Q1 2025 Oatly Group AB Earnings Call

Good day and welcome to the old lease first quarter 2025 earnings conference call. All participants will be in listen only mode. So do you need assistance. Please signal a conference specialist with pressing the star key followed by zero.

Operator: Good day, welcome to the Oatly Q1 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask questions, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Brian Kearney, VP of Investor Relations. Please go ahead.

Today's presentation, there will be an opportunity to ask questions to ask question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference call over to Brian Kearney VP of Investor Relations.

Go ahead.

Brian Kearney: Good morning, and thank you for joining us today on today's call are our Chief Executive Officer, John Kristoff peloton, our global President and Chief operating officer, Daniel or don't yet and our chief financial.

Brian Kearney: Good morning, and thank you for joining us today. On today's call are our Chief Executive Officer, Jean-Christophe Flatin, our Global President and Chief Operating Officer, Daniel Ordoñez, and our Chief Financial Officer, Marie-José David. Before we begin, please review the cautionary statement regarding forward-looking statements and other disclaimers on Slide 3, which are integrated into this presentation and includes the Q&A that follows. Please also refer to the documents we have filed with the SEC 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. Also, please note on today's call, management will refer to certain non-IFRS financial measures, including adjusted EBITDA, constant currency revenue, and free cash flow. Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS.

Speaker Change: Financial Officer Murray just.

Speaker Change: Before we begin please review the cautionary statement regarding forward looking statements and other disclaimers on slide three which are integrated into this presentation and includes the Q&A that follows. Please also refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially.

Speaker Change: Curiously from those expressed or implied in any forward looking statements made today.

Speaker Change: Please note on today's call management will refer to certain non <unk> financial measures, including adjusted EBITDA constant currency revenue and free cash flow. Please refer to today's release for reconciliation of non <unk> financial measures to the most comparable measures prepared in accordance with item for us in addition.

Brian Kearney: In addition, Oatly has posted a supplemental presentation on its website for reference. With that, I'd now like to turn the call over to Jean-Christophe.

Speaker Change: We have posted a supplemental presentation on its website for reference with that I'd now like to turn the call over to John Kristoff. Thank you, Brian and good morning, everyone.

Jean-Christophe Flatin: Thank you, Brian. Good morning, everyone. Slide 4 has the key messages I want you to take away from today's presentation. You will hear us use the word progress a lot today, as I believe the biggest takeaway from today is that we are making progress toward our North Star of structural, consistent, profitable goals. As we discussed last quarter, we have driven a significant transformation over the past 2 years, and we've made further progress in Q1 2025. In this Q1, our financial results came in largely as we expected, and we made progress on our top line, our cost structure, and our cash flow. Today, you will hear both from Daniel and Marie-Jose about how we are executing on our 2025 priorities.

Speaker Change: Slide four as the key messages I want you to take away from today's call.

Speaker Change: Foundation.

Speaker Change: You will hear us use the word pullback.

Speaker Change: Today as I believe the biggest take away from today is that we are making progress to Waldo no style of structural consistent profitable goals.

Speaker Change: As we discussed last quarter, we believe the significant transformation over the past two years and we've all felt good in the first quarter of 2025.

Speaker Change: In this first quarter, our financial results came in largely as we expected.

Speaker Change: And we made progress on our top line.

Speaker Change: Our structure and our cash flow.

Speaker Change: Today, you will hear more from them yet.

Speaker Change: The both how we are executing on our 2020 priorities.

Jean-Christophe Flatin: These 2025 priorities all have the overarching theme of disciplined allocation of resources in order to create value. We believe that is exactly what you should see in our results. We have been allocating resources with the goal of igniting positive momentum in our business. These resources have been time, people, and capital to engage with customers and consumers in the unique way that only Oatly can. We are starting to see results. We are being disciplined in this resource allocation. We are generating the fuel for this investment by aggressively continuing to drive efficiencies throughout the company. In the quarter, we continued to make progress in driving efficiencies in both our supply chain and SG&A. We redeployed a portion of those savings to our growth-focused investments.

Speaker Change: These 2025 <unk> all the time.

Speaker Change: The overarching theme of disciplined allocation of resources in order to create value and.

Speaker Change: And we believe that is exactly what you should see you know results.

Speaker Change: We have been allocating resources with the goal of igniting positive momentum in our business.

Speaker Change: This is all seems that'd be dumb people and get people to engage with customers and consumers in the unique way that only.

Speaker Change: D C cap and.

Speaker Change: And we are starting to see results.

Speaker Change: We are being disciplined in D. C colocation and we are generating the fuel for these investments by aggressively continuing to drive efficiencies throughout the company.

Speaker Change: In the quarter, we continued to make progress in driving efficiencies in both self seemed like Chad and SG&A and we redeployed a portion of those savings TOBA gold focused investments.

Jean-Christophe Flatin: We believe this progress keeps us on track to deliver our first full year of profitable growth as a public company. Therefore, with 1 quarter of results behind us and with strong plans for the rest of the year, our full-year guidance remains unchanged. Slide 5 shows a summary of our quarterly performance. I am proud to report that we have made progress on many of our key financial metrics. It is a big recognition for the team's efforts over the past 2 years to see that our Q1 results for gross profit, gross margin, adjusted EBITDA, and free cash flow were all the best they have been since our IPO. Our top-line performance was a bit mixed.

Speaker Change: We believe this progress keeps us on track to deliver our first full year of profitable growth as a public company.

Speaker Change: Therefore, with one quarter lumpy that it's behind us and we've talked plan for the rest of the year or full year guidance remains unchanged.

Speaker Change: Slide five shows a summary of our quarterly performance.

Speaker Change: I am proud to report that we have made progress on many of our key financial metrics.

Speaker Change: It is a big Echo nation for the teams at fault. So over the past two years to see that the our first quarter results for gross profit gross margin adjusted EBITDA and free cash flow.

Speaker Change: Sure.

Speaker Change: Best There've been seemed so ideal.

Speaker Change: Our topline performance was a bit me so.

Jean-Christophe Flatin: While we grew volume a solid 9.2% in the quarter, with notably strong volume growth in our Greater China segment and solid volume growth in Europe and International, our constant currency revenue growth was 0.7% in the quarter. As we enter 2025, we plan for our Q1 top-line growth to be below the full-year guidance level. While we made good progress and even outperformed our expectations in several markets, we continued to face some challenging dynamics in North America, where we have not yet fully deployed the resources to ignite positive momentum. We believe the investments we are making, combined with our action plans to drive positive momentum, will enable us to accelerate total company growth later this year. Now, I will turn the call over to Daniel to give you a more detailed update on how we are progressing on our 2025 priorities.

Speaker Change: Why do we grew volume a solid nine 2% in the quarter with notably strong volume growth you know greater China segment.

Speaker Change: So I mean volume both in Europe and international.

Speaker Change: Our constant currency revenue growth was <unk> seven in the quarter.

Speaker Change: As we entered 2025, we planned for our first quarter topline growth to be below the full year guidance level.

Speaker Change: Why do we made good progress and even outperformed our expectation in several markets. We continued to face some challenging dynamics in North America, where we have not yet fully deployed the resources. So a nice positive momentum.

Speaker Change: We believe the investments we are making combined with our action plans to drive positive momentum will enable us to accelerate total company goals later this year.

Now I will turn the call over to Danielle to give you a more detailed update of how we are progressing on our 'twenty to 'twenty five priorities.

Daniel Ordoñez: Thank you, J.C., and good morning, everyone. As a reminder, our 2025 priorities are to ignite positive momentum globally, aggressively pursue cost efficiencies to simplify and generate fuel for additional demand-driving investments, and to deliver our first full year of profitable growth as a public company. First, to ignite positive momentum globally, we're executing against three pillars: increasing our relevance to customers and consumers, attacking barriers to conversion, most notably preconceptions on taste and misinformations on health, increasing the availability of our products to consumers. The first pillar is relevance, rooted in our fantastic portfolio of products that consumers love. Our barista family is second to none, as demonstrated by its velocities and continued growth. It has changed the game, and as it grows into occupying more usage occasions, channels, and price points, it is best placed to leverage the growing momentum in the coffee and beverages space.

Danielle: Thank you J P and good morning, everyone.

Speaker Change: As a reminder, our 2025 priorities are to ignite positive momentum globally.

Speaker Change: Aggressively pursue cost efficiencies to simplify and generate fuel for additional demand driving investments.

Speaker Change: And to deliver our first full year of profitable growth as a public company.

Speaker Change: First to ignite positive momentum globally, we're executing against three pillars.

Speaker Change: Increasing our relevance to customers and consumers.

Speaker Change: Attacking barriers to conversion, most notably preconceptions on taste and misinformation is home health.

Speaker Change: Increasing the availability of our products to consumers.

Speaker Change: The first pillar is relevance rooted in a fantastic portfolio of products that consumers love.

Speaker Change: Our barista family is second to none as demonstrated by its velocities and continuous growth.

Speaker Change: Has it changed the game and as it grows into occupying more usage locations channel can price points. It is best place to leverage the growing momentum in the coffee and beverage space.

Daniel Ordoñez: You should expect us to continue to expand into the coffee and beverage space, further driving cultural relevance and conversion into oatmilk. Relevance does not start and stop with the product. Oatly is a generational brand that maintains its cultural edge with millennials and Gen Z, as you can see in the examples on slide 9. A good example of how we are activating the brand at global scale is our collaboration with Nespresso, with whom we developed an Oatly-branded pod for the perfect latte or flat white experience. Nespresso boutiques across most cities of the world will experience this collaboration over the course of this year with stunning visibility. At local level, we continue to execute relevant brand activations like It Works in Tea in the UK, reminding Brits that our product work just as well in tea as they do in coffee.

Speaker Change: You should expect us to continue to expand into the coffee and beverage space further driving cultural relevance and conversion into oat milk.

Speaker Change: But really that's not start and stop with the product hopefully is a generational brands that maintains its cultural edge with millennials and Gen Z.

Speaker Change: As you can see in the examples on slide nine.

Speaker Change: Example of how we are activating the brand at global scale is a collaboration with Nespresso with whom we developed and only branded pods for the perfect lofty or flat wide experience.

Speaker Change: Espresso boutiques across most cities of the world with experienced this collaboration over the course of this year with stunning disability.

Speaker Change: At local level, we continue to execute relevant brand activations like it works in tea in the U K reminding breaks down our product war chest as well at <unk>.

Speaker Change: As they do in coffee.

Daniel Ordoñez: This result of these high impact activations have been outstanding in terms of awareness. You should expect us to continue executing these in the future. We're not stopping there. Slide 10 shows you some examples of how we're attacking one of the primary barriers to conversion, which is a preconception on taste. Those of you who have followed us for a while know that our proven model is to drive experience in the food service channel and then to ensure that consumers can find us in retail so that they can repeat the experience at home. Other occasions again and again. We're taking the exact model and dialing it up, owning the growing momentum there is in the coffee and the beverages space. There is a taste bonanza and a flavor bonanza going on in coffee around the world. Our teams are intimately woven into this community.

Speaker Change: This result of these high impact Activations have been outstanding in terms of awareness and you should expect us to continue executing this in the future.

Speaker Change: And we're not stopping there.

Speaker Change: 10 show you. Some examples of how we're attacking one of the primary targets to conversion, which is a preconception on taste.

Speaker Change: Those of you who have followed us for a while not that our proven model is to drive experience in the foodservice channel and then to ensure that consumers can find us in retail so that they can repeat the experience at home and other locations again and again.

Speaker Change: We're taking that exact model and dialing it up owning the growing momentum there is in the coffee and the debit space.

Speaker Change: There is a taste bonanza flavor bonanza going on in coffee.

Now in the World and our teams are intimately woven into this community.

Daniel Ordoñez: Whether in a coffee shop in Shanghai, Brussels, Mexico, Dubai or Boston, Oatly is uniquely positioned to bring the hottest emerging global taste trends to their menus. We're working with most of our food service customers to revitalize their menus and bring the most exciting new news to the category. They want us to help them better understand the market, better understand Gen Z, and therefore better anticipate what is next and help them to become more competitive. On the left, you can see just a few examples of what we have been developing with them among thousands of signature drinks that we are creating with and for our customers all around the world. Expect these examples on the slide just to be the tip of the iceberg.

Speaker Change: Whether in a coffee shop in Shanghai, Brussels, Mexico, Dubai, or Boston, hopefully is uniquely positioned to bring the hottest emerging global pace trends to their menus.

Speaker Change: Well, one thing with most of our foodservice customers to revitalize their menus and bring the most exciting new news to the category.

Speaker Change: They want us to help them better understand the market better understand Gen Z and therefore, better anticipate what is next and held them to become more competitive.

Speaker Change: On the left you can see a few examples of what we have been developing with them among thousands of signature drinks that we are creating with and for our customers all around the world.

Speaker Change: Expect these examples on the slide just to be the tip of the iceberg.

Daniel Ordoñez: We're supporting these efforts with provocative, integrated brand activations across digital and in real life platforms that encourage consumers to try converting from dairy to Oatly. An example is our ongoing blind taste test activation. We have been executing taste tests across many markets, and the results are remarkably consistent, showing that roughly half of the sample prefers Oatly to dairy milk. Since our household penetration has not yet reached that 50% level, that potentially means that millions and millions of people are having a suboptimal coffee drinking experience. Finally, we close the loop with impactful in-store retail executions. I'm happy to say that our in-store execution is ever so strong and has become one of the key reasons behind the sustained commercial traction that is reflected in market share gains and velocities that remain well above our competitors.

Speaker Change: And we are supporting these efforts with provocative integrated brand activations across digital and in real life platforms that encourage consumers to try converting from dairy to Oakley.

Speaker Change: An example is our ongoing blind taste test activation.

Speaker Change: <unk> been executing taste test across many markets and the results are remarkably consistent showing that roughly half of the sample refers only to dairy milk.

Speaker Change: Since our household penetration has not yet reached that 50% level that potentially means that millions and millions of people are having a suboptimal coffee drinking experience.

Speaker Change: Finally, we closed the loop with impactful in store retail executions and.

Speaker Change: Happy to say that our in store execution is ever so strong and has become one of the key reasons behind the sustained commercial traction that is reflected in market share gains and velocities that remained well above our competitors.

Daniel Ordoñez: Slide 11 shows what we have been doing to attack another large barrier to conversion, which is misinformation on health. Instead of creating more noise, we have been systematically engaging with registered and renowned dietitians, nutritionists, and key opinion leaders, arming them with science-based facts about our category and our products so they can be advocates for the truth. The science behind our product is unequivocal. Fortified plant-based milk like Oatly are recommended in dietary guidelines all around the world. While there's plenty more to do to ensure that the public is not being misled, our tracking data shows that negative media coverage has declined very significantly compared to last year. We're making progress on ensuring the discussion on our category is balanced and honest. Now let's talk results starting on slide 12.

Speaker Change: Slide 11 shows what we have been doing to attack another large barriers to conversion, which is misinformation on him.

Speaker Change: Instead of creating more noise, we have been systematically engaging with registered and renal dieticians nutritionists and key opinion leaders.

Speaker Change: Arming them with science based facts about our category on our products. So they can be advocates for the truth.

Speaker Change: The science behind the product is unequivocal 45 planned basically of like opening a recommended in dietary guidelines all around the world.

Speaker Change: There's plenty more to do to ensure that the public is not being misled are tracking data that shows that negative media coverage has declined very significantly compared to last year.

Speaker Change: So we're making progress on ensuring the discussion of our category is balanced and honest now let's stop results starting on slide 12.

Speaker Change: We have started to roll out the strategy in Europe and this slide shows the retail takeaway data for our European markets. You can see that we have started to accelerate our volume growth.

Daniel Ordoñez: We have started to roll out this strategy in Europe, and this slide shows the retail takeaway data for our European markets. You can see that we have started to accelerate our volume growth. As we have persistently highlighted, Oatly continues to outperform both the plant-based milk category as well as the oat milk category. Slide 13 is even more interesting though, as the data gives us the confidence to say that we're on the right track. Our two largest markets in Europe are the UK and Germany, and they are precisely where we started to roll out. On the left, you can see that our German business has accelerated growth to nearly 8% in the last 12 weeks. On the right, you can see the UK data. If you recall from several quarters ago, we mentioned how the UK market was seeing some sluggishness.

Speaker Change: Persistently highlighted of the continues to outperform both the plant based milk category as well as the ultimate categories.

Speaker Change: Slide 13 is even more interesting.

Speaker Change: At the data gives us the confidence to say that we're on the right track.

Speaker Change: Our two largest markets in Europe, the UK and Germany, and they are precisely what we started to rollout on the left you can see that our German business has accelerated growth to nearly 8% in the last 12 weeks on.

Speaker Change: On the right you can see the UK data as Youll recall from several quarters ago, We mentioned, how the UK market will see some sluggishness.

Daniel Ordoñez: Well, we believe the actions that we have taken have started to revitalize our UK business, moving from decline to incipient growth. Good progress and plenty more to do. It is important to know though, that we have not yet fully deployed this playbook across all our markets, but we will do so throughout the course of this year and consistently as we move forward. Igniting category momentum will not happen by a snap of a finger, but by consistently focus on breaking down the barriers that exist with culturally relevant execution and surgical resource allocation. North America is the largest market where we have not yet rolled out this playbook, but the strategic direction will be identical, and so is the external context and the relevance of the brands and the portfolio. Let's then discuss North America. Last quarter, we mentioned some discrete headwinds within this segment.

Speaker Change: We believe the actions that we have taken have started to revitalize our UK business moving from declining tuning CPM growth.

Speaker Change: So good progress and plenty more to do.

Speaker Change: It is important to note, though that we have not yet fully deployed this playbook across all of our markets, but we will do so throughout the course of this year and consistently as we move forward.

Speaker Change: Igniting category momentum will not happen, but its not of a finger, but by consistently focus on breaking down the barriers that exist with culturally relevant execution surgical resource allocation.

Speaker Change: North America is the largest market what we have not yet rolled out this playbook, but the strategic direction will be identical and so is the external context and the relevance of the brands and the portfolio. So less then discuss North America.

Speaker Change: Last quarter, we mentioned some discrete headwinds within the segments.

Daniel Ordoñez: First, we're navigating a change in sourcing strategy at our largest customer. Second, we're going through an SKU rationalization on certain frozen items. In the first, over 100% of the segment's year-on-year sales decline came from the impact of our largest customer and the decline in the frozen business. While we expect these headwinds to continue to impact our year-on-year growth rates for the rest of the year, we view them as temporary. We were able to offset some of these headwinds, most notably with distribution gains on the core portfolio. However, the gains were not enough to offset the declines from the largest customer and frozen. Slide 15 goes a level deeper.

Speaker Change: We're navigating a changing sourcing strategy at our largest customer and second we're going to and its SKU rationalization on certain items.

Speaker Change: In the first over 100% of the segments year on year sales decline came from the impact of our largest customer.

Speaker Change: In the frozen business.

Speaker Change: While we expect these headwinds to continue to impact our year on year growth rates for the rest of the year, we view them as temporary.

Speaker Change: We were able to offset some of these headwinds most notably with distribution gains on the core portfolio. However, the gains were not enough to offset the declines from the largest customer unfolds.

Speaker Change: Slide 16 goes a level deeper.

Daniel Ordoñez: In the quarter, we continued to outperform both the plant-based milk category and the oatmilk category, even when including the impact of the frozen business decline. If we remove the impact of the frozen products, our retail scanner data would have showed only a 1% decline in the quarter. This outperformance relative to the category was driven by share gains in each of our drink subcategories, which outline the core beverage portfolio strategy that I referred at beginning of my discussion. This is clear evidence that we continue to execute well despite category headwinds. Retails are seeing this strong execution and allocating us more shelf space, as shown on Slide 16. We see these distribution gains are evidence that our customers continue to see a bright future for our category.

In the quarter, we continued to outperform both the plant based meat category and the ultimate category, even when including the impact of the frozen business declined.

Speaker Change: But if we remove the impact of the frozen products, our retail scanner data would have show only a 1% decline in the quarter.

Speaker Change: This outperformance relative to the category was driven by share gains in each of our drinks subcategories, which outlined the core beverage portfolio strategy that I referred at the beginning of my discussion.

Speaker Change: This is clear evidence that we continue to execute well despite category headwinds.

Speaker Change: Retailers are seeing the strong execution and allocating us more shelf space as shown on slide 16, we see these distribution gains are evidence that our customers continue to see a bright future for our category.

Daniel Ordoñez: These distribution gains are an important building block as we prepare for the North America Segment to execute the brand playbook in a similar fashion to Europe. Additionally, our lineup of creamers and other coffee complements, which include a variety of flavors and pack sizes, has been performing well with solid velocities. We continue to pursue additional distribution opportunities in both measured and not measured channels, and you should expect us to report steady progress on these fronts. Slide 17 shows that the Greater China Segment is performing well. As many of you know, the category here is not as developed as it is in the other two segments. The application of our strategy is still focused on strong execution with the food service channel, and it's just now starting to rebuild our retail presence in a disciplined manner.

Speaker Change: And these distribution gains are an important building block as we prepare for the North America segment to execute the brand playbook in a similar fashion to Europe.

Speaker Change: Additionally, our lineup of Christmas another coffee complements which include a variety of flavors and pack sizes has been performing well with solid velocities.

Speaker Change: We continue to pursue additional distribution opportunities in both measured and not measured channels and you should expect us to report steady progress on these fronts.

Speaker Change: Slide 17 shows that the greater China segment.

Speaker Change: It's performing well.

Speaker Change: Many of you know the category here is not as developed as it is in the other two segments. So the application of our strategy is still focused on strong execution with the foodservice channel and it's just now starting to rebuild our retail presence in a disciplined manner.

Daniel Ordoñez: The food service business continues to perform well in the quarter. It is now larger than it was before we executed the strategic reset, as you will remember, we initiated mid-2023. On the right side of the page, you can see that the retail side of the business is starting to gain traction now that we have entered the club channel. While it is early days, we continue to believe that the retail channel is a very large opportunity for this segment. We're making good, steady progress. Now, I want to turn the discussion to our second priority, which is to aggressively pursue cost efficiencies that generate the fuel for demand-driving investment. Slide 19 shows some of the progress we have been making. In Q1, we reduced our cost of goods sold per liter by 15% year on year and 6% compared to last quarter.

Speaker Change: The foodservice business continues to perform well in the quarter and it is now larger than it was before we executed the strategic reset as you will remember we initiated meet 2023.

Speaker Change: On the right side of the page you can see that the retail side of the business is starting to gain traction now that we have entered the club channel.

Speaker Change: While it is early days, we continue to believe that the retail channel is a very large opportunity for this segment and we're making good steady progress.

Speaker Change: Now I want to turn the discussion to our second priority, which is to aggressively pursue cost efficiencies that generate the fuel demand driving investments.

Speaker Change: Slide 19 shows some of the progress we have been making in the first quarter will reduce our cost of goods sold per liter by 15% year on year, and 6% compared to last quarter. Our teams have done a stellar job leveraging our fixed asset with volume growth finally.

Daniel Ordoñez: Our teams have done a stellar job leveraging our fixed asset with volume growth, finding additional efficiencies, renegotiating contracts, as well as rightsizing our network, including plant closures. I am pleased to say that this translates into a year-on-year total cost of goods reduction of $10 million. Slide 20 shows the progress we have been making on SG&A efficiencies. As we discussed last quarter, we have driven a significant reduction in our total SG&A over the past two years, and we continue to make progress in Q1. This has been driven primarily by a reduction in overhead spend. We have taken a portion of the savings from the supply chain and SG&A and strategically redeployed part of these savings into the brand investments I mentioned previously. Turning now to Slide 21.

Speaker Change: Additional efficiencies renegotiating contracts as well as right sizing our network, including plant closures.

Speaker Change: I am pleased to say that this translates into a year on year total cost of goods reduction of $10 million.

Speaker Change: Slide 20 shows the progress we have been making on SG&A efficiencies.

Speaker Change: As discussed last quarter, we have driven a significant reduction in our total SG&A over the past two years and we continue to make progress in quarter one.

Speaker Change: He has been driven primarily by a reduction in overhead spend.

Speaker Change: We have taken a portion of the savings from the supply chain and SG&A and strategically redeploy part of these savings into the brand investments I mentioned previously.

Speaker Change: Turning now to slide 21.

Daniel Ordoñez: As we look forward, we intend to continue to drive productivity and efficiency savings in our supply chain and SG&A, redeploying a portion of those savings into demand-driving brand activation to ignite positive momentum. We will start to roll out the strategy to more European markets and North America in Q2, given the size of the market, we expect that our investment will be tilted towards the North America segment. While we have confidence in our strategy, we know that it will take time for it to generate its full impact, especially in North America, where the category remains soft. As we roll out the strategy, we will continue to pursue additional distribution opportunities across all channels. I would now like to turn the call over to MJ.

Speaker Change: As we look forward, we intend to continue to drive productivity and efficiency savings in our supply chain and SG&A and then redeploying a portion of those savings into demand driving brand activation to a nice positive momentum.

Speaker Change: It will start to rollout the strategy to more European markets and North America in quarter, two and given the size of the market. We expect that our investments will be tilted towards the North America segment.

Speaker Change: While we have confidence in our strategy, we know that it will take time for it to generate its full impact, especially North America, where the category remains soft.

Speaker Change: And as we rollout this strategy, we will continue to pursue additional distribution opportunities across all channels.

Ajay: I will now like to turn the call over to Ajay.

Marie-José David: Thank you, Daniel. Good morning, everyone. Slide 23 shows an overview of the quarterly P&L. In Q1, we reported a revenue decline of 0.8% and constant currency revenue growth of 0.7%. We continue to drive strong gross margin expansion with our Q1 gross margin expanding 450 basis points year over year to 31.6%. Adjusted EBITDA was a loss of $3.7 million in the quarter, which is a $9.5 million improvement compared to last year's Q1. Our gross margin and Adjusted EBITDA are our best quarterly results as a public company. Slide 24 shows the bridging items of our total company revenue growth. We grew volume by 9.2% in the quarter, which was partially offset by an 8.5% decline in price mix. Foreign exchange was a 1.5% headwind.

Ajay: Thank you Ed and good morning, everyone.

Speaker Change: Slide 23 shows an overview of the quarter Etfs.

Speaker Change: In the first quarter, we have reported a revenue decline of eight.

Speaker Change: 8%.

Speaker Change: Constant currency revenue growth of 7%.

Speaker Change: We continue to drive strong gross margin expansion.

Speaker Change: Our first quarter gross margin expanded 450 basis points year over year.

Speaker Change: One 6%.

Speaker Change: Adjusted EBITDA was one seven.

Speaker Change: 7 million in the quarter, which Inc.

Speaker Change: <unk> 5 million improvement compared to last years fourth quarter.

Speaker Change: Our gross margin and adjusted EBITDA.

Speaker Change: Our bad debt.

Speaker Change: And it's a big company.

Speaker Change: Slide four shows the bridging.

Ken: Hi, Ken.

Speaker Change: Well the never ending.

Speaker Change: We grew volume by nine 2% in the quarter, which was partially offset by eight 5% decline in pricing.

Speaker Change: So our next 10 was at one 5% headwind.

Marie-José David: As mentioned on our last earnings call, our 2025 revenue growth will be impacted by a change in sourcing strategy at our largest food service customer in North America. The impact of that headwind in Q1 was approximately a 270 basis points headwind to revenue growth. Slide 25 shows the drivers of our strong year-over-year growth margin expansion. The benefits of absorption and supply chain improvements improved margin by 490 basis points. This reflects the benefit of right-sizing our supply chain for 2024, including the closure of our Singapore manufacturing facility in December, which drove approximately 240 basis points or just under half of the supply chain-driven margin expansion. The remainder comes from volume absorption, productivity efficiency, as well as improved sourcing. Pricing and product mix added 30 basis points to our gross margin in Q1.

Speaker Change: As mentioned on our last earnings call.

Speaker Change: Our <unk> revenue growth will be impacted by a change in sourcing strategy at our largest food service customer in North America.

Speaker Change: The impact of that headwind in the first quarter was approximately 270 basis point headwind.

Speaker Change: Slide 25 shows the drivers of our strong year over year gross margin expansion.

Speaker Change: But then I think our absorption and supply chain improvements.

Speaker Change: Cause marketing by 490 basis points.

Speaker Change: This reflects the benefits of right sizing our supply chain.

Speaker Change: Including the Florida, our Singapore manufacturing facility.

Speaker Change: Which Tom.

Speaker Change: 240 basis points or just under half of the supply chain driven margin expansion.

Speaker Change: Remind eric Samsung volume upside from pharmacy efficiency as well as improved sourcing.

Speaker Change: Pricing and product mix added 30 basis points to our gross margin in the quarter.

Marie-José David: While our revenue bridge that I discussed on the prior slide showed a headwind from price mix, we saw a mix benefit in the quarter as we reduced sales in lower margin products and increased sales in higher margin products. We experienced 60 basis point headwind from inflation in the quarter. Finally, the impact of foreign exchange movement was a 10 basis point headwind to gross margin. Slide 26 shows the year-over-year improvement in our adjusted EBITDA. The $9.5 million improvement compared to last year's Q1 was mainly driven by a $8.4 million increase in gross profit. The $1.1 million year-over-year improvement in SG&A and other reflects our ongoing efficiencies programs, which were partially offset by increase in branding and advertising. Slide 27 shows segment-level detail.

Speaker Change: While our revenue bridge that I discussed on the third slide towards some headwinds some technique.

Speaker Change: And mix benefits in the quarter as we already said.

Speaker Change: So we're marching toward that end.

The increase in higher margin products.

Speaker Change: We experienced a 60 basis point headwind from inflation in the quarter.

Speaker Change: The impact of foreign exchange movement was a 10 basis point headwind to gross margin.

Speaker Change: Slide 26 shows the year over year improvement in our adjusted EBITDA.

The 925 million improvement compared to last year's first quarter was mainly driven by $8 4 million increase in gross profit.

Speaker Change: The $1 1 million year over year improvement journey and reflect our ongoing efficiency program.

Speaker Change: Which were partially offset by increase in branding and advertising.

Speaker Change: Slide seven shows segment level detail.

Marie-José David: On the top line, our 0.7% constant currency revenue growth was slightly below our expectations as the Europe and International and Greater China segments both outperformed our expectations, while the North America segment underperformed. On adjusted EBITDA, our $3.7 million loss in the quarter was slightly better than we expected, primarily driven by the Europe and International segment. Turning to our balance sheet and cash flow on slide 28. First, our business plan remains fully funded. As of the end of the quarter, we had $74 million of cash and $211 million of our credit facility. The middle of the slide shows our free cash flow improvement. In Q1, free cash flow was $21 million use of cash, which was our best quarterly performance as a public company and a $25 million improvement compared to last year Q1.

On the top line, our seven for some furniture revenue growth was slightly below our expectation as the Europe and international and worked our planet segments, both outperformed our expectations, while the North America segment under perform.

Speaker Change: Adjusted EBITDA, our <unk> 7 million loss in the quarter was slightly better than we expected.

Speaker Change: Primarily driven by Europe and international segments.

Speaker Change: Turning to our balance sheet and cash flow on slide 28.

Speaker Change: Our business plan remains fully funded.

Speaker Change: As of the end of the quarter, we had 74 million of cash and 411 million of our credit facility.

Speaker Change: This slide shows our free cash flow in four months in the first quarter free cash flow was 21 million use of cash which was our best quarterly performance as a public company and the 25 million improvement compared to last year first quarter.

Marie-José David: Within that $21 million, $5.5 million was for payments related to restructuring and severance, as well as $7.6 million for annual incentive plan payments. We expect the majority of these payments will not occur again this year. On the right side, you can see our progress on working capital. In the quarter, we reduced our trade working capital by another $2 million. In the quarter, our trade receivables were below $100 million for the first time since Q1 2022, when our sales base was much lower. We have created a cash mindset into the entire organization, and this is generating results. In summary, we are making solid progress on improving our cash flow, and we expect continued improvement as our H2 adjusted EBITDA is expected to be higher than the H1, and non-P&L cash flow drivers are expected to improve through the year.

Speaker Change: We think that plus one five.

Speaker Change: $5 5 million was for payments related to restructuring and severance.

One seven.

Speaker Change: Seven 6 million for annual incentive plan payments.

Speaker Change: We expect the majority of this statement will not occur again this year.

Speaker Change: On the right side, you can see our progress in working capital.

Speaker Change: In the quarter, we have reduced our trade working capital by another $2 million.

Speaker Change: In that forecast our trade receivables were below 100 million for the first time since Q1.

Speaker Change: One hour says David wanted to mature we have created a cash mindset into the entire organization and <unk> generics in great depth.

Speaker Change: In summary, we are making solid progress on improving our cash flow and we expect continued improvement.

Speaker Change: Our second half adjusted EBITDA is expected to be higher than the first half.

Speaker Change: CMS cash drivers are expected to improve for the year.

Marie-José David: Our first priority for 2025 is to deliver our first full year of profitable growth as a public company. Slide 13 shows our outlook. We continue to expect constant currency growth in the range of 2% to 4%. The improvement from the Q1's growth rate is expected to be largely driven by the benefit of executing the playbook Daniel discussed more broadly. For adjusted EBITDA, we continue to expect to report in the range of $+5 to 15 million. We continue to expect the improvements to be primarily driven by gross profit as the benefit of stronger net sales, as well as our ongoing supply chain efficiency program flow through. As Daniel mentioned earlier, the North America segment and several European countries are expected to launch integrated brand activation in the Q2, and we intend to support the launches through an increase in brand activations.

Speaker Change: Our first priority for 2025 is to deliver our first full year of profitable growth as a public company.

Speaker Change: Slide 14 shows our outlook.

Speaker Change: We continue to expect.

Speaker Change: Currency growth in the range of 2% to 4%.

Speaker Change: The improvement from the first quarter's growth rate is expected to be largely driven by the benefit of existing to table Daniel discussed small project.

Speaker Change: For adjusted EBITDA, We continue to expect to report in the range of 25 to take India.

Speaker Change: We continue to expect the improvement to be primarily driven by both parties.

Speaker Change: Business is stronger in that test as well as our ongoing.

Speaker Change: <unk> program still true.

Speaker Change: And then you had mentioned earlier, the North America segment and several European countries are expected to launch integrated brand activation in the second quarter.

Speaker Change: And we intend to support the launches from increased inbound activation.

Marie-José David: As such, Q2 adjusted EBITDA is likely to be comparable to Q1 levels. We are not currently including any significant direct impact of tariffs into our guidance. Since we believe the majority of the products we import from Canada are USMCA compliant. We do, however, assume that the current economic conditions and consumer behaviors remain largely consistent for the rest of the year. Finally, we continue to expect CapEx to be in the range of $30 to 35 million for the full year. This concludes our prepared remarks. Operator, we are now prepared to take questions.

Speaker Change: Assets second quarter, adjusted EBITDA is likely to be comparable to Q1 levels.

Speaker Change: We are not currently including any significant direct impact of carry into our guidance. Since we believe the majority of the products we bought from Canada.

Speaker Change: With MCA guidance, we do however.

Speaker Change: The current economic conditions and consumer behavior.

Speaker Change: Main largely consistent for the rest of the year.

Speaker Change: Finally, we spoke and you expect capex to be in the range of 30 to 35 million.

Yeah.

Speaker Change: This concludes our prepared remarks.

Speaker Change: Alright.

I'll now prepared to take questions.

Speaker Change: Okay.

Operator: We will now begin the question-and-answer session. The first question comes from Max Gamport with BNP Paribas. Please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick your handset before pressing the keys.

Speaker Change: At any time your question has been answered and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Yes.

Speaker Change: The first question comes from Max <unk> with BNP Paribas. Please go ahead.

Max Gamport: Hey, thanks for the questions. It was great to get color on some of the initiatives you're rolling out in Europe in particular to increase the relevance of oatmilk and attack some of these barriers to conversion, and also to see the results that that's already having in terms of improving your own performance. It looks like, though, on the slides that you presented, that it's so far at least really just driving improvement in Oatly's own performance and it's not lifting category growth trends for oatmilk. I'm just curious, as you start to roll this out in the US, what's giving you the confidence that this will also lift what is still a very soft oatmilk category in the US? Thanks very much.

Speaker Change: Thanks for the question it was great to get color on some of the initiatives you're rolling out in Europe in particular it too.

Speaker Change: The increase the relevance of militant attacks some of these barriers to conversion and also to see the results that that's already having in terms of improving your own performance. It looks like you go on the slides that you presented.

So far at least really just driving improvement and performance.

Speaker Change: Performance and it's not lifting category growth trends for our work. So I'm just curious as you start to roll this out in the U S.

Speaker Change: Giving you the confidence that this will also lift is installed.

Speaker Change: Phil.

Speaker Change: <unk> soft spoken about that category in the U S. Thanks very much.

Daniel Ordoñez: Thanks, Max. Daniel here. Good morning to you. Yes. If you allow me a couple of minutes, I will speak up about Europe first to provide even more color about what we're seeing there. It's clearly a business that is outperforming markets and competitors, right? I would like to start there. As you can see in market shares across the different markets. That's number one. You see that in the established and more mature markets. I wouldn't like you to forget as well that the expansion markets in Europe are giving us also a signal of increased traction of the Oatly brand across Europe. Countries like France, Spain, Belgium, Mexico, or UAE, which are in this reporting segment, are really increasing relevance and contributing to our total company growth in a meaningful manner.

Speaker Change: Thanks, Mark Daniel here Good morning to you, yes, we do allow me couple of minutes.

Speaker Change: Speak up about Europe, first who will provide more color about what we see there is clearly a business that is outperforming markets and competitors right and I would like to start there as you can see in in market shares.

Speaker Change: Across the different markets. So that's that's number one.

Speaker Change: You see that in the establish a more mature markets.

Speaker Change: I wouldn't like you to forget as well that the expansion markets in Europe, giving us also a signal of increased.

Speaker Change: Traction of the <unk> brand across Europe.

Speaker Change: Hunters like France, Spain, Belgium, Mexico UAE, we're trying these reporting segments are really really.

Speaker Change: Increasing relevance and contributing to our total company the company growth in a meaningful manner. So that's something that we don't normally take into account, but they start building onto that critical mass.

Daniel Ordoñez: That's something that we don't normally take into account, but they start building onto the critical mass. The initiative you referred to, we would like to be as conservative as we can possibly be, although the numbers are giving us confidence that this will gain traction. The reason why you hear me being conservative is because we know that turning around category momentum will not happen overnight, right? The first signals are quite interesting, right? What we see in the two most important markets. It's a matter of allocation of resources to the different segments. The context we see, it's a bit softer in the US, as you know, but the dynamics are similar, and we expect the relevance of the brand and of the playbook to be equally applicable.

Speaker Change: The initiatives you referred to.

Speaker Change: We would like to be as conservative as we can possibly be although the numbers are giving us confidence that this will gain traction. The recent why you hear me being conservative because we know that turning around category momentum will not happen overnight right and but the first signals are quite.

Speaker Change: Interestingly right what we see in these two months the two most important markets then it's a matter of.

Speaker Change: Allocation of resources to the different segments. The context, we see it's a bit softer in the U S. As you know.

Speaker Change: But the dynamics are similar and we expect the relevance of the brand and of the playbook to be equally applicable now when it comes to the U S. I would also like to draw your attention Matt would you know very well.

Daniel Ordoñez: When it comes to the US, I would also like to draw your attention, Max, to what you know very well. The ocean of opportunity we have in distribution in all channels measured and not measured, be it retail, be it clubs, and be it food service. It's enormous. This is why we plan for a softer Q1 and H1 of the year in North America, and we expect those things to be improving as well as we start deploying. Going back to your question of category and playbook deployment, we will do so according to a North Star, which is profitable, steady, profitable growth. That means that reporting segment, which has reported consistent now, EBITDA, +EBITDA, we will allocate resources according to this tempo that we set for ourselves moving forward.

Speaker Change: Ocean of opportunity, we have in distribution in all channels measured and not measured be it retail be it.

Speaker Change: <unk> clubs.

Speaker Change: On the foodservice.

Speaker Change: It's enormous.

Speaker Change: This is why we plan for a softer quarter one yes.

Speaker Change: First half of the year in North America, and we expect those things to be improving as well as we start deploying now going back to your question of category and a playbook deployment, we will do so according to our North star, which is profitable steady profitable growth, which means that that reporting segment.

Speaker Change: Each has reported.

Speaker Change: Consistent now.

Speaker Change: EBITDA positive EBITDA, we will allocate resources. According to these tempo that we set for ourselves moving forward.

Daniel Ordoñez: More in the second part of the year than in the first part of the year, but again, with the clear North Star that JC set up in this call again and again, which is first year of profitable growth as a public company.

Speaker Change: More in the second part of the year than in the first part of the year, but again with a clear not start that JC set up in this call again, and again, which is first year.

Speaker Change: Ratable growth as a public company.

Max Gamport: Great. Thanks very much. As a follow-up, the progress you're making on gross margin is very clear. Setting a new record and improving sequentially and year over year by meaningful amounts. It looks like it's primarily driven by supply chain improvements and absorption, which largely is within your control. I'm just trying to get a better sense for any sort of update on how you're thinking about your gross margin for the full year and beyond, given this marked progress that you are making. Thanks very much.

Speaker Change: Great. Thanks, very much and then as a fee.

Speaker Change: Follow up.

Speaker Change: Progress Youre, making on gross margin is very clear.

Speaker Change: Setting a new record of improving sequentially.

Speaker Change: Year over year by a meaningful amount and it looks like it's primarily driven by supply chain improvement inventory person, which largely is within your control. So I'm just trying to get a better sense for any sort of update on how you're thinking about your gross margin for the full year and beyond given given the smart progress that you are.

Speaker Change: Thanks very much.

Marie-José David: Yes. No, sure. Let me take this question, Max. You know we are not guiding to a specific number, and we expect an improvement in our gross profit in dollars, right? To be, as we mentioned already, the biggest drivers in gross margin being the improvement in our adjusted EBITDA. This gross margin is expected to increase compared to the 28.7% we reported in 2024. As you mentioned, as we continue to optimize the production footprint, as we continue to drive efficiency through the supply chain, we also mentioned a few times already that we're negotiating contracts and we are managing our product mix. Of course, what we also know is obviously two variables could influence where we will exactly land.

Speaker Change: Yes, no sure let me take this question Max.

Speaker Change: We're not guiding specific number and we expect an improvement in our gross profit in France to be thank you.

Speaker Change: As we mentioned already biggest driver being.

Speaker Change: The biggest drivers in gross margin being the improvement in our adjusted EBITDA.

Speaker Change: So the gross margin is expected to increase compared to the 28, 7% we reported in 2024.

Speaker Change: As you mentioned as we continue to optimize the production footprint.

Speaker Change: We continue to drive efficiency for the supply chain. We also mentioned two times already that we're negotiating contracts and we are managing our product mix.

Speaker Change: Of course, what we also know abuse HQ Barber with NPS.

Speaker Change: Exactly.

Marie-José David: That could be our sales guidance range, that could be our customer mix, that could be potentially foreign exchange, and potentially further development on the tariff situation as we know. Our plan is to continue to make this progress on our path towards our long-term gross margin target, which is a 35% to 40%, as we have already mentioned.

That could be over our sales guidance range that could be our customer mix that could be potentially foreign exchange.

Speaker Change: And potentially structure developmental literacy, Jason as you know.

Speaker Change: So our plan is continue to make good progress.

On our path towards our long term gross margin target, which is a 35% to 40% as we have already mentioned.

Max Gamport: Great. Thanks very much. I'll pass it on.

Speaker Change: Great. Thanks, very much I'll pass it on.

Operator: The next question is from Andrew Lazar with Barclays. Please go ahead.

Speaker Change: The next question is from Andrew Lazar with Barclays. Please go ahead.

Andrew Lazar: Great. Thanks so much. Nice to see early signs of volume consumption improvement for plant-based milks and Oatly specifically in Europe. Price mix was a larger drag in Europe in the quarter than we'd modeled, I think down 4% or so. I was hoping to get a little more clarity on what drove that and what your expectation around price mix would be in Europe as we move through the rest of the year.

Speaker Change: Great. Thanks, so much thanks.

Speaker Change: Nice to see early signs of volume consumption improvement for plant based milks and or at least specifically in Europe.

Speaker Change: Price mix was a larger drag in Europe in the quarter than we'd modeled I think down 4% or so I was hoping to get a little more clarity on what drove that and what are your expectation around price mix would be in Europe as we move through the rest of the year.

Daniel Ordoñez: Hi, Andrew. How are you doing? Daniel here. Yes, exactly. Largely expected. You obviously see just a 4% growth in volume, which is offset by price mix. Start of the year, Q1, some customer renegotiations, some of them got a bit funny, but most of them are behind us. I wouldn't give this a lot of importance as we move forward. Of course, the context is tight, but super manageable and within the guidance we have provided. I should guide you not to read anything else as we move forward for the rest of the year.

Speaker Change: Hi, Andrew how are you doing Daniel here, yes.

Speaker Change: Exactly largely expected.

Speaker Change: Obviously, just a 4% growth in volume, which is offset by price mix.

Speaker Change: You know start of the year quarter, one some customer renegotiations. Some some some of them got a bit funny.

Speaker Change: Most of them are behind us.

Speaker Change: No I wouldn't do this I wouldn't keep this in a lot of.

Speaker Change: A lot of importance as we move forward of course, the context is.

Speaker Change: It's these types, but super manageable within the guidance, we have provided so I would ask.

Speaker Change: Should guide you not to read anything else as we move forward for the rest of the year.

Andrew Lazar: Got it. In North America, obviously with the loss of some food service business and discontinued certain frozen items, I assume there's likely some flex in the North America supply network now. You called out in the slides, you're obviously pursuing additional distribution opportunities in the region. I'd be interested in hearing where you think the biggest opportunities are from a distribution standpoint in North America and how you think about balancing sort of improving sales trends with the improving profitability that you're seeing in the region as well. How do you balance those? Thank you.

Speaker Change: Got it and then in North America.

Speaker Change: Obviously with the loss of problems, some foodservice business and discontinued certain frozen items I assume there's likely some flex in the North America supply network now you called out in the slides Youre, obviously pursuing additional distribution opportunities in the region I guess I'd be interested in hearing what do you think the biggest opportunities are from a distribution standpoint in north.

Speaker Change: Erica and how you how you think about balancing sort of improving sales trends with the improving profitability that youre seeing in the region as well how do you balance those thank you very good very very good question as well I tried to stress it.

Daniel Ordoñez: Very good. Very good questions. Well, I try to stress it. We have opportunities everywhere I see. It's our ability to execute them that is the gap, Andrew. I would say that perhaps 2025 should be this kind of last part of the cleaning exercise of some part of the portfolio, which is strategic and has to do with, as we said, always balancing growth and margin. As we move forward, you see the new portfolio. There are items that I'm sure you can pick up in scan data, like the new Barista 64 oz chilled with very promising velocities, the new Creamers with very promising velocities. The ACVs of those items range around 5%, right? As you can imagine, there is an ample opportunity within the new core portfolio drinks. I underline drinks because the opportunity is very significant in the new growing beverage space.

Speaker Change: We have opportunities everywhere I see so it's our ability to execute them that is the gap under I would say that perhaps 2025 should be.

Speaker Change: This kind of last part of the cleaning exercise of some part of the portfolio, which is strategic and has to do with as we said always balancing growth and margin.

Speaker Change: We move forward you see the new portfolio there are items that I.

Speaker Change: I'm sure you can pick up in scan data like the new <unk>.

Speaker Change: 60 per ounces shields with very promising velocities, the new creamers with very promising velocities. The ACB of those items range around 5% right. So as you can imagine there is ample opportunity within the new core portfolio drinks I underlying drinks because the.

Speaker Change: Community is very very significant in the new growing beverage space.

Daniel Ordoñez: You know that this category is evolving following how beverages are evolving, and we believe we're well poised for that. Significant growth opportunity of the portfolio you see on the picture in retail, all customers. I would like to underline clubs. I should expect to come to you in the following quarters with some news on these fronts. Number 2, and Number 3, food service. Outside the largest customer and even within the largest customer, we see ample opportunity to continue to grow. I would say pretty much everywhere, Andrew.

Speaker Change: Yes.

Speaker Change: This category is evolving following how beverages are evolving and we believe we're well poised for that so significant growth opportunity of the portfolio you will see on the picture in.

Speaker Change: Retail.

Speaker Change: All customers.

Speaker Change: Then I would like to underline.

Speaker Change: <unk> clubs.

Speaker Change: I see.

Speaker Change: We would expect to come to you in the following quarters with some new some of these firms.

Number two and number three foodservice outside the largest customer and even within that.

Speaker Change: This customer we see ample opportunity to continue to grow.

Speaker Change: So I would say pretty much everywhere.

Andrew Lazar: Thank you.

Speaker Change: Thank you.

Operator: The next question comes from Michael Lavery with Piper Sandler. Please go ahead.

The next question comes from Michael Laughery with Piper Sandler. Please go ahead.

Speaker Change: Okay.

Michael Lavery: Thank you. Good morning. Just wanted to get a little more color on the US consumer. You've pointed to some outperformance for yourselves in the category, especially excluding the SKU cuts, but the retail sales momentum for the category and for Oatly's been decelerating the last few months. Is it just a stretched consumer trading down? Can you help us maybe give some sense of what you're seeing and what you expect looking ahead over the rest of the year?

Michael Laughery: Thank you and good morning.

Michael Laughery: Just wanted to get a little more color on the U S consumer.

Speaker Change: <unk> pointed to some outperformance for yourselves and the category, especially excluding the.

Michael Laughery: <unk> cuts, but.

Michael Laughery: The retail sales momentum for the category and for Oatley decelerating in the last few months is it just.

Michael Laughery: Stretched consumer.

Michael Laughery: Down.

Speaker Change: Can you help us maybe give us some sense of what Youre seeing and what you expect looking ahead over the rest of the year.

Daniel Ordoñez: Thank you. I would try not to repeat myself, Michael. What else I can say here in this front, I would say if I look at velocities, units per sales per week in both dollars and units, I don't see an erosion there. On the contrary, I see a slight upside when I look at dollars shares and unit shares. I don't see loss of traction, on the contrary. It's this category that, as you know very well, is pivoting around the -5. When you remove these one-off items, we were talking about the total different performance. Going back to the way in which we will eventually ignite a new category momentum, that it will not take a snap of a finger, but it will be the adoption of the playbook that we have been starting to deploy in Europe and seeing positive signs.

Michael Laughery: Thank you.

Michael Laughery: I would like I will try not to repeat myself, Michael what else I can say here in this front I would say if I look at velocities units per sales per week in both dollars and units I don't see any erosion there on the contrary.

Michael Laughery: See a slight upside when I look at dollars.

Michael Laughery: Shares in units chairs.

Michael Laughery: I don't see lots of construction on the country.

Michael Laughery: Is the category that is well it's Steve.

Michael Laughery: Around that right now when you remove these one off items, but talking about the total different performance. So now.

Michael Laughery: Going back to the way in which we will eventually ignite a new category momentum that E E.

Michael Laughery: We'll not take a snap of a finger, but it will be the adoption of the playbook that.

Michael Laughery: But we have been starting to deploy.

Michael Laughery: In.

Michael Laughery: In Europe.

Michael Laughery: Positive signs now.

Daniel Ordoñez: Now, the headline was the US, but I would like to go a step back a bit and see how we're looking at the category in general, because we have, if you allow me a couple of minutes here, we have seen great momentum, distributional momentum of this category for many years. Now, there's a paradigm shift going on, and growth in this paradigm shift category is never, ever linear.

Speaker Change: The headline was the U S, but I would like to go a step back a bit and see how we're looking at the category in general because we have if you allow me a couple of minutes here, we have seen great momentum disproportionate momentum of this category for many many many years now this is there's a paradigm shift.

And growth in this paradigm shift categories is never ever Lynch.

Michael Lavery: Okay.

Speaker Change: So.

Daniel Ordoñez: We are creating this new wave. We are starting to create the fundamentals of the new wave. Fundamentals like health, taste, climate impact are so strong that we believe the future is absolutely irreversible. What we're working on is creating that infection point. 70% of consumers, 82% in the US haven't tried oatmilk. That's our new obsession, and we add that to the list of controllables. Why do we believe that those things go in our favor? It's not just because of the 2 points we start seeing in Germany and in the UK. We are uniquely placed to serve the new wave of coffee and beverages. We have the great Gen Z I see very, very few brands around the world. All hands on deck.

Speaker Change: We are creating these new ways.

Speaker Change: And we are starting to create the fundamentals.

Speaker Change: A wave and fundamentals like health taste climate impact are so strong that we believe the future is absolutely irreversible so.

Speaker Change: Creating inflection points.

Speaker Change: 70% of consumers, 82% in West haven't tried to that's our new obsession.

Speaker Change: That to the list of controllable so.

Speaker Change: Why do we believe that.

Speaker Change: That's.

Speaker Change: Those things go in our favor is not just because of the two points.

Speaker Change: We're seeing in Germany under the.

Speaker Change: The U K.

Speaker Change: We are uniquely placed.

Speaker Change: To serve the new wave of coffee.

Speaker Change: We have the great <unk>.

Speaker Change: <unk> see.

Speaker Change: A key very very few brands around the world So all hands on deck.

Daniel Ordoñez: It will not happen overnight, but I'm really looking forward to report progress in how we're adopting this new strategy in the US very soon.

Speaker Change: It will not happen overnight.

Speaker Change: What I'm really looking forward to the progress and how we're adopting the strategy in the U S very soon.

Speaker Change: Yes.

Speaker Change: No.

Michael Lavery: That's helpful elaboration. Just to follow up on that, the outperformance Oatly has ex frozen versus oatmilk broadly and all of plant-based milk is pretty meaningful. Are you seeing that help drive rationalization of competitors at retail or distribution gains for yourselves? How is that playing out on shelves?

Speaker Change: Thats helpful elaboration.

Speaker Change: Just to follow up on that.

Speaker Change: The outperformance.

Speaker Change: Ex frozen versus oatmeal broadly ethanol plant based milk.

Speaker Change: It's pretty meaningful.

Speaker Change: Are you seeing that helped to drive.

Speaker Change: Rationalization of competitors at retail or distribution gains for yourself.

Speaker Change: Is that playing out on shelf.

Daniel Ordoñez: Sorry, do you mind repeating the question, Michael? It's a bit quirky, the signal, so I need to. It is on my end.

Speaker Change: Sorry, do you mind repeating the question mindful that its a big coffee the signals.

Speaker Change: Could you just a month.

Michael Lavery: Yeah, no problem. As you outperform both oatmilk and all of plant-based milk, are you seeing that drive better distribution for yourselves? Just how is the shelf space evolving?

Speaker Change: Yeah, no problem. So you outperformed both oat milk and all plant based milk are you seeing that drive better distribution.

Speaker Change: For yourselves.

Speaker Change: How's the shelf space evolving.

Daniel Ordoñez: No, it's accompanying that. It relates to the question I answered before. It's a more robust and solid oat drinks portfolio that accompanies coffee and accompanies beverages is starting to grow and expand on shelves. Of course, we're not walking away from the adjacent categories. As you saw in frozen, we're adapting and recalibrating. You should expect, definitely, if that was your question, Michael Lavery, expect us to grow in share of shelf in the portfolio of drinks, both in chilled and in ambient. If you go into the double click of the scan data, you will see some disproportionate growth in the ambient shelves, which needs new life as well across the ocean.

Speaker Change: So it's a company that it relates to the question I answered before.

Speaker Change: License and more robust consolidates bold drinks portfolio that accompanies coffee and accompanies beverages is starting to grow and expand on shelf.

Speaker Change: Of course, we are not walking away from the adjacent categories. As you saw in frozen we are adapting and Recalibrating, but you should expect definitely that was your question Michael expect us to grow in share of shelf.

Speaker Change: Polyol drinks, both in Chile and in Amgen's.

Speaker Change: If you go into the double click of the scan data you will see some disproportionate growth.

Speaker Change: In the ambiance shelf, which.

Speaker Change: It needs new lights as well.

Speaker Change: Across the ocean.

Michael Lavery: Okay, great. Thanks so much.

Okay, great. Thanks, so much.

Speaker Change: Yeah.

Operator: The next question comes from Ken Goldman with J.P. Morgan. Please go ahead.

Ken Goldman: The next question comes from Ken Goldman with Jpmorgan. Please go ahead.

Elsa: Hey, this is Elsa on for Ken. You mentioned that some of the brand investments being made in the US will take time to generate full impact. Can you elaborate on the timeline for some of those investments to start making an impact? Should we start to expect the majority of those benefits to be seen later in the year, or is that more of a 2026 story?

Speaker Change: Hey, This is also on for Ken.

Speaker Change: So you mentioned that some of the brand investments being made in the U S will take time to generate full impact can you elaborate on the timeline for some of those investments to start making an impact should we start to expect the majority of those benefits to be seen later in the year or is that more of a 2026 sorry.

Daniel Ordoñez: Thank you, Elsa. Are you referring specifically to the US or is a general question?

Speaker Change: Thanks, Joe are you, referring specifically to the U S or it's a general question.

Elsa: Yeah, to the brand investments being made in the US.

Speaker Change: Yes, Brendan since being made in the U S.

Daniel Ordoñez: Yeah, in the US. Thank you for the clarification. It has to do with the way we're managing the business as a whole. You see, we present a very solid, according to ourselves, a solid track record on EBITDA progression and margin progression. As you can see, we're all the time balancing growth with margin and with profit. When it comes to a game of resource allocation, expect us to start fully deploying or starting to deploy more strongly the new playbook in North America in the second part of the year. Okay? That's hopefully as much as I can share with you at the moment. I would like to stress that as much as we provided color into how this new strategy is panning out in Europe with promising signs, I would like to underline that we don't expect the full category turnaround overnight.

Speaker Change: Yes in the U S. So I think thank you for the clarification. It has to do with the way we're managing the business as a whole you see we presented a very solid.

Speaker Change: According to ourselves a solid track record on EBITDA progression.

Speaker Change: <unk> progression. So what you can see where it all the time balancing growth with margin and with profit.

Speaker Change: When it comes to a game of resource allocation.

Speaker Change: Expect us to start fully deploying all starting to deploy more strongly.

Speaker Change: Strongly the new playbook in North America in the second part of the year Okay.

Speaker Change: So that's hopefully as much as I can share with you at the moment.

Speaker Change: I would like to stress that as much as we provided color into how these new strategies spanning out in Europe with promising signs I would like to underline that we don't expect the full category turnaround overnight. These things take time.

Daniel Ordoñez: These things take time.

Elsa: Great. Thanks, I'll pass it on.

Speaker Change: Great. Thanks, I'll pass it on.

Operator: The next question comes from John Baumgartner with Mizuho. Please go ahead.

John Baugh: The next question comes from John Baugh.

Speaker Change: <unk> got now with Mizuho. Please go ahead.

John Baugh: Okay.

John Baumgartner: Good morning. Thanks for the question. Maybe first off, coming back to food service, I'm curious of the feedback that you're hearing from operators where you're seeing momentum, from those operators who haven't adopted plant-based and are doing so now, or maybe those who dialed back on plant-based and now want to return. Are there any common themes you're hearing? Is it primarily that plant-based needs to be offered as a creamer to keep up with competitors? Is it that plant-based is recognized more as a significant product innovation driver itself as the main ingredient in beverages, and that's being seen as a traffic driver? Just how are you seeing some of these newer customers utilizing plant-based on the menu?

John Baugh: Good morning, Thanks for the question.

John Baugh: Maybe.

John Baugh: First off coming back to foodservice I'm curious of the feedback that you're hearing from operators, where youre seeing momentum from those operators, who haven't adopted plant based and are doing so now for maybe those who dialed back on plant based and that water return are there any common themes youre hearing is it primarily the plant base needs to be offered as a creamer.

John Baugh: To keep up with competitors is at that plant based is recognized more as a significant product innovation driver itself as the meat ingredient in beverages, and that's being seen as a traffic driver.

John Baugh: Are you seeing some of these newer customers utilizing plant based on the menu.

Daniel Ordoñez: Thank you. Good to speak to you, John. Listen, very good question, because I think this paints the color we are observing, the macro picture of the market. There are two big, big dynamics going on here that affect not just the plant-based milk category, but affect food service in general. Which is how coffee is massively, drastically evolving from hot latte art. A few years ago only, when millennials were driving the world of coffee into Gen Z, who are driving beverages and cold beverages. In some cases, I'm sure you hear a lot of statistics, but we're talking about very significant amounts. In some cases, cold beverages have overtaken hot coffee. I'm sure you've read about the matcha phenomenon. There's no coffee in matcha, and yet it's the same space. You've asked me a general question about food service.

John: Thank you. Thank you good to speak with you John.

John Baugh: Listen.

John: Very good question because.

John: Because I think these things the color we are observing the macro picture of the of the market and.

John: There are two big dynamics going on here.

John: FX not just the plant based milks category, but affect food service in general the cheese, how cost coffee is massively drastically evolving from <unk>.

John: Art.

John: A few years ago won't really where millennials, what's driving the worlds of coffey into Gen Z.

John: <unk>.

John: Our driving.

John: Beverages.

John: And cold beverages and in some cases I'm sure you'll hear a lot of statistics, but we're talking about very significant amounts in some cases cold beverages have overtaken hot coffee.

John: And.

John: I'm sure you read about the matter phenomenon Theres no coffee how much up on yet is the same space. So you've asked me a general question about foodservice foodservice is evolving and we see many of our most of our very large customers trying to evolve slash catch up with that trend.

Daniel Ordoñez: Food service is evolving, and we see most of our very large customers trying to evolve/catch up with that trend. What I'm observing, and you can see what JC and I post normally on this topic, is that small to medium and medium large food service customers are adapting faster to these trends and are adopting faster our playbook, and are seeing very disproportionate growth serving Gen Z with this type of offering. Now, I don't expect this to be simply an ingredient story for us, John, as we have discussed many times before. Of course, A, we believe we have the absolute relevance of our food service package to be the ones winning in this space, and service package is end to end. It's the brand, it's the product, barista, our amazing army of barista market developers around the world who have intimacy with this space.

John: What I'm observing and you can see what J C&I post normally on this topic is that small to medium and medium large foodservice customers are adapting faster to this trend and are adopting faster.

John: Our.

John: Playbook.

John: And they're seeing very disproportionate growth serving gen Z with this type of offering now.

John: Don't expect this to be simply a.

John: Ingredient story for Us John as we have discussed many times before of course, a we believe we have the absolute relevance of our foodservice package to be the ones winning in this space.

John: Service package is end to end is the brand is a product based our amazing army of barista market developers around the world we have intimacy with this space.

Daniel Ordoñez: This eventually, as it happened a decade ago with oatmilk, will travel into the retail space. Watch this space for some of us. If you look at the Nordics, at the moment, we are offering with great initial success, flavored offerings, cold beverage drinks, oatmilk-based with Espresso House, one of our key customers in the Nordics market. Be on the look for more stuff like that. Not just an ingredient, but certainly surfing the way from hot coffee into cold beverages with our distinctive brand uniqueness and service package. That's what we see. Hopefully, I'm painting a picture of both the market and how we continue to be at the leading edge of that.

John: And then.

John: Eventually as it happened a decade ago with ultra milk will travel into the retail space.

John: So watch this space or some of US if you look at the Nordics.

At the moment, we are offering with great initial success.

John: Flavored offerings, so cold beverage drinks ultimate based with express a special house, one of our key customers in the Nordics market. So.

John: Be on the look for more stuff like that so not just an ingredient, but certainly sourcing the way from hot coffee into cold beverages without distinctive brand uniqueness on service package, that's what we see hopefully pain.

John: Painting, a picture of both the market and how will we drive continued to be at the leading edge of that.

John Baumgartner: Yep. Thanks, Daniel. I guess maybe to follow up, coming back to the mention in the presentation of the significant reduction in negative media that you're seeing for the category. Presumably, the work you're doing is good, but your resources alone, I don't think are sufficient to affect that kind of a shift in isolation. Are there any other sources or contributors that you're seeing out there that are sort of adding support to the debate in favor of plant-based right now? I guess moving forward, thinking about that support, in plant-based meat, we've seen some endorsements or positive recognitions for products from the American Diabetes Association, the Heart Association. I know from a product claim perspective, it's very difficult to make claims yourself on products.

Speaker Change: Yes, Thanks, Daniel I guess, maybe to follow up coming back to the mentioned in the presentation of the significant reduction in negative media that youre seeing for the category.

John: <unk>.

John: Work Youre doing as good but your resources alone I don't think are sufficient to affect that kind of a shift in isolation are there are there any other sources were contributors that youre seeing out there that are sort of adding support to the debate in favor of plant based right.

John: Right now and then I guess moving forward thinking about that support in plant based meat. We've seen some endorsements are positive recognitions for products from the American Diabetes Association and Heart Association.

John: I know from a product claim perspective, it was very difficult to make claims yourself on products, but I mean do you see an opportunity for plant based beverage to kind of pick up some of these endorsements or support from.

John Baumgartner: Do you see an opportunity for plant-based beverage to kind of pick up some of these endorsements or support from, I guess, recognizing the third-party, medical or health organizations?

John: I guess, recognizing a third party.

John: Medical or health organizations.

Daniel Ordoñez: The answer to that is definitely yes, John. We are not under any illusion that our size is enough to do what you just suggested. Allow me to provide a couple of data points or sentiment. We were quite conservative as to what we shared on the prepared remarks on the evolution we see on this point of disinformation on health in the two key markets who generate and bounce off of each other on the noise front, which are the UK and the US. Right? They operate as one market. What we now see is that just by simply by consumers getting tired about this noise, and see how many pimples you will get by drinking oatmilk or the depression we will get after Blue Monday in the UK thanks to oatmilk, which of course doesn't make a lot of sense.

John: The answer to that is definitely yes.

John: And.

John: John but we are not under any illusion that our size.

John: Is enough to do what you just suggested.

John: But allow me to provide a couple of data points, so or sentiment, we see we're quite conservative.

John: What we shared in the prepared remarks evolution, we see on this point of this information on health.

John: In the two key markets, who generates a bounce off of each other on the noise fronts, which are the UK and the U S right. They operate as one market will.

John: What we now see that just by simply by consumers getting tired of all this noise.

John: See how many people you will get by 'twenty oat milk or the depression, if you will get after blue Monday in the U K. Thanks towards milk, which is of course doesn't have a doesn't make a lot of sense.

Daniel Ordoñez: To this work, a lot of science and data provided by the key opinion leaders, nutritionists, and dietitians that have worked with us. We see our tracking shows us that that science-based data is already starting to spread. So is, for instance, some positive signs about fibers and gut health, which we have not heard for life. We don't believe those things are just pure coincidence, right? People getting tired and some of the good information coming across. We are indeed building alliances, be it in Brussels or at the Hill, be it with some think alike partners of ours, and why not public education? This is something that was discussed in the past, and we're acting with schools. You will see us starting to do that, some efforts in the US this year, with schools, John.

John: Through this work a lot of science and data provided by the key opinion leaders nutritionists and dietitians that have worked with us.

John: That we see are tracking shows us that that.

John: Science based data is already starting to spread.

John: And so we are experiencing some positive signs about fibers and <unk>, which we have no cure for life. So we don't believe those things up to just pure coincidence right. So people are getting tired and some of the good information coming across.

John: We are indeed building alliances.

John: Be it.

In Brazos or of the he'll be it with some.

John: I think alike are partners of ours, and why not public communication.

John: This is something that was discussed in the past.

John: And we are acting with schools, you will see us starting to do that some efforts in the U S. This year.

John: With schools, John So all of that to say absolutely, yes. It will take time, but we have decided to go there.

Daniel Ordoñez: All of that to say absolutely yes, it will take time, but we're decided to go there.

John Baumgartner: Great. Thanks, Daniel.

Speaker Change: Great. Thanks Danielle.

John: Yes.

John: Yes.

Operator: This concludes our question and answer session. I would like to turn the conference over back to Brian Kearney for any closing remarks.

John: Thanks, <unk> concludes our question and answer session I would like to turn the conference back to Brian Kearney for any closing remarks.

Brian Kearney: Thanks everyone for joining us today. Thank you for your interest in Oatly. If you have any follow-up questions, please feel free to reach out to me.

Brian Kearney: Thanks, everyone for joining us today. Thank you for your interest and if you have any follow up questions. Please feel free to reach out to me.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Brian Kearney: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Brian Kearney: [music].

Brian Kearney: Yes.

Brian Kearney: [music].

Brian Kearney: Yes.

Brian Kearney: [music].