Good day and welcome to the Oatly Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brian Kearney from Investor Relations. Please go ahead.

Good morning and thanks for joining us today. On today's call are our Chief Executive Officer, Jean-Christophe Flatin; our Chief Operating Officer, Daniel Ordonez; and our Chief Financial Officer, Marie-Jose David. Before we begin, please review the disclaimer on Slide 3. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results of operations and financial position, industry and business trends, business strategy, market growth and anticipated cost savings. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the documents we have filed with SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, please note on today's call, management will refer to certain non-IFRS financial measures, including EBITDA, adjusted EBITDA, constant currency revenue and free cash flow. While the company believes these non-IFRS measures will provide useful information, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS. Please refer to today's release for reconciliation of the non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. In addition, Oatly has posted a supplemental presentation on its website for reference. With that, I'd now like to turn the call over to Jean-Christophe.

Thank you, Brian and good morning, everyone. Slide 5 has the key messages I want you to take away from today's presentation. First, our third quarter results demonstrate continued solid progress toward reaching structural and consistent profitable growth. I am pleased to report that each of our three operating segments drove profitable growth in the quarter. This is a significant milestone as we continue to drive the total business towards structural, consistent profitable growth. While we are pleased that we have driven improvements in our profitability, we are proud that we have driven those results in a healthy way that has strengthened our business. Finally, with just one quarter remaining in the year, we are refining our full year guidance. We now expect constant currency revenue growth to be near or slightly below the low end of our previously provided range of 6% to 10%. Adjusted EBITDA near the favorable end of our previously provided range of minus $35 million to minus $50 million and capital expenditure to be below $55 million, which is below our prior expectation of below $70 million. Turning now to our report card on Slide 6. Here, you can see we continue to make progress on our journey towards profitable growth. As you can see, in the quarter, constant currency revenue growth accelerated to nearly 10% year-over-year with every segment driving volume-led growth. Similarly, we have continued to drive significant progress on our adjusted EBITDA. Today, we are reporting a quarterly loss of just $5 million and our fifth consecutive quarter of sequentially improving adjusted EBITDA. Slide 7 goes one level deeper and shows that our profitability improvements have been driven by a true strengthening of our business. Just over one year ago, on our second quarter 2023 earnings call, I shared with you my…

Thank you, J.C., and good morning, everyone. I will start on Slide 12 with our largest operating segments, Europe and International. This segment reported solid results in the quarter with 6% revenue growth or 4% on a constant currency basis. This revenue growth drove 46% year-on-year increase in adjusted EBITDA as we captured the benefits of fixed cost absorption and drove efficiencies in both cost of goods and SG&A while also increasing advertising investments year-on-year. On Slide 13, you can see how we continue to see broad-based strength in the segment. In the quarter, the retail side of the business grew volume by 5% and foodservice by 7% year-on-year. As we've mentioned in the past, we continue to believe there is a significant opportunity to drive robust growth in the foodservice channel, where there is not only head space to grow, but it is also where consumers can experience the brand to its fullest. On the right side, you can see that our established markets, which represent nearly 90% of the segment volume grew by a solid 5% in the quarter. These are the markets where we have operated for many years, and they continue to drive solid mid-single-digit growth rates. The European markets where we have recently expanded drove a strong 25% volume growth in the quarter. And in many of them, we already developed leadership presence in the coffee space and number one velocities in retail. However, our international expansion markets saw a 4% volume decline in the quarter. These markets make up only 6% of the segment's volume and are primarily made up of Southeast Asia, Australia, the Arab Peninsula, Mexico, and some exports markets. While we have seen solid performance in most of these markets, Southeast Asia has become much more competitive in the recent time,…

Thank you, Daniel and good morning, everyone. Slide 25 shows an overview of the quarterly P&L. We reported 10.9% year-over-year revenue growth and constant currency revenue growth of 9.6%. Gross margin for the quarter was 29.8%, which is 1,240 basis points higher than a year ago. It was also 60 basis points higher than the second quarter, and this is the first time we have reported a sequential improvement in first quarter gross margin since well before our IPO, which we believe demonstrates an increased level of operational and financial discipline. Adjusted EBITDA was a loss of $5 million, which is $31 million improvement compared to last year's first quarter. As a percent of revenue, our adjusted EBITDA loss was approximately 2%. Comparing that 2% to our branding and advertising investment in the mid- to high single-digits as a percentage of revenue highlights that we are continuing to invest for the long-term, while also improving profitability in the short-term. In summary, we had solid performance in the quarter. Slide 26 shows the bridging items of our total company quarterly revenue growth. Volume grew 13%. Price/mix was a 3.4% headwind for a 9.6% constant currency revenue growth. Foreign exchange was a tailwind of 1.3%, resulting in 10.9% total revenue growth for the quarter. Slide 27 shows the revenue bridge by segment. Jean-Christophe and Daniel's presentation outlined everything we are doing in each region to drive solid growth. The takeaway of this slide is that each region drove solid volume growth as our strategic initiatives and growth plans continue to work. Europe and International continued to report solid growth with 4% constant currency revenue growth, led by 5.4% volume growth. North America's revenue growth of 18.1% was driven mainly by the strong 17.6% volume growth. Greater China's 12.4% constant currency growth was…

The first question comes from Max Davenport with BNP Paribas. Please go ahead.

Hi, this is Alex Hilsenrath on for Max. Thanks for the question. So, guidance implies a slowdown in revenue growth to around 7% in 4Q 2024. What is driving the deceleration? And then how should we think about the exit rate going into 2025?

Alex, Jean-Christophe, thank you so much for the question. First, let me give you the context. As you know, we always strive to deliver on our commitments, but we think it's important to be open about the reality of the situation. So, the main element that has changed over the past three months since we last guided is the category growth dynamics in Europe that Daniel mentioned in his prepared remarks and most notably, the recent category sluggishness in the U.K. As you have heard us say multiple times, the way we work is we are really going to focus on controlling the controllables. In this case, what we call the controllables includes the most -- the most thoughtful and deliberate approach to consumer engagement and advertising that Daniel has discussed. So, that's the way we look at it.

Got it. Makes sense. And then just one more follow-up. So, given the progress on EBITDA with all three segments turning positive, are there any factors to consider that would prevent the company from achieving positive adjusted EBITDA in 2025?

Thank you again, Alex. And I'm sure there will be plenty of your colleagues that also have questions they want to ask about 2025. So, let us cover that now and tell you what we can tell you at this stage. I propose that we start and then hand over to M.J., if she wants to add on anything. First of all, let me remind, achieving profitable growth is -- has been and remains our unique North Star. I am and we are fully committed to it. We are really pleased to see the significant structural progresses we have made so far. You can see it in the gross margin significant increase. You can see that in the SG&A recalibration that we highlighted in our prepared remarks. We are clearly moving in the right direction, and we expect to continue making progress as we move forward. The way we do that is by making the right decision day by day, one after the other to bring this business to profitable growth as quickly as possible. Obviously, we are not going to give you any 2025 guidance today, but you should expect that our teams will continue to drive distribution gains, market share improvement as well as category creation in expansion markets. At the same time, we will also remain super disciplined on our costs and capital to ensure that all the great things we are doing to drive demand flow through to improvements in the P&L and ultimately improvement in the cash flow. M.J., Marie-Jose, anything you want to add?

No. Maybe just to build, we are still going through our budget process. We will give you, for sure, full outlook in our next call. However, here are some high-level thoughts on how we are looking at 2025. On top line, Daniel spoke about the momentum we have still building, and we will look to build on that. From a margin perspective, I would point out that Greater China will anniversary this first large LTO starting in Q2. Our supply chain teams will continue to drive efficiency, whether for absorption or other productivity improvements. We will continue to support our strategy to stimulate demand through healthy branding and advertising investments. We will, of course, continue to stay diligent and disciplined on SG&A. And finally, as we look forward, we will continue to embrace a rigorous fact-based analysis of our CapEx. By the way, we expect most of the majority of them to go through safety, efficiency and sustainability projects within our existing sites. So, I hope that helps. But again, we are sharing as much as we can at this stage, Alex, I hope that helps.

Great. Thanks so much. I'll pass it on.

Thank you. [Operator Instructions] We have no further questions, ladies and gentlemen. I would like to turn the conference back over to Brian Kearney for any closing remarks. Over to you.

Great. Seen as there are no more questions in the queue, we will end the call here. Thank you, everybody, for joining us. Feel free to reach out to me if you have any questions, and we can set up some time to chat. Thanks, everybody, and have a great day.

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