energy prices, increasing and the broader implications of Ukraine being a large exporter of grain as well as vegetable oils, which could impact global pricing for these items as well as Russia being a significant exporter of fertilizer.

On an annualized basis, we expect to see improvement in our gross margin year over year, starting in the second half of 2022 with a long term goal of 40% in.

In Q1 to date, we have experienced similar gross margin headwind to Q4 from inflation on Underutilization of our production facilities as we bear the full fixed and variable cost without getting the benefit of increased sales volume.

Now focusing on our balance sheet and cash flow as of December 31, 'twenty to 'twenty, one we had cash and cash equivalents of $295 $6 million.

$249 $9 million in short term investments and total of outstanding depth to credit institutions of $6 million.

Well.

Fully unutilized revolving credit facility of approximately $500 million.

Including an accordion.

Net cash used in operating activities was $213 $8 million for the year ended December 31st 2021, compared to $44 $3 million during the prior year period.

Capital expenditures were 270 to $3 $8 million for the year ended December 31st 2021, compared to $134 $3 million in the prior year period cash flow from financing activities was $955 $8 million.

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

Turning to guidance for fiscal year 'twenty to 'twenty, two we expect revenue of 880 million to $921 million, an increase of 37% to 43% compared to fiscal year 'twenty to 'twenty, one with strong growth across region.

Guidance reflects the mid single digit appreciation of the U S dollar versus our major European currencies on a percentage basis.

We expect revenue to be back half weighted this year as we scale our production given a number of factors primarily related to COVID-19 .

Broken down by region in EMEA, we expect growth to accelerate beginning in the second quarter with the first quarter expected to be relatively flat versus Q4, we have built supply ahead of expansion into the foodservice channel our new markets. Later this year, we also see variability in the.

The timing of some retailer resets with some coming as late as the second half of the year. We are very excited about the discussions we're having with our retail partners in EMEA and we expect to have a better share of the shelf once resets or complete.

We are also re entering markets, such as Italy, France, Spain, and Portugal through distribution partners and will expand to select other countries in Europe through 2022 that being said given the conflict in Ukraine, we are taking a more cautious approach to our guidance.

And in managing our international expansion plans.

In the Americas.

We're pleased with the recent production output improvement, particularly in our Ogden, Utah facility. However, given the COVID-19 related issues in the first quarter, including labor absenteeism due to a local spiking cases supply chain challenges, but raw material spare parts and logistics.

Based on the Canada border, including the situation with truckers and bad weather, we expect lower production and sales volume in the first quarter, which will impact our sales by high mid teens versus Q4 and meaningfully impact our gross margin due to continued ramp up of <unk>.

<unk> done and relying on co Packers we.

We expect accelerated growth in the back half of the year once all done it fully ramped and the mill a build own base expansion is completed.

And finally in Asia strict public health measures remain in effect due to omicron. We are closely monitoring the situation and remain focused on the health and safety of our team. However, given the ongoing restrictions, particularly in Hong Kong, We did zero Covid policy and.

Foodservice, representing over 70% of borrowers tariffs in Asia, we expect the first quarter to be down low to mid twenties on a percentage basis versus Q4, though it was still up more than 25% to 30% year over year.

We still expect to see strong growth for the full year, because as new production comes online we will be able to broaden our range of products and introduce more formats that are tailored for retail and e-commerce .

We expect capital expenditures to be between 400 and $500 million primarily related to our third generation plants in each of our regions Peter borrow in the UK Fort worth, Texas in the U S and Asia.

Three in China.

We expect run rate production capacity to be approximately 900 million liters of finished goods by the end of fiscal 2022 long term, we continue to expect to generate gross margin approaching greater than 40% and then adjust that they'd be EBITA margin.

Broaching, 20% as we benefit from a much larger self manufacturing footprint globally greater economies of scale and continued strong revenue growth without review Tony will now provide a few closing remarks.

Thanks Christian.

What remains clear is the tremendous opportunities still ahead of us continue converting users into ultra consumers.

The syndicated scanner data continues to highlight a clear velocity outperformance on shelves. When we had the supply and the distribution will also continue to have strong results from the foodservice channel.

And we're excited about the future growth trajectory in EMEA now that we have improved supply.

We're currently navigating in a difficult operating environment as a result of the ongoing impacts from Covid and we're monitoring the conflict in Ukraine. However continue to expect to capture a disproportionate amount of the category growth going forward.

I wanted to reiterate that our long term objectives remain unchanged. Although from time to time, we will experience short term variability in our top line growth and margin profile based on our pace of new production coming online.

I'd like to thank our global employees for the efforts and dedication continues to advance the reach and impact of Otis mission on a global scale.

With that overview PD Christian and I are now available for your questions operator.

Thank you we will now be conducting a question and answer session.

Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.

Okay.

Our first questions come from the line of Ken Goldman with Jpmorgan. Please proceed with your questions.

Alright, thank you.

With the understanding you're not providing EBITDA guidance at this time.

Yeah, I'm, a little concerned that analysts, including me right might overestimate where EBIT.

We will come in right.

Im trying to avoid further disappointment, so I'm, hoping to avoid further disappointments on that line. So I'm just trying to get a general sense of how you think about EBITDA for the year EBITDA margins.

And any help you can provide there I think would be would be welcomed by the street otherwise it'll be sort of this vacuum of information. Thank you.

Hi, Ken It's Christian here.

Thanks for the question. Good question in terms of EBITDA guidance for 2022.

We are seeing a lot of uncertainty in the marketplace are driven by Covid, we have the inflationary pressures we have the geopolitical situation in your in EMEA.

With the Ukraine, and what's happening over there.

So that puts us in a situation where it is quite difficult to assess where we will be what.

What we can say is from a margin point of view from a gross margin point of view, we see some headwind in the first quarter, which we spoke to in the.

In the earnings call.

Release, but that will improve over time.

Throughout the year.

With the scaling over the Oregon facility and the facilities that we have in Asia. So we will see an improvement throughout the year from a gross margin point of view.

And the long term outlook counter still remains the same so we're focused on the long term.

Uh huh.

And we should see over time operating leverage from our top line.

And how that will improve and see leverage from an operating and EBITDA perspective.

That's sort of at the high level, where we are.

It's under the current circumstances with everything happening in and around the world that makes it a bit difficult for us to sort of pin down a number for EBITDA.

So in terms of theirs.

Sorry, and then SG&A, Ken So we what we will do we will continue to invest in our infrastructure and organizational capabilities.

Sort of are putting us in a place to support our growth trajectory.

So we will maintain our investment in branding and marketing activities across all our markets growth continues to be our priority and that's what we're investing behind but over time, we should expect to see operating leverage from our top line growth, resulting in SG&A, reducing at the share of our revenues.

Okay. Thank you for that.

And then quick follow up how locked in are you for the year in terms of boats and edible oils and whats your best estimate right now for total Cogs inflation again with the understanding that the current situations.

Predictable.

So I think in terms of.

Cogs and general inflation.

We expect that to increase in the range of 8% to 9% in 2022 versus 'twenty to 'twenty one globally.

Which is a sort of a slight increase from what we communicated in the third quarter.

So we expect increased for several of our key ingredients and cost components.

And we spoke about in the past so we see the cost for oats increase in the range of 8% to 50% depending on the region and site.

Uh huh.

We're Americas, we see perhaps the increase at the higher end of the range.

We also continue to see cost pressure for rapeseed oil.

That are quite significant.

So if you were to split Cogs into different pieces in terms of material cost inflation, we expect that to be in the 5% to 6% range.

To add another 1% and then you have the remaining components of Cogs, including labor imaging co packing.

It will be in the range of two to two 5% but.

But we have the supply that.

That we need in terms of votes.

Four.

2022, when our growth projections.

It's tightened in America, but we use.

Where we use gluten free oats, and we've talked about the poor harvest I think in our last earnings call as well. So we have experienced some lost days of production in the first quarter, where bad weather and Covid work from factors impacting our Miller.

Who is providing us with the oats.

But we have the <unk>.

Apply necessary to for our top line growth throughout the year.

And in the dish in terms of the price increases or the cost increases that we have experienced.

We are.

Turning to offset some of those increases with some strategic price adjustments that we're making in EMEA. Some of those are already being executed now in March.

That will sort of blast through May and in America and management team are planning on second half price increases to offset some of the inflationary pressure that we're seeing.

Thanks, so much.

Thanks, Ken.

Thank you. Our next question is coming from the line of Brian Holland with Cowen. Please proceed with your questions.

Yes. Thanks, good afternoon, where you are.

Just kind of following up on Ken's question about the EBITDA I'm just curious.

Is there an expectation if we assume that you were kind of at about a 26% gross margin in Q3 is there an expectation that by the time, we get to Q4 of 2022 that we would be back towards those levels or above.

So help us understand.

Because for instance, you mentioned taking price.

Inflation was a 480 bps headwind on your gross margin this quarter, how much pricing do you expect to.

Or how much of an offset do you think pricing is to.

Inflation as you said as you just laid out.

So I mean, I think in terms of gross margin, maybe I should give sort of at the bigger picture.

And so are many of the questions that you have and if I didn't answer some of them. We can take it from there. So I actually I want to start with the fourth quarter and then we can kind of take it from there and we'd do that journey.

Just to take us back to that we had record production output quarter driven by the new production capacity that we added this year, resulting in us and shaving the record revenues for the quarter now in terms of margin performance. The key driver for our margin performance is our ability to scale rfps.

This will reduce our reliance on co packing specifically in the U S.

And on top of that we're also executing price increases are just spoke to that will offset some of the inflationary pressures that we're seeing.

As we have indicated in the past it takes at least three to four quarters and now in some cases a bit longer due to COVID-19 impacts before a new facility reaches steady state utilization of their production lines.

And during that ramp up phase when it is not at steady state levels, we carry the fixed and variable costs.

That we see.

You'll have to carry while we have not reached up to steady state capacity.

So in terms of.

Margin progression looking ahead for 2022.

We expect that the reported margin for Q1 will be continued to be impacted by the under utilization of our new facilities in America or in Asia, and the higher inflationary pressure that we're seeing.

And we can go into the various regions in Americas in Ogden and the difficulties that we had there I mean, I think we have laid that out and and in the earnings release, but we can go into it they had a bunch of different challenges with labor absenteeism.

<unk> challenges under like so that's sort of the first quarter in the Americas, but also in Asia, we're still dealing with strict public measures remain in effect due to omicron and we're closely monitoring the situation there.

So.

That means that we are having some headwinds going into the first quarter.

Sony Americas, we see an impact of high mid teens.

And so that will meaningfully impact our gross margin in Q1.

And the same with Asia, We also expect some sort of a decline.

Okay I appreciate that.

Then the key thing is.

As we've kind of note on slide 18 that the key driver to margin performance coming back to that again will come from the improved utilization of our organization facilities, which will help too.

Improve our production mix, reducing our reliance on co packing and shifting more production to self manufacturing. So we will start to see meaningful gross margin improvement in the second quarter, which will continue towards the second half of 2022, and then on top of that we spoke about the price increases as well.

All about coming back again, our ability to scale, our new facilities, we see some headwind in the first quarter.

Related to that but that will start to improve in the second quarter and proceed into the second half of 'twenty two.

I appreciate all that color Christian and then just to follow on.

Maybe the question I get asked most often is about cash burn and capital needs going forward. So I'm wondering if you could just address that as we as we look at the increase in operating expenses this quarter and obviously, we have some inflationary pressures that arent going to moderate in the.

In the very near term just kind of what your capital needs are going forward and the options you have to that end.

So we ended 'twenty to 'twenty, one with 546 million us dollars in cash on hand, and on top of that we also have the unutilized.

Our revolving credit facility of around $500 million, including the accordion.

So we have sufficient liquidity to fund our business for 2022, but we are continuously and opportunistically monitory capital market for favorable opportunity.

I appreciate it thank you.

Thank you. Our next question is coming from the line of Cameron <unk> with Credit Suisse. Please proceed with your questions.

Hi, good morning, or good afternoon I suppose.

A couple of questions on what happened in or what's happening in <unk>, you mentioned labor staffing and that.

<unk> got a bit better, but it doesn't sound like labor staffing is getting any better.

Was this just like a first two weeks of January type of thing or.

This labor issue maybe more persistent.

I mean, if we speak about <unk>, specifically that that was more related to COVID-19, and the <unk> impact that we saw in that facility, but that has since improved.

From a labor and TNK creative point of view.

Okay, Great and then just.

Just to make sure when we think about where you intend to go with long range margins and the shift to one production versus has anything structurally changed that suggests I know the timing has shifted due to lots of different things, but has anything structurally changed that suggest that maybe you can't get those margins back to work.

Get the margins to where you are.

Goals were.

Last year no. It was still we're still executing on the long term plan.

We are living in unprecedented.

Environment currently with the crisis in Ukraine, and Covid and all of that.

That's what we're dealing with in the short term long longer term, we still are executing on what we set out to do.

Last year and that we will see meaningful improvement to gross margin and EBITDA over time.

Okay, great. Thank you.

Thank you our next questions come from the line of <unk> <unk> with Oppenheimer. Please proceed with your questions.

Good morning, Thanks for taking my question. So first just given some of the development in Ukraine, and Russia. Just curious what you guys are seeing right now on the ground in Europe , just given some of the geopolitical currently have you started to see any changes in behavior or any anything of note on the consumer demand side.

Hi, there. This is Tony it's a good question and then firstly Europeans were closer to the conflict and our colleagues are people here in the U S and our hearts and prayers go to.

All people impacted by the situation.

Just to clarify from Otis perspective, we don't do any business in Russia, Ukraine.

Monitoring the situation I think Christian highlighted some of the impact that we need to look closely at and follow.

But the situation definitely creates uncertainty in Europe like for instance, and do prices and again, we are monitoring it but we don't we don't read any behavioral changes from a consumer perspective at this very moment.

Okay, Great and then second I know you guys are in the process of taking pricing.

Maybe you have some initial reads. So just curious just in terms of where you're taking pricing pricing any reads on elasticities.

As you look at the upwards.

Youre doing on the pricing front.

Goal to fully offset the cost pressures.

You expect to have pricing in place to be able to do that this year or is that something over time that you'll be able to offset all the cost pressures you are seeing.

Yes, so so.

We see a wide price increases across categories and.

A majority of the regions not not all of them though.

And.

We are taking price increases in Europe , and U S. S. Christian stated it started already in Europe and in mid year.

The U S team is going to implement that in the U S.

And we are premium priced but they're relative price position remains the same.

So we won't have a negative price gap the key reasons for why consumers buy our products is the performance of the product and our brand.

We have.

So.

Yes, that's basically.

How we look at the pricing.

Okay, great. Thank you. Thanks.

Thanks.

Thank you. Our next question is coming from the line of Laurent <unk> with Guggenheim. Please proceed with your questions.

Yes, good morning, and good afternoon.

Thanks for the very detailed review of your business, so I'd like to.

See you on pricing it should.

First.

In retail I mean, you've been.

Specifically in the U S quite late to increase price, especially in comparison to other food and beverage companies installed either.

I mean that could get once you want them in the second half. So is there any specific reason for that is squishy.

I think that we saw at least constrained manufacturing you could have increased price too.

To get that benefit. So that's my first question and then we'll come back for the second one on pricing.

Yes.

So just to give you the.

<unk> been an overall picture here that the supply constraints hasn't helped us in pursuing those discussions in the U S.

Now, we would do feel ready and we have ongoing discussions in the U S. And also its multiple channels that we are addressing with multiple different partners. So.

Related to the start of the discussions it's mainly linked with our supply constraints.

Okay, Thanks, and I, just really talking about.

Segments of the business.

How much of your foodservice business is constructed.

I'm sure that you've got less of what do you need to increase price.

As those price may be contracted for few years, so specifically.

Thinking about the Starbucks all those big declines I. Appreciate you would not say tell me the price of topics, but if I can appreciate that.

Next here.

If it's.

Maybe.

How do we need to for you to increase prices.

Right.

No. We are we are going to apply a price increase across all the channels.

Okay. Thanks.

The last one that because it can be very short one of the major kind of.

Gross.

Opportunities.

Especially in the U S to increase significantly.

The distributions from from each study so.

Should we think about the ramp up you can come off distribution now that you have.

Got more.

More I'm supply should we think about these can be more.

The second half of this year or that'd be Gregory getting higher.

From the start up this year.

Widely across all channels, you're going to see increased mint starting.

Late Q2, or beginning of H, one here and I'm glad you missed mentioning the ACB because we are still at 34%, even though we are supplying more volumes into the measured channels.

Is related to the strong velocity performance and increased meant there.

Yes.

Thank you I'll pass it on thank you.

Thank you.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Our next questions come from the line of Michael elaborate with Piper Sandler. Please proceed with your questions.

Good morning, Thank you.

Just wanted to come back to the shelf resets in the EU and you've said in the past those typically or at least maybe primarily our January through may.

Maybe a couple of things one is just have you seen anything yet to date, given we're about halfway through that window.

And you touched on some coming later in the year.

Maybe just update us on how to think about all those moving parts.

No. That's a good question to hi, Michael.

So in Europe , where reset is confirmed we are getting first shelf space based on volumes.

And we have very good dialogues with our key retailers across the region and as we mentioned we already received multiple commitments to increase our shelf space for instance in UK. One of the largest retailers has confirmed an increase of 10% in distribution as well as increased shelf space there.

It will get us to fast share and this includes fruit for first time ever a full permanent pallet displays in the top 300 stores. Another retailer in UK is confirmed reset for April which is a us increasing stocking points by more than 90% now.

Now, Germany is a decentralized we took categories. So the expansion of shelf space will be more gradual but we are also winning new distribution there.

At the same time to remind everybody the retail environment continues to be volatile, which impacts when we are able to follow through on these shelf space expansions in general our retailers have extended the timeline over which these shelf spaces. We said will take place for instance.

Some of our retailers have flagged that there are only able to accommodate the shelf space reset in the second half of 2022, which is very unusual.

Where we see where we are getting things confirm we are increasing our shelf space as we said.

In the earlier earnings calls.

Okay, great. Thank you and just one more actually back on pricing I know you are trying to take pricing in all the inflation headwinds of course.

Logical, but you've also historically had relatively low promotional rates.

With the higher pricing and or because of the growing capacity should we expect increased promotional activity or do you think that will likely hold more similar to historical levels.

All to historical levels.

Okay, great. Thank you yeah. Thank you Michael.

Thank you. Our next question is coming from the line of John Baumgartner with Mizuho. Please proceed with your questions.

Good morning, Thanks for the question.

I guess first off I don't think it was disclosed and forgive me if I missed it but to what extent are you hedged on energy costs in 2022.

European gas price volatility.

So from a thanks John from a.

The guidance point of view, we have assumed.

Pretty significant gas and.

Energy prices in EMEA.

So we expect energy costs to increase in the range of 10% to 30% and EMEA being at the high end of the range and that's what we've assumed in our inflation.

Inflation forecast for 2022.

Okay. Thanks for that and just wanted to come back to Ken's earlier question on EBITDA and specifically on the SG&A line for for what you can control in 2022, how do we think about advertising and marketing spend in the context of sales being up call it 40%.

We expect a sizable increase there year on year and then in terms of personnel, obviously, a big grants here. The last couple of years, where do you see personnel and consulting costs. In 2022 is that a year on year headwind or have you sort of reached kind of a run rate you need just trying to get a feel for.

In light of investment like where that investment maybe concentrated thank you.

So I think in general in terms of SG&A, we sort of reached the run rate and the levels that we need to grow the business.

Overtime in terms of marketing and branding expenses that historically have been in the range of 9% to 10% and we expect that to remain.

In the medium term.

To support the growth in the business.

And the opportunities that we see in the business to help to grow so that that would remain.

Okay. Thank you thanks for your time.

Thank you.

Thank you our next questions come from the line of Jon Andersen with William Blair. Please proceed with your questions.

Good afternoon everybody.

First question is just on the product mix.

How should we think about the focus going forward.

Given cassidy.

Constraints that you've talked about are you.

Shifting your focus to core.

Milk products and and kind of deferring.

The launch of or expansion of.

Other product types such as.

Frozen novelties.

Or am I misreading that can you kind of tell us how you're thinking about product innovation and product mix in the portfolio over the next 12 months to 24 months. Thanks.

Hey, John Thanks, Good question.

So yes.

As we stated earlier that the focus is definitely milk.

And to drive the conversion of the plant based movement and I think that's why you find that the influx of new consumers and that's what we've seen the consumer behavior. However, however, I just want to say that innovation remains.

Very important part of our business.

And and if you look at it.

Different regions here and in Asia, you will see a wide range of product innovation coming alive sooner than in in U S and Europe for instance, but it's this is a matter of timing in these regions and also like you said linked with the supply.

Ability that we have for when timing is right, we will be able to expand more but you are right. The focus is.

Okay, and then one quick one on capacity.

Targeting you said 900 million liters of run rate capacity exiting 2022.

Is that accomplished with.

The existing <unk>.

Facility footprint.

And then if you look to the three additional facilities beyond 2022, I think Petersburg, <unk> Fort worth and a third location in China.

Are you rethinking the timing of those those three additional plants given some of the.

The lead time challenges that you talked about thank you.

No.

Hi, This is Peter Ho Noh.

<unk>.

Because I think both Chris and Tony said prior.

We are still building out our manufacturing capabilities to support the $1.

8 billion liters of technical capacity by the end of 'twenty 'twenty four.

However, as we've said the situation is still evolving in terms of potential supply chain disruption.

Example, we are seeing longer lead times.

For certain equipment, which we expect to have some impact to our production timeline. We are therefore, taking a took the approach to executing on our capacity expansion project and strategically delaying the timing of certain smaller otas project in Ogden and not crude.

So this will allow us.

All the resources on the greatest opportunity to add meaningful production capacity, including the upcoming manufacturing facilities in Peterborough Port worth in Asia.

So we are clearly monitoring and testing all our projects and I believe a more conservative approach is prudent given the dynamic operating and supply chain apart.

Therefore, the number has come down from one 1 billion 75 to 900 million.

Okay. Thank you.

Yes.

Thank you there are no further questions at this time I'd like to turn the call back over to management for any closing comments.

Yeah.

Thank you everybody for listening to our earnings call and I will be speaking with many of you shortly.

This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time and enjoy the rest of your day.

[music].

Greetings and welcome to <unk> fourth quarter and full year 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.

Pat as a reminder, this conference is being recorded I would now like to turn the call over to Katie Turner of Investor Relations. Thank you you may begin good morning.

And thank you for joining us on <unk> fourth quarter and full year 2021 earnings conference call and webcast on today's call are Tony Peterson, Chief Executive Officer, and Christian Heng, Chief Financial Officer, Peter Burke, Chief Operating Officer will also be available for questions. Before we begin please remember that during the course of this call.

We may make forward looking statements within the meaning of the federal securities laws, including financial projections for future periods in fiscal year 2022. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual results are those described in these forward looking statements.

Please refer to the Companys final prospectus filed pursuant to rule 424, B III on May 21, 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 in today's call management will refer to certain non <unk> financial measures, including EBITDA adjusted EBITDA and adjusted EBITDA margin, while the company believes these non <unk> 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 finance.

All information presented in accordance with ISR.

Please refer to today's release for a reconciliation of non <unk> financial measures and the most comparable measures prepared in accordance with IRS. And addition of please go ahead and a supplemental presentation on its website for reference with that I'd like to turn the call over to Tony Peterson.

And discuss the key reasons, we believe <unk> continues to be well positioned for increased revenue growth and profitability.

Christian will then review our financial results and 2022 outlook finally question, Peter and I will be available for questions.

We are pleased that we achieved record sales volumes and revenue in each quarter of 2021, our annual revenue increased approximately 53% year over year to 643 million us dollars if.

If foreign currency remained constant from the time, we provided 2021 guidance on our last earnings call in November of sales would have been approximately $648 million.

Globally. The Ot team did an exceptional job in a very challenging operating environment to remain focused and agile while executing on our growth strategies across more than 20 countries.

Not many companies have ever opened three production facilities in one year during a pandemic, but we did.

We added these new production capacity at an extraordinary pace to help US bridge the gap between our supply and the overall consumer demand for our products.

We're confident in the size of the category of opportunity in the future long term trajectory of our business now I'm excited to share more detail with you today on why we believe this is the case.

We're pleased to have ended the year with over 600 million liters of run rate capacity, representing an increase of 72% compared to 2020 and in line with expectations. We provided at the time of our IPO Importantly, we believe our run rate capacity provides us with required volumes to achieve our.

<unk> revenue growth for 2022.

We are continuing to prioritize growth investments over profitability to best position <unk> to serve customers and consumers as we covered dairy users to plant based milk.

We have invested heavily in our business establishing infrastructure, including.

Personnel innovation capabilities and partnerships to grow our category leadership position.

We believe these investments are critical for accelerating conversion from the global dairy market, which we estimate to be worth approximately $600 billion in the food retail channel alone with a large food service footprint and growing e-commerce opportunity as well.

Whilst the Derrick consume is converted to plant based milk, we see very strong repeat purchase behaviors.

According to a consumer insight study, 60% to 70% of the consumers use plant based milk at least once every two to three days and nearly 80% consume it at least once per week.

This highlights how quickly consumers switch to incorporating plant based meal into the daily routine.

These figures also demonstrate the transformation that is taking place in the dairy category and the staying power of the plant based dairy category, including oat milk.

The syndicated scanner data shows that the old category continues to gain share of other dairy alternatives across our key markets.

And we are an important driver of this growth.

As we grow we believe owning and controlling our global operating footprint is paramount to addressing the significant consumer demand for Otis products.

These 2018, we have been shipping our products from Europe to support the growth in Asia now with our two facilities to Singapore Marshawn, we expect to begin to gain operating and financial efficiencies and sustainability savings from localized production and expected phase out shipments from EMEA in the first half of this year.

We continue to scale up capacity of our existing facilities and we are in the development stages to open up additional facilities in the U S U K and Asia over the next few years. However, like many companies we are experiencing longer lead times for certain required equipment related to our planned capacity investments.

For 2022 and 2023.

We're closely monitoring and assessing all of our projects and believe a more conservative phased approach is prudent given the dynamic operating and supply chain environment.

In the light of the overall macro environment, we're taking a very focused approach to execution of our capacity expansion projects.

And we are strategically facing the timing of certain smaller outpaced project.

To follow after the completion and ramp up of.

And to end facilities this will impact the timing of Ogden and thus kronos based expansions.

Last weekend, the opportunity to spend time with our Americas team in Ogden, Utah facility is impressive we.

Work to make continuous improvements over the past year, adding additional experience to the onsite management team and hiring a team of more than 100 high quality technicians.

The factory and team have recently received the highest double eight waiting in BRC third party audit.

As we escape production, we're confident that Ogden with proved to be an amazing facility for us.

And Ah Millburn, New Jersey manufacturing opening facility continues to be very high performing in terms of efficiency of output quality and safety.

Recently, the Milwaukee facility had an unannounced external plants audit, which resulted in a double a plus rating 100% score with zero no conformance.

BRC Global standard food safety audits.

The highest score of food production facility can obtain.

The second consecutive year.

Great job to the team for this accomplishment.

This was further exacerbated due to supply chain challenges and inflationary pressures from Covid, which Christian will discuss more in detail.

We're taking price to help offset cost inflation in our key markets.

Our target over the long term is to have 50% to 60% of our total volumes come from itself manufacturing, reducing co packing to 10% to 20% and hybrid manufacturing to 30%, 40%. We believe that this manufacturing mix should increase gross margins and profitability.

Going forward, we intend to continue to invest in our innovation capabilities with our <unk>.

Manufacturing footprint and expand our consumer base, all supporting our growth trajectory.

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

According to Nielsen data for the 52 weeks ended in December 2021, or at least the number one selling brand by market share in the UK, Germany, Sweden, Switzerland, and the Netherlands, we are gaining market share in the UK and Germany and the total plant based category continued to see strong velocity perform.

<unk>.

Our brand contributed and the highest amount of sales growth to the dairy alternative drinks category in the U K, Australia, Switzerland and Netherlands.

In Sweden, Germany, and UK. <unk> addition item is the number one selling SKU in plant based milk and milk.

Our brand accomplished this with limited SKU range and a fraction of the distribution point, yet significant distribution potential for future growth in these markets with the competition has been more than three times the distribution of Oaktree today.

To illustrate using the U K in Q4, <unk> total doors increased 8% compared to Q3 with 1000, new stores added in 2022, we expect to continue to add more shelf space in the UK and leading retailers within EMEA for example in a large grocery chain in the UK we confirmed it.

10% increase in distribution and more space on shelf. In addition, this includes our first ever full permanent pallet displays.

And we have more shelf space and SKU placement plan through the spring and into the fall for both our own milk in food products in EMEA.

With our improved supply infrastructure in EMEA, we are now able to act more aggressively into deepening our footprint within the retail channel as well as widening our reach by focusing our organization on unlocking the foodservice channel.

Which we were historically not been able to do due to supply constraints.

One early proof point of this strategy was the announcement of a major collaboration with Deutsche Bahn in Germany, which began in January Deutsche Bond is one of the largest railway companies in Europe . They are now carrying only reached the addition onboard as the first ever plant based vehicle turnkey offering for consumers.

We have a lot more exciting a significant foodservice partnership expected to be announced in EMEA. During 2022. In addition to expanding our distribution coverage in our existing markets. We are also now in position to selectively re enter expand into new EMEA markets are Great example of this opportunity is Switzerland, which we.

We entered in the spring of 2021 have already become the number one retail plant based milk brand.

We're also re entering markets, such as Italy, France, Spain, and Portugal through distribution partners and will expand to select other countries in Europe through 2022.

In the Americas demand for OLED product continues to be strong. According to the Nielsen data for the 52 weeks ended January 8th in 2022.

<unk> remains the number one fastest turning branding total dairy.

Plant based dairy and milk.

We've accomplished this with a household penetration of approximately 4% representing a lot of room for future growth.

The old mute category continues to gain market share in the U S growing from 15% in January 2021 to almost 21% in January 2022, while almond and soy moves both declined.

Although our market share of the total dairy alternatives category has continued to grow from 4% to 6% since the start of 2021, we believe that this low market share also indicates a significant distribution potential is still in front of us.

We're also very excited about the frozen business in Americas. This is a great example of how we're expanding the conversion universe.

Heading into 2021, we already had a strong core offering with ice cream pie in the course of 2021, we further built out our portfolio with a trial friendly software product and a great new innovation with frozen novelties started to hit store shelves in Q4 and Q1.

Our acceleration in frozen products with a pint and new novelty business.

And finally in Asia, our team has done very well navigating a very difficult consumer environment based on the zero Kobe policy in China.

Our foodservice business represents over 70% of our Asia revenue.

Which was significantly impacted by the Covid related closures.

Yet the resilience of our team has led to outstanding growth with added distribution in foodservice as well as establishing the infrastructure to launch our brand in the retail channel.

<unk> all beverage brands on Tmall.

This was really exciting for us since double 11 serves as the window to observes China's latest consumer trends and brands.

Two driving growth and maintain our leading position in the coffee and tea channel through new and existing partnerships. The <unk> channel in Asia is larger than the coffee channels.

And three diversifying our growth in e-commerce , and in new and existing product categories through the new Skus and oatmeal food product innovation, including ice cream and <unk> Kurtz, our successes in a difficult operating environment across more than 20 different countries with varying levels of COVID-19 related restrictions.

The resilience of our global team the strength of our product portfolio across multiple categories.

And the increase in consumer appetite for <unk> cross channels.

That said and as we have consistently highlighted since our IPO, we expect that we would experience certain variability in our margins quarter to quarter as we rapidly scale our global operations.

Our performance in 2021 was an example of this but the variability was further compounded by multiple external factors that also pivoted our growth for the year.

To start 2022, we experienced the efforts of omicron like everyone else are Christian will review our outlook. It is important to understand that we believe our growth in Q1 will continue to be impacted by heightened restrictions and lockdowns in certain countries with the risk of Covid related absenteeism.

<unk> revenue to be up low to mid teens on a percentage basis year over year.

We started to see improvements across many key areas of our business in March including production in the U S and Asia as well as revenue in EMEA Americas and Asia. We believe that we have visibility to increased distribution to fuel an improvement in the amount of revenue, we expect to generate each quarter of the year.

Total, we expect 2022 to be another record year of revenue for our business.

A COVID-19 restrictions and Lockdowns.

We're maintaining.

The responsible and prudent approach or our cost and expenses as we navigate this environment.

Thanks, Tony and good morning, everyone. It's nice to speak with you today, turning to the financials revenue for the fourth quarter of 'twenty to 'twenty, one was 100 and they did $5 $9 million.

An increase of $58 $8 million or four to six 3% compared to revenue of $127 $1 million in the fourth quarter of 2020.

There was a minor foreign exchange headwind to revenue of approximately <unk> $2 million in the quarter as.

As Tony mentioned, while foreign currency was a tailwind for the majority of 'twenty to 'twenty. One in late November currency became a headwind versus our expectation for a low single digit tailwind as a result, our revenue would have been in an estimated $5 million higher or fix.

<unk> hundred $48 million, if ex FX had remained constant from the time, we provided our guidance.

On our earnings.

Earnings call in November .

The foodservice channel in EMEA and the Americas increased in the fourth quarter of 2021 compared to the prior year period with the reopening of on premise outlets from the relaxation of COVID-19 restrictions in our key markets, partially offset by <unk>.

And related foodservice location closures in Asia.

For the fourth quarter of 2021, the foodservice channel accounted for 38, 3% of revenue compared to 31% in the same period last year on a year over year basis.

Foodservice channel was up at a five 9% compared to Q4 of last year.

The retail channel accounted for 56, 2% of fourth quarter 2021 revenue compared to 66, 3% in the fourth quarter of 2020 on a year over year basis. The retail channel was up 23, 9% compared to Q4 of last year.

From 'twenty to 'twenty. One we are pleased to have achieved our expected run rate capacity of 600 million liters into fourth quarter consolidated net sales per liter was $1 50 compared to $1 48 in the fourth quarter of 2020, primarily driven by positive customer.

On channel mix in Asia, and positive foreign exchange effect in Asia, offset by customer and channel effect in EMEA, and Americas, and a foreign exchange headwind in EMEA.

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

Net sales per liter was in line with our expectations.

<unk> four in Asia, where it exceeded our expectations driven by channel and customer mix.

Gross profit in the fourth quarter was $29 6 million compared to $35 $2 million in the prior year period.

Gross margin decreased by 11, 180 basis points to 15, 9% compared to 27, 7% in the prior year period.

We have a detailed on page 17 of our earnings presentation to show our gross margin bridge and importantly on page 18, we provide a bridge illustrating key reasons, we believe our gross margin will improve as we progress through 2022.

Charge related to startup production in inventory at our new Singapore facility of $2 3 million and a higher share of co packing production unplanned.

The latter part of the fourth quarter of $2 million.

And we recognize costs associated with the previously announced limited EMEA product recall of $1 $6 million and on EMEA asset impairment charge of $1, one $5 million associated with the company's lengths kroner facility in Sweden.

The gross margin also reflects a change in channel and customer mix, primarily in the America, partially offset by positive shine and cost customer mix in Asia, and a minor benefit from foreign exchange.

Going forward.

We continue to expect that the localization and expansion of our production capacity within the region should improve our production economics over time.

Though we expect inflationary pressures to impact our cost of goods more broadly.

We are seeing higher cost for raw materials logistics and energy globally as well as labor inflation, we are strategically taking price increases in EMEA and the Americas to help offset a portion of these higher cost price increases are already in effect in certain markets in EMEA and <unk>.

We will begin to see the benefit of price increases in the Americas starting in the second half of 2022. In addition, we are closely monitoring the current situation in Ukraine.

And the impact it may have on our business.

As a reminder, <unk> accounts for approximately 10% of our total cost of goods sold there Walter challenging old crop harvest in 2021 exacerbated by drought conditions in North America, but we have been working through all suppliers are facing similar effects of COVID-19.

Such as longer lead times for equipment.

We have great relationships with our raw material suppliers that puts us in a position to mitigate raw material shortages, particularly of note and we are also expanding our sourcing auction.

<unk> and supply in place to grow revenue at the rate, we expect for 2022 and beyond.

On an annualized basis, we expect to see improvement in our gross margin year over year, starting in the second half of 2022 with a long term goal of 40% in Q1 to date, we have experienced similar gross margin headwind to Q4 from inflation on Underutilization.

Of our production facilities as we bear the full fixed and variable costs without getting the benefit of increased sales volume.

Now focusing on our balance sheet and cash flow as of December 31, 2021, we had cash and cash equivalents of $295 6 million.

$249 9 million and short term investments and total debt outstanding depth to credit institutions of $6 million as.

As well as a fully unutilized revolving credit facility of approximately $500 million.

<unk> an accordion.

Net cash used in operating activities was $213 $8 million for the year ended December 31, 2021, compared to $44 3 million during the prior year period capital expenditures were 270 to $3 8 million.

For the year ended December 31, 2021, compared to $134 3 million in the prior year period.

Cash flow from financing activities was $955 8 million.

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

Turning to guidance for fiscal year 'twenty to 'twenty, two we expect revenue of $880 million to $921 million, an increase of 37% to 43% compared to fiscal year 'twenty to 'twenty, one with strong growth across region guidance reflect the mid <unk>.

Single digit appreciation of the U S dollar versus our major European currencies on a percentage basis.

We expect revenue to be back half weighted this year as we scale our production given a number of factors primarily related to COVID-19 .

Broken down by region in EMEA, we expect growth to accelerate beginning in the second quarter with the first quarter expected to be relatively flat versus Q4, we have built supply ahead of expansion into the foodservice channels and new markets. Later this year, we also see variability.

And in managing our international expansion plans.

In the Americas, we are pleased with the recent production output improvement, particularly in our Ogden, Utah facility. However, given the COVID-19 related issues in the first quarter, including labor absenteeism due to a local spiking cases supply chain challenges with raw materials.

Our parts and logistics based on the Canada border, including the situation with truckers and bad weather, we expect lower production and sales volume in the first quarter, which will impact our sales by high mid teens versus Q4 and meaningfully impact our gross margin.

Due to continued ramp up of Ogden and reliance on co Packers.

We expect accelerated growth in the back half of the year. Once <unk> is fully ramped and the mill a bill oat base expansion is completed.

And finally in Asia strict public health measures the remaining impact due to <unk>. We are closely monitoring the situation and remain focused on the health and safety of our team. However, given the ongoing restrictions, particularly in Hong Kong, We did zero Covid policy.

And foodservice representing over 70% of our sales in Asia, We expect the first quarter to be down low to mid twenties on a percentage basis versus Q4, though still up more than 25% to 30% year over year.

We still expect to see strong growth for the full year, because as new production comes online we will be able to.

To broaden our range of products and introduce more formats that are tailored for retail and e-commerce .

We expect capital expenditures to be between 400 $500 million, primarily related to our third generation plan in each of our regions Peter borrow in the UK Fort worth, Texas in the U S and Asia.

Three in China.

As we benefit from a much larger self manufacturing footprint globally greater economies of scale and continued strong revenue growth with that review Tony will now provide a few closing remarks.

Thanks Christian.

What remains clear is the tremendous opportunity still ahead of us continue converting daily users into ultra consumers to.

The syndicated scanner data continues to highlight a clear velocity outperformance on shelves when we had the supply and the distribution. We also continue to have strong results from the foodservice tail channel.

And we're excited about the future growth trajectory in EMEA now that we have improved supply.

We're currently navigating in a difficult operating environment as a result of the ongoing impacts from Covid.

And we are monitoring the conflict in Ukraine. However, we continue to expect to capture a disproportionate amount of the category growth going forward.

I want to reiterate that our long term objectives remain unchanged. Although from time to time, we will experience short term variability in our top line growth and margin profile based on our pace of new production coming online.

I'd like to thank our global employees for the efforts and dedication continues to advance the reach and impact of Otis mission on a global scale.

With that overview PD Christian and I are now available for your questions operator.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.

The Star Keys, one moment, please while we poll for your questions.

Our first questions come from the line of Ken Goldman with Jpmorgan. Please proceed with your questions.

Alright, thank you.

With the understanding you're not providing EBITDA guidance at this time.

Yeah, I'm, a little concerned that analysts, including me overestimate, where EBITDA will come in right.

Trying to avoid further disappointments or im hoping to avoid further disappointment on that line. So I'm just trying to get a general sense of how you think about EBITDA for the year EBITDA margins.

And any help you can provide there I think would be would be welcome by the street otherwise it'll be sort of this vacuum of information. Thank you.

Hi, Ken It's Christian here.

Thanks for the question. Good question in terms of EBITDA guidance for 2022.

We are seeing.

Sort of uncertainty in the marketplace driven by Covid, we have the inflationary pressures, we have the geopolitical situation in Europe and EMEA.

Ukraine, and what's happening over there.

So that puts us in a situation, where it's quite difficult to assess where we will be.

What we can say is from a <unk>.

Margin point of view from a gross margin point of view, we see some headwind in the first quarter, which we spoke to in the.

In the earnings.

Call it.

Release, but that will improve over time.

Throughout the year.

With the scaling over the Oregon facility and the facilities that we have in Asia. So we will see an improvement throughout the year from a gross margin point of view.

And the long term outlook still remains the same so we are focused on the long term.

And we should see over time operating leverage from our top line.

And how that will improve in the CLEC.

Leverage from an operating and EBITDA perspective, so that's sort of at the high level, where we are.

It's under the current circumstances with everything happening in around the world that makes it a bit difficult to sort of pin down a number for EBITDA.

So in terms of thinking yes.

Sorry, and in terms of.

SG&A, Ken So what we will do we will continue to invest in our infrastructure and organizational capabilities, which sort of putting us in a place to support our growth trajectory.

Okay. Thank you for that.

Unpredictable.

So I think in terms of.

Cogs and general inflation, so we expect that to increase in the range of 8% to 9% in 2022 versus 2021 globally.

Which is a sort of a slight increase from what we communicated in the third quarter.

So we expect increased for several of our key ingredients and cost components.

And we spoke about in the past so we see the cost for oats increase in the range of 8% to 50% depending on the region and site.

We're Americas, we see perhaps the increase at the higher end of the range.

We also continue to see cost pressure for rapeseed oil.

That are quite significant.

So if you were to split Cogs into different pieces in terms of material cost inflation, we expect that to be in the 5% to 6% range freight to add another 1% and then you have the remaining components of Cogs, including labor energy and co packing, which will be in the range of two to two 5%.

But we have the supply that.

That we need in terms of votes.

Four.

2022, when our growth projections.

It's tightened in America, but we use.

Where we used gluten free oats, and we've talked about the poor harvest I think in our last earnings call as well. So we have experienced some lost days of production in the first quarter, where bad weather and Covid work from factors impacting our Miller.

Who is providing us with the oats.

But we have the supply necessary to.

For our top line growth throughout the year.

And in addition in terms of the price increases or the cost increases that we have experienced.

Sure.

Planning to offset some of those increases with some strategic price adjustments that we're making in EMEA. Some of those are already being executed now in March and in EMEA that will sort of lost through May and in America and management team are planning on second half price increases to offset some of the inflationary pressure that we're seeing.

Thanks, so much.

Thanks, Ken.

Thank you. Our next question is coming from the line of Brian Holland with Cowen. Please proceed with your questions.

Yes. Thanks, good afternoon, where you are.

Just kind of following up on Ken's question about the EBITDA I'm just curious.

Is there an expectation if we assume that you were kind of at about a 26% gross margin in Q3 is there an expectation that by the time, we get to Q4 of 2022.

We would be back towards those levels or above and if so help us understand because for instance, you mentioned taking price.

Inflation was a 480 bps headwind on your gross margin this quarter, how much pricing do you expect to.

Or how much of an offset do you think pricing is too.

<unk> as you said as you just laid out.

So I mean, I think in terms of gross margin, maybe I should give sort of a bigger picture.

So are many of the questions that you have announced.

Announced some of them we can take it from there so I actually I want to start with the fourth quarter and then we can kind of take it from there would do that journey.

Just to take us back to that we had record production output quarter driven by the new production capacity that we added this year, resulting in us achieving the record revenues for the quarter now in terms of margin performance. The key driver for our margin performance is our ability to scale our.

Facilities.

This will reduce our reliance on co packing specifically in the U S.

And on top of that we're also executing the price increase of just spoke to that will offset some of the inflationary pressures that we're seeing.

And during that ramp up phase when it is not outside the state levels, we carry the fixed and variable costs.

Doug.

We still have to carry while we have not reached out to steady state capacity.

So in terms of.

Margin looking ahead for 2022.

We expect that the reported margin for Q1 will be continued to be impacted by the under utilization of our new facilities in America finisher and the higher inflationary pressure that we're seeing.

And we can go into the various regions in Americas and in Ogden and the difficulties that we had there I mean, I think we have laid that out in.

The earnings release, but we can go into it they had a bunch of different challenges with labor absenteeism.

So.

That means that we are have some headwinds going into the first quarter.

So in the Americas, we see an impact of high mid teens.

And so that will meaningfully impact our gross margin in Q1.

And the same with Asia, We also expect some sort of a decline.

Okay I appreciate that.

Then the key thing is.

As we've kind of note on slide 18 that the key driver to margin performance coming back to that again will come from the improved utilization of our organization facilities, which will help too.

Back again, our ability to scale, our new facilities, we see some headwind in the first quarter.

Related to that but that will start to improve in the second quarter and proceed into the second half of 'twenty two.

I appreciate all that color Christian and then just to follow on.

In the very near term just kind of what your capital needs are going forward and the options you have to that end.

So we ended 2021 with 546 million us dollars in cash on hand.

And on top of that we also have the unutilized.

Revolving credit facility of around $500 million, including the accordion.

So we have sufficient liquidity to fund our business for 2022, but we are continuously and opportunistically monitory capital market for favorable opportunities.

I appreciate it thank you.

Thank you. Our next question is coming from the line of <unk> <unk> with credit Suisse. Please proceed with your questions.

Hi, good morning, good afternoon I suppose.

A couple of questions on what happened in or what's happening in <unk>, you mentioned labor staffing and that.

March got a bit better, but it doesn't sound like labor staffing is getting any better.

Was this just like a first two weeks of January type of thing or.

Is this labor issue, maybe more more persistent.

I mean, if we speak about <unk>, specifically that was more related to COVID-19, and the <unk> impact that we saw in that facility, but that has since improved.

Labor and TNK creative point of view.

Okay, Great and then just on <unk>.

Just to make sure when we think about where you intend to go with long range margins and the shift to loan production versus has anything structurally changed that suggests I know the timing has shifted due to lots of different things, but has anything structurally changed that suggest that maybe you can't get those margins back towards.

The margins to where you are.

<unk>.

Last year no it was still.

We're still executing on the long term plan.

We are living in unprecedented.

Environment currently with the crisis in Ukraine, and Covid and all of that.

That's what we're dealing with in the short term long longer term, we still are executing on what we set out to do.

Last year and that we will see meaningful improvement to gross margin and EBITDA over time.

Okay, great. Thank you.

Thank you our next questions come from the line of <unk> <unk> with Oppenheimer. Please proceed with your questions.

Good morning, Thanks for taking my question. So first just given some of the development in Ukraine, and Russia. Just curious what you guys are seeing right now on the ground in Europe , just given some of the geopolitical conflicts have you started to see any changes behavior.

Anything of note on the consumer demand side.

Hi, there. This is Tony it's a good question and then firstly Europeans were closer to the conflict and our colleagues are people here in the U S and our hearts and prayers go to all people impacted by the situation.

Just to clarify from <unk> perspective, we don't do any business in Russia, Ukraine.

We are monitoring the situation I think Christian highlighted some of the impact that we need to look closely at and follow.

But this is Jason definitely creates uncertainty in Europe like for instance, and new prices and again, we are monitoring it but we don't we don't read any behavioral changes from a consumer perspective at this very moment.

Okay, Great and then second I know you guys are in the process of taking pricing.

Maybe you have some initial reads. So just curious just in terms of where you're taking pricing any reads on elasticity.

And I guess as you look at the upwards.

Youre doing on the pricing front.

Is the goal to fully offset the cost pressures and is that something you expect to have pricing in place to be able to do that this year or is that something over time that you'll be able to offset all the cost pressures you are seeing.

Yes, so so.

Just we see wide price increases across categories and.

A majority of the regions not not all of them, though and.

Yes.

We are taking price increases in Europe and U S. S question stated.

Started already in Europe and in mid year.

The U S team is going to implement that in the U S.

And we are premium priced but they're relative price position remains the same.

So we won't have a negative price gap.

The key reasons for why consumers buy our products is the performance of the product and our brand that we have.

So.

Yes, that's basically.

I will look at the pricing.

Okay, great. Thank you. Thanks.

Thanks.

Thank you our next questions come from the line of Laurent <unk> with Guggenheim. Please proceed with your questions.

Yes, good morning, and good afternoon.

Thanks for the very detailed review of your business, so I'd like to.

To continue on pricing it should Ian.

First.

In retail.

Specifically in the U S quite late to increase price.

Appreciate your comparison to other food and beverage companies' installed either.

I mean that in fiscal year 'twenty, one of the things the second half. So is there any specific reason for that is squishy.

I think that we saw at least constrained manufacturing you could have an increased price.

To get that benefit. So that's my first question and then come back for the second one on pricing.

Okay.

Yes.

So just to give you the overall picture here that the supply constraints hasn't helped us in pursuing those discussions in the U S.

And but now we do feel ready and we have ongoing discussions in the U S. And also its multiple channels that we are addressing with multiple different partners. So.

Related to the start of the discussions it's mainly linked with our supply constraints.

Okay, Thanks, and I actually I'm not talking about.

Segments of the business.

How much of your foodservice business is constructed.

I'm sure that you've got less opportunity to increase price.

As those prices may be contracted for few years, so specifically.

Thinking about the Starbucks all those big declines I. Appreciate you would not say tell me the price its public stubs.

I can appreciate that.

<unk> here.

If it's.

Maybe.

Hi.

How do we need to before you have to.

To increase prices.

Right.

No. We are we are going to apply a price increase across all the channels.

Okay. Thanks.

The last one that because it can be very short one of the major can offer.

Gross.

Opportunities is especially in the U S to increase significantly.

The distribution.

For <unk>, so how should we think about the ramp up you can come up distribution now that you've got more.

More on the supply should we think about these coming more in the second half of this year or should I be Gregory getting higher from the startup this year.

Widely across all channels youre going to see increasing starting.

Late Q2, or beginning of H, one here and I am glad you man's mentioning the ACB because we're still at 34%, even though we are supplying more volumes into the measured channels.

This is related to the strong velocity performance and increasing there.

Yes.

Thank you. Thank you.

Thank you.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Our next questions come from the line of Michael elaborate with Piper Sandler. Please proceed with your question.

Good morning, Thank you.

Just wanted to come back to the shelf resets in the EU and you've said in the past those typically or at least maybe primarily our January through may.

Maybe a couple of things one is just have you seen anything yet to date, given we're about halfway through that window.

And you touched on some coming later in the year.

Maybe just update us on how to think about all those moving parts.

A good question to Hi, Michael.

So in Europe , where reset is confirmed we are getting fair shelf space based on volumes.

We will get us to fast share and this includes fruitful first time ever a full permanent pallet displays in the top 300 stores. Another retailer in the UK is confirmed reset for April which is us increasing stocking points by more than 90% now.

Now, Germany is a decentralized we took category. So the expansion of shelf space will be more gradual but we are also winning new distribution there.

At the same time.

To remind everybody the retail environment continues to be volatile, which impacts when we are able to follow through on these shelf space expansions in general our retailers have extended the timeline over which these shelf spaces. We said will take place for instance.

Some of our retailers have flagged that there are only able to accommodate the shelf space reset in the second half of 2022, which is very unusual.

But where we see where we are getting things confirm we are increasing our shelf space as we said.

In the earlier earnings calls.

Okay, great. Thank you and just one more actually back on pricing I know you are trying to take pricing in all of the inflation headwinds of course.

Quickly logical, but you've also historically had relatively low promotional rates.

With the higher pricing and or because of the growing capacity should we expect increased promotional activity or do you think that will likely hold.

Similar to historical levels.

We'll hold to historical levels.

Okay, great. Thank you.

Thank you Michael.

Thank you. Our next question is coming from the line of John Baumgartner with Mizuho. Please proceed with your questions.

Good morning, Thanks for the question.

I guess first off I don't think it was disclosed and forgive me if I missed it but to what extent are you hedged on energy costs in 2022.

The European gas price volatility.

So from a thanks John from a.

The guidance point of view, we have assumed.

Pretty significant gas.

Energy prices in EMEA.

We expect energy costs to increase in the range of 10% to 30% on EMEA being at the high end of the range and that's what we've assumed in our.

Inflation forecast for 2022.

<unk>, obviously, a big ramp here the last couple of years, where do you see personnel and consulting costs. In 2022 is that a year on year headwind or have you sort of reached kind of a run rate you need just trying to get a feel for.

In light of investments where that doesn't meet the concentrated thank you.

So I think in general in terms of SG&A, we sort of reached the run rate and the levels that we need to grow the business.

Over time in terms of marketing and branding expenses that historically have been in the range of 890, 10% and we expect that to remain in the medium term.

To support the growth in the business.

And the opportunities that we see in the business to help to grow so that will that will remain.

Okay. Thank you thanks for your time.

Thank you.

Thank you our next questions come from the line of Jon Andersen with William Blair. Please proceed with your questions.

Good afternoon everybody.

First question.

<unk> is just on the product mix.

How should we think about the focus going forward.

Kevin Cassidy.

Constraints that you've talked about are you.

Shifting your focus to core.

Milk products and and kind of deferring.

The launch of or expansion of <unk>.

Their product types such as.

Frozen novelties.

Or am I misreading that can you kind of tell us how you're thinking about product innovation and product mix in the portfolio over the next 12 months to 24 months. Thanks.

Hey, John Thanks, Good question.

So yes.

We stated earlier the focus is definitely oat milk.

And and if you look at the differ.

Different regions here and in Asia, you will see a wide range of product innovation coming alive sooner than in in U S and Europe for instance, but this is a matter of timing in these regions and also like you said linked with the supply.

The ability that we have for when timing is right, we will be able to expand more but you are right. The focus is.

Okay.

And then one quick one on capacity.

Targeting you said $900 million leaders of run rate capacity exiting 2022.

Is that a.

Complicit with.

The existing.

Six facility footprint.

And then as you look to the three additional facilities beyond 2022, I think Petersburg Fort worth and a third location in China.

Are you rethinking the timing of those those three additional plants given.

Some of the.

The lead time challenges that you talked about thank you.

No.

Hi, This is Peter Ho Noh.

<unk>.

Because.

Both Chris and Tony said prior.

We are still building out our manufacturing capabilities to support the $1.

<unk> billion liters of technical capacity by the end of 2024.

However, as we've said the situation is still evolving in terms of potential supply chain disruption.

But we are seeing longer lead times.

<unk>.

Focus all the resources on the greatest opportunity to add meaningful production capacity, including the upcoming manufacturing facilities in Peterborough Fort worth in Asia.

We are clearly monitoring and assessing all our projects and I believe more conservative phased approach is prudent given the dynamic operating and supply chain apart.

Therefore, the number has come down from one 1 billion $75 million to $900 million.

Okay. Thank you.

Yes.

Thank you there are no further questions at this time I would like to turn the call back over to management for any closing comments.

Thank you everybody for listening to our earnings call and I will be speaking with many of you shortly.

This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Q4 2021 Oatly Group AB Earnings Call

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