Oatly Group AB (OTLY) 9 May 232023 Q1 Earnings call transcript

Good morning and welcome to Oatly 2023 First Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note that this event is being recorded.

I will now turn the conference over to Brian Kearney, Investor Relations. Please go ahead.

for conference today call. thanks quarter Oatly’s and earnings XXXX morning joining on us first Good On Executive Hawke, Officer, call and today’s are Christian Chief Toni Financial Petersson, Chief Officer. will and Chief Global questions. Daniel Flatin, available for President, Operating Jean-Christophe Officer also be Ordonez,

review Before Slide X. disclaimer we the on begin, please

strategy, today's may risks involve forward-looking differ and our with materially regarding business for cause implied detailed statements and forward-looking statements cost business future of that these statements. operations to make During position, from anticipated within materially the Please industry of risks trends, statements or meaning in actual call any management’s discussion refer XXXX, growth, results today. of Litigation the actual Securities SEC including the management financial made savings. and documents differ based that filed Private events are and beliefs to Reform could from current forward-looking those have and in the uncertainties or expressed market described the statements those Act of results and expectations These on could we

Also EBITDA, please EBITDA EBITDA, call, note and to will margin, growth. currency adjusted constant revenue adjusted measures, financial on certain non-IFRS refer today’s including management

for for to non-IFRS Please these the reconciliation financial the IFRS. company of substitute IFRS provide or information for useful information presentation information the with measures While believes presented release most accordance refer presentation not to the to measures. financial or comparable the be a isolation earnings as will intended investors, in is this of today’s appendix the considered in

Toni. the turn now With that I’d to over call

everyone. morning We you appreciate Thanks today. joining Brian. us Good

Directors. will over expansion board leadership. of the and moment the announcement that And look like to of last this new on as XXXX, under global get proud Chairman and we Co-Chairman Milou. of a CEO current I'm of I a I to utmost that I would and our from taking new discuss have have led we team our our since take through a in our extremely the transitioning forward I Co-Chairman Oatly of alongside Board company the both to to the morning our XX Before to be have confidence this results, as the future work the done I Eric years. challenge IPO exciting

We consumer are value done June over brings us of has experience XX growth brands full become and on about CEO our cultures. X. he leading forward year track working as has do pleased growth a Jean-Christophe while implementing that also throughout that collaborative he have job ago Flatin growth record to will creating we years him He as on execute top alongside of great and He continue organization. joined both beginning precedent line bottom a global our significant global faith high the to will transformations our and nurturing a wonderful strategy. job strong delivering look and a I

against Moving towards drive believe supply to to a solid each start. We top in which line the first chain of continue is our growth profitability, XXXX We on make results we progress the results. key off improvements in to accelerate in we XXXX. made expect quarter to continue and priorities, good to XXXX our delivered globally, and reach

its is play on Oatly in And offense own said way. in to starting segment last offense starting to call play I As XXXX. our each

so are this XXXX the year, good reiterating far progress our Given guidance. we

see of our we priorities. made of You can progress each that

XXX acceleration growth XX% revenue of fourth relative to was currency Our basis growth rate. constant quarter our point

adjusted out last both quarter-over-quarter. we EBITDA segments basis Page discussed Our we gross call. And margin lays and expanded X which XXXX by sequentially. points EMEA our the XXX priorities year-over-year improve

of see these good make we will each against progress you As priorities.

The total And priorities. Germany, Page with first X key rate and our the year-over-year milk growth UK digit to markets EMEA shows remained market continue double on quite oats Netherlands basis. grow robust category post strong two very shares. of continuing progress in to

sign new also customers food up continued service. in We to have

seen exciting to partnerships some on our You this of we've recent and press ones some new customers releases have sign page. the may announcing continued like exciting and

and Moving to Slide beyond XX our coffee expansion locations.

delicious product baking you breakfast you your smoothie product is to oat enjoy. or to able we Our any whether any fruit an milk type milk other portfolio or for for replace of almost cereal, use, want based have for

on can and stocked enhanced see lineup. that now this shelf You retail page

they that We are a how product consumers media educate to these supporting activations on and replace store products use the in dairy. can with disruptive

increases excited very with our are consumers our We products. that ways the about engage it of this, number as can

consumers an engage QX. see with be QX marketing can XX, Slide the We intend ways consumers. On of aggressive and we'll with some in plan with to engaging you

we'll introducing but campaign also soft We the events out In be with rolling types a will EMEA. markets the be multiple serve supporting all festivals consumers it at beyond variety across of of media. coffee expansion and our service, the in food to across core

on portion far we're total excited XX expansion. they about drove but volume, very markets the an come. are These a almost of quarter. what's the and to This is two good our volume slide progress of in still segments update EMEA you Finally, growth third gives geographical so the a small

XX. Turning to on the segment Slide America

on out the we that last laid our America segments Here discussed XXXX call. priorities quarter’s have we

this pleased on now chain be is we As aggressive to that noted, more supply side. and segment commercial able we improved the has its are

only enabled experience, but supply frontline largely the transition to by XX. YA which employees. with update The not Slide Ya on going Ya hiring is Oatly operational also start Let's YA food has YA well, Ya chain been very

for network. from our more simple we the agreements, with XXs. have as see The is costly, consolidation pleased partners moving the progress transition costs. have co-packer Ya the in are wide impact inefficient we our consolidate structure us we're to In our of search to co-packers, a efficient mid to had expect on is cost situation lower first service to benefit the we YA quickly and remained the this far and that material levels structure We quarter that move and successful terminate to to enabling

We expect by complete the third end the complete consolidation quarter. of to be operational

Page to XX. Turning

Here on you our that are well commercials priorities. see can executing we

supply good expansion that have Given chain drive stores. in increase in largely stable, number our distribution for by point while retail seeing an driven expansion to good distribution items able we been number of the of in also

started few increase You that of last promotional can rates the see in have also to quarter. weeks the we our

only to We They our expect the were they to confident as but serve customers. continue the important in drive to our to are send and will our an retail rates chain in signal stability demand, coming that promotions Their increase not intended consumer supply promotional demand. month. ability also

market of that do see the we On the this are of have work improve progress most side but happy It's still data. still we're in share you to started slide, with making. to we has the right plenty early recent can our and

support This launching brand some marketing XX we Slide of will two initiatives outlines off are taken kick a that the this additional activations. building be segment. of will month, to actions series

baseball baseball oat ever an the U.S. New Portland, as multiyear is non with all sponsor This the dairy first sports and milk of plant national XXX unprecedented as to food spanning teams minor first Mexico official based partnership association of partnership Maine. league. Albuquerque, frozen league marks a the with minor Oatly Oatly league dessert designates The

of and big it digital call stadium bring impacts, asking on The its plant to sponsorship cities this industry fans sampling product events will branding, lead footprint climate include action, of we we confessions, field packaging. publishing on to And dairy small. media to just based do our like the the just that climate revolution hundreds in and all on follow week, the

markets. conference this executing in high are centerpiece through spreads billboard We and impact the biggest

standard see dairy On match free company XXXX. footprint product to even are advertising another dares and we its example that us is you that share just any can the of climate offering of This verify of play XX, transparency. offense starting in Slide to our climate to

Turning includes products launching that our XXXX remind expanding efficiency. for driving here we priorities you Slide to Asia distribution, on new and XX,

tea via and the coffee and it continued retail. has rapid also channels steady in growth has to food gains seen in Asia see service

great products. and expanding Slide XX execution example shows two our our is new distribution a priorities, of how launching retail of

You year-over-year can page and team. store that the retail side in XXX% left by the expand we're growth distribution with to over of continuing hand see count. the on Great progress

some see examples new also in and can ice recent here launches drinks of You both product cream.

are In X% co-branded QX strategic launched with a In smaller ready launches to launches oatmeal Pete's segment ready packaging. as Tim drink QX our reached revenue have and of flavors In well special specific of we the excited lattes already And several as we multiple customers drink of drinks driven ice QX cream that product exciting to about flavored anticipated in launches. SKU approximately editions. partnering we are very new by Hortons. with with new latte Camila and

develop, locally these to consumers produce ability team's local design to cater truly us. differentiator preferences a Our for is the products and to

XX. Asia to progress Turning The their efficiency is making team slide good on programs.

locally. the volume year-over-year both increase progress significant this far, volume enabled and in by So sold produced

of volumes opposed locally Now Asia a to almost our all produced purchase is EMEA. from

impact future. demand, our on COVID-XX beginning that temporarily at As business to to in quarter. as functions last updating launched impacted we look on several We saw efficiency team very in has as an the reduce ability the supply mentioned programs The of recently Asia supporting expect Asia the our from forward quarter’s that the them we call you This office. well to costs.

We're first strategic reported summary, each a solid in on quarter. progress priorities. So making we our of

deliver XXXX guidance. profitability, disciplined We and be balancing will and driving continue to on our to growth, on investments remain we track in

over With it that I will turn Christian. to

Toni. Good everyone. you, morning, Thank

Turning on Slide XX. to financials the

revenue the quarter by which growth had the of an growth of XX%, quarter. quarter. see can prior acceleration was an points XX%, a the compared is year we of to constant basis We basis currency revenue points and from that an fourth first of gross year-over-year compared XX%, XXX reported which margin XXX fourth with of to is increase solid driven which You improvement

million was Our million, adjusted of of quarter loss, an the to million $XX was of the XXXX. improvement compared versus fourth as quarter $XX $XX which the well year, as an in EBITDA improvement a prior

page X% XX% volume We was constant $XXX.X by for XX% currency company On revenue XX% a increase million sales the growth can a the total mix. see price XX, and bridge and to by quarter. the our in increase in driven increased you first revenue

growth shows items. XX bridge will of the price in Americas three as EMEA the volume saw out volume fiscal food remained benefit mix only a the the strong service we within of a a Slide took channels. customer channel An growth additional few food we increases I third increase face showed muted. a have large strong call took our as drivers. The XXXX retail customer service. increase across all each reflecting price of The and and for segments. price mix benefit we quarter into sales positive recent positive one in elasticities notable mix price

strong are mix Asia decline growth sales volume the Overall, show growth pleased an across as improvement continues and XX% compared was fourth the in increase quarter's price to each X% moderated. intensity the promotional with to we segments.

gross company. Slide the shows the XX quarter-over-quarter margin total bridge for sequential

the last saw margin guidance XXXX the quarter, We an we we Compared headwind have COVID-XX bridge be basis a we that fiscal to provided grouped the related presented fourth Asia. bridging environment point presentation. with bridge the appendix consistent of have to quarter. in the the And in items year-over-year XX alongside to our

That to a mentioned, EMEA throughout first in implemented of last lower was an the led price was which XXX December there partially margin spend increases point improvement. headwind in cases contributed offset in the quarter promotional the absorption. Asia. increase Toni As utilization by in basis and and early lower year quarter

primarily XXX to channel benefit also basis related customer mix the saw We in point Americas. and

XXX from This costs per related Americas goods of Cost network the impact of related headwind a basis to which a sequential consolidation. saw co-packer liter primarily is negative saw the points. to

experienced headwind EMEA. to inflation improvements a partially chain also by We which offset slight in related supply was

year. Finally, a or meaningful FX. be for related FX we driver mix to don't a XX saw We and to the expect basis segment segment margin mix primarily point full benefit

XX. slide to Turning

continues pleased the made EBITDA positive continued are caused EMEA to the report our sequentially consolidation. improve to that see co-packer by to absent the in We EBITDA total. noise progress Americas

quarterly a to has continued the transition to a expense corporate normal expect into level. we be world what line Asia to as and make progress they settled post-COVID

announced raised closed We on announced $XXX more in quarter’s a which call the million being also slightly we loan. We difference the of million $X what a April. total previously is mid last fundraising larger than on term with

lender pending million to convertible notes, consents. approval shareholder will of excited also a are share We and investment receipt Hillhouse that global certain invest firm in Oatly's $XX

consumer will a quarter’s notes in buying announced great extensive from leading notes have each Hillhouse Hillhouse through convertible is confidently receive complexities and partner of and regional economic a convertible terms navigate $XX million decision as shareholder and years, record companies with known I our notes admiration. [indiscernible]. investor on Hillhouse convertible with call. global customer They nearly and other helped and last accelerate successfully is and we of and also portfolio to can identical Oatley introductions and respect foodservice a an brands. mutual the on for support track say have capital growth Asian Asia, strategic has Hillhouse expertise there investments, that making.

expertise but relationships by We with to see only relationship and our their across also scale China. enormous not Hillhouse potential in to financially track our continue strategically record leveraging operations

this aligns with $XXX fully to our our augment long while already was business interest million, plan firepower believe investment term additional with we plan business and our funded ambitions. achieve While us providing the

XX. Turning Slide to

we As XXXX Toni our guidance. mentioned, reiterating are

currency growth with acceleration continue to to in driven the the of discussed. We expect that constant revenue Toni XX% the range initiatives XX% by

quarter-over-quarter in the promotional in support continue the margin, to second quarter. the even expect XXs improvement We gross to with and fourth in in reach increase high the America's quarter sequential

range capital $XXX of to also We the expect expenditures million in be $XXX million. to

to enable in and EBITDA reach adjusted will we believe us improve Finally, our to profitability positive action EBITDA XXXX. adjusted continue that

sequential the marketing we sales offset as This margin profitability. see to in adjusted first the quarter’s in as As original more we of expect budget. by to be sequential in gross expect then increase the increase second this move in our second is net close And with we expansion half fiscal U.S. and are inflection consistent a level in through quarter the dollars the well as year, EMEA. to investments material dollar cadence EBITDA

now ready Operator? we your that are take With questions. to

Thank you.

the Instructions] begin question comes and question will Lavery, Michael First [Operator Piper session. Please we ahead. Now Sandler. answer from go

you, your on congrats roles. new Thank Good and morning.

you. Thank

Michael. you, Thank

if us little ahead. wondering a a of was peek further Just you bit could give

You do positive seem bit could have little line that know little and beginning be out? of you a we Would want fiscal mentioned too specific or you ways unfolds? a be the a at in run of again, right that just given still year have EBITDA plans just any just think how how expect you how Do 'XX. sight on that the better about you've modeling would some it's But got be I don't a to some, further off. you add to there, helpful. color

team I Christian, XXXX. EBITDA the year we on start us achieve else previous our close and called full earnings is this Mike, can to chime So a then anyone in. to free enabling to we a in expect feel year as in the And said, in basis adjusted positive have

in that time We guidance this point are of not giving how at terms XXXX. quarterly unfold a in in will

basis. year on So a full it's

give any much unfold? gotten maybe a more the doors how update that how Can announcement Okay, that's could just or and helpful. service European sense of And that's an sense start open of the or you that the off McDonald's. on to specifically opportunities on with just food can how

excited QSR It's in it's are Daniel in and early, early same more is really are early arrangement what the customers. can Michael. in say many, going very Yes, profile service days, of at And about and weeks, Thanks, we're is McDonald's the there some really, this we well. But that stage Austria. partnership making there here. food this

great. Okay, much. so Thanks

you. Thank

next be Rob from Dickerson ahead. Please Our will Jefferies. go of question

much. so thanks Great,

on clearly on Two America promotional kind bit question. quick the America's commentary XX% but a a around activity. leaning little there's QX pricing up then more in almost One of in pricing, Just questions.

So pricing higher the we of a year-over-year But as little it in say time, QX the I'm was get growth kind it year. half the because bit than year like we a as the the we let's just of it through like expected. see get at a QX through the increased sounds back seem promotional of of does in same activity, curious should in kind deceleration

think pointing of more you to I were teen. high kind

America's and pricing are Is we actual revenue QX ask, material that on to higher have here more to then with absolute cut up. such better basis that expectation we thinking the supply year, about QX. would see absolute out, sequentially, an And I of kind relative also flat because say see pricing follow let's mid beneficial think a is you revenues start teens? and volumes dollars. And we also you just quick the then So full saw acceleration I

sort then can will Christian Daniel and think to I It's out add start of it. I

this mix year it the decelerate will pricing In quarter-by-quarter. throughout terms of

I Daniel No. to So wanted add? else that context. give to anything

month, add our in early to we Christian, for and look we of data coming to adjusting of net the some the unit rates, second lap deceleration availability color per sales we some month good improving you some seeing promotional the as that time. that seen and see are the growth only seeing improving And month based liter some said, year volume we And the signals start will levels. are as if of not yes, increases. and April, consistency field sales start sales, of scan price you but that Just we we haven't improvement, significant supply in of the part after we that at given

forward. So, improvement we sequential as yes, we continuous we see expect move these

fairly have? Ya the a like question transition could do with comfortable it. super. Or Okay, sounds going if Thanks. is you supply you from else that just with so anything quick you're this feel well benefit a Ya, That's there as transaction? in far point on pipeline similar the then And chain. you're, It what at potentially

speaking. Jean-Christophe you. Thank

with we have. what I think comfortable we are fairly

further evaluating because no we are options. updates today, have still We

UK, we both in as three, said are in well calls, options have the as as on factory simply Asia, in speak. we because we Peterborough Asia in previous pack evaluating As

is term with that the previous line earnings we no you supply shared our So only targets guys margin model matter which say, them. calls that bill would the and are for absolutely last choose achievable long we in in

you Thank much. so enough. Fair

Thank you.

Next question of is from ahead. Galbo Bank Peter of go Please America.

Hey, taking Thanks Good the questions. morning. guys. for

Of course. here. [indiscernible]

Toni. Thanks, Thanks.

off forward back Just follow have setting, maybe Have XX/XX like on kind on a the your solid Rob's shows going this kind chain retail go reevaluated how that basis? to back maybe you're foodservice I those just just America question. just But footing. split, in up America's is again, just now that revenue obviously now know you that of a normal but maybe you start just of supply kind between could the of priorities split about and gone is good maybe channels forward. two a slide just on we is more and kind side between back more in on this thinking mix of you're now kind that volume of the and

have the and as plans in I again. in It's you Right, on will new ambitious TDPs supply will so year. reality. we here Indeed existing retail, both plans Peter. becomes Daniel doors channels. take that accomplish remember have as ambitious That's stable this we to

robust ahead food onwards are expect also and moving results quarter in ambitiously We service. especially some two forward move we as we

have service. with headline, footprint But of that that, channels. to the our ambitious the in of expect So both say, I recent on improve as we we expect, this a big margins we retail year. of Peter, come, plans part because but And versus course will would enhance past, food

or don't chain very is 'XX. How EBITDA that assign is of of better? into that is could And targets to much, then or going maybe are know phasing mix you guys. get for any target improvement? you much that much to that the How is buckets to of of supply much percentage the that, kind I way and reaching Okay. guidance us inflation don't big can of just of, them? help want Just any profitability? Thanks timing what getting EBITDA there but of just How change? kind quarterly on back kind know, you profitability bucket I

on continue Christian our as our and here. mean, the Yes. facilities big side. to I I the business. can you it's I it's operating of improve driver start, see utilization is expense leverage mean, the that's will the grow we mean, to I then

thank Okay, you.

Thank you.

of Next be John ahead. Please go Mizuho. question will from Baumgartner

question. the Good morning. Thanks for

Good morning.

quality increase about and Good to and I America the morning. you're how managing to promos what balance wanted relative given promotional we sort right there. consumer, display North investments to your between broader category think the the promotion How now thinking its in feature price just a back approach, plans come about promotional should approach? is the more the based and of

John, Daniel Thank it's again. you,

execution, Here you the fill whole saw mentioned. maintain improving and two promotions, as is we that you are we're doing things and we improved, and rates things consistently exactly have

and promo enhance to we good pressure in very last see that visibility of First, given both and store we the And our is in early results competitive data key. And some April. scan have context. March the availability

what have tell significant do Europe not very promo. we you price when exactly Europe just improve in me well consistently and we our which displays is Let promotional this in velocities

So we along. move expect that do we as to

So now to we're do we that just planning stress, availability. consistent to again, have both

operating six a And finally to position you here. distribution seem Okay, of Asia, And then next bit the lot thanks since nine in built for leverage new about overhang your a we're past COVID. talk months? for to to Could you the plans points COVID assuming that. a be in

do some to plan changed projects. how is You're you the this COVID? as how the working since market efficiency Thank reopens opportunity And you. But through reinvest now? or environment

said market Again, to very last China a play from perspective. like different consumer we're offense. ready we very earnings dynamic, being a call

the to us. continue on shop in important channels. are, do We in we investing for have we in expansion we're execute said be to to in expand. a our significantly increasing All going to of tea lot out rolling as number we stating our are are Also going continues retail and deckchair stores brand and to

into shop we our expansion market especially the and now, new bet channel, But excited number about [indiscernible] that us of but hit consumer us to a innovation, innovation think coffee tea will again, and a have bring that we China, comes retail channel, really-really now to benefit very, the greatly. position way an very brand building Ma'anshan directly in it strong see also the shop when facility allows we very to

from shares As with total so is very China development. Ma'anshan success brand happy cream, comes with in an there example instrumental the position. X% our ice of our our The facility together to

Thanks Toni.

Thanks.

will Thank you. ahead. [indiscernible] [Operator Next Instructions] from question be go Please

the the Thanks new and for congrats question roles. on

First margins. question is gross on

So understand as QX, quarter. move could drive XQ key versus to nice that expectations. XX% only it's target XQ how to there's and see we much most of that what drivers of deliver a versus From terms your Yes, you. might color improvement in you quarter one Thank with XQ, for expect, towards high you I this are? hoping extension will the sequential 'XX. that bit what improvement this line in And in you cadence posted was the roughly expect get was I that we on more

year we that high question. don't other this specific for quarter the we each really the you give reach that we'll Thank fourth improve quarter No, in than the guidance XXs until quarter. sequentially on

we think a things. have articulated few I

have sequential quarter, second well. in but levels higher expect the U.S. promotional in improvement We we as to

highlight that to piece. wanted just So

get target on XXXX? you end your of you. of as Thanks. utilization towards end to stands an where capacity, can us XXXX you update your would and the And up how expect then give your also on Thank you capacity

what on have in and capacity communicated we terms we have There's of that the hand no before. change

utilization we assets we our continuously of So business. expect are the as to expanding improve our

next have We to of plenty grow year. this capacity

Thank you much. very

back Petersson closing you. Thank to question like our This turn and conference Toni remarks. to session. concludes for the answer over I

have set final the past food co-chairman. out on the and global my you partners, meaningful take phenomenon trust to Oatly thank impact the for XXXX, be company to I our company everybody. all of proud past world. I and the partnership took importantly real role that's we a in to able more a and create and the we This great lie my Thanks for And Oatly. transitioned industry Thank what a mission. to brand decade, small Swedish Oatly transform accomplishment accomplished so the making we contributions. eager the incredible to over CEO of be customers, as have marks want most new employees consumers before time joined late into in present as I that investors, I'm couldn't witness I call much. ahead day and earnings and When for

Thank you. today's Thank conference is The now presentation. concluded. attending you for

You may now disconnect.