Q1 2022 Oatly Group AB Earnings Call

Speaker 1: [music]

Operator: Thank you for standing by. This is the conference operator. Welcome to Oatly's first quarter 2022 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions.

Operator: To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Rachel Ulsh, Investor Relations. Please go ahead.

Rachel Ulsh: Good morning and thank you for joining us on Oatly's first quarter 2022 earnings conference call and webcast. On today's call, our Toni Petersson, Chief Executive Officer, and Christian Hanke, Chief Financial Officer. Peter Bergh, Chief Operating Officer, will also be available for questions.

Rachel Ulsh: 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 and 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 events, are those described in these forward-looking statements.

Rachel Ulsh: Please refer to the company's annual report on Form 20 F for this year ended December 31st, 2021, filed with the SEC on April 6th, 2022, 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-IFRS financial measures, including EBITDA and adjusted EBITDA. While the company believes these non-IFRS 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 IFRS. Please refer to today's release for a reconciliation of these non-IFRS financial measures and the most comparable measures prepared in accordance with IFRS. In addition, Oatly posted supplemental presentation on its website for reference. I'd now like to turn the call over to Toni Petersson. 

Toni Petersson: Thanks Rachel, good morning. We appreciate you joining us and discuss the first quarter financial results. Today, I would provide an overview of our business and discuss the key reasons we believe Oatly's position to become the number one plant based drink globally, and Christian will review our financial results in 2022 outlook, and Christian, Peter and I will be available for questions. It has been less than two months since our last earnings call in March and our confidence in the business remains as strong as ever. I'm pleased to report we beat our first quarter guidance revenue growth of 19% to one $166 million. This was despite production challenges in January and February due to COVID-19's OMICRON variant. As expected, the month of March was significantly improvement in EMEA and the Americas, with record revenue in EMEA and the largest production month ever for the Americas.

Toni Petersson: At the same time, Asia has continued to be impacted by COVID-19, with lockdowns in China that intensified in March and are spilled in effect in certain areas today. The health and safety of our team members remains our number one priority and we want to support the communities in which we live and operate as much as we can, especially through such a difficult time. That is why we`ve worked with our local team to donate and deliver care packages with Ultra products and other essentials to those most in need.

Toni Petersson: Globally, our team has done an excellent job navigating a very challenging operating environment while executing on our growth strategies across more than 20 countries.

Toni Petersson: We have a vision for a food system that's better for people and the planet. We believe Oatly is a once in a generation company, leading transformation of the food industry in nutritional health and sustainability.

Toni Petersson: To support execution of our strategy in our next phase of our global growth, we have added two new executives with an extensive industry experience to the OP team, both effective first of June .

Toni Petersson: Jean-Christophe Flatin will join Oatly to serve in the new role of Global President, and  Daniel Ordonez   has been appointed Chief Operating Officer.

Toni Petersson: Together, John-Christophe and Daniel have a total of over 55 years of experience leading incredible growth and transformation at scale across big multinational brands. These two positions with serve in connecting and bridging integral parts of the organization as we continue to expand our global footprint.

Toni Petersson: Peter Bergh, our current COO, we transitioned to the new role of Chief Strategy Officer, where he will focus on leading a global strategic project to help further strengthen Oatly's long-term growth.

Toni Petersson: The addition of these two world-class executives with proven [inaudible] records will be valuable to Oatly while we continue to build production capacity and capabilities to meet the growing demand for our products and we're excited to welcome them to our team next month.

Toni Petersson: Turning back to the global opportunity ahead of us, we estimate the global dairy market to be worth approximately $630 billion in 2021, in the food retail channel alone, with plant-based dairy currently only 3% of that at $20 billion , up from $18 billion at the end of 2020.

Toni Petersson: Our studies have found that the majority of plant-based new consumers joined the category in the last two years, which is another reason we are confident in the size of the category opportunity and the future long-term trajectory of our business.

Toni Petersson: We believe Oatly`s position to become the number one plant-based milk globally. Scanner data continues to show that the oat category is gaining share over other dairy alternatives across our key markets and we're an important driver of this growth.

Toni Petersson: Plant-based is one of the fastest growing segment in CPG and we're still in the early innings of expanding distribution, entering new [inaudible], as well as expanding into adjacent dairy categories.

Toni Petersson: Our strategic multichannel approach, brand and proprietary oat-based production process also differentiated us from our competition.

Toni Petersson: The opportunity in front of us remains massive. So in the near term, we're continuing to prioritize growth investments over profitability, to best position Oatly and serve our customers and consumers as we drive the conversion of dairy users to plant-based products.

Toni Petersson: We are investing heavily in our business to establish the infrastructure necessary for a global company on a multibillion-dollar growth trajectory.

Toni Petersson: This includes not only our innovation and digital infrastructure, but also our production capacity, which is a key factor in achieving growth.

Toni Petersson: As we grow, we believe only in controlling our global operating footprint is important to meeting the significant consumer demand for Oatly`s products, as well as protecting our IP for our [inaudible] process.

Toni Petersson: Our total production volume was 121 million litres in the first quarter, in line with our previous guidance, broken down by region. In EA production was in line with expectations. America`s production was impacted by COVID-19, severe weather conditions and logistical constraints. In Asia, production ramp-up was slow due to the COVID-19 lockdowns impacting the food service demand environment.

Toni Petersson: All these setbacks were unfortunate and temporary. We remain focused on what we can control. I'm pleased to report our augment facility remains on track to finish ramping up by the end of second quarter. The Millville`s expansion project is on track for the second half of this year. Singapore is expected to reach fully utilized production in the third quarter and Maanshan is continuing to ramp up throughout the year pending the overall COVID-19 environment and lockdown restrictions in China. So I stated earlier, production volumes reach all time high in March in the Americas. Localized production in Asia, with Maanshan and Singapore, will enable us to further diversify our product portfolio. The new products performance of future growth include service, retail and e-commerce. In Q1, 80% of our sales in Asia were derived from the barista product, compared to 85% in Q1 last year. We also expect to begin to gain operating and financial efficiencies and reduce our environmental impact from localized production.

Toni Petersson: And will set out shipments for EMEA over the course of this year. I'm also pleased to announce we concision both of our North American facilities to 100% renewable energy in 2021. Renewable electricity was generated in part from our both fibre residue, as well as wind and soar. This was significant milestone towards achieving our global sustainability ambitions and limiting our environmental impact and greenhouse gas emissions.

Toni Petersson: In the second quarter, our production volume is projected to rebound and we expect to produce 135 to 145 million litres of finished goods. We continue to expect ground breaking capacity, of approximately 900 million litres exiting 2022 and then approximately 40% increase to 1.3 billion litres exiting 2023.

Toni Petersson: In the light of the overall macro environment, as we discussed last quarter, we're taking a very focused approach to execution of our capacity expansion projects and we're strategically facing the timing of certain smaller oat-based projects such as Ogden and Landskrona .

Toni Petersson: This approach will allow our teams to have all resources focused on the largest expansion projects and to have meaningful production capacity.

Toni Petersson: Over the next few years, we expect to drive profitable growth through increasing our sales and hybrid manufacturing models, reducing our reliance on copackers, as well as localizing our production footprint. We expect this to improve our production and supply chain economics, economies and scales and our service level.

Toni Petersson: In the first quarter, sales manufacturing was 25% of our total volume, compared to co-packing at 32% and hybrid at 43%.

Toni Petersson: Our target over the long term is to have 50% to 60% of our total volumes come from sales manufacturing, reducing CO2 passing to 10% to 20% in hybrid manufacturing to 30% to 40%. We believe this manufacturing makes, coupled with pricing actions, will help offset inflation and benefit cost margins in our pathway to profitability.

Toni Petersson: I'd like to share a few highlights across the key market to support why we believe Oatly will continue to win a significant share of the dairy alternative market globally, focusing on EMEA first. According to Milton data for the 12 and 13th week ended March 2022, Oatly is the number 1 selling oat milk brand by market share in the UK, Germany, Sweden, Switzerland and Netherlands.

Toni Petersson: We continue to see strong velocity performance with the number one velocity of any non-dairy milk brand in the US, UK, Germany, Sweden and Netherlands. In the UK, Germany and Sweden, our barista edition item is the number one semi-skimmed plant-based milk and oat milk. Our brand accomplished this with a limited skew range in the fraction of the distribution points, with a significant distribution potential for future growth in these markets, where the competition had more than 3 times the distribution of Oatly today.

Toni Petersson: In the May of our Q1 we increased our retail doors year-over-year by 14% to 52.500 and food service location by 21% to 15.000.

Toni Petersson: Retail remains 84% of our business in EMEA and we expect to continue to expand our shelf space with new and existing retailers. Extent in U K, our products can now be found in Holland& Barrett, Amazon fresh and starting April, we`re now in 900 Lidl stores. We're also increasing our facing and expect to have more chilled oat milk products in major UK retailers this summer.

Toni Petersson: In Germany, our sales reached all time highs in every month in Q1, and our growth rate accelerated compared to fiscal 2020. Our one leader, Oatly barista, has higher groceries health value, with the next top five brands used in the plant-based category combined for the first quarter. We have expanded our distribution and also started to expand our product range. We launched frozen desserts in March and April in major retailers, leading to nearly 32.000 additional stocking points across Tac, including 25.000 in Germany. Food service, which represents proximately 16% of our business in EMEA, with the core focus of expansion going forward to become a more natural part of our consumers' daily lives and to meet the consumer where they are. Historically, we had not been able to aggressively pursue this channel because of supply constraints. We`re just getting started and have a long runway. So far we had great success with a launch in[inaudible].

Toni Petersson: And recently partnered with Tchibo, the biggest coffee brand in Germany with public 500 locations. We are also excited to announce our new strategic partnership with Dunkin and Arrowmark in Germany beginning June . I'm also excited to announce we have renewed an expanded our partnership with Espresso House, one of the largest coffee chains in the Northern Europe with nearly 500 locations across Sweden, Norway, Finland, Denmark and Germany. As discussed on our last call, we currently only have significant presence in five markets in EMEA. With out expanded capacity, we are now in the position to selectively re-enter and expand into new EMEA markets. We are currently in the incubation phase of our expansion plans, starting with limited distribution, but we are very excited about this wide space opportunity and driving more conversion globally, also given our proven success in entering new market.

Toni Petersson: In the Americas demand for Oatly product is very strong. According to Milton data, for the 13 weeks ending March 26th, 2022, Oatly remains number one fastest turning brand in total dairy, plant-based dairy and oat milk. In fact, for the 24 week period ending March 26th, Oatly has the top 2 velocity items in plant-based milk with lower ACV and the premium price point.

Toni Petersson: The oat milk category continues to gain market share in the US, calling from 16% in March 2021, to over 21% in March 2022, while almond and soy milks both declined. We made major progress and development in our frozen business with our PI`s growing share distribution and performing well on shelf. We recently launched our frozen Novelties bars with great market adoption so far and over 2500 retail locations confirmed in the first six month of launch. We believe our frozen business has great potential to expand our dairy conversing universe. In 2022, as capacity continues to ramp and we have more supply in the US, we are looking to fill the gaps with current customers, we are selectively expanding our distribution with new customers such as [inaudible]. And finally in China, I'd like to command our team for navigating a very difficult environment, especially in light of these recent lockdowns. Our business has been severely impacted by the lockdown, with over 17.000 retail and food service location closed in China, and food service, representing 75% of our sales to Asia in the first quarter. We expect continued headwinds in the region until the situation begins to improve, given the lockdowns are still in place, including in Shanghai, where we have a large portion of our business. However, the team has used the lockdown to sharpen our multi-channel growth strategy to better position us both in near term and as soon as the restrictions ease. Recently we implemented bulk purchasing for communities and lockdown, government procurement and online to offline ordering to more business partners.

Toni Petersson: And food service, representing 75% of our sales to Asia in the first quarter. We expect continued headwinds in the region until the situation begins to improve, given the lockdowns are still in place, including in Shanghai, where we have a large portion of our business. However, the team has used the lockdown to sharpen our multi-channel growth strategy to better position us both in near term and as soon as the restrictions ease. Recently we implemented bulk purchasing for communities and lockdown, government procurement and online to offline ordering to more business partners.

Toni Petersson: The tier 1 and 2 cities are the most impacted by the lockdowns. We've turn our focus to Tier 3 and 4 cities, where we are working to expand distribution.

Toni Petersson: Additionally, we have accelerated our APEC market expansion plans with distributors agreement in neighbouring countries such as South Korea, Thailand and the Philippines. In Asia in Q1 we increased our retail penetration year over year by more than 250% to over 21.500 locations, and food service location increased by more than 60% to 37.000 doors. And since the end of 2021 we've added over 2500 retail doors and over 11.000 feature service doors.

Toni Petersson: We continue to maintain our number one position on [inaudible] 45% market share in the new plant-based category year-to-date and 19% share in the total plant-based category.

Toni Petersson: With our newly open facilities, we're able to aggressively launch new products that we have tailored to the Asian market and enable us to successfully enter expand in new channels. For instance, in the past few weeks we launched our tea master products and a new 250 millilitres format for our oat milk products.

Toni Petersson: The tea master is the equivalent of our barista product, but specifically created for the specialty tea channel, which is twice the size of the specialty coffee channel, based on our estimates.

Toni Petersson: Prior to the Covid lockdown, our tea master launched in approximately 5000 [inaudible] delicious stores, which is one of the largest specialty tea chains in  China. We launched with a special beverage that became one of the top selling drinks with 10 days and sold over one million cups. We feel very confident about the success so far, with strong in present orders from additional chains, and look forward to expanding this platform in 2022 and beyond.

Toni Petersson: Our new 250 millilitres format for our oat milk product is specifically tailored for the retail channel and makes it easier for our consumer to enjoy our product on the go.

Toni Petersson: In China, the on-the-go 200 to 350 millilitres pack size represent the largest volume segment in the Chinese milk category, which underlines our excitement about being able to offer similar format for oat milk products. Overall, we believe we remain well positioned in Asia for accelerated growth, while lockdowns begin to ease.

Toni Petersson: While Christian will read our annual guidance and near-term views in more detail, it's important to understand that we believe Oatly`s growth opportunities over the next 3 to 5 years and beyond remains very strong. Dairy users continue to convert to oat milk users globally, with a long runway ahead of us, to increasingly connect with more consumers around the world.

Toni Petersson: We expect the quarter 2 will continue to be impacted by heightened restrictions and lockdowns in certain countries, as well as increased inflationary pressures, but our teams have done a great job navigating the  dynamic operating environment and defending and growing our market share in key markets.

Toni Petersson: We are reiterating a revenue guidance of $880 million to $920 million for the year.

Toni Petersson: Despite the challenging operating environment, with supply chain destruction globally and Covid-related lockdowns in Asia that I spoke about earlier, we`re maintaining a responsible and prudent approach for our cost and expenses as we navigate this environment and believe our actions today will benefits margins beginning in the second quarter. In summary, our success in a difficult operating environment across more than 25 different countries demonstrates the resilience of our global team, the strength of our product portfolio across multiple categories and the increasing consumer appetite for Oatly across channels. With that, I would now like to turn the call over to Christian.

Christian Hanke: Thanks Tony, and good morning everyone. It's nice to speak with you today. As we indicated on our previous earnings call, our first quarter production output decreased sequentially to 120.9 million litres of finished goods product from 142.2 million litres produced in the fourth quarter of 2021.

Christian Hanke: The lower production output was an outcome of a number of COVID-19 -related factors impacting our business, primarily in the Americas and Asia.

Christian Hanke: This resulted in the lower sequential revenue reported in the first quarter and increased our cost of production, driving a lower growth margin for the first quarter compared to the fourth quarter of 2021. This performance was in line with our internal expectations.

Christian Hanke: Turning to the financials, revenue for the first quarter of 2022 was $166.2 million, an increase of 26.1 million, or 18.6%, compared to revenue of $140.1 million in the first quarter of 2021. There was a foreign change headwind to revenue of approximately $5.1 million in the quarter.

Christian Hanke: The food service channel in EMEA and the Americas increased in the first quarter of 2022, 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 COVID-related food service location closures in Asia.

Christian Hanke: For the first quarter of 2022, the food service channel accounted for 33.8% of revenue, compared to 30.1% in the same period last year.

Christian Hanke: On a year-over-year basis, the food service channel was up 32.8% compared to Q1 of last year.

Christian Hanke: The retail channel accounted for 62.9% of first quarter of 2022 revenue, compared to 65.7% in the first quarter of 2021. On a year-over-year basis, the retail channel was up 13.6% compared to Q1 of last year. As expected, consolidated net sales per litre was $1.41 in the first quarter of 2022, compared to $1.52 in the first quarter of 2021, mainly driven by customer and channel effects in EMEA and Americas and a foreign change headwind in EMEA.

Christian Hanke: As a reminder, our highest regional net sales per litre is in Asia, followed by the Americas and then EMEA.

Christian Hanke: Gross profit in the first quarter was $15.8 million, compared to $41.9 million in the prior year period.

Christian Hanke: Gross profit margin decreased to 9.5%, in line with our expectations, compared to 29.9% in the prior year period.

Christian Hanke: Please refer to Page 21 of our earnings presentation to show our gross margin bridge year-over-year and the key reasons we believe our gross margin will improve as we progress through 2022.

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

Christian Hanke: During the ramp-up phase we carried the full fixed and variable cost structure but have not yet reached the steady state levels of production output that fully utilizes the capacity of the facilities.

Christian Hanke: The gross profit margin in the first quarter of 2022 was impacted by a number of factors, as communicated during our fourth quarter earnings call, including the underutilization of our three new facilities in Americas and Asia, as well as higher inflationary pressures.

Christian Hanke: The primary reasons for the gross profit margin decline in the first quarter of 2022, as compared to the prior year period, were the positive margin impact from higher share of self-manufacturing of 250 basis points, driven by increased output from our new and expanded facilities.

Speaker 5: The positive margin impact from higher share of self-manufacturing of 250 basis points, driven by increased output from our new and expanded facilities.

Christian Hanke: Offset by first, short term underutilization of our new facilities due to supply chain challenges of 970 basis points, largely driven by COVID-19 -related impacts on labor, absenteeism in Americas, and lockdowns in China, and logistical constraints delaying the timely supply of raw materials and spare parts, all of which resulted in the lower production output.

Christian Hanke: Second, higher cost inflation of raw materials, logistics and electricity expenses of 760 basis points, primarily due to the inflationary environment.

Christian Hanke: Third, a consolidation action in our EMEA co-packing network, resulting in a our margin impact of 290 basis points that we incurred in the first quarter, but will enable us to accelerate the shift of production volumes to our higher margin sales, manufacturing and hybrid facilities for the remainder of 2022. And lastly, 270 net basis points impact of other items.

Christian Hanke: Sequentially, gross profit margin decreased by 640 basis points from the fourth quarter of 2021, primarily related to the short-term underutilization of our new facility in Americas, which led to a higher cost of production.

Christian Hanke: We experienced lower production and sales volumes in the first quarter in Americas, mainly driven by COVID-19 related issues, which included labor absenteeism due to a local spike in cases and supply chain challenges, such as the Canada border situation with truckers and inclement weather, which affected the timely supply of raw materials and spare parts, the lower sales volumes impacted both our revenue sales mix and also led to a higher cost of production, which jointly led to a meaningful reduction to our gross margin.

Christian Hanke: In Asia, strict public health measures remain in effect, due to the Omicron variant. Since our Q4 earnings call the COVID-19, lockdowns have intensified, including a complete shutdown of Shanghai during the latter half of March and larger closures of both food service and retail locations.

Christian Hanke: As such, our revenue in Asia reflected a more challenging operating environment, which also negatively impacted our gross profit margin.

Christian Hanke: We continue to expect variability in our gross profit margin quarter-to-quarter, based on the impact of supply chain challenges, inflation, timing of new capacity coming online and mix of production model, and by sales channel and region.

Christian Hanke: We are monitoring the situation in Ukraine, as well as the worst than expected COVID-19 lockdowns in China is adding another level of uncertainty and the impact it could potentially have on our business.

Christian Hanke: However, we should start to see meaningful gross profit margin improvement in the second quarter, which we expect to continue in the second half of 2022 through the better utilization of our Ogden and Asian facilities. In our gross margin bridge, in the earnings presentation, the positive impact of the higher share of sales manufacturing is an early proved point of this.

Christian Hanke: The higher production output from our sales-manufacturing facilities will unlock multiple margin accretive benefits at the same time. Namely:

Christian Hanke: Capturing higher production economics and reducing logistic expenses from shifting co-packing volumes to in-house filling, as well as the localization of production closer to our customers, enabling us to increase our sales to higher-margin channels and customers, and generally leading to higher fixed operating leverage in our new facilities.

Christian Hanke: In addition, as previously communicated, we are executing on broad-based price increases in two of our regions to offset a portion of the inflation we are experiencing for raw materials, logistics, energy and labor globally.

Christian Hanke: In EMEA, mid-single-digit price increases have been and will be rolling out from March through May. In the US we are planning double-digit price increases that will be reflected this summer across all channels.

Christian Hanke: We have great relationships with our raw material suppliers. That puts us in a position to mitigate raw material shortages, particularly in oat, and we are also expanding our sourcing options. We have raw material contracts and supply in place, to grow revenue at the rate we expect for 2022 and beyond. We expect to see year-over-year improvement in our gross profit margin starting in the second half of 2022 and sequential improvement in gross margin starting in the second quarter. We continue to expect that the localization and expansion of our production capacity within the regions should improve our production economics over time, and we are watching inflation closely. We are also continuing to monitor the war in Ukraine and any impact it may have more broadly on our business. Both Russia and Ukraine are large exporters of grains, such as wheat, as well as vegetable oils.

Christian Hanke: Which could impact global pricing for these items and even directly impact other grains, ingredients and energy prices. In addition, Russia is a significant exporter of fertilizer. Again, as already noted, the recent, more severe COVID-19 lockdowns in China could have a meaningful short-term impact on our business if restrictions do not ease in the beginning of the third quarter.

Christian Hanke: First quarter of 2022 EBITDA loss was $81.4 million, compared to an EBITDA loss of $24.7 million in the first quarter of 2021 .

Christian Hanke: Adjusted EBITDA loss for the first quarter of 2022 was $71.4 million, in line with our internal expectations. The adjusted EBITDA loss was primarily related to the lower gross profit and we balanced the need for investments in our scalable infrastructure to support growth across three continents while managing and reducing our operating expenses on a quarter-over-quarter basis.

Christian Hanke: Beginning in the second quarter, we expect operating expenses as a share of net revenue to improve.

Christian Hanke: We will continue to manage our operating expense growth rate very closely, given the more uncertain operating environment today.

Christian Hanke: Now focusing on our balance sheet and cash flow. As of March 31st 2022, we had cash, cash equivalence and short-term investments of $411 million and total outstanding debt to credit institutions of $5.3 million. We also have a fully on utilized revolving credit facility of approximately $475 million, including an accordion.

Christian Hanke: Net cash used in operating activities was $68.9 million for the three months ended March 31st 2022, compared to $29.2 million during the prior year period.

Christian Hanke: Capital expenditures were $53.3 million for the three months ended march 31st 2022, compared to $45.5 million in the prior year period.

Christian Hanke: Capex spend was lower than expected in the first quarter of 2022 after COVID-19 restrictions in China have impacted the faithing of our investments.

Christian Hanke: Cash flow used in the financing activities was $4.2 million, for the 3 months ended March 31st 2022, compared to cash flow from financing activities of $62.4 million in the prior year period. Turning to the guidance.

Christian Hanke: In the second quarter, we expect an acceleration in our revenue growth rate compared to Q1, driven by higher production output. As Toni mentioned, we expect production volume in the range of 135 to 145 million litres, which is a leading indicator of our revenue expectation and reflects that our growth is a function of our production output.

Christian Hanke: Note there is a lag in turning production volumes into sales volumes, and the fourth quarter of 2021 is a good representation of what that ratio typically looks like.

Christian Hanke: We expect a sequential improvement on net sales per litre compared to Q1 and expected to reach the same level as the fourth quarter of 2021.

Christian Hanke: As I stated a few moments ago, compared to the first quarter of 2022, we also expect meaningful gross margin improvement and operating expenses as a share of net revenue to improve.

Christian Hanke: For fiscal year 2022 we are reiterating our outlook and continue to expect.

Christian Hanke: Revenue of $880 to $920 million, an increase of 37% to 43% compared to fiscal year 2021, with strong growth across regions. Importantly, our guidance reflects a mid-single-digit appreciation of the US dollar versus our major European currencies, on a percentage basis, and our earnings presentation shows the FX assumptions in our full year guidance.

Christian Hanke: We expect revenue to be back half-weighted this year, with approximately 60% in the second half of the year as we scale our production, given a number of factors, primarily related to COVID-19. Broken down by region:

Christian Hanke: In EMEA we have built supply ahead of expansion into the food service channel and new market later this year. We continue to see variability in the timing of some retailer resets that are very excited about the discussions we are having with our retail partners in EMEA and we expect to have a better share of the shelf once resets are complete. We are also re-entering and expanding to new European markets throughout 2022, as Tony stated earlier. That being said, given Ukraine, we are cautiously managing our international expansion plans. In the Americas, we are pleased with recent production output improvements, particularly in our Ogden, Utah facility. We expect accelerated growth in the back half of the year once Ogden is fully ramped and the Millville Oatly based expansion is completed. And finally, in Asia.

Christian Hanke: We are closely monitoring the strict public health measures for Omicron and remain focused on the health and safety of our team. Given the ongoing restrictions, particularly in China, with a zero-COVID policy and food service representing over 70% of our sales in the region, we see near-term risk to our second quarter sales projections, depending on how long the lockdowns last.

Christian Hanke: We remain bullish overall for this region in the long term, as we see significant opportunity to grow, but short term, the level of risk has increased.

Christian Hanke: We still expect to see strong growth for the full year, assuming lockdowns ease, because as new production comes online, we will be able to broaden our product portfolio and introduce more products and formats that are tailored for the Chinese consumers and the retail and e-commerce channels.

Christian Hanke: We expect capital expenditures to be between $400-$500 million, likely at the low end of the range, as the Covid restrictions in China will impact the phasing of our investments.

Christian Hanke: We expect run rate production capacity to be approximately 900 million litres of finished product by the end of fiscal 2022.

Christian Hanke: With that review, we are now ready to take your questions. Operator?

Operator: Thank you. We will now begin the question and answer session. To join the question you, you may press star, then one on your telephone key pad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any Keys. To withdraw your question, please press star, then two. Our first question comes from Andrew Lazar of Barclays. Please go ahead.

Andrew Lazar: Great. Thanks very much. I guess, to start off, in thinking about gross margins and the meaningful sequential improvement that you're looking for in Q2, you broke out a bunch of the buckets in terms of the gross margin bridge in the first quarter, year over year. I guess, what portion of those buckets do you think are now sort of essentially completely behind you, such that they don't, or are not expected to impact Q2 as a starting point? 

Christian Hanke: Yes. So, hi Andrew. Christian here. That`s a great question. So, in terms of the ones that are completely behind us is the EMEA co-packer consolidation charge that we took in the first quarter. We continue to expect inflationary impact throughout the year, as we have indicated during a fourth quarter earnings call. But, as you know, we are implementing price increases in EMEA through March and May, across all markets and regions, which we`ll hope to offset some of that. And then we have the Americas taking the effect in the second half of the year.

Christian Hanke: And also the ramp-up of production improvement, the sequential improvement that we expect to see in the second quarter, both in Americas as well as in Asia, we`ll start to see an improvement in terms of underutilization and the challenges that we faced there. So, the first quarter is the worst margin quarter and from here on we should start to see a sequential improvement throughout the year.

Multiple speakers: [Andrew Lazar] Great. Thank you for that. And then, Toni, in looking at the Nielsen data, it does show that as distribution improve, so too typically does market share. Are you seeing that similar trend in many of your other key countries? And are there markets where you don't see that? And if So, what would be the reason for that? Thank you.   [Toni Petersson] Hi, Andrew. Good question. And just to be clear on the question, did you ask for distribution gains or market share? [Andrew] Right, so we see a nice correlation, certainly in the Nielsen Data that we can track in the US, and I'm curious if you see that type of relationship in your other key markets, and if there are markets where you don't, why that might be? 

Multiple speakers: [Toni Petersson] Yeah, we are starting to see great progress, and in EMEA we have solid market share, and with increased shelf space and distribution, as well as launching new skews, we are expanding on multiple levels. And as expressed earlier, we`re facing a lag as we're implementing the shelves expense increasement and distribution expansion. But the underlying health factor is the velocity performance. So with that, together with expansion that we're doing on multiple levels, we are seeing great progress, especially at the end of Q2 here. On top of that Andrew, I just want to add that, the experiential marketing that we haven't been able to do for two years, we expect to boost the brand and sales in Europe . We previously did around 200 different events a year. We haven't been able to do that for the last couple of years and now we are really, really accelerating that and we're going to see output from that. That's what we expect. [Andrew Lazar] Great. Thanks very much. [Toni Petersson] Thank you.

Multiple speakers: [Operator] Our next question comes from Ken Goldman of J P Morgan. Please go ahead. [Ken Goldman] Hi. This may be some faulty math that I just did back on the envelope here. We sort of take the ratios that you were talking about in the fourth quarter of last year and apply it to, maybe your expected production of 140 million for Q2. It implies sales pretty far below where the street might be forecasting. So I'm just wondering if you can sort of give a little bit more color on what you expect that production, in terms of millions of litres to turn into in terms of revenues, just given some of the puts and takes that might be unclear to us? [Christian Hanke] I think, I mean, when we we obviously have sort of tried to give you some factors that you should use in terms of getting to a reasonable revenue range for the quarter.

Multiple speakers: [Christian Hanke] And, based on the production volume range of the 135 to 145 million litres. To use that ratio of sales volumes, versus production volumes in the fourth quarter should get you there. It's a production led revenue growth for the second quarter and also considering that the net sales per litre should improve as well versus the first quarter. I mean, those are the key components, Ken, and you should be able to get there. And the other factor in terms of revenue on a full year basis is that 60% of what we guided to the market will happen in the second half of the year. So I think those pieces together you should be able to sort of get there here. [Ken Goldman] We can. Just because you're not giving the number, I think some people feel like it's a little bit hidden, so to speak, and so, I just wanted to make sure we weren't missing anything. It sounds like we`re not. I guess my second question is, last quarter, you said that, while you have sufficient liquidity and while you`re still doing your [inaudible]. I`m just curious, Christian, do you have any additional thoughts on the attractiveness of the potential capitalist opportunities? That`s just something we get a lot of questions on. I`m sure most of out peers do as well. 

Christian Hanke: Yeah, that`s a fair question, Ken. First one, to reiterate that we ended Q1 with plenty of cash in our books, $411 million used in cash,[inaudible] And we also have the unutilised RCF, I am sure you guys are aware of that, $475 million, including an accordion. So, we believe we have sufficient liquidity to fund our business through 2022. But we are also confident that we have multiple options to access capital to fund our growth at the right time.

Operator: [inaudible] Our next question comes from Rupesh Parikh of Oppenheimer, Please go ahead.

Rupesh Dhinoj Parikh: Good morning. Thanks for taking my question. So I had two questions on the pricing front. So first, have your competitors started to take pricing on in other plant-based categories? And secondly, I think your commentary apply that the pricing actions that you're taking will help thoughts at some cost pressures. So is it fair to assume that there could be more pricing even after the rounds that you're expected to do in EMEA in the Americas coming up?

Toni Petersson: Hi. It`s Toni. Great question. I will let Christian fill in if you want. We are still monitoring the price increases. We do see competition take price. Not all of them. The smaller ones are waiting a little bit. But all the bigger competition we see are implementing price. We haven't seen and can't track anything from [inaudible] perspective so we just have to wait and see, the price increasement in US going to take place in the second half of this year, so we just have to wait that out.

Rupesh Dhinoj Parikh: Okay, great. Am I correct that the the price that you're taking is only going to partially offset the class pressure, so there could be additional pricing required down the road? Or do you anticipate this route to help to offset all the cost pressures you're currently seeing?

Christian Hanke: No, I mean, I think that' we're certainly monitoring the inflationary environment very closely, driven by a bunch of different factors that we have stated during the earnings call. So, if the inflationary rate continues to expand beyond what we guided in our fourth quarter earnings call, of 89%, as you might recall, on a consolidated level, we would clearly have to consider potential additional actions to offset these inflationary pressures, including additional pricing action. [Rupesh Parikh] Okay, great. Thank you.

Operator: Our next question comes from Michael Scott Lavery of Piper Sandler. Please go ahead. 

Michael Scott Lavery: Thank you. Good morning. Can you just give... You mentioned that 75% of your sales in Asia were from food service, but you also have the lockdown pressure there, skewed primarily to March in the quarter, if I'm not mistaking. I guess, one, can you confirm, I think you said there's 17 thousand of your outlets out of your 37 thousand there, that are closed. What did that ratio look like in March? And trying to just understand how it may look in second quarter, obviously.

Multiple speakers: [Toni Petersson] In terms of close retail doors and including food service, it's still 17 thousand. I'm sorry, Michael, can you repeat that question, just so I can get it right? [Michael Lavery] So, again, what I'm trying to understand is if you had 75% of your sales from food service in the quarter, how did that look in March when the lockdowns started to take effect, because that says more like how second quarter might look. What was that ratio? [Toni Petersson] Right, OK, now I understand, that's a great question. No, that probably that didn't change during March. Ok, it got more severe in March, the lockdowns, than it was prior to our earnings call. But also, that said, the team have pivoted because I think that's the core of the question: how can we sell when everything is closed, basically? But the team has done a great job to really pivoting on our business model and, as I stated in my preparing remarks, we do a lot of activity to sell in different ways, including entering new cities for retail procurement, government procurement and community sales.

Toni Petersson: And as well as entering the t-shop channel. So yes, we are monitoring. It is very closely. It is the severe lockdown, but also, given the activities that we have done, we actually strengthened our position during the lockdown, meaning that our customer base is higher than planned and the acceleration once lockdown is eased will potentially happen faster.

Multiple speakers: [Michael Lavery] Okay, that's helpful, and maybe just a follow-up on that. You talked about converting some of the production to retail product. How much of an increase in the retail or online sales have you been able to see? You know, even with or in part because of the lockdowns? [Christian Hanke] Michael? You mean in Asia specifically? [Michael Lavery] Yeah, right, or yet, China in particular, right.

Christian Hanke: China in particular. It's still still early innings, I would say, in terms of the retail strategy, considering the lockdown that we've had experienced in Asia, but we are preparing ourselves, from a production point of view, having the right format to enter into the retail space with the smaller format, the small pack, and that is something that will progress throughout the year.

Multiple speakers: [Michael Lavery] Ok, great. Thank you so much. [Operator] Our next question comes from Laurent Daniel Grandet of Guoggenheim. Please, go ahead. [Laurent Grandet] Hey. Good morning, everyone. Actually I have got to question about the US sales distribution. So US [inaudible] in the quarter you lost the market share leadership to Planet Food, this by higher velocity, [inaudible] I mean, you mentioned 34%. So two questions, the first one is: what is the rational in how to get into the present category, rather than securing more distribution in the re-alternative mix first?

Toni Petersson: Yes, that was a decision made prior to the supplies disruption in January and February . Also, it takes the way lower amount of oat base to create the frozen items. So those are the components for that decision. And you're right, we lost market share for the first quarter, but more that was really purely due to production disruption that we had and how we need to strategically allocate the volumes that were on hand. 

Laurent Daniel Grandet: Appreciate that. And, the second question, I mean, not really to diss as well, is, I`d like now to pass into the Starbucks business and partnership with the US. I appreciate why you are focusing on Starbucks. But at this point, I mean, the only talk about stability is still very limited, I mean, to say the least. To us, part of the reason to be in Starbucks is to be the brand, as you are not obtaining in that visibility yet, wouldn`t it really be better to expand distribution in retails with the use of your stock, in-store space, market share and probably also, I mean increase profitability? Like, to understand. Basically, I appreciate it`s not an easy answer, and the Starbucks relationship is probably more longer-term nature, but really, if you don't get in what you should from them, [inaudible]. 

Speaker 16: no, but that is a very valid question or all, and I just want to say that this we have a long term stratclgic questionion for that partnership.

Toni Petersson: no, but that is a very valid question, Laurent. And, I just want to say that we have a long-term strategic mission for that partnership. And in the short round, yes, obviously if we would have allocated the volumes differently, the profitability would have been different. However, we do believe that this is strategically the right thing to do to drive conversion, brand awareness and the long term opportunities for the company. And I just want to point out that the multichannel strategy is so important for us and how that creates halo. Even if we don't have like menu board visibility in the US, we had to remove it from the app once we launched at Starbucks, because of the success related to then the supply we had. It still gives the brand a lot to be at Starbucks, and the partnership that we have with them we really value, is a very collaborative and open partnership that we have and we share the use of plant based vision going to the future here.

Multiple speakers: [Toni Petersson] So strategically, we truly believe it`s the right thing to do. Short term, yes, you can take different decisions, but we`re here for the long term, as we stated right from the start, so that's what we're pursuing right now. [Laurent Grandet] Thank you. Good luck, guys. [Operator] Our next question comes from Robert Frederick Dickerson of Jeffereis. Please go ahead. [Robert Dickerson] Great. Thank you.

Robert Frederick Dickerson: It's only just a couple of questions in terms of the expected ramp in the back half, on the revenue side. You said you plan to enter a few new European markets, but kind of have to watch maybe the timing, just given the situation in the Ukraine. And then also, I heard you say there's clear potential to ramp skews in Asia as you get through the back half. But again, kind of assuming things start to ease a bit in Asia. So, you know,  I'm just curious, if you sit here now, or you already may, talking back half right, which start July . Are you already in those conversations with those retailers and saying "Hey, if  Ukrain kind of eases, obliging it gets better, like we're ready to go? Here`s our product." is it just in Asia, or has it been of a little bit more complicated, just given the operating backdrop? That`s my first question. 

Multiple speakers: [Toni Petersson]  Hi, Robert, by the way. Good question. Just, are you referring to EMEA or all the different regions?  [Robert Dickerson] Really all the different regions, yes, but mainly just EMEA and Asia. [Toni Petersson] Yes, okay, got it.  As we expressed so many times, this all about, in the US it is all about getting all enough running and we see really good progress there. So, we feel confident about the ramp up for the second half of this year. We can also start to allocate the volumes the way we want to. That is probably more favourable for us in terms of, from a margin perspective as well. In Europe, we are really stepping up with fantastic progress in retail. We increased shelf space. I mean 50% increase of facing in one of the major retailers in UK, just one action. Food service, we're having really interesting discussions, and we are confident that we will announce more excitement in the opportunities of food service in Europe.

Toni Petersson: So, we see really good progress there that will see the benefit of coming into H2 this year. In Asia, we actually, like we said, fantastic proof points when we launched the tea master, for instance, and I just want to say the magnitude of that product is massive. It is a tailored product for food service segment that is twice as big as coffee shop and with great proven result, and we have tea counts lined up. Also, already receive the orders for the majority of them and we see great proof of retailers. So we just waiting in China and Asia, just about waiting it out. We think the platform for our growth actually expanded massively during the lockdown because the work, the team is down there. Was that sufficient, Rob?

Robert Frederick Dickerson: Yes, no, that's great. I appreciate it. And then, second question, kind of back to the margin piece, as we get through the year. I just want to clarify, I know you had said expect sequential improvement in the second quarter and then the gross margin should you be better on a year over year basis, as we get to the second half. Obviously, you know, Q4 extremely difficult comparison. So, maybe it could help everyone on the call to kind of understand, is it really kind of expected sequential improvement quarter to quarter so you get through the year? So, let's say, I'm speaking kind of more so the Q3 at Q3 should be better than Q2. But it doesn't necessarily mean Q3 would be better year over over year, given allow the cost headwinds. It's more the average of the back half versus the half of last year. That's it. Thanks. 

Multiple speakers: [Christian Hanke] Hi, Rob, it`s Christian here. Yes, So I think you sort of laid it out the way you should look at it. You know, it will be a quarter over quarter sequential improvement. We are improving our production out from our three new facilities around the world. That will offset some of the underutilization headwinds that we have experienced here in first quarter. Again, the first quarter is like the lowest point of gross margin, from here on it will improve, fourth quarter being the highest margin quarter. [Robert Dickerson] Ok, helpful. Super. Thank you so much. [Toni Petersson] Thank you. [Operator] Our next question comes from Jon Andersen of William Blair. Please, go ahead.

Jon Robert Andersen: Well, hi everybody. Thanks for the question. I wanted to revisit Laurent's question on US distribution with the progress that you're making in Ogden and I guess, later in the year with the enhancement into Millville. How should we be thinking about your both ability to service, let's say, Starbucks and food service, but perhaps, on the retail side, to get your distribution up from, let's say, 40% to something more like, you know, the leading brand at 80%? What kind of time frame is associated with that, in kind of your own internal plan at this point? 

Speaker 14: What how should we be thinking about your both ability to service, let's say, a Starbucks and food service, but perhaps on the retail side, to get your distribution up from, let's say, 40% to something more like you know, the leading brand at 80%? What kind of time frame is associated with that in kind of your, your own internal plan at this pointhijohn? yeah, I mean, that's a very good question. Our ability, as you said, would definitely increase.

Toni Petersson: Hi, Jon. Yeah, I mean, that's a very good question. Our ability, as you said, would definitely increase. In terms of food service, we will continue to consider, and together with, in discussions with Starbucks, to see how much of their demand we're going to continue to serve. In retail mainly it's about filling the field rate gaps. Again, velocity is increasing for us and if you look at the dollar per store per week, actually increased from 80 to 84 this quarter. So, we still see a strong performance on velocity side. So we need to- that's going to be a catch up game for us- to fill that, that gap. In terms of expanding, we are taking a very cautious and mindful approach to expanding. We are in continued discussions with all the retailers, the major retailers in the US, to be extending further into their network and other brands that they have. So I guess we just have to balance that. It's going to be a decisions made by the local teams, mainly. We are very close to the action here in the US, but we are monitoring if there's an opportunity.

Toni Petersson: We're going to go for it. We're going to do in a very mindful manner. I Can't give you time frame, Jon. It also depends on development, especially the velocity development, which we are extremely excited about, of course. So we just have to wait and see, and balance that thoroughly. Yeah. 

Jon Robert Andersen: Just a quick follow up on that, Toni. When you think about the US and the retail opportunity, do you envision or see a placement of the Oatly brand at those higher levels of ACV, 80% plus, or do you anticipate more selective distribution where the brand may sit at 50% ACV, because you're going to be selective, choosing your locations and locations that serve a target customer?

Toni Petersson: For the next period of time, we're going to continue to have a mindful approach and be selective, and we're also going to battle, because we do believe the multichannel strategy is very important for us and I think 43% of the sales today comes from retail.

Multiple speakers: [Toni Petersson] So around 50% maybe is retail. That band is going to be maintained as we go forward because we think that is a good balance for us. In terms of getting up to 80%, yes. But again, it will be related to supply, how much supply we have at the moment. So we are very excited about all of the progress and the Millville expansion. We're going to have data [inaudible] forth coming up and then we can go really, really wider hope. [Jon Andresen] Ok, that's super helpful. One more, quick one. With the lockdowns in China, I wanted to try and understand how that may be affecting the construction or ramp in the Maanshan facility. Has that pushed out, kind of, your time frame to kind of hit run rate production within that facility? Because, that's an important facility, to your point, to expanding the product range that you can offer in that part of the world in expanding distribution? Thank you.

Multiple speakers: [Peter Bergh] Yes, this is Peter here. We are producing volume in both Maanshan and Singapore facilities but, as you said, due to the Covid lockdown on the demand environment in China, and our ability to receive input materials in Maanshan, we are very deliberately managing our time now to ramping up production. And as Toni mentioned, we see significant growth opportunities in Asia and have strong confidence in the potential of that region. So, we are positioning us in both facilities to quickly ramp up as soon as the lockdown will switch in out listed. So, our current expectation is that Singapore will reach steady state utilisation in the third quarter and that Maanshaan will continue to ramp up during the course of this year. And remember Maanshan just started in November, so, it is still an ramp of it and it hasn't material impact on our plans at this stage. [Jos Andersen] Great Thank you so much. Good luck.

Speaker 5: And as ton mentioned, we see significant growth opportunities in Asia and have strong confidence in the tential potential of that region. So we are positioning us in both facility to quickly ramp up as soon as the lockdown with swaching our listed. So our current expectation is that Singapore will reach steady stateage utilation in the third quarter and that maan will continue to ramp up during the course of this year- and remember maangjust started in November , So it is still an ramp of it and it hasn't material impact our plans at this stage. Great Thank you so much, but.

Multiple speakers: [Toni Petersson] Thank you. [Christian Hanke] Thanks, Jon. [Peter Bergh] Thank you. [Operator] Our next question comes from John [inaudible] of Miris Security. Please go ahead. [John] Good morning, thanks for the question. Maybe for Tony. Just just returning to the pricing discussion. At retail in the US, you've seen many categories or elasticity has been either minimal or at least better than expected up to this point. But you know, plant beverages that you have seen some balling pressure. So if you could, I'm just in the context of your commentary pertaining to the future price increases: what are your thought in the categories existing elasticity and I guess, how do you think about value? I mean, you look at the categories pricing relative to milk? I mean, is there a pricing threshold, either on a relative basis, or an absolute price point where you think elasticity may accelerate? I understand the limited visibility, but I'm just curious in terms of, you know, just historical case studies. You know, anything you've seen around thresholds or consumer pushback? Thank you.

Toni Petersson: Yes, because we are a premium price... It's a good question. Hi, John. It`s a correct question. And, we are premium price brand with fantastic performance. In terms of elasticity, we don't take that likely. We have done our work, thorough analysis, in multiple angles, and we believe that the pricing that we're going to take is going to benefit the company and our position and we also, relatively to other brands, we do see that the competition also is taking price. So relatively, the gap is going to maintain or if it's going to be a change it`s going to be very, very low. In terms of absolute pricing, it's really hard to say. We also see that some dairy, across some markets, we do see dairy also take price. So overall, the inflationary pressure is going to, we're going to see impact  across the whole food industry and other industries, which is very evident for us today.  

Toni Petersson: So I do believe, one thing that is important is that, try to understand the milk industry is subsidized. So, it's not a healthy industry for anybody really. What is the industry? Well, very few or no one is really making any money. That is not the benchmark with this or where this category is going. So, either those subsidized are going to be lifted or they're going to maintain that. That remains to be seen, but the category is not going to hit rock-bottom in terms of that type of pricing.

Toni Petersson: We do recognize going forward, say midterm- long term, that pricing could like potentially be in hurdle to reach other demographics and geographies. That is something that we are strategically working out on the supply chain side to optimize our production. So, with the new facilities that we have, we have great opportunities to lower our path over time where we can get more focused on really launching those initiatives at dept.

Multiple speakers: [John] Ok, thank you. Thanks for the details. [Toni Petersson] Thanks, John. [Operator]This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Operator: [music]

Speaker 2: Thank you for standing by. This is the conference operator. Welcome to Ole's first quarter 2022 earnings call. As a reminder, all participants are listen only mode and the conference is being recorded. After the presentation, there ll be an opportunity to ask questions. To join the question Q, you may press star, then one on your telephone key pad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Rachel O Investor Relations. Please go ahead. Good morning and thank you for joining us on y's first quarter 2022 earnings conference call and webcast. On today's call. Our Tony peterson, Chief Executive Officer, and Christian Han, Chief Financial Officer. Peter burg, Chief Operating Officer, will also be available for questions. Before begin, Please remember that during the course of this call, management may make forward looking statements within the meaning of the federal securities logs.

Speaker 3: Including financial projections for future periods and fiscal year 2022. These statements are based on management's current expectations and beliefs and involve a risks and uncertaintityes that could differ materially from actual events or those described in these forward looking statements. Please refer to the company's annual report Form 20 F for this year ended December 30, first two thousand and 20 one filed with the se C on April sixth 2022, 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 I if R's financial measures, including EBITDA and adjusted eda. While the company believes these non I if R's financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with I if R's. Please refer to today's releefs for a reconciliation of these non I R's financial measures and the most.

Speaker 18: tirevenue in the Maya and the largest production month ever for the Americas.

Speaker 18: At the same time, Asia has continueed to be impacted by COVID-19, with lockdowns in China that I'm intensified in March and are still in effect in certain areas today. The health and safety of our team members remains our number one priority and we want to support the communities in which we live and operate as much as we can, especially through's such a difficult time. That is why we're worked with our local team to donate and deliver care packages with Ultra products and other cententials to those most in need globally. Our team have done an excellent job, navigating a very challenging operating environment while executing on our growth strategies across more than 20 countries.

Speaker 18: We have a vision for a food system that's betteriffor people and the planet. We believe openakley, once in a generation company leading transformation of the food industries and nutritional health and sustainability, the sport execution of our strategy in our next phase of our global world. We have added two new executives with an extensive industry experience to the OP team, both effective first of June .

Speaker 18: John cristoal flatian will join Ole to serve in the new role of global prescedident, and Daniel orderess has been appointed Chief Operating Officer. Together, John cristoal and Daniel have a total of over 50 to five years of experience leading incredible growth and transformation at scale across big multinterational brands. These two positions were serve in connecting and bridging integral parts of the organization as we continue to expand our global footprint.

Speaker 18: peterberg, our current COO we position, to the new role of Chief strategy Officer, where he will focus on leaving our global strategic projects to help further strengthen of these long-term growth. The addition of these two world-class executives, proven track records, will be valuable to o while we continue to build production capacity and capabities to meet the growroing demand our products and we're excited to welcomethem to our Pam next monthturning back to the global opportunity ahead of us, we estimate the global dairy market to be worth approximately 6, 7- three billion new dollars in 2020 . one in the food retail channel alone, with plant-based dairy currently only 3% of that, at two billion new dollars, up from 18 billion at the end of 2020 . Our studies have found that the majority of plan-based new consumers joined the category in the last two years, which is another reason we areconfident in the size of the category, opportunity and the future long-term trajectory of our business. We believe both position to become the number one plan-based new globally. canner data continues to show that the? O categy is gaining share over out the dairy.

Speaker 18: To meeting the significant consumer demand for Opus products, as well as protecting our IP for our patented oak-based process.

Speaker 18: Our total production volume was 121 million meiters in the first quarter, in line with our previous guidance, broken down by region. mea production was in line with expectations. Americas's production was impacted by COVID-19, severe weather conditions and logistical constraints, and Asia production ramp-up was slowed due to the COVID-19 nockdowns impacting the food service demand environment.

Speaker 18: While these setbacks were unfortunate contemporary, we remain focused on what weekend control? I'm pleased to report our augan facility remains on track to finish ramping up by the end of second quarter. The mill expansion project is on track for the second half of this year. Singapore is expected to reach fully utilized production in the third quarter and sununshoan is continuing to ramp up throughout the year pending the overall COVID-19 environment and lock-down restrictions in chinasustated earlier. Production volumes reach all time high in March in the Americas.

Speaker 18: Localized production in Asia, with manshaan and Singapore, will enable us to further diversify our product portfolio therenew products and performance of future growth in food service, retail and e-commerce. In Q1, 80% of our sales in Asia will derived from the brter product, compared to 85% in Q1 last year. We also expect to begin to gain operating and financial efficiencies and reduce our environmental impact from localized production and will face out shipments for EMEA of the course of this year. I'm also pleased to announce we conition both of our North American facilities to one hundred percent renewable energy in 2021. renewable electricity was generating in, apart from our both fighter residue, as well as wind and soar. This was significant milestone towards achieving our global sustainability ambitions and limiting our environmental impact in greenhouse gas emissions. In the second quarter, our production volume is projected to rebound.

Speaker 18: We expect to produce 135 toone hundred and 45 million leers of finished goods. We continue to expect roundound Ed capacity on approximately nine million leaders exiting 2022 and an approximately 40% increase to one point three billion leiters exiting 2023. in the light of the overall macro environment, as we discussed last quarter, we're taking a very focused approach to execution of our capacity expansion project and we're strategically facing the timing of certain smaller oat-based projects such as Ogden and th grown up.

Speaker 18: This approach will allow our teams to have all resources focused on the largest expansion project and to have meaningful production capacity.

Speaker 18: For the next few years, we expect to drive profitable growth through increasing our's and hybrid manufacturing models, reducing our reliance on copac, kers as well as localizing our production footprint. We expect this to improve our production and supply chain economics. Economies of scales in our service levelin the first quarter, sales manufacturing was 25% of our total volume, compared to copacking at 32% and hybrid at 43 percentour targetable of the long term is to have 50 percentto 60% of our total volumes come from sales manufacturing, reducing copacking to 10% to 20% and hybrid manufacturing to 30% to 40%. We believe this manufacturing makes, coupled with pricing actions, will help offset inflation and benefit cost margins in our pathway to profitability.

Speaker 18: 'd like to share a few highlights across the key market to support why we believe oakley will continue to win a significant share of the dairy alternatties market globallyi'focusing on the Maya first. According to mils data for the 12 and 13 we ended, March 2022, oaky- the number of while selling oaknew brand by market share in the U K Germany Sweden, switzerland- and never ent.

Speaker 18: We continue to see strong velocity performance with a number one velocity of any nonairy milk bram in the U's U K Germany, Sweden and the Netherlands. In the U K Germany and Sweden operisa edition item is the number one sevenvent sskven ten-based milk and oath milk. Our brand accomplishates with a limited skeed range in the fraction of the distribution points. We have the significant distribution potential for future growth in these markets. With the competition had more than three ton of distribution of O F today. In the Maya quarter one we increased our retail sce year-over-year by 14% to 50 to 2500 and food service location by 21% to fifteen thousand.

Speaker 18: Retail remains 84% of our business in EMEA and we expect to continue to expand our shelf space with new and existing retailers. extensing U K. our products can now be found in holl and barret, Amazon fresh and starting April , where now 900 legal stores. We're also increasing our facing and expect to have more chilled oakgroup products in major U K retailers this summer.

Speaker 18: In Germany our sales switch all-time highs in every month of Q1. Our growth rate accelerated compared to fiscal 2021. a one leader. Oak Barista has higher grocerrate salthes value with the next top five brand used in the plant based category combined for the first quarter, who have expanded our distribution and also started to expand our product range. We launched frozen the charchch in March and April and major retailers, leading to nearly 32 thousand additional stocking points across duck, including 25 thousand Germany.

Speaker 18: Food service, which represent approximately 16% of our business in EMEA, with a core focused for expansion, going forward to become a more natural part of our consumers' daily lives and to meet the consumer where they are. Historically, we had not been able to aggressively pursue this channel because of supply constraints, who just getting started and have a long runway. So far we had great success with the launching on Bo jban train and recently part ly with tibo, the biggest costfeperof brand in Germany with over 500 locations.

Speaker 18: We are also excited to announce our new strategic partnership with Duncan and arrow Mark in Germany, beginning in June . I'm also excited to announce we have renewed and expanded our partnership with expressal house, one of the largest coffee changes in northering Europe , with nearly 500 locations across Sweden moway andland, Denmark and Germany.

Speaker 18: As discussed on our last call, we currently only have significant presence in five markets. In EMEA we are expanded capacity. We are now in the position to selectively we enter and expand into new EMEA markets. We are currently in the incubation ped of our expansion plant, starting with limited distribution but we are very excited about this widesspace opportunity and driving more conversion globally. Also given up proven success in entering new marke in the Americas demand the oaka product is very strong according to Milton data for the 13 weeks and March 20. sixth, twentthousand and 22, Oak remains the number one test Turning branding total dairy, plant based dairy and oakmilk. In fact, for the 24 week period end in March twent twenty-sixth, O has the top to velocity items in plant based milal with lower ACV and the premium price point.

Speaker 18: The open category continues to gain market share in the? U's, calling from 16% in March 2021 to over two y-one percent in March 2020 -two, while almond and soil milillks both declinedwe have made major progress and development in our frozen business with our pice growroing share distribution and performing well on shelf. Recently launch our frozen novelty bars with great market adoption so far and over two y-five hundred retail locations confirmed in the first six month of launch. We believe our frozen business has great potential to expand our dairy conversing universe in 2020 -two. Its capacity continues to ramp and we have more supply in the? U's. We are looking to fill the gaps with current customers. We are selective, expanding our distribution with new customers such as cds and warens.

Speaker 18: And timeing in China. I'd like to command our team for navigating a very difficult environment, especially in light of these wecent lockdowns. Our business has been severely impacted by the lonockdown to build 17 thousand wetail and free service location clossing in China and food service representing 75% of our sales in Asia in the first quarterwe expect continued headwinds in the region until the situation begins to improve, given the lonockdowns are still in place, including Shanghai, where we have a lost portion of our businesshowever, the team has used the lockdown to sharpen our multi-channel growth strategy to better position us both in the term and assume as the restriction. needaserecently, we implemented growth purchasing for communities and lockdown government procurement and online to offline ordering the more business. parnersto, tiiwuan and two cities are the most impacted by the lockdown.s with turn our focus to Tier three and four cities.

Speaker 18: Where we are working to expand distribution. Additionally, we have accelerated our a PEC market expansion plans. We distributors agreement in neighboring countries such as South Korea, Thailand and the Philippines. In Asia and Q1, we increased our retail penetration year over year by more than 250% to over twenty one thousand five hundred location and food service location increased by more than 60% to over 37 thousand doors and is the end of 2020. one we have added over 25 kar retail doors and over 11 thousand F service doors. We continue to maintain our number one position on T MO with oate: 45% market share in their new plant based category year to date and 19% share in the total plant based category.

Speaker 18: With our new ly open facilities, we're able to aggressively launch new products that we have tailored to the Asia market and enable us to successfully enter expand a new channels. For instance, in the past few weeks, we launched our team master products and a new 250 milillli to format for our opennew products.

Speaker 18: The team Mas, a equivalent of our burisster product but specifically created for the specialty tea channel, which is twice the size of the specialty coffee channel, based on our estimates prior to the COVID-19 lockdown, our team master launch in approximately 5000 Shi toicious stores, which is one of the largest specialty te chains in China. We launched with a special beriververs that became one of the top setting rings with 10 days and sold over one million cups. We feel very confident about the success so far, with strong present orders from additional chains and look forward to expanding this forming 2022 M bond. Our new 250 millle todeformat for our open new products is specifically tailored for the retail channel and makes it easier for our consumer to enjoy our product on the golo in China. That on the go- 200 to 350 mion Le pack lze- represent the largest volume segment in the Chinese mk category, which on lines our excitement about being able to offer similar format for open group products. Overall, we believe we remain well positioned in Asia for accelerated growth, while lockdowns beginning to eat.

Speaker 18: While Christian will re our annual guidance and near-term view in more detail, it's important to understand that we believe both its growth opportunities over the next fle to five years and be remains very strong. D users continue to convert to opening users globally, with a long runway ahead of us to increasingly connect with more consumers around the worldwe expect the quarter two will continue to be impacted by high-end restrictions and lockdowns in certain countries, as well as increase inflationary pressures, but our teams have done a great jobs navigating the dynamic operating environment and defending and growing our market share in key marketswe are reiterating our revenue guidance of 88 million to 92 million use dollars for the year.

Speaker 18: Despite the challenging operating environment, with supply chain desrction globally and could be-related lockdowns in Asia, low quiteadter earlier, we maintaining a responsible andimprudent approach for our cost and expenses as we navigate this environment and believe our actions today will benefit margins beginning in the second quarter. In summary, our success in a difficult operating environment across more than 25 different countries demonstrate the resilience of our global team, the strength of our product portfolio across multiple categories and the increasing consumer efftppe for oley across channels.

Speaker 18: With that, I would now like to turn the call over to Christian. Thanks Tony, and good morning everyone. It's nice to speak with you today. As we indicated on our previous earnings call, our first quarter production output decreased sequentially to hundred and 20.9 million leaders of finnished goods product from 142.2 million leaders produced in the fourth quarter of 2021.

Speaker 10: The lower production output was an outcome of a number of COVID-19 -related factors impacting our business, primarily in the Americas and Asia.

Speaker 10: This resulted in the lower sequential revenue reported in the first quarter and increased our cost of production driving a lower growth margin for the first quarter compared to the fourth quarter of 2021. This performance was in line with our internal expectations. Turning to the financials.

Speaker 10: Revenue for the first quarter of 2022 was 160 to $6.2 million, an increase of two point zero zero six one billion or 18.6 percentage points, compared to revenue of $140.1 million in the first quarter of 2000 to twenty-one.

Speaker 10: There was a foreign exchange headwind to revenue of approximately five -point $1 million in the quarter.

Speaker 10: The food service channel in EMEA and the Americas increased in the first quarter of 2022 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 COVID-related food service location closures in Asia.

Speaker 10: For the first quarter of 2022, the food service channel accounted for thirty-twothree 1% of revenue, compared to 30% in the same period last year. On a year-over-year basis, the food service channel was up thirty-two 1% compared to Q1 of last yearthe retail channel accounted for sixty-two point nineeight percent of first quarter of two ythousand and 22 revenue, compared to 66% in the first quarter of 2020 -one. On a year-over-year basis, the retail channel was up thirtyteen 1% compared to Q1 of last year.

Speaker 10: As expected, consolidated net sales per leader was $1 for the one cents in the first quarter of two million. 22 compared to $1 and 52 cents in the first quarter of 2020. 1- mainly driven by customer and channel effects in EMEA and Americas, and a? four and Exchange headwind in emeaas. A reminder: our highest regional net sales per leader is in Asia, followed by the Americas and emeagross profit in the first quarter was $15.8 million compared to for the $9 thousand in the prior year period. Gross profit margin decreased to 10% in line with our expectations, compared to 30% in the prior year periodplease refer to Page twenty one of our earnings presentations to show.

Speaker 10: Our gross margin bridge year-over-year and the key reasons we believe our gross margin will improve as we progress through 2022. as we have indicated in the past, it takes at least three to four quarters, and now longer due to COVID-19 impact- the before a new facility reaches steady state utilization of the production lines. During the ramp-up phase we carry the full fixed and variable cost structure but have not yet reached the steady state levels of production output that fully utilizes the capacity of the facilities.

Speaker 10: The gross profit margin in the first quarter of 2022 was impacted by a number of factors, as communicated during our fourth quarter earnings call, including the underutilization of our three new facilities in Americas and Asia, as well as higher inflationary pressures.

Speaker 10: The primary reasons for the gross profit margin decline in the first quarter of 2022 as compared to the prior year period were the positive margin impact from higher share of selfes-manufacturing of 250 basis points, driven by increased output from our new and expanded facilities.

Speaker 10: Offset by first short term underutilization of our new facilities due to supply chain challenges of 970 basis points- largely driven by COVID-19 -related impacts on labor absenteism in Americas and lockdowns in China, and logistical constraints delaying the timely supply of raw materials and spare parts, all of which resulted in the lower production output.

Speaker 10: Second higher cost inflation of raw materials, logistics and electricity expenses of 760 basis points, primarily due to the inflationary environment.

Speaker 10: Third a consolidation action in our EMEA copacket network, resulting in our margin impact of 290 basis points that we incurred in the first quarter but will enable us to accelerate the shift of production volumes to our higher margin sales, manufacturing and hybrid facilities for the remainder of 2022. And lastly, 200 and seventnet basis points impact of other itemssequentially, gross profit margin decreased by 640 basis points from the fourth quarter of 2021, primarily related to the short-term under utilization of our new facility in Americas, which led to a higher cost of production. We experienced lower production and sales volumes in the first quarter in Americas, mainly driven by COVID-19 related issues, which included labor absenteism due to a local spike in cases.

Speaker 10: And supply chain challenges, such as the Canada border situation with truckers and implement weather, which affected the timely supply of raw materials and spare parts. The lower sales volumes impacted both our revenue and sales mix and also led to a higher cost of production, which jointly led to meaningful reduction to our gross margin in Asia.

Speaker 10: Strict public health measures remain in effect due to the omnirom variant. Since our Q for earnings call, the COVID-19 lockdowns have intensified, including a complete shutdown of Shanghai during the latter half of March and larger closures of both food service and retail locations. As such, our revenue in Asia reflected a more challenging operating environment, which also negatively impacted our gross profit marginwe continue to expect variability in our gross profit margin quarter-to -quarter, based on the impact of supply chain challenges inflation, timing of new capacity coming online and mix of production model, and by sales channel and region. We are monitoring the situation in Ukraine, as well as the worst than expected COVID-19 lockdowns in China.

Speaker 10: iding another level of uncertainty and the impact it could potentially have on our business. However, we should start to see meaningful gross profit margin improvement in the second quarter, which we expect to continue in the second half of 2022, through the better utilization of our organ and Asian facilities.

Speaker 10: In our gross margin bridge in the earnings presentation. The positive impact of the higher share of sales manufacturing is an early proved point of this. The higher production output from our sales manufacturing facilities will unlock multiple margin accretive benefits at the same time, namely capturing higher production economics and reducing logistics expenses from shifting co-packing volumes to in-house filling, as well as the localization of production closer to our customers.

Speaker 10: Enabling us to increase our sales to higher-margin channels and customers and generally leading to higher fixed operating leverage in our new facilities.

Speaker 10: In addition, as previously communicated, we are executing on broad-based price increases in two of our regions to offset a portion of the inflation we are experiencing for raw materials logistics, energy and labor globallyin EMEA, mid-single-digit price increases have been, and will be, rolling out from March through may. In the U's we are planning double-digit price increases that will be reflected this summer across all channels.

Speaker 10: We have great relationships with our raw material suppliers. That puts us in a position to mitigate raw material shortages, particularly in old, and we are also expanding our sourcing options.

Speaker 10: We have raw material contracts and supply in place to grow revenue at the rate we expect for 2022 and beyond. We expect to see year-over-year improvement in our gross profit margin starting in the second half of 2022 and sequential improvement in gross margin starting in the second quarter.

Speaker 10: We continue to expect that the localization and expansion of our production capacity within the regions should improve our production economics over time, and we are watching inflation closely.

Speaker 10: We are also continuing to monitor the war in Ukraine and any impact it may have more broadly on our businessboth. Russia and Ukraine or large exporters of ains such as wheat, as well as vegetable oils, which could impact global pricing for these items and even directly impact other grains, ingredients and energy prices. In addition, Russia is a significant exporter of fertilizer.

Speaker 10: Again as already noted, the recent more severe COVID-19 lockdowns in China could have a meaningful short-term impact on our business if restrictions do not ease in the beginning of the third quarter.

Speaker 10: First quarter of 2022, EBITDA loss was a $1.4 million, compared to an EBITDA loss of two y-four $7 thousand in the first quarter of 2021 .

Speaker 16: Adjusted EBITDA lo for the first quarter of 2022 was se the $1.4 million, in line with our internal expectations. The adjusted EBITDA loss was primarily related to the lower growth profit and we balanced the need for investments in our scalable infrastructure to support growth across three continents while managing and reducing our operating expenses on a quarter over-quarter basisbeginning. In the second quarter, we expect operating expenses as a share of net revenue to improve. We will continue to manage our operating expense growth rate very closely, given the more on certain operating environment todaynow focusing on our balance sheet and cash flow, as a March thirty-first 2022, we had cash, cash equivalence and short-term investments of $411 million and total outstanding debt to credit institutions of five point three million dollars. We also have fully on utilized revolving credit facility of approximately.

Speaker 10: 400 and some the $5 million, including an accordion. Net cash used in operating activities was six $8.9 million fortythe three months and that March for the first 2022, compared to $29.2 million during the prior year period. Capital expenditures were fifty three point three million dollars for the three months andended that March for the first 2022, compared to for the five point $5 million in the prior year period.

Speaker 16: Capex span was lower than expected in the first quarter of 2022 after COVID-19 restrictions in China had impacted the facing of our investments.

Speaker 16: Cash flow used in the fin financing activities was four point two million- 43 months and that March for the first 2022, compared to cash flow from financing activities of $62.4 million in the prior year periodturning to the guidancein the second quarter, we expect an acceleration in our revenue growth rate compared to Q1, driven by higher production output. As Tony mentioned, we expect production volumme in the range of one hundred and thirty-five to one hundred and forty-five million leaders, which is a leading indicator of our revenue expectation and reflects that our growth is a function of our production outputnote. There is a lag in turning production volumes into sales volumes and the fourth quarter of 2021 is a good representation of what that ratio ptypically looks like. We expect a sequential improvement on net sales per leader compared to Q1.

Speaker 10: And expected to reach the same level as the fourth quarter of 2000 and twenty-oneas I stated a few moments ago, compared to the first quarter of 2000 and twenty-two. We also expect meaningful gross margin improvement and operating expenses as a share of net revenue to improve for fiscal year 2000 and twenty-two. We are reiterating our outlook and continue to expect revenue of 88.902 thousand $2 million and increase of 37% to 43% compared to fiscal year 2000 and twenty-one, with strong growth across regions. Importantly, our guidance reflects a mid single-digit appreciation of the U's dollar versus our major European currencies on a percentage basis and our earnings presentation shows the fsex assumptions in our full year guidance.

Speaker 10: We expect revenue to be back half weighted this year, with approximately 60% in the second half of the year as we scale our production, given a number of factors primarily related to COVID-19, broken down by region.

Speaker 10: In EMEA we have built supply ahead of expansion into the food service channel and new market later this year. We continue to see variability in the timing of some retailer rese but are very excited about the discussions we are having with our retail partners in EMEA and we expect to have a better share of the shelf once resets are complete.

Speaker 16: We are also reentering and expanding to new European markets throughout 2022, as Tony stated earlier. That being said, given Ukraine, we are cautiously managing our international expansion plansin the Americas, we are pleased with recent production output improvements, particularly in our orggan Utah facility. We expect accelerated growth in the back half of the year once orggan is fully ramped and the Millville O based expansion is completed. And finally, in Asia, we are closely monitoring the strict public health measures for Omicron and remain focused on the health and safety of our teamgiven the ongoing restrictions, particularly in China, with a serero COVID-19 policy and food service representing over 70% of our sales in the region, we see near-term risk to our second quarter sales projections.

Speaker 10: The pending on how long the lockdowns last. We remain bullish overall for this region in the long term, as we see significant opportunity to grow, but short term the level of risk has increased. We still expect to see strong growth for the full year, assuming lockdowns ease, because as new production comes online, we will be able to broaden our product portfolio and introduce more products and format that our tailored for the Chinese consumers and the retail and e-commerci channels. We expect capital expenditures to be between $40.5 billion, likely at the low end of the range, as the COVID-19 restrictions in China will impact the phasing of our investments. We expect run rate production capacity to be approximately nine million leaders of finish by the end of fiscal 2022. with that review, we are now ready to take your questions operator.

Speaker 2: Thank you. We will now begin the question and answer session. To join the question Q, you may press star, then one on your telephone. Keep P. you will hear a tone acknowledging your Quest. If you are using a speaker phone, please pick up your handsset before pressing any Keys. To joraw your question, Please press star, then two our first question comes from Andre Lazar of barclay. Please go ahead great. Thanks very much. I guess, to start off, in thinking about gross margins and the meaningful sequential improvement that you're looking for in two Q, you broke out a bunch of the buckets in terms of the gross margin bridge in the first quarter year over year. I guess what, what portion of of those buckets do you think are now sort of essentially completely behind you, such that they don't or not expected to impact two Q as a starting point?

Speaker 9: Yes So a high Andrews Christian here? That's a great question. So, in terms of the ones that are completely behind us, is the EMEA Co packer consolidation charge that we took in the first quarter?

Speaker 16: We continue to expect inflationary impact throughout the year, as we have indicated during a fourth quarter earnings call. But, as you know, we are implementing price increases in theemaya through March, in May, across all markets and regions, which will helppe to offset some of that. And then we have the Americas taking the effect in the second half of the year and also the ramp up of production improvement. The sequential improvement that we expect to see in the second quarter, both in Americas as well as Asia, will start to see an improvement in terms of underutilization and the challenges that we faced there. So the first quarter is the worst margin quarter and from here on we should start to see a sequential improvement throughout the year.

Speaker 19: Right Thank you for that. And then Tony, just you know, in looking at the U's Nielsen data it does show that is distribution improves, So to typically does market share. Are you seeing that, that similar trend in you, many of your other key countries? And is there? Are there, is there markets where you don't see seethat And if So, what would be the reason for that? Thank you, HI Andrew. Good question. And just to to be clear on the question. You ask for distribution gains or market share. Right, So we see a nextice correlation, certainly in the niels DAT that wecantrack in the? U and i'mcurious if you see that type of relationship in your other key markets and if there are markets where you don't, why that might be. yeah no, but we are starting to see great progress and in May we have solid market share and with increased shelf space distribution as wellwas launching new SKUs. We are expanding on multiple levels and just expressed earlier with facing a lag asess. We're implementing the shelves space increasedment and distribution expansion.

Speaker 4: But the underlying health factor is to have velocity performance So that, together with the expansion that we're doing on multiple levels, we are seeing great progress, especially at the end of Q2 here. On top of that Andre, I just want to add that the exponential marketing that we haven't been able to do for two years, we expect to boost the brand and sales in Europe . We previously did around two hundred different events a year. We haven't been able to do that for the last couple of years and now we are really, really accelerating that and we're going to see up from that. That's what we expect.

Speaker 19: Thanks very much. Thank youour next question comes from Ken Goldman of J P Morgan. Please go ahead. Hi, this may be some faulty maapth that I just did back at the envelope. Here it's: if we sort of take the ratios that you were talking about in the fourth quarter of last year and apply it to maybe your're expected production of 14 million for two Q, it applies sales pretty far below where the street might be forecasting. So I'm just wondering if you can sort of give a little bit more color on what you expect that production in terms of millions of leaders to turn into in terms of revenues, just given some of the puts and takes that might be unclear to us.

Speaker 16: I think I mean I when we obviously have sort of tried to give you some factors that you should use in terms of getting to a reasonable revenue range for the quarter and.

Speaker 10: Based on the production volume range of the 135 to hundred 45 million leaders, to using that ratio of sales volumes versus production volumes in the fourth quarter should should get you there. It's a production led revenue growth for the second quarter and also considering that the net sales per leader should improve as well versus the first quarter. I mean those are the key component. Had should be able to get there, and the other factor in terms of revenue on a full year basis is that 60% of what we guided to the market will happen in the second half of the year. So I think those pieces together you should be able to sort of get there.

Speaker 5: yeah we can. It's just because you're not giving the number it, you know. I think some people feel like it's a little bit Hidden, So to speak, and so I just wanted to make sure we weren't missing anything, and it sounds like we're not. So I guess my second question is: you know, last quarter you said that you know, while you have, you know sufficient liquidity and still do your myor and capital markets for some favorable opportunity. So I'm just curious: you know Christian, do you have any additional thoughts of the attractive potential you know capital raise opportunities? This time, I think it's a know something that we get a lot of questions on it. I'm sure most of our peers do as wellyeah, that's a fair question. Can I mean first want to reiterate that you know we ended Q1 with 10 of the cash on our books- 411 million used dollars and cash and short coming investments, and we also also have the on you, on you- to light the f- I'm sure you guys are aware of that 407- $5 million U dollars, including in the accorddium. So we believe we have sufficient liquidity to fund our business through 2022, but we're also home F them that we have multiple options to actscess of capital to fund our growth at the right time.

Speaker 7: That was A. our next question comes from ueh peri of Oppenheimer. Please go ahead. Good morning, thanks for taking my question. So I had two questions on the pricing front. So first, have your competitors started to take price in other plant based categories? And exactly I think your commentary applyed that the priceicing actions that you're taking will help thoughts at some cost pressures. So it very assume another: there could be more pricing even after the rounds youre expected to do and in the Americas coming uponly. Great question. I will let christip en if you want to. We are still monitoring the price increases. We do see competition take price. Not all of them. The smaller ones are waiting a little bit. All the bigger competition with are implementing price. We haven't seen and CAn't Thank anything from perspective that. We just have. Wait and see the price, the price increasement, and you is going to take past for the second half of this year.

Speaker 4: So we just have to wait that outokay great in my correct that the price now you're takekingis to partially offset the cost pressure, there could be additional pricing required down the road, or do you anticipate these, this roundout to help to offset all the cost pressures you're currently seeing? No, I mean, I think that we're certainly monitoring the inflationary environment very closely, driven by a bunch of different factors that we have stated during the earnings call. So if the inflationary rate continues to expand beyond what we guided in our fourth quarter earnings call of 8% to 9%, as you might recall, on a consolidated level, we would clear, clearly have to consider potential additional actions to offset these inflationary pressusure, including additional pricing action.

Speaker 8: Ok great, Thank you. Thank you, our next question comes from Michael lay of five per cent there, Please go ahead. Thank you the morning Ning, can you just give. You mentioned that seventy 5% of your sales in Asia were from food service, but but you also have the lockdown pressure there skewed primarily to March in the quarter, if I'm not mistaken, and I guess one did you for I mean did. Can you confirm? I think you said there's 17 thousand of your outlets out of your 37 there, 37 thousand that are closed. What did that ratio look like in March? And trying to just understand how it may look in second quarter obviously, So terms of close, close retail doors, including food service, is still 17 thousand. I'm sorry, Michael K, repeat that question. Just I get it right. So I guess the what I'm trying to understand is if you had seventy 5% of your sales from food service in the quarter.

Speaker 14: Have that look in March, when the lockdowns had starteded to take effect, because that feels more like how second quarter might look. What was that ratio lay right? No okay no, I understand that's a great question. No that, probably that didn't change during March. Okay, it got more severe in March, the lockdowns, and it was prior to our earnings call, but also.

Speaker 4: That said, the team had pivoted, because I think that's the court, the question- how can we sell when everything is closed, basically? But the team has done a great job to to really pivoting on our business model and, as I stated into my my prepared remarks, we do a lot of activity to sell in different ways, including entering new cities for retail procurement, government procurement and community slles And as well as entering the t-shop channel. So yes, we are monitoring it very closely. It is a severe lockdown, but also.

Speaker 4: Given the activities that we have down, we actually strengthened our position during the lockdown, meaning that our customer base is higher than plans and that the acceleration once lockdown is East will potentially happen faster.

Speaker 20: Okay that's helpful and maybe just a follow-up on that. You talked about converting some of the production to retail product. How much of an increase in the retail or online sales have you been able to see, even with or in part because of the lockdowns?

Speaker 16: In you mean in Asia, specifically right or yes, China in particular, right dy in particular, and it's still still early innings, I would say, in terms of the retail strategy, considering the, the lockdown that we've had experi in in Asia, but we are preparing ourselves from a production point of view, having the right format to enter into the retail space with the smaller format, the small pack, and that is something that we progress through throughout the yearo.kay, greatthankso much, Thank you.

Speaker 2: Our next question comes from Laura and day of guoggen. Please go aheady. Good morning everyone. Actually I have got two question: rate the? U's distribution. So in? U's that in the quarter you lost market share leadership to planet food by higher velocity, as as acc. Pretty O I mean you mentioned 34 percentso two question. The first one is: what is the rational and to get into the frozen category rather than securing more distribution in the realalternative M? firstyes, that was a decision made prior to the suppli disruption in January and February . Also, it takes way lower, lower amount of oed to create the frozen items. So those are the components for that decision.

Speaker 18: And you're right, we lost market share for the first quarter but more that was really clearly re struction that we had and how we need to strateically loc the volume. The world and health said thatand the second question- I'm not ready to this as well- is: you know, I like them to cus in the Starbucks business and partnership in the? U's. I appreciate why you are focusing on starbucksbut at this point I mean talk. Visibility is still very limited. Them mean, to say the least, to us part of the reason to be in Starbucks is to be the brand. As you are not obtaining in that visibility yet, we not be better to expand distribution in retailes with use yourards of stock, the ential space in market share and probably, or so I mean, increased profitability? Like to understand basically, I appreciate is not an easy answer and the starbu relationship is for more longer term nature.

Speaker 21: But really, if you don't get- but you should from them in that, get some of these retail, no that, but that is a very valid question around and I just want to say that this we have a long term strategic version for that partnership and and push in the short run. Yes obviously, if we would have allocated the volumes differently, the profitability would have been different. However, we do believe that this is strategic, is the right thing to do to drive conversion, brand awareness and the long term opportunities for the company. And I just want to point out that the multichannel strategy is so important for us and how that whichage halo, even if we don't have like many Board visibility in the us, we have to move from the P once we launched that Starbucks the, because of the success and related to the to then the supply we had. It still gives the brand a lot to be Starbucks and the partnership that we have with them we really value is very.

Speaker 4: Collaborative and open partnership that we have and we share the views of plant, plant based vision going to the future here. So strategically, we truly believe it by thing to do. Short term yes, you could have done, you can take different decisions, but we hear for the long term, as we started it right from the start. So that's what we're pursuing right now. Thank you, guys.

Speaker 11: Thank you to. Our next question comes from rock of Jeffrey. Please go aheadgreat, Thank youso it's only just just a couple questionions in terms of this. You know the expected ramp in the back half on the revenue side, you know I, you know you'd said you plan enter new, a few new European markets. Kind of have to watch maybe the timing, just given the situation in Ukraine. And then also I heard you say there's clear potential to ramp sskws in Asia as you get through the back half, but again kind of assuming things start to ease a bit in Asia. So you know I I'm just curious, like if you sit here now or we're already in May and we're talking back half right, which start July , are you already in those conversations with those retailers and saying Hey, if the Ukrainian kind of eas, obligge gets better, like we're ready to go here are product in the same as or?

Speaker 6: Has been a little bit more compeicated, just given the operating backdrop. But my first question: So if you very high Ro, by the way, good question. Just you're referring to EMEA or all the different regions? Really ly all the different regions just kind of in Asia? Ok, got it in. As we express so many times, this all about in the U's, it's all about getting running and we see see really good progress there. So we feel confident about the ramp up for the second half of this year. We can also start to allocate the volumes the way we want to. That is probably more favorable for us in terms of from a margin perspective as well Europe . We are really stepping up with fantastics progress in retail. Or we increase shelf space. I mean 50% increase the facing in one of the major retailers in U K, just 1: one action food service.

Speaker 4: We are. We're having really interesting discussion and we are confident we will announce more excitement in the opportunities of food service in Europe . So we have, we see, really good progress there that we will see the benefit of coming into H two this year in Asia. We actually, like we said, fantastic proof points when we launched the T? T master, for instance, which is- and I just want to say the magnitude of that product is massive. It is a tailored product for food service segment that is twice as big as coffee shop and we great proval result and we have key counts lined up, also already receive the orders for the majority of them and we see great proof of retailers. So we just waiting in China and Asia, just about waiting it out. We think the platform for our growth actually expanded massively dune the lockdown because the work, the team is down there. Was that sufficient roub.

Speaker 6: Yes that's great, I appreciateit. And then secondd question, kind of back to the margin piece as we get to year. I just want to clarify, I know you know you had said expect sequential improvement in the second quarter and then gross margin should, you know, be better in a year over year? ase, as we get to the second half. Obviously you know Q4 extremely, know difficult comparison, So maybe it could help everyone on the call just to kind of understand. You know, is it really kind of expected sequential improvement quarterto quarters? You get through the year. solet's say I'm speaking kind of more of the Q3 at Q3 should be better than Q2. But it doesn't cessarily mean Q3 would be better year over year. Given allow the cost headwinds. It's more the average of the back half versus the back half of last year. And that's iti, all this Christian here. Yes, So I think you sort of laid it out the way you should look at it. You know it will be a quarter over quarter, the questionential improvement.

Speaker 10: We are improving our production out from our three new facilities around the world. That also some of the underutilization headwinds that we have experienced here. And first quarter: again, the first quarter is like the lowest point of gross morgin. From here on it will improve, fourth quarter being the highest margin quarter. Ok helpful ful, all right super, Thank you so much. Thank you. Our next question comes from John Anderson of William Blair. Please go ahead. Well, HI everybody. Thanks to the question. I wanted to revisit laureon's question on U's distribution. With the progress that you're making in ogin and I guess later in the year with the enhancement to millbil what, how should we be thinking about?

Speaker 14: Your both ability to service, let's say, a Starbucks and food service, but perhaps on the retail side, to get your distribution up from, let's say, 40% to something more like the leading brand at 80%? What kind of time frame is associated with that in kind of your own internal plan at this point?

Speaker 9: Hi johnyes, I mean that's a very good question. Our ability, as you said, will definitely increase in terms of food service. We will continue to consider and together with in discussions with Starbucks, to see how much of their demand we're going to continue to serve in retail. Mainly it's about filling the fill rate gaps. Again, velocity is increasing for us and if you look at the dollar for a store per week actually increase from 80 to 80- four this quarter. So So we still see a strong performance on velocity side. So we need to. That's going to be a catchup for us to fill that, that gap. In terms of expanding, we are taking a very cautious and mindful approach to expanding, but we are in continue discussions with all the retailers, the major retailers in the? U's to be furing to the network and other brands that they have. So I guess we just, we just have to balance. That's going to be decisions made by a local.

Speaker 14: A target customer.

Speaker 4: We're going for the next, for the next period of time, we're going to continue to have a mindful approach and be selective and we're also going to balance us, because we do believe the multichannel strategy is very important for us and I think 43% of the sales today comes for retail.

Speaker 4: somemmer overaround 50% maybe is retail salers. That balance is going to be maintained as we go forward because we think that is a good balance for us. In terms of getting up to 80 yes, but again it will be related to supply, how much supply we have at the moment. So we are very excited about the organ progress and the mill able expansion. We're going to have dllas forthforth coming up and then we can go really, really wide to hope.

Speaker 14: Ok that's super helpful one more quick one with the lockdowns in China wanted to try and understand how that may be affecting the construction or ramp in the mancht. Facility has that as that pushed out kind of your time frame to kind of hit run rate production within that facility because that's an important facility to your point to expanding the product range that you can offer in that part of the world in expanding distribution. Thank youyeah and to that point this is Peter. Here we are producing volume and in both my Chan and sing ort facility. But you due to the kovid lockdownfound the demand environment in China and our ability to receive input materials in my.

Speaker 22: We are very deliberately managing our time now to ramping up production and, as ton y mentioned, we see significant growth opportunities in Asia and have strong confidence in the T potential of that region. So we are positioning us in both facility to quickly ramp up as soon as the lockdown restricting our listed. So our current expectation is that Singapore will reach steady stateage utilization in the third quarter and that maan will continue to ramp up during the course of this year- and remember maana started in November , So it is stillven a ramp up it and it hasn't material impact our plans at this stage. Great, Thank you so much. But thank you, Thank John , Thank you.

Speaker 2: Our next question comes from John bomb gartner of means cy Securities. Please go aheadthe morning. Thanks for the question, maybe for Tony. Just just returning to the pricing discussion at retail of the's, you've seen many categories or elasticity have been either minimal or at least better than expected up to this point. But iyou know plant beverages, you have seen some balling pressure. So if you could, I'm just in the context of your commentary pertaining to the future price increases- what are your thought in the categories existing elasticity and I guess how anything, anything about value, I meanans you look at the categories pricing relative to milk. I mean, is there a priciceing threshold, either on a relative basis or an absolute price point where you think elasticity may accelerate? I understand that, the limited visibility, but I'm just curious in terms of- you know, just historical case studies, anything you've seen around threshold or consumer pushback. Thank you.

Speaker 18: Yes we don't take we just because we are a premium price it good. It's a good question. hydraon is a good rect question and we are premium price brand with fantastic performance in terms of elasticity. Like we we don't take that likely we have done our work thorough analysis multiple multiple angles and we believe that the pricing that we're going to take is going to benefit the company and our position and we also relatively to other other brands. We do see that the competition also is taking price. So relatively the gap is going to even the maintain or be if it's going to be a change going to be very very low in terms of absolute pricing. It's really hard to say we also see that some very across some markets we do. See very also take price. So So overall inflationary pressusure is going to like we're going to see impact across the whole food industry and other industries which which is very evident for us. Today. So.

Speaker 4: I do believe one thing that is important is that tryunderstand: the milk industry is subsidized, So it's not a healthy industry for anybody. Really what is? Is industry? Well, very few or no one really making any money. That is not the benchmark. Or with this or this category is going So. So either those subsidies are going to be lifted or they're going to maintain that. There remains to be seen about the category is not going. It's not going to rock bottom in terms of the type of pricing.

Speaker 4: We do recognize going forward- say midterm, long term- that pricing could like potentially be hurdled to reach other demographies and geographies. That is something that we are strategically working on the supply chain side to optimize our production. So with the new facilities that we have, we have great opportunities to lower our costs over time where we can get more focused on really launching those initiatives at depththank you, thank for the detail. Thanks, John .

Speaker 2: This concludes the question and answer session and today's conference callyou may disconnect your linesthank you for participating and have a pleasant day.