Q2 2025 Oatly Group AB Earnings Call

Operator: Second Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good day and welcome to the Ole second quarter 2025 earnings conference call.

All participants will be in a listen-only mode.

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After today's presentation, there will be an opportunity to ask questions.

to ask a question, you may press star then 1 on a touchtone phone,

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Brian Kearney: I would now like to turn the conference over to Brian Kearney, VP of Investor Relations. Please go ahead. Good morning, and thanks for joining us today.

Please note this event is being recorded.

Speaker Change: I would now like to turn the conference over to Brian Kearney VP of investor relations. Please go ahead.

Brian Kearney: On today's call are our Chief Executive Officer, Jean-Christophe Petain, our Global President and Chief Operating Officer, Daniel Ordonez, and our Chief Financial Officer, Marie-Josée Debbier. 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.

Speaker Change: Good morning and thanks for joining us today. On today's call our our chief executive officer, John Kristoff, platon our Global president and Chief Operating Officer Daniel Gordon's, and our Chief Financial Officer Marie Jose w.

Brian Kearney: 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 earnings release for reconciliation of non-IFRS financial measures to most comparable measures prepared in accordance with IFRS.

Brian Kearney: In addition, Oatly has posted a supplementary presentation on its website for reference.

Speaker Change: Revenue and free cash flow please. Refer to today's earnings release for reconciliation of non-ifrs. Financial measures to the most comparable measures prepared in accordance with IFRS.

Jean-Christophe Petain: And now I'd like to turn the call over to Jean-Christophe. Thank you, Brian. And good morning, everyone. Slide 4 has the key messages I want you to take away. First, we continue to make good progress on our 2025 priorities. Igniting top line momentum is our most important priority out of the three, and the actions are working. We are continuing to roll out our goals playbook more broadly and we continue to see similar results.

Speaker Change: In addition only as posted a supplementary presentation on its website for reference and now like to turn the call over to Jeanne Kristoff.

Jeanne Kristoff: Thank you, Brian. And good morning everyone.

Jeanne Kristoff: Slight fall as the key messages. I want you to take away.

Jeanne Kristoff: Sir, we continue to make good progress on our 2025 priorities.

Jeanne Kristoff: Igniting Topline momentum is our most important priority out of the 3 and the actions are working.

Jean-Christophe Petain: While we are confident our playbook will continue to drive results, we are reducing our full-year outlook on the top line. This reflects reduced, slower-than-expected progress in our North America segment as well as a soft, macro environment in our Greater China region. Importantly, we plan to drive additional cost efficiencies and keep us on track on the bottom line, and we are reaffirming our adjusted EBITDA guidance. Therefore, we are refining our 2025 We know it's Constant currency revenue growth of approximately flat to plus 1%. adjusted a BDA in the range of $5 million to $15 million, which represents no change compared to our prior outlook.

Jeanne Kristoff: We are continuing to roll out our goals, Playbook more broadly and we continue to see similar results.

Jeanne Kristoff: While we are confident our Playbook will continue to drive results. We are reducing our full year, outlook on the top line,

Jeanne Kristoff: This reflects reduced slower than expected progress in our North America segment, as well as a soft macro environment in our greater China business.

Jeanne Kristoff: Importantly, we plan to dive additional cost efficiencies and keep us on track on the bottom line.

Jeanne Kristoff: And we are reaffirming our adjusted abda guidance.

Jeanne Kristoff: Therefore, we are refining our 2025 plan.

Jeanne Kristoff: We now expect

Jeanne Kristoff: constant currency Revenue growth of approximately flat to plus 1%.

Jean-Christophe Petain: and Capex of approximately $20 million.

Adjusted. The BTA in the range of 5 million to 15 million. Which represents no change compared to our prior Outlook?

Jean-Christophe Petain: Finally, we have decided to conduct a strategic review of our Greater China business with the goal of accelerating growth and maximizing value for this part of the business. Slide five reminds you of our three priority areas. This year, we are focused on reducing cost, igniting supply momentum, and driving profitability. We fully expect our disciplined execution on these priorities areas will set us up for long-term value creation.

Jeanne Kristoff: And capex of approximately 20 million.

Jeanne Kristoff: finally, we have decided to conduct a strategic review of our greater China business with the goal of accelerating growth and maximizing value, for this part of the business,

Jeanne Kristoff: Slide. 5. Remind you of our 3 Priority areas?

Jeanne Kristoff: This year we are focused on reducing cost igniting to high momentum and driving profitability.

Jeanne Kristoff: We fully expect our disciplined execution on. These priorities areas will set us up for long-term value creation.

Jean-Christophe Petain: I will start with Cots on slide six. We have made good progress in driving efficiency this year. In the first half of this year, we have driven down our cost of goods per litre by 10% compared to last year's first half. And Q2 is our eighth straight quarter of year-on-year reduction. We believe we still have a long way to push it lower. We also continue to reduce our SG&A overhead expenses, which provided us with additional fuel for branding investments. And we have identified additional SG&A efficiencies that will drive more impact later this year. Overall, I'm pleased with our progress on cost discipline and we will continue to drive out inefficiencies.

Jeanne Kristoff: I will start with costs on slide 6.

Jeanne Kristoff: We have made good progress in driving efficiency this year.

Jeanne Kristoff: In the first half of this year, we have driven down our cost of goods per liter by 10% compared to last year's first half.

Jeanne Kristoff: And 22 is our 8 straight quarter of year on year, reductions.

Jeanne Kristoff: We believe we still have Runway to push it lower.

Jeanne Kristoff: We also continue to reduce our sdna, overheads expensive.

Jeanne Kristoff: Which provided us with additional fuel for Branding Investments.

Jeanne Kristoff: And we have identified additional sgna efficiencies, that will drive more impact later this year.

Jeanne Kristoff: Overall, I'm pleased with our progress on cost discipline and we will continue to drive out inefficiencies

Jean-Christophe Petain: Slide 7 shows the results of our deliberate and disciplined growth-focused investment.

Jean-Christophe Petain: As Daniel will elaborate further, our year on international sales performance is clear proof our refreshed gross playbook is working. When we launched our refreshed playbook late last year, the category goals wasn't there. In the quarter, our business grew 4.7% while the category grew 1.9%. As you can see, the data is even stronger for the last four weeks. where we grew over 7%. And once again, igniting category goals and outgrowing both plant-based milk and oat milk.

Jeanne Kristoff: slide 7 shows, the results of our deliberate and disciplined goals focused on investments.

Jeanne Kristoff: As Daniel will elaborate further our European International sales performance is Clear. Proof our refreshed. Gross Playbook is working.

Jeanne Kristoff: when we launched our refresh, Playbook late last year,

The category goes wasn't there.

Jeanne Kristoff: In the quarter.

Jeanne Kristoff: Our business. Grew 4.7% while the category grew 1.9%,

as you can see, the data is even stronger for the last 4 weeks.

Where we go over 7%.

Jeanne Kristoff: and once again, igniting category goals and outgoing boosts plump based milks and oat milk

Jean-Christophe Petain: Turning to our third priority, profitability, on slide 8. We continue to make good progress on profitability in the court. Our adjusted EBDA improved 7 million year-on-year in the quarter to minus 3.6 million, which is in line with the guidance we provided on the last quarter's call.

Jeanne Kristoff: Turn into our third priority, profitability on flight 8.

Jeanne Kristoff: We continue to make good progress on profitability in the quarter.

Jean-Christophe Petain: This continued progress and the actions we are taking to drive the business give us the confidence to reaffirm our full year profitability guide. Slide 9 shows our updated outlook. The biggest takeaway is that we are reaffirming our adjusted BPA guidance of $5 million to $15 million, which I believe demonstrates that we have good flexibility within our business to deliver on our commitment. While we are adjusting our top-line outlook to reflect both slower-than-expected progress in North America and the continued soft macro environment in Greater China, we continue to believe that our refreshed growth playbook is working.

Jeanne Kristoff: Now, adjusted the BDA improved 7 million year on year in the quarter to minus 3.6 million which is in line with the guidance. We provide in on the last quarter score.

Jeanne Kristoff: And the actions we are taking to drive the business. Give us the confidence to reaffirm our full year profitability guidance.

Slide 9 shows our updated Outlook.

The biggest takeaway is that we are. Reaffirming our adjusted BDA guidance of 5 million to 15 million.

Jeanne Kristoff: Which I believe demonstrates that we have good flexibility within our business to deliver on our commitments.

Jeanne Kristoff: While we are adjusting our Topline Outlook to reflect both slower than expected progress. In North America and the continued soft macro environment in data China.

Jean-Christophe Petain: And that we are on the right path.

Jeanne Kristoff: We continue to believe that our refreshed gross Playbook is working.

Jean-Christophe Petain: The progress we are seeing in the Europe and international segment is clear evidence of that.

Jeanne Kristoff: And that we are on the right path.

Jeanne Kristoff: The progress we are seeing in the Europe and international segments is clear evidence of that.

Jean-Christophe Petain: Finally, we have initiated a strategic review of our Greater China Bill. We will consider a range of options, including a potential carve-out with the goal of accelerating the growth and maximizing the value of the business. Our Greater China Business has improved over the past few years. and it is much stronger now. It has been a strong contributor, delivered better results, established market leadership, and is now well positioned for the future. We believe in the future potential of this. Therefore, we believe now is the right time to conduct this review to help the business reach its future potential.

Jeanne Kristoff: Finally.

Jeanne Kristoff: We have initiated a strategic review of our greater China business.

Jeanne Kristoff: We will consider a range of options, including a potential car out with the goal of accelerating, the growth and maximizing, the value of the business.

Jeanne Kristoff: I'll get to China business as improved over the past few years.

Jeanne Kristoff: And it is much stronger now.

It has been a strong contributor delivered, better results, established Market leadership and is now well, positioned for the future.

Jeanne Kristoff: We believe in the future potential of this business.

Jean-Christophe Petain: As we conduct this strategic review, we will continue to operate in the region, including our mansion facilities. And we remain committed to our customers, our consumers, and our employees whilst maintaining the safety and continuity of our operations.

Therefore we believe now is the right time to conduct this review to help the business reach. Its future potential.

Jeanne Kristoff: As we conduct this strategic review, we will continue to operate in the region, including our Mansion facility.

Jeanne Kristoff: And we remain committed to our customers, our consumers and our employees, whilst maintaining the safety and continuity of our operation.

Jean-Christophe Petain: I'm with notes, so... There are no assurances that the process will result in any transaction or strategic change. We will update the market on our progress as is necessary and appropriate.

Jeanne Kristoff: I must not stop.

Jeanne Kristoff: There are no assurances that the process will result in any transaction or strategic change.

Daniel Ordonez: Daniel, over to you. Thank you, JC. Good morning, everyone.

Jeanne Kristoff: We will obtain the market on our progress, as is necessary and appropriate.

Daniel: Daniel over to you.

Daniel Ordonez: Slide 12 shows how the Europe and international segment has been performing. Strong Volume-Led Double-Digit Revenue Growth in the Quarter The steady volume led growth, coupled with reliable operational efficiency. pushed the segment's EBITDA margin from the low double digits in early 2024.

Speaker Change: Thank you. JC. Good morning, everyone.

Speaker Change: Slide 12 shows how the Europe and international segment has been performing.

Speaker Change: Strong volume lead, double digit Revenue growth in the quarter.

Daniel Ordonez: to the mid-teens in Q4 and Q1 and now north of 20% for Q2. This segment is now focused on generating incremental consumer demand, which we expect will drive continued profit improvement.

Speaker Change: The steady volume Le growth coupled with reliable operational efficiency. Push the segments, evida margin from the low double digits in early 2024,

Speaker Change: To the meetings in Q4 and q1 and now north of 20% for quarter 2.

Daniel Ordonez: Today, I will discuss how we're driving demands on our plans for the future.

Speaker Change: This segment is now focused on generating incremental, consumers, demand, which we expect will drive continued profit Improvement.

Daniel Ordonez: Life 13 reminds you of the three pillars of a growth playbook. The first is to increase our relevance to consumers. As you saw in my first slide, we have significantly expanded our portfolio from a position of strength and uniqueness out of our iconic Barista Original Edition. We're doing so by leveraging new usage occasions and the emerging taste and flavor bonanza that Gen Z is driving, and that is evolving coffee into a much broader beverages space. At the same time, our advertising has become simpler, equally arresting and with messaging focused on the barriers to conversion.

Speaker Change: Today, I will discuss how we're driving demands on our plans for the future.

Speaker Change: Like 13, reminds you of the 3 pillars of our growth. Playbook. The first is to increase our relevance to consumer.

Speaker Change: As you saw on my first slide, we have significantly expanded our portfolio from a position of strength.

Speaker Change: And uniqueness out of our iconic, Barista original Edition.

Speaker Change: We're doing so by leveraging, new usage, occasions and the emerging taste and flavor Bonanza that gen Z is driving and that is evolving coffee into a much broader beverages space.

Speaker Change: At the same time, our advertising has become simpler equally a resting and with messaging focused on the barriers to conversion.

Daniel Ordonez: The second pillar is to attack those barriers to conversion, most notably preconceptions on taste. Anywhere we test blind, we see that around one in two people prefer Oatly to cow's milk in their coffee. This is a very persuasive tool that we expect to intensify in our communication. We add to these our elevated signature drinks experience so relevant in these new beverages space.

Speaker Change: the second pillar is to attack those barriers to conversion, most notably preconceptions on taste

Speaker Change: Anywhere we test blind we see that around 1 in 2. People prefer only to cow's milk in their coffee.

Speaker Change: This is a very persuasive tool that we expect to intensify in our communication.

Daniel Ordonez: And the final pillar is to increase the availability of our products to consumers. We continue to add new customers and new distribution points every day. We know there's still a tremendous amount of runway ahead of us, and we're relentlessly pursuing it.

Speaker Change: We add to these are elevated signature drinks experience. So relevant in these new beverages space,

And the final pillar is to increase the availability of our products to Consumers. We continue to add new customers and new distribution points every day.

Daniel Ordonez: Slide 14 shows the early results of executing this growth playbook. We started rolling this out in Germany and the UK late last year. Given the cultural relevance of our brand in food service channels, the impact of this strategy is hitting food service first, while retail following. withdrew a strong growth acceleration in the German food service channel when we started our refresh strategy. Encouragingly, these strong growth rates have been sustained for several quarters. Retail is a much larger portion of the German economy. and we're seeing strong results there as well. We grew 5% in the last 12 weeks and a very strong 14% in the last four weeks.

Speaker Change: It.

Speaker Change: Slide 14 shows the early results of executing these growth Playbook. We started rolling this out in Germany and the UK late last year.

Given the cultural relevance of our brand in Food Service channels, the impact of these strategies heating food service. First, while retail following

Speaker Change: We drove a strong growth acceleration in the German Food Service Channel. When we started our refresh strategy,

Encouraging me. These strong growth rates have been sustained for several quarters now

Retail is a much larger portion of the German business.

Daniel Ordonez: On this slide you can see an in-store retail example of how we're maximizing our expanded barista portfolio to gain incremental distribution and space in-store. This retailer is showing our entire lineup 1.5 liters, lighter taste, a scannable six-pack, organic barista and original barista. With this new enhanced portfolio, our distribution has grown over 35 percent and we're bringing new consumers into the category. After seeing traction in the first markets, we rolled out the strategy to our third largest European market, Sweden. Sweden is the company's original market, where we have been operating the longest and where penetration is the highest.

Speaker Change: And we're seeing strong results there as well. We group 5% in the last 12 weeks and a very strong 14% in the last 4 weeks.

Speaker Change: On this slide. You can see an install retail example of how we're maximizing our expanded, Barista portfolio, to gain incremental distribution and space in store.

Speaker Change: This retailer is showing our entire lineup.

Speaker Change: 1.5 L lighter taste a scannable 6-pack organic Barista and original Barista with these new enhanced portfolio are distribution, has grown over 35% and we're bringing new consumers into the category.

Speaker Change: After seeing fracturing, the first markets, we rolled out these strategy to our third largest European market.

Speaker Change: Sweden.

Daniel Ordonez: Given our long history there, we thought it might be more difficult to drive improvement. But after deploying the playbook earlier this year, I'm pleased to report that we have started to see solid, positive growth in our retail sales. Not only we're driving growth, but the velocities on our new barista product are outperforming our own expectations. These results give us confidence to say that there is still much more runway for expansion everywhere, given the significant headspace we have in front of us to gain more penetration and drive further category growth. And this strategy is not only working in countries where we already have a strong presence, it is also working in our expansion markets, where we grew 40% year-on-year in quarter two, as we continue to create the capital.

Speaker Change: Sweden is the company's original Market where we have been operating the longest and were penetration is the highest

Speaker Change: Given our long history there, we thought it might be more difficult to drive improvements.

Speaker Change: But after deploying The Playbook earlier, this year, I'm pleased to report that we have started to see solid positive growth in our retail sales.

Speaker Change: Not only we're driving roles, but the velocities on our new Barista products are outperforming our own expectations.

Speaker Change: These results give us confidence to say that there is still much more runway for expansion everywhere. Given the significant head space, we have in front of us to gain more penetration and drive further category growth.

Daniel Ordonez: From Madrid to Melbourne to Mexico City and everywhere in between, the teams are doing an amazing job connecting with customers and consumers, driving distribution gains and dominating the coffee and beverage culture around the world. Today, in Paris, two out of three cafes have adopted Oatly, driving a headline-making category explosion. In Spain, for instance, which is already one of the third largest plant-based beverage markets in Europe, our track channel data is growing over 70%, which is pushing the overall category up. And in Mexico City, we have taken the massive coffee space by storm and have become the fastest-earning retail item in less than two years.

Speaker Change: And this strategy is not only working in countries where we already have the strong presence. It is also working in our expansion markets, where we grew 40% year on year in quarter 2, as we continue to create the category.

Speaker Change: From Madrid to Melbourne to Mexico City. And everywhere in between the teams are doing an amazing job. Connecting with customers and consumers, driving distribution, gains, and dominating the coffee and the rich culture around the world.

Speaker Change: Today.

Speaker Change: In Paris 2 out of 3 cafes have adopted only driving a headline making category explosion in Spain for instance which is already 1 of the third largest plant-based beverage markets in Europe. Our track Channel data is growing over 70% which is pushing the overall category upwards.

Daniel Ordonez: We believe these markets have a long runway for growth and we are excited to continue bringing the Oatly magic to more people in more places around the world.

Speaker Change: And in Mexico City, we have taken the massive cost of space by storm and have become the fastest turning retail item in less than 2 years.

Daniel Ordonez: To be clear, though, while we are pleased with our performance in both established and expansion markets, we are not satisfied. We have much bigger expectations on where our business can go.

Speaker Change: We believe this markets have a long runway for growth and we are excited to continue bringing the old the magic to more people. In more places around the world.

Daniel Ordonez: That is why we're taking this strategy to the next stage.

Speaker Change: To be clear though while we are pleased with our performance in both establishment and expansion markets, we're not satisfied. We have much bigger expectations on where our business can go.

Daniel Ordonez: We're doubling down on taste with the rollout of the Oatly Lookbook, as shown on slide 17. We know one of the biggest barriers to conversion is consumers' preconceptions on the taste of a plant-based product. The Lookbook is helping us breaking down those barriers and drive incremental demands, generating excitement with codes reminiscent to fashion and unexpected recipes that totally change the way in which consumers view oat milk. Not anymore an alternative tool, but an exciting canvas to enjoy their beverage. There is a taste and flavor bonanza going on in coffee shops around the world, with Gen Z leading the way.

Speaker Change: That is why we're taking this strategy to the next stage.

We're doubling down on taste with a roll out of the Oakley Loop book as shown on slide 17.

Speaker Change: We know 1 of the biggest barriers to conversion is consumers preconceptions on the taste of a plant-based product.

Speaker Change: The lookbook is helping us breaking down those barriers and drive incremental demands generating excitement with colds reminiscence to fashion and unexpected recipes. That totally changed the way in which consumers view oat milk.

Speaker Change: Not anymore, an alternative tool, but an exciting canvas to enjoy their beverage.

Daniel Ordonez: and our unique barista market developers team who are intimately woven into this space are working hand-in-hand with our food service customers to revitalize their offering. A win-win that builds traffic and ticket growth with provocative, exciting, and most importantly, Oatly-based items on their menu. These are not your grandparent's cappuccinos. These are premium signature drinks that tap into Gen Z's obsession with flavor and cold drinks. Can you imagine any of these drinks with cow's milk? We don't think so. Then, as these flavors gain in popularity, we are launching new products to increase their convenience. This makes the flavor profile accessible for at-home consumption while also helping us to become the vendor of choice in food service.

Speaker Change: There is a taste and flavor Bonanza going on in coffee shops, around the world with Genty leading the way.

And our unique Barista Market developers. Team, who are intimately woven into this, space are working hand in hand, with our food service, customers to revitalize their offering a win-win that builds traffic and ticket growth with provocative, exciting. And most importantly old based items on their menus.

Speaker Change: Cappuccinos.

These are premium signature drinks that tap into Genesis obsession with flavor and cold drinks.

Speaker Change: Can you imagine any of these drinks with cow's milk?

Speaker Change: We don't think so.

Speaker Change: Then at these flavors, gaining popularity, we are launching new products to increase their convenience.

Daniel Ordonez: For example, in Sweden, we have partnered with movie theaters to develop sweet and salty popcorn lattes that consumers can enjoy while there. These dreams rapidly gained in popularity, and so we launched a popcorn-flavored product in no time. As we have moved from food service to retail, the velocities have outperformed our expectations. And now, this item will be rolled out across Europe. This new product uses our already amazing Arista products as the chassis and then adds the flavoring near the end of the production process.

Speaker Change: This makes the flavor profiles accessible for at home consumption while also helping us to become the vendor of choice in food service.

Speaker Change: For example, in Sweden, we have partnered with movie theaters to develop sweet and salty, popcorn lattes that consumers can enjoy while their these drinks rapidly gained in popularity. And so we launched a popcorn flavored product in no time.

Speaker Change: As we have moved from Food Service to retail, the velocities have outperformed our expectations. And now this item will be rolled out across Europe.

Daniel Ordonez: so our supply chain can execute this customization quickly and efficiently.

Speaker Change: This new product uses our already amazing. Arista products as the chassis and then add the flavoring near the end of the production process.

Speaker Change: So, our supply chain can execute these customization quickly and efficiently.

Daniel Ordonez: Slide 19 shows that we don't stop there. If you look at the current version of our lookbook, which is in our company website, you will see many matcha-based drinks. And, you know, there is currently an explosion of match around the world.

Speaker Change: July 19 shows that we don't stop there.

Speaker Change: If you look at the current version of our lookbook, which is our in our company, uh website, you will see many matcha based drinks.

Daniel Ordonez: And we have decided to capitalize upon it. Here you can see the new Matcha portfolio that we're rolling out across Europe as we Not only you will be able to go to your favorite cafe to get an Oatly Rosemary Matcha Latte or a Smoky Matcha, but you will be able to go to your local retailer and get a carton for home use or the small, cute brick right from the go.

Speaker Change: And you know, there is currently an explosion of match around the world and we have decided to capitalize upon it.

Speaker Change: Here you can see the new matcha portfolio that we're rolling out across Europe as we speak.

Daniel Ordonez: Turning now to North America on slide 21, where we are still in the early stages of implementing our refreshed growth table. While we continue to face the discrete headwinds we mentioned last quarter, including a large customer sourcing strategy shift and the frozen SKU rationalization that were both greater than planned, we remain confident in the underlying strength of our approach. In fact, excluding these headwinds, the rest of the North America business has grown. we achieved record quarterly retail sales and the highest ever full service revenue outside our largest customers.

Speaker Change: Not only you will be able to go to your favorite Cafe, to get an osley Rosemary matcha latte or a smoky matcha, but you will be able to go to your local retailer and get a carton for home, use or the small cute break while you're on the go.

Speaker Change: turning now to North American slide 21,

Speaker Change: what we are still in the early stages of implementing our refreshed growth Playbook.

Speaker Change: While we continue to face the discrete where headwinds we mentioned last quarter, including a large customer sourcing strategy shift and the Frozen SKU rationalization that were both greater than planned. We remain confident.

Speaker Change: In the underlying strength of our approach.

Speaker Change: In fact, excluding these headwinds the rest of the North America business has grown.

Daniel Ordonez: Let me say this straight, though. Our overall results in North America were below our own expectations. Yes, we made progress, but we had higher expectations. Given the success we've seen in Europe and internationally using this same playbook, we know what's possible and we remain committed to applying these lessons to drive the consistent performance that we expect from our North American business. who are being even more thoughtful, more deliberate, and more disciplined in executing our strategy to accelerate demand. At the same time, we continue to solidify the operational fundamentals that will generate the muscle to increase investment while we step up execution.

we achieved record quarterly retail sales and the highest ever Food Service Revenue outside, our largest customers,

Speaker Change: Let me say this trade, though. Our overall results in North America were below our own expectations.

Speaker Change: Yes, we make progress but we had higher expectations.

Speaker Change: Given the success we've seen in Europe and international using this same Playbook, we know what's possible. And we remain committed to applying these lessons to drive the consistent performance that we expect from our North America business.

We're being even more thoughtful, more deliberate, and more disciplined in executing our strategy to accelerate demand.

Speaker Change: At the same time, we continue to solidify the operational fundamentals that will generate the muscle.

Daniel Ordonez: Slide 21 shows how we started to roll out this playbook.

Speaker Change: to increase investment while we Step Up execution,

Daniel Ordonez: We began to attack the barrier to conversion that is FASE. Same as in Europe, we have been running these campaigns in high-impact areas to capture the opportunity in people's dormant ultimate preference, or DOMP, as our US team calls it. We have also started to roll out the Lookbook with provocative flavors to enhance menus. And over the balance of the year, we will be focused on a continued disciplined rollout of our playbook. We are confident that with proper execution and future steady investments, this strategy can drive incremental demand. We continue to believe there is a significant opportunity to expand distribution in the U.S.

Speaker Change: July 21 shows how we started to roll out this Playbook, we began to attack the barrier to conversion that it stays same. As in Europe we have been running this campaigns in high impact, areas to capture the opportunity in people's dorms oatmeal preference or dump.

Speaker Change: As our us team calls, it.

Speaker Change: We have also started to roll out the lookbook with provocative flavors to enhance menus.

Speaker Change: And over the balance of the year, we will be focused on a continued discipline rollout of her Playbook. We are confident that with proper execution and future steady Investments, this strategy can drive incremental demand

Daniel Ordonez: in all channels, and we have exciting upcoming tests with new customers.

Daniel Ordonez: However, we remain vigilant of the consumer environment and the category dynamics, and we do not expect an immediate inflection to growth until the full playbook has been deployed steadily and with sufficient resources for a good period of time.

Speaker Change: We continue to believe there is a significant opportunity to expand distribution in the US in all channels. And we have exciting upcoming tests with new customers.

Speaker Change: However, we remain Vigilant of the consumer environment and the category Dynamics, and we do not expect an immediate infection to growth.

Daniel Ordonez: Turning to the Greater China segment on slide 22, our Greater China team continues to execute well in a challenging consumer environment. The food service side of the business, which is the largest part of the segment, grew revenue by 12% in the first half, and we maintain strong relationship with the market's largest coffee chain. We have also continued to develop the retail channel with our entrance into club stores. In the quarter, the segment's retail volume reached an all-time high.

Speaker Change: Until the full Playbook has been deployed steadily and with sufficient resources, for a good period of time.

Speaker Change: Continue to execute well in a challenging consumer environment.

Speaker Change: The food service side of the business, which is the largest part of this segment grew Revenue by 12% in the first half, and we maintain strong relationship with the Market's largest coffee chains.

Marie-Josée Debbier: I will now turn the call over to Marie-Josée. MJ, please. Thank you, Daniel.

Speaker Change: We have also continued to develop the retail Channel with our entrance into Club stores in the quarter. The segments, retail volume reached an all-time high

Marie-Josée Debbier: Good morning, everyone. Slide 24 shows an overview of the quarterly PMS. In the quarter, we grew revenue 3% but declined 0.2% on a constant currency basis. We continue to drive strong margin expansion with Q2 growth margin expanding 330 basis points year-over-year to 32.5%. Our adjusted EBITDA was a loss of $3.6 million in the quarter, which was approximately in line with the first quarter's level and what we guided to on last quarter's course. Both our gross margin and adjusted EBITDA are our best portfolio results as a public company.

I will now tell turn the call over to Maria. Jose MJ please.

Maria: Thank you, Danielle. Good morning, everyone.

Fly 24 shows an overview of the quarterly pns.

Maria: In the quarter, we grew Revenue 3%, but declined 0.2% on a constant current currency basis.

Maria: We continue to drive strong margin expansion with Q2 gross margin.

Maria: Spending 350 visits points year over year to 32.5%.

Maria: Our adjusted. Aita was a lot of 3.6 million in the quarter.

Maria: Which was approximately in line with the first quarter's letter and what we guided to on last quarter's Court.

Marie-Josée Debbier: Slide 25 shows the breaking items of our revenue group. We grew volume by 2.8% in the quarter, which was offset by a 3% decline in price. Parade Exchange was a 3.2% sell-off.

Maria: Both our gross margin and adjustability are our best portfolio result as a public company.

Maria: July 255 shows the breaking items of our Revenue growth.

Maria: We drew volume by 2.8% in the quarter.

Maria: Which was offset by a 3% decline in prices.

Marie-Josée Debbier: Slide 26 shows the driver of our year-over-year gross margin expansion. The benefits of absorption and supply chain efficiencies improved margins by 273 businesses. These reflect the benefits of closure of our Singapore manufacturing facility in December, as well as volume absorption, productivity efficiency, and improved sources. Pricing and product mix at a hundred and ten, this is going to our worst market in the world. While our revenue bridge that I discussed on the prior slide showed a headwind from price mix, we drove margin mix benefits in the quarter as we reduced sales in lower margin products and customers and increased sales in higher margin.

Maria: Current exchange was a 3.2% selling.

Maria: July 26th shows the driver of our year-over-year growth margin expansion.

Maria: The benefits of abstractions and supply chain efficiencies improved margins by 270 business part.

Maria: Deep reflects, the benefit of closure of our Singapore manufacturing facility in December as well as volume absorption productivity efficiencies and improved sourcing.

Maria: Pricing and product, mix added 110%, this is going to our worth margin in the quarter.

Maria: Why our Revenue bridge, but I discussed on the power slide, show, the headwind from Price mix.

Marie-Josée Debbier: For example, some of the newer products in large pack sizes are diluted to price mixed in the same fridge but are marginal. We experienced a 90 basis points headwind from inflation in the quarter which was mainly driven by higher labor costs in our European supply chain and certain inputs in North America. Finally, the impact of foreign exchange movements added 40 basis points to the report.

Withdrawal margin, mix benefit in the quarter as we reduce sales in lower margin products and customers and increase sales in higher margin ones.

Maria: For example, some of the newer products in large part, sizes are diluted to price mixed in the first stage. But our margin active. We experience a 90 basis point has been from inflation in the quarter which was mainly driven by higher labor cost in our European by 10 and certain inputs in North America.

Marie-Josée Debbier: Slide 27 shows the year-over-year improvement in our adjusted EBITDA. The $7.4 million improvement compared to last year's second quarter was mainly driven by an $8.6 million increase in gross profit.

Maria: Finally, the impact of Foreign Exchange movements added 40 basis points worth working.

Maria: Slide 27 shows the year-over-year improvement in our adjusted debt.

Marie-Josée Debbier: The 1.2 million increase in SG&A and over mainly reflects foreign exchange movements, which were the 3.5 million headwinds in the quarter. Excluding those affected with LCNA would have decreased as we continue to reduce our overhead expense.

Maria: The 7.4 million Improvement compared to last year. Second quarter was made driven by a 8.6 million increase in gross profit.

The 1.2 million increase in FDA and over mainly reflect foreign exchange movements which were the 3.5 million headwind in the quarter.

Maria: Excluding those affect headwinds.

Marie-Josée Debbier: Slide 28 shows segment-level details.

Sdna would have decreased as we continue to reduce our overhead expenses.

Marie-Josée Debbier: European International Group Volume by 9.4%, which highlights that our growth playbook is working. The second quarter was the segment's all-time highest-volume quarter.

Maria: Client 28. Showed segment level detail.

Maria: European International approval by 9.4%.

Maria: Which highlights that our growth Playbook is working.

Marie-Josée Debbier: North America's 6.8% decline in revenue was driven mainly by the change in sourcing strategy and the segment's largest customer. The segment adjusted EBITDA declined $3.5 million compared to the prior year, which was almost entirely driven by an increase in branding and advertising.

Maria: The 7 quarter was the segments all time, highest volume quarter.

Maria: North America. 6.8% decline in Revenue was driven mainly by the change in sourcing strategy at the segments, largest customer.

Maria: The segments, adjusted daily. I declined 3.5 million compared to the prior year.

Maria: Which was almost entirely driven by an increase in branding and advertising.

Marie-Josée Debbier: Greater China to a 6.6% constant currency revenue decline, which may reflect the difficult macro environment impact on the country.

For China to a 6.

Maria: Currency Revenue decline.

Maria: Which mainly reflects the difficult macro environment impact on the consumer.

Marie-Josée Debbier: Turning to our balance sheet and cash flow on slide 29. Our business plan remains fully funded.

Maria: Journey to our balance and cash flow on flight 29.

Marie-Josée Debbier: I hope at the end of the quarter, we have $68 million of cash and $221 million of credit that is. The middle of the slide shows our pre-cash flow improvement. The Q2 cash outflow of 5 million was our best quarterly performance as a public company and confirms our progress in developing a cash culture mindset in the company. In the quarter, our total trade work in capital balance was the lowest since 2021, when our business was much smaller. And our quarterly cash conversion cycle was the best in our IPO, driven by strong processes to manage inventories, collections, and payment terms. I am seeing good progress throughout the company and we continue to believe there is still room to improve.

Maria: Our business plan remains fully funded.

Maria: As of the end of the quarter, we have 68 million of cash and 221 million of credit facilities.

Maria: The middle of the slide shows our free cash flow Improvement.

the Q2 cash outflow of 5 million was our best quarterly performance as a public company and confirms our product, in developing a cash culture mindset in the company,

Maria: In the quarter, our total trade working. Capital balance was the lowest since 2021 when our business was much smaller.

Maria: And our quarterly cash conversion cycle was the best in our IPO driven by strong processes to manage inventory, Collections and payment terms.

Marie-Josée Debbier: Slide 30 shows our redefined outlook, which continues to include the Greater China Segment. We now expect constant currency revenue growth in the range of approximately flat 2.1%.

Maria: I am seeing good progress throughout the company and we continue to believe there is still room to improve.

Flight 30 shows, our redefined Outlook which continues to include the greater China segment.

Marie-Josée Debbier: We have reduced our outlook to reflect slower-than-expected progress in North America executions, as well as softer macroeconomic conditions in the greater China region. In addition, our prior outlook assumed that climate change would be a 100 basis points headwind to next step. Based on recent FX rates and assuming they hold for the balance of the year, we now estimate FX to be an approximately 150 basis points to fully earn a sale.

Maria: We now expect constant currency Revenue growth in the range of approximately flat 2 plus 1%.

Maria: We have reduced our Outlook to reflect slower than expected progress in North America execution, as well as software macroeconomic conditions in the greater China region.

Maria: In addition, our prior output assume that foreign exchange would be a 100 basis points had been connected.

Marie-Josée Debbier: For adjusted EBITDA, we are reaffirming the range of $2.85 to $2.15 million. We continue to expect gross profit dollars to improve in the second half compared to the first half, benefiting from best-in-class supply chain purchases combined with higher sales. We have also identified additional SG&A savings. We plan to drive this savings by accelerating our work of eliminating inefficient spend in areas such as indirect procurements, which we expect primarily hit the corporate segment, with the impact starting to hit in Q3 and then growing in Q4.

Maria: Based on recent affect rate and assuming they hold for the balance of the year. We now estimate effect to be an approximately 150 basis on penguin to fully ourselves.

If you are interested in, we are, we are firming the ranch of positive, 5 to 15 million.

Maria: We continue to expect growth profit dollars to improve in the second half compared to the first half, benefiting from best-in-class supply chain practices combined with our higher self.

We have also identified additional lgna savings.

We plan to drive the savings by accelerating our work of eliminating inefficient spend in areas such as in our procurement.

Maria: Which we expect primarily if the proper segment.

Marie-Josée Debbier: While some of these savings are one-time in nature, such as incentive pay, we expect a large portion to benefit us beyond this six-year. Our guidance assumes no direct impact on tariffs since we expect the products that we import to the U.S. to be exempt to the U.S. MTA. We also assume that the current economic conditions and consumer behavior will remain largely consistent for the rest of the year.

Maria: with the impact, starting to heat into 3 and then growing into 4,

Maria: While some of the savings are 1 time in nature such as incentive pay, we expect a large portion to benefit us Beyond this year.

Marie-Josée Debbier: Finally, we now expect Capex to be approximately $20 million for the full year. We have continued to drive efficiency in our supply chain, and we believe this is an appropriate level of investment. where we are continuing to invest in our business while being disciplined in our capital.

Maria: Our guidance assumes no direct impact on T. Since we expect the product that we import to the US to the exempt, to the US. And CA we also assume that the current economic conditions and consumer Behavior will remain largely consistent for the rest of the year.

Finally, we now expect SE to be approximately 20 million for the full year.

Maria: We have continued to drive efficiencies in our supply chain and we believe this is an appropriate level of investment.

Operator: This concludes our prepared remarks. Operator, we are now prepared to take questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Maria: Where we are continuing to invest in our business, while being disciplined in our capital.

Maria: This concludes our prepared remarks.

Maria: Operator. We are now prepared to take questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: to ask a question, you may press star then 1 on your touchtone phone,

Speaker Change: If you are using a speaker-phone, please pick up your handset before pressing the keys.

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

Speaker Change: if at any time your question has been addressed and you would like to withdraw your question, please press star then 2

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

Kaumil Gajrawala: The first question today comes from Kaumil Gajrawala with Jeffrey. Please go ahead. Hey, everybody, good morning or good afternoon.

Speaker Change: The first question today comes from Camille guala with Jeffrey. Please go ahead.

Jean-Christophe Petain: I guess a couple of things on the decision on the Strategic Review of China. The first maybe is, you know, why is now the right time? But maybe more importantly, what does an optimal outcome look like? And to give you, maybe make it a multiple choice question is, is the preference to sell it? Is the preference to, you know, raise some capital through a JV? Is the preference to find a strategic that helps improve the condition of the business? If you can maybe just help us out with where you hope to get to with this review.

Hey everybody. Good morning or good afternoon? Um, I guess a couple of things on the decision on uh, the Strategic review of China. The first maybe is, you know, why is now the right right time. Um, but maybe more importantly, what is an optimal outcome look like, and to give you maybe make it a multiple choice. Question is, is a preference to sell. It is the preference to, you know, raise some Capital through a JV, uh, is the preference to, you know, find the Strategic that helps improve the condition of the business if you can. Maybe just help us out with where uh you you hope to get to with this review.

Jean-Christophe Petain: Hi Kaumil, Jean-Christophe, thank you so much for the multifaceted questions on the same topic. So let me address them one by one. First, why? The why we're doing that is because we believe in the future potential of this business, and we are looking to maximize shareholder value. Your second question was why now? And the why now is that after the reset that we conducted in this business in 23 and 24, we believe this business is now leaner and stronger. And therefore, it's a good time to step back and evaluate how to accelerate its goals and maximize its value.

Jean-Christophe Petain: The next thing I want to tackle is your question about what are we looking for. As we said, we are considering a range of options, including a potential carve-out. Of course, we are not going to speculate today on the ultimate outcome of this strategic review, and we will provide updates on this strategic process as appropriate and when relevant. The final thing I want to insist on is that as we conduct this review, we remain fully committed to our team, to our customers and suppliers in Greater China.

Speaker Change: The second question was why now and why? Now is that after the recess that we conducted in this business in 2013 and 24, we believe this business is now linear and stronger and therefore it's a good time to step back and evaluate how to accelerate this goals and maximize its value.

Speaker Change: The next thing I I want to um, tackle is your question about, what, what are we looking for?

Speaker Change: As we said we are considering a range of options including a potential car out. Of course, we are not going to speculate today on the ultimate outcome of this strategic review and we will provide updates on this strategic process as appropriate and when relevant

Speaker Change: The final thing I want to insist on is that as we conduct this review, We remain fully committed to our team, to our customers and suppliers in Greater China.

Kaumil Gajrawala: Okay, great, got it. So looking forward to hearing about progress. On North America, you know, I think it's the business was flat, excluding business losses or discontinuations. Flat still sounds like a challenged market to some degree. So why do you think that is? And what do you think you can do to turn that around? Again, excluding any of the sort of discontinuations or business loss.

Speaker Change: Okay, uh, great got it. So looking forward to hearing about progress on um on North America. If you know I think it's uh the business was flat excluding uh business losses or discontinued. Um, flat still sounds like a a challenged Market in to some degree. So um, why do you think that is and and what do you think you can do to to turn that around again? Excluding any of the

Daniel Ordonez: Thank you, Kamil. Daniel here. Good to speak to you again.

Speaker Change: Sort of a, you know, discontinuous or business losses.

Daniel Ordonez: Ethan, it's important to accentuate what you said, right? So when we exclude these two one-offs that we are going through this year and that we expect to affect us for the year to go on a full year basis, we see a solid performance in a challenged market, as you said. The market continues to show softness, Kamil, but as we discussed, it's plateauing. The underperformance of the market is plateauing and slightly inflecting that curve, right?

Speaker Change: Thank you, Camille, Daniel here. Um, good to speak to you again. Um, listen, uh, it's important to accentuate what you said, right? So when we exclude these 2 1 off, uh, uh, that we are. Um, uh,

You know, going through this year and that we expect to affect us for the year to go on a full year basis. Um, we see a solid performance in a challenge Market, as you say, the, the market continues to show softness Camille, but as we discussed,

Daniel Ordonez: So for the future, while in the short term performance is below our expectations and our expectations, as we discussed before, is for the North American segment to be our largest and softest growing, the opportunity remains intact for two reasons. In one hand, the mechanical growth, be it distribution, be it category growth, and be it operational excellence, it's still to be deployed, if I'm brutally honest. On the second hand, we have every confidence that the early signs of significant improvement we're seeing in Europe can be fully deployed in North America. If you want, I can elaborate why, but the consumer and the demand situation in Europe compared to North America is similar.

Speaker Change: Um, it's plateauing. Uh, the the, the, the underperformance of the market is plateauing and slightly, uh, uh, inflecting that curve, right? So, um, for the future, uh, while in the short term performance, it is below our expectations and our expectations. Uh, as we discussed before is for the North American segments, to be our largest and fastest growing. Um, the opportunity remains intact for 2 Reasons in 1 hand. The mechanical growth, the distribution be it category growth and be. It operational excellence. It's still to be deployed if I'm brutally honest. On the second hand we have every confidence that the early signs of significant Improvement. We're seeing in Europe can be fully deployed in North America if you

Daniel Ordonez: You know, beyond the most, you know, vegan and climate-focused consumers, the barrier beyond those tastes continues to be the number one barrier to consumption. North America and Europe are identical. Whether we taste in Germany or the UK or in the U.S., One out of two Americans prefer Oatly to cow's milk in their coffee. The brand is equally strong and equally hot in both markets. And also, the way coffee is developing in Europe and in North America is identical. It's going from the old latte cappuccino, warm, mostly in winter, to a raft of choices and signature drinks, mostly cold.

Speaker Change: We want that kind of elaborate why? But the the consumer, uh and the demand situation in in Europe, uh, Compared to North America is similar. Um, you know, beyond the, the most, um, you know, uh, vegan and climate focused consumers. Um, the barrier Beyond those tastes continues to be the N number. Number 1 barrier to consumption. North America and Europe are identical.

Speaker Change: whether we taste in Germany, or the UK, or in the US,

Speaker Change: 1 out of 2, Americans prefer only to cows milk in their coffee.

The brand uh is equally strong and equally hot in both markets, and also the the way coffee is developing in Europe.

Daniel Ordonez: So all of that combined proves to us that when we are able to execute the playbook and invest accordingly in full, Kaumil, the same dynamics will progress. Great, thank you. Thank you.

Speaker Change: And in North, America is identical, is going from the outlet, the cappuccino 1, mostly in Winter to a draft of choices and signature drinks, uh, mostly cold. So, all of that combined, uh, process that when we are able to execute the Playbook and invest accordingly in full Camille, uh, the fan Dynamics, uh, will provide

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

John Baumgartner: The next question comes from John Baumgartner with Mizzou Home. Please, please go ahead. Good morning. Thanks for the question.

Speaker Change: The next question comes from.

Speaker Change: John Baumgardner with meizuo please, please go ahead.

Daniel Ordonez: Maybe first off, Daniel, if I could come back to North America and just keep on this topic. I think just given the magnitude and duration of the volume declines at this point for the category, we're four or five years into this. It seems like it's become less of an issue of maybe reduced frequency by existing households and more just folks leaving the category. I appreciate the growth playbook and flavor innovation, but to what extent is this weakness just simply the protein content in the U.S. relative to traditional dairy, whether it's protein and trans, GLP-1s, whatever it may be, which might limit the ability or ease of duplicating some of the turnarounds that you've highlighted in your article.

Speaker Change: Good morning. Thanks for the question.

Speaker Change: You know, to the extent, I mean, I guess to what extent is this weakness? Just simply the protein content in the US relative to traditional Dairy, whether it's, you know, protein and trans glp1, whatever it may be, which might limit the ability or ease of duplicating, you know, some of the turnarounds that you've you've highlighted in Europe.

Daniel Ordonez: That's a very provocative question. You make the point that you have done in the past about, you know, frequency and penetration, John, and I totally get it. If we go through some facts, the reality of the penetration numbers is not necessarily showing that. Penetration for oat milk in the U.S. is stable, and in the case of Oatly, has shown consistent decimals of growth in our yearly and monthly penetration. So there is a relevance and there is a frequency topic that we are addressing and points taken about protein. The reality, as we have discussed in previous calls and one-on-one, the protein topic is more of a value phenomenon in North America, less than a volume phenomenon when you look at the dairy category.

Speaker Change: That's a, that's a very provocative question. Um,

Speaker Change: You, you make the point that you have done in the past about, you know, frequency and penetration John and I totally get it. Um,

Speaker Change: If we go through some facts, um the reality of the penetration numbers is not necessarily showing that uh penetration uh for old milk in in the US, it's stable. And in the case of Oakley has shown consistent decimals of growth uh in our in our yearly and monthly penetration.

Daniel Ordonez: We will be hand-in-hand focused on driving relevance. We don't make a choice between health, protein, fibers, and we strongly believe that we are focused on driving both penetration and frequency in that order. penetration and frequency in that order.

Speaker Change: Um, so there is a relevance and there is a frequency topic that we are addressing and points point taken about about protein, um, the reality as we have discussed in previous calls and 1-on-1. The protein, uh, topic is more of a value phenomenon in North America, less than a volume phenomenon. When you look at the dairy, uh, the dairy category we will be, uh, hand in hand, uh, focused on driving relevance.

Speaker Change: Um we don't make a choice between Health uh, protein fibers. Uh and we strongly believe that we are focused on driving both penetration and frequency in that order.

Daniel Ordonez: Taste remains the number one barrier to consumption for plant-based products, and certainly for oat milk and plant-based meals. So you will see us, without ignoring the point about protein, a lot of focus on the health topic via enhanced fiber content, wholeheartedly driving the taste strategy, which is starting to prove to work in Europe, Okay.

Speaker Change: Penetration and frequency in that order, taste Remains the number 1 barrier, to consumption for brand plant-based products and certainly for oat milk and plant-based meals. So, um, you will see us um, without ignoring the point of our protein, a lot of focus on on the health topic, via enhanced fiber content, um uh wholeheartedly driving. The Taste strategy, which is proven uh it's starting to prove to work in in Europe uh job.

John Baumgartner: Thanks for that.

John Baumgartner: And then, you know, a follow-up on the P&L. You identified these incremental SG&A savings for this year and moving forward as well. Can you detail a bit more, you know, where these savings are derived? I think you mentioned some procurement, but I mean, I guess, what prompted these reductions right now? Can you isolate the savings between corporate expenses relative to the individual segments? And then I guess, you know, to what extent should investors feel confident that you're not cutting too close or begin to sacrifice resources for growth?

Speaker Change: Okay, thanks for that. And then you know a follow-up on on the p&l. Uh you identify these incremental sgna savings for this year and moving forward as well. Can you detail a bit more you know worthy savings or drive? I think you mentioned some procurement. But I mean I guess what prompted these reductions right now? Can you isolate the savings between corporate expenses relative to the individual segments?

Speaker Change: And then I guess, you know, to what extent should investors feel? Confident that you're not cutting too close or it begins to sacrifice resources for growth.

Marie-Josée Debbier: Hey John, this is Marie-Josée. I expected this question, to be honest. So first, as you know, over the past three years, we've gone through two big savings programs, which allow us to look at all the details and understanding in a very deep detail our contract.

Marie-Josée Debbier: So what does this mean? It means that this approach led us to be in a place where either we want to be aggressive at all costs, which is absolutely not the way that we are looking at it. We are looking at it with the approach where we want to be aggressive, but with the right level of efficiency and refueling as well the top line. So the way that I want you to think about this is it's about efficiency without hurting the business, and it's about what we have identified as additional SG&A savings. With that said, let me double click on those additional SG&A savings.

Speaker Change: Hey John, this is Marie. I expected this question to be honest, but first as you know, over the past 2 years, we've gone through 2, big saving programs, which allow us uh to look at all the details and understanding in a very deep detail. Our constructure

Marie-Josée Debbier: Most of it will come from corporate, just to answer to your question. Yes, it's a part of the indirect savings, which will come from initiatives, right? I mean, I'm not going to tell you all the initiatives, but it could be just like centralizing some contracts. It could be like professionalizing our way of negotiating. So that's one thing. The other things are coming from the efficiencies that we have been looking at, analyzing, and making sure that they will come through as we go into the year. So clearly, corporate segments, as aggressive as we can, without hurting the business, on both sides, efficiencies and incremental accounting dollars.

Speaker Change: So what does it mean? It means that this approach led us to be in a place where either we want to be aggressive at all costs, which is absolutely not the way that we are looking at it. We are looking at it with the approach where we want to be aggressive, but with the right level of efficiency and refueling as well, the, uh, the top line. So, the way that I want you to think about it is, it's about efficiency without hurting the business and it's about what we had identified as additional savings with that said, let me double, click on those additional sgna feelings.

Speaker Change: Mostly we come from corporate just to answer your question. Yes it's a part of the indirect savings, which we will come from initiatives, right? I mean, I'm not going to to tell you all the the initiatives that it could be just like centralizing some contracts. It could be like professionalizing, our ways of negotiating. So that's 1 Thing. The other things are coming from the efficiencies that we have seen uh, looking at analyzing and making sure that they

Speaker Change: Will come through as we go into the year.

Speaker Change: So, clearly corporate segment.

John Baumgartner: Code this answer. Great. Thank you very much.

Have received as we can without working the business on both sides efficiency and incremental from indirect.

Hope this answer.

Speaker Change: Great, thank you very much.

Speaker Change: John.

Operator: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Great, thank you everyone. If you have any follow-up questions, feel free to reach out to me at Investor Relations. Have a great day.

Speaker Change: This concludes our question and answer sessions, I would like to turn the conference back over for any closing remarks.

Speaker Change: Great. Thank you, everyone. If you have any follow-up questions, feel free to reach out to me and investor relations have a great day.

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

Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect

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