Oatly Group AB (OTLY) Q1 2025 Earnings Report, Transcript and Summary

Good day, and welcome to the Oatly First Quarter 2025 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, VP of 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 Global President and Chief Operating Officer, Daniel Ordoñez; and our Chief Financial Officer, Marie-José David. Before we begin, please review the cautionary statement regarding forward-looking statements and other disclaimers on Slide 3, which are integrated into this presentation and includes the Q&A that follows. Please also refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, please note on today's call, management will refer to certain non-IFRS financial measures, including adjusted EBITDA, constant currency revenue and free cash flow. Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. 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 4 has the key messages I want you to take away from today's presentation. You will hear us use the word progress a lot today. As I believe the biggest takeaway from today is that, we are making progress toward our North Star of structural, consistent, profitable growth. As we discussed last quarter, we have driven a significant transformation over the past two years, and we will further progress in the first quarter of 2025. In this first quarter, our financial results came in largely as we expected, and we made progress on our top line, our cost structure and our cash flow. Today, you will hear both from Daniel and Marie-José about how we are executing on our 2025 priorities. These 2025 priorities all have the overarching theme of disciplined allocation of resources in order to create value and we believe that is exactly what you should see in our results. We have been allocating resources with the goal of igniting positive momentum in our business. These resources have built time, people, and capital to engage with customers and consumers in the unique way that only Oatly can and we are starting to see results. We are being disciplined in this resource allocation, and we are generating the fuel for these investments by aggressively continuing to drive efficiencies throughout the company. In the quarter, we continued to make progress in driving efficiencies in both our supply chain and SG&A, and we redeployed a portion of those savings to our growth focused investments. We believe this progress keeps us on track to deliver our first full year of profitable growth, as a public company. Therefore, with one quarter of results behind us and with strong plans for the rest of the year, our full year guidance remains unchanged. Slide 5 shows a summary of our quarterly performance. I am proud to report that we have made progress on many of our key financial metrics. It is a big recognition for the team's efforts over the past two years to see that our first quarter results for gross profit, gross margin, adjusted EBITDA and free cash flow were all the best they have been since our IPO. Our top-line performance was a bit mixed. So, while we grew volume a solid 9.2% in the quarter, with notably strong volume growth in our Greater China segment and solid volume growth in Europe and International, our constant-currency revenue growth was 0.7% in the quarter. As we enter 2025, we plan for our first quarter top-line growth to be below the full year guidance level. While we made good progress and even outperformed our expectations in several markets, we continued to face some challenging dynamics in North America, where we have not yet fully deployed resources to ignite positive momentum. We believe the investments we are making combined with our action plans to drive positive momentum will enable us to accelerate total company growth later this year. Now, I will turn the call over to Daniel to give you a more detailed update on how we are progressing on our 2025 priorities. Daniel Ordoñez: Thank you, JC, and good morning, everyone. As a reminder, our 2025 priorities are to ignite positive momentum globally, aggressively pursue cost efficiencies to simplify and generate fuel for additional demand-driving investments and to deliver our first full year of profitable growth as a public company. First, to ignite positive momentum globally, we're executing against three pillars: increasing our relevance to customers and consumers, attacking barriers to conversion, most notably preconceptions on taste and misinformation on health increasing the availability of our products to consumers. The first pillar is relevance, rooted in our fantastic portfolio of products that consumers love. Our Barista family is second to none, as demonstrated by its velocities and continued growth. It has changed the game and as it grows into occupying more usage occasions, channels, and price points, it is best to leverage the growing momentum in the coffee and beverage space. You should expect us to continue to into the coffee and beverage space, further driving cultural relevance and conversion into oat milk. way, that only Oatly can. And we are starting to see expand into the coffee and beverage space, further driving cultural relevance and conversion into oat milk. But relevance does not start and stop with the product, Oatly is a generational brand that maintains its cultural edge with millennials and Gen Z, as you can see in the examples on Slide 9. Next example of how we are activating the brand at global scale is our collaboration with Nespresso, with whom we developed an Oatly-branded pot for the perfect latte or flat white experience. Nespresso boutiques across most cities of the world will experience this collaboration over the course of this year with stunning visibility. At local level, we continue to execute relevant brand activations like It Works in Tea in the UK, reminding Brits that our product works just as well in tea as they do in coffee. This result of these high-impact activations have been outstanding in terms of awareness, and you should expect us to continue executing this in the future and we're not stopping there. Slide 10 shows you some examples of how we're attacking one of the primary barriers to conversion, which is the preconception on taste. Those of you who have followed us for a while know that our proven model is to drive experience in the foodservice channel and then to ensure that consumers can find us in retail so that they can repeat the experience at home and other occasions again and again. We're taking that exact model and dialing it up, owning the growing momentum there is in the coffee and the beverages space. There is a taste bonanza and a flavor bonanza going on in coffee around the world, and our teams are intimately woven into this community. So, whether in a coffee shop in Shanghai, Brussels, Mexico, Dubai or Boston, Oatly is uniquely positioned to bring the hottest emerging global taste trends to their menus. We're working with most of our foodservice customers to revitalize their menus and bring the most exciting new news to the category. They want us to help them better understand the market, better understand Gen Z, and, therefore, better anticipate what is next and help them to become more competitive. On the left, you can see just few examples of what we have been developing with them among thousands of signature drinks that we are creating with and for our customers all around the world. Expect these examples on the slide just to be the tip of the iceberg and we are supporting these efforts with provocative integrated brand activations across digital and in real-life platforms that encourage consumers to try converting from dairy to Oatly. An example is our ongoing blind taste test activation. We have been executing taste test across many markets, and the results are remarkably consistent, showing that roughly half of the sample refers Oatly to dairy milk. Since our household penetration has not yet reached that 50% level, that potentially means that millions and millions of people are having a sub-optimal coffee drinking experience. Finally, we closed the loop with impactful in-store retail executions. I'm happy to say that our in-store execution is ever so strong and has become one of the key reasons behind the sustained commercial traction that is reflected in market share gains and velocities that remain well above our competitors. Slide 11 shows what we have been doing to attack another large barrier to conversion, which is misinformation on health. Instead of creating more noise, we have been systematically engaging with registered and renowned dietitians, nutritionists and key opinion leaders, arming them with science-based facts about our category and our products, so they can be advocates for the truth. The science behind our product is unequivocal. 45 plant-based meals like Oatly are recommended in dietary guidelines all around the world and while there's plenty more to do to ensure that the public is not being misled, our tracking data shows that negative media coverage has declined very significantly compared to last year. So, we're making progress on ensuring the discussion on our category is balanced and honest. Now let's talk results starting on Slide 12. We have started to roll out this strategy in Europe, and this slide shows the retail takeaway data for our European markets. You can see that we have started to accelerate our volume growth, and we have persistently highlighted Oatly continues to outperform both the plant-based milk category as well as the oat milk categories. Slide 13 is even more interesting though as the data gives us the confidence to say that we're on the right track. Our two largest markets in Europe are the UK and Germany, and they are precisely where we started to roll out. On the left, you can see that our German business has accelerated growth to nearly 8% in the last 12 weeks. On the right, you can see the UK data. If you recall from several quarters ago, we mentioned how the UK market was seized on sluggishness. We believe the actions that we have taken have started to revitalize our UK business moving from decline to incipient growth. So, good progress and plenty more to do. It is important to note, though, that we have not yet fully deployed this playbook across all our markets, but we will do so throughout the course of this year and consistently, as we move forward. Igniting category momentum will not happen by a snap of a finger, but by consistently focused on breaking down the barriers that exist with culturally relevant execution and surgical resource allocation. North America is the largest market, where we have not yet rolled out this playbook, but the strategic direction will be identical, and so is the external context and the relevance of the brands and the portfolio. So, let's then discuss North America. Last quarter, we mentioned some discrete headwinds within these segments. First, we're navigating a change in sourcing strategy at our largest customer, and second, we're going through an SKU rationalization on certain frozen items. In the first, over 100% of the segment's year-on-year sales decline came from the impact of our largest customer and the decline in the frozen business. While we expect these headwinds to continue to impact our year-on-year growth rates for the rest of the year, we view them as temporary. We were able to offset some of these headwinds, most notably with distribution gains on the core portfolio. However, the gains were not enough to offset the declines from the largest customer in frozen. Slide 15 goes a level deeper. In the quarter, we continued to outperform both the plant-based meal category and the oatmeal category, even while including the impact of the frozen business decline but if we remove the impact of the frozen products, our retail scanner data would have shown only a 1% decline in the quarter. This outperformance relative to the category was driven by share gains in each of our drink sub-categories, which outline the core beverage portfolio strategy that I referred at the end of my discussion. This is clear evidence that we continue to execute well despite category headwinds. Retailers are seeing the strong execution and allocating us more shelf space as shown on Slide 16. We see these distribution gains are evidence that our customers continue to see a bright future for our category, and these distribution gains are an important building block as we prepare for the North America segment to execute the brand playbook in a similar fashion to Europe. Additionally, our line-up of creamers and other coffee complements, which include a variety of flavors and packed sauces has been performing well with solid velocities. We continue to pursue additional distribution opportunities in both measured and not measured channels, and you should expect us to report steady progress on these fronts. Slide 17 shows that the Greater China segment is performing well. As many of you know, the category here is not as developed as it is in the other two segments. So, the application of our strategy still focuses on strong execution with the foodservice channel and is just now starting to rebuild our retail presence in a disciplined manner. The foodservice business continues to perform well in the quarter, and it is now larger than it was before we executed the strategic reset, as you will remember, we initiated mid-2023. On the right side of the page, you can see that the retail side of the business is starting to gain traction now that we have entered the club channel. While it is early days, we continue to believe that the retail channel is a very large opportunity for this segment, and we're making good, steady progress. Now I want to turn the discussion to our second priority, which is to aggressively pursue cost efficiencies that generate the fuel for demand-driving investments. Slide 19 shows some of the progress we have been making. In the first quarter, we reduced our cost of goods sold per liter by 15% year-on-year and 6% compared to last quarter. Our teams have done a stellar job, leveraging our fixed assets with volume growth, finding additional efficiencies, renegotiating contracts, as well as rightsizing our network, including plant closures. I am pleased to say that this translates into a year-on-year total cost of goods reduction of $10 million. Slide 20 shows the progress we have been making on SG&A efficiencies. As we discussed last quarter, we have driven a significant reduction in our total SG&A over the past two years, and we continue to make progress in quarter one. This has been driven primarily by a reduction in overhead spent. We have taken a portion of the savings from the supply chain and SG&A and strategically redeployed part of these savings into the brand investments, I mentioned previously. Turning now to Slide 21. As we look forward, we intend to continue to drive productivity and efficiency savings in our supply chain and SG&A, and then redeploying a portion of those savings into demand-driving brand activation to ignite positive momentum. We will start to roll out the strategy to more European markets and North America in quarter two, and given the size of the market, we expect that our investments will be tilted towards the North America segment. While we have confidence in North America, where the category remains soft, and as we roll out the strategy, we will continue to pursue additional distribution opportunities across all channels. I would now like to turn the call over to MJ. Marie-José David: Thank you, Daniel, and good morning, everyone. Slide 23 shows an overview of the quarterly P&L. In the first quarter, we reported a revenue decline of 0.8% and constant-currency revenue growth of 0.7%. We continue to drive strong gross margin expansion with our first quarter gross margin expanding 450 basis points year-over-year to 31.6%. Adjusted EBITDA was a loss of $3.7 million in the quarter, which is a $9.5 million improvement compared to last year's first quarter. Our gross margin and adjusted EBITDA are our best quarterly results as a public company. Slide 24 shows the bridging item of our total company revenue growth. We grew volume by 9.2% in the quarter, which was partially offset by an 8.5% decline in price mix. Foreign exchange was a 1.5% headwind. As mentioned on our last earnings call, our 2025 revenue growth will be impacted by a change in sourcing strategy at our largest food service customer in North America. The impact of that headwind in the first quarter was approximately a 270 basis point headwind to revenue growth. Slide 25 shows the drivers of our strong year-over-year gross margin expansion. The benefits of absorption and supply chain improvement improved margin by 490 basis points. This reflects the benefit of rightsizing our supply chain through 2024, including the closure of our Singapore manufacturing facility in December, which drove approximately 240 basis points or just under half of the supply chain-driven margin expansion. The reminder comes from volume absorption, productivity efficiency as well as improved sourcing. Pricing and product mix added 30 basis points to our gross margin in the quarter. While our revenue bridge that I discussed on the prior slide shows a headwind from pricemix, we drove a mix benefit in the quarter, as we reduced sales in lower margin products and increased sales in higher margin products. We experienced 60 basis point headwind from inflation in the quarter. Finally, the impact of foreign exchange movement was a 10 basis point headwind to gross margin. Slide 26 shows the year-over-year improvement in our adjusted EBITDA. The $9.5 million improvement compared to last year's first quarter was mainly driven by a $8.4 million increase in gross profit. The $1.1 million year-over-year improvement in SG&A and other reflects our ongoing efficiencies programs, which were partially offset by increase in branding and advertising. Slide 27 shows segment-level detail. On the top line, our 0.7% constant-currency revenue growth was slightly below our expectations as the European International and Greater China segments both On adjusted EBITDA, our $3.7 million loss in the quarter was slightly better than expected, primarily driven by the Europe and International segment. Turning to our balance sheet and cash flow on Slide 28. First, our business plan remains fully funded. As of the end of the quarter, we had $74 million of cash and $211 million of our credit facilities. The middle of the slide shows our free cash flow improvement. In the first quarter, free cash flow was $21 million of cash, which was our best quarterly performance as a public company and a $25 million improvement compared to last year's first quarter. Within that $21 million, $5.5 million was for payments related to restructuring and severance, as well as $7.6 million for annual incentive plan payments. We expect the majority of these payments will not occur again this year. On the right side, you can see our progress on working capital. In the quarter, we've reduced our trade working capital by another $2 million. In the quarter, our trade receivables were below $100 million for the first time since Q1 2022 when our sales base was much lower. We have created a cash mindset into the entire organization, and this is generating results. In summary, we are making solid progress on improving our cash flow, and we expect continued improvement as our second half adjusted EBITDA is expected to be higher than the first half, and no P&L cash flow drivers are expected to improve through the year. Our first priority for 2025 is to deliver our first full year of profitable growth as a public company. Slide 30 shows our outlook. We continue to expect constant-currency growth in the range of 2% to 4%. The improvement from the first quarter's growth rate is expected to be largely driven by the benefit of executing the playbook Daniel discussed more broadly. For adjusted EBITDA, we continue to expect to report in the range of positive $5 million to $15 million. We continue to expect the improvement to be primarily driven by gross profit as the benefits of stronger net sales, as well as our ongoing supply chain efficiency program flow through. As Daniel mentioned earlier, the North America segment and several European countries are expected to launch integrated run activation in the second quarter, and we intend to support the launches from an increase in run activations. As such, second quarter adjusted EBITDA is likely to be comparable to Q1 level. We are not currently including any significant direct impact of tariffs into our guidance, since we believe the majority of the products we import from Canada are U.S. and CA compliant. We do, however, assume that the current economic conditions and consumer behavior remain largely consistent for the rest of the year. Finally, we continue to expect CapEx to be in the range of $30 million to $35 million for the full year. This concludes our prepared remarks. Operator, we are now prepared to take questions.

We will now begin the question-and-answer session [Operator Instructions] The first question comes from Max Davenport with BNP Paribas. Please go ahead.

Thanks for the question. It was great to get color on some of the initiatives you're rolling out in Europe in particular, to increase the relevance of oat milk and the tax on these barriers to conversion and also to see the results that's already having in terms of improving your own performance. It looks like, though on the slides that you presented that, so far at least really just driving improvement in Oatly's own performance, and it's not lifting category growth trends for oat milk. So I'm just curious as you start to roll this out in the U.S., what's giving you the confidence that this will also lift to what is still a very soft oat milk category in the U.S.? Thanks very much. Daniel Ordoñez: Thanks, Max. Daniel here. Good morning to you. Yes, if you allow me a couple of minutes, I will speak up about Europe first to provide even more color about what we're seeing there. It's clearly a business that is outperforming markets and competitors, right? And I would like to start there, as you can see in market shares across the different markets. So that's number one. You see that in the established and more mature markets. I wouldn't like you to forget as well that, the expansion markets in Europe are giving us also a signal of increased traction of the Oatly brands across Europe. Countries like France, Spain, Belgium, Mexico or UAE, which are in this reporting segment, are really, really increasing relevance and contributing to our total company growth in a meaningful manner. So that's something that we don't normally take into account, but they start building onto the critical mass. The initiatives you referred to, I would like we would like us to be as conservative as we can possibly be, although the numbers are giving us confidence that this will gain traction. The reason why you hear me being conservative is, because we know that, turning around category momentum will not happen overnight, right, but the first signals are quite interesting, right? What we see in these two most important markets. Then, it's a matter of allocation of resources to the different segments. The context we see it's a bit softer in the U.S., as you know, but the dynamics are similar, and we expect the relevance of the brand and of the playbook to be equally applicable. Now when it comes to the U.S., I would also like to draw your attention, Max, to what you know very well, the ocean of opportunity we have in distribution in all channels measured and not measured, be it retail, be it class and the food service, it's enormous. So this is why we plan for a softer quarter one, yes, and first half of the year in North America, and we expect those things to be improving as well, as we start deploying. Now going back to your question of category and playbook deployment, we will do so according to a North Star, which is steady profitable growth, which means that reporting segment, which has reported, consistent now EBITDA, positive EBITDA, we will allocate resources according to this tempo that we set for ourselves moving forward, more in the second part of the year than in the first part of the year, but again, with a clear North Start that JC set up in this call again and again, which is first year of profitable growth as a public company.

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

Yes. No, sure. Let me take this question, Max. So you know we're not guiding to a specific number, and we expect an improvement in our gross profit in dollars, right, to be, as we mentioned already, biggest driver being the biggest driver in gross margin being the improvement in our adjusted EBITDA. So this gross margin is expected to increase compared to the 28.7% we reported in 2024. As you mentioned, as we continue to optimize the production footprint, as we continue to drive efficiency through the supply chain, we also mentioned a few times already that we're negotiating contracts, and we are managing our product mix. Of course, what we also know is, obviously, key variables could influence where we would exactly land. That could be our sales guidance range. That could be our customer mix. That could be potentially foreign exchange and potentially, structure development on the tariff situation as we know. So, our plan is continue to make this progress on our path towards our long-term gross margin target, which is a 35% to 40% as we have already mentioned.

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

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

Great. Thanks so much. Nice to see early signs of volume consumption improvement for plant based milks and Oatly specifically in Europe. Price mix was a larger drag in Europe in the quarter than we'd modeled, I think down 4% or so. I was hoping to get a little more clarity on what drove that and what your expectation around price mix would be in Europe, as we move through the rest of the year? Daniel Ordoñez: Hi, Andrew. How are you doing? Daniel here. Yes, exactly, largely expected. You obviously see just a 4% growth in volume, which is offset by price mix. Start of the year, quarter one, some customer renegotiations, some of them got a bit funny, but most of them are behind us. So I wouldn't do this -- I wouldn't give this a lot of importance as we move forward. Of course, the context is tight, but super manageable and within the guidance we have provided. So I would -- I should guide you not to read anything else as we move forward for the rest of the year.

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

Very good. Very, very good question. I'll try to stress it. We have opportunities everywhere I see. So, it's our ability to execute them that is the gap, Andrew. I would say that, perhaps 2025 should be this kind of last part of the cleaning exercise of some part of the portfolio, which is strategic and has to do with, as we said, always balancing growth and margin. As we move forward, you see the new portfolio. There are items that I'm sure you can pick up in scan data like the new Barista, 64 Ounces Chilled with very promising velocities, the new creamers with very promising velocities. The ACVs of those items range around 5%, right? So, as you can imagine, there is ample opportunity within the new core portfolio, drinks. I underlined drinks, because the opportunity is very, very significant in the new growing beverage space. We know that this category is evolving following how beverages are evolving, and we believe we're well poised for that. So significant growth opportunity of the portfolio you see on the picture in retail, all customers. Then I would like to underline clubs and I should expect to come to you in the following quarters with some news on these fronts, number two, and number three is food service outside the largest customer and even within the largest customer, we see ample opportunity to continue to grow. So, I would say, pretty much everywhere, Andrew.

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

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

I would like -- I would try not to repeat myself, Michael, what else I can say here in this front. I would say, if I look at velocities, units per sales per week in both dollars and units, I don't see an erosion there. On the contrary, I see a slight upside. When I look at dollars, shares and unit shares, I don't see loss of traction on the contrary. It's this category that as you know very well is pivoting around the minus five. Now when you remove these one-off items, we're talking about the total different performance. So, now going back to the way in which we will eventually ignite a new category momentum that it will not take a snap of a finger, but it will be the adoption of the playbook that we have been starting to deploy in Europe and seems positive signs. Now the headline was the U.S., I would like to go a step back a bit and see how we're looking at the category in general, because we have if you allow me a couple of minutes here. We have seen great momentum, this proportionate momentum of this category for many, many, many years. Now, this is -- there's a paradigm shift going on, and growth in this paradigm shift categories is never ever linked. So, we are creating this new wave. We are starting to create the fundamentals in new wave and fundamentals like health, taste, climate impact are so strong that we believe the future is absolutely irreversible. So, we're working on creating [Technical Difficulty] for us. Now 70% of consumers, 82% in U.S. haven't tried oat milk. That's our new obsession. We add that to the list of controllables. So why do we believe that those things go in our favor is not just because of the two points we start seeing in Germany and the UK. We are uniquely placed to serve the new wave of coffee and beverages. We have the great Gen Z, very, very few brands around the world. So, all hands on deck. It will not happen overnight, but really looking forward to report progress in how we're adopting this new strategy in the U.S. very soon.

That's helpful elaboration. And just to follow-up on that, the outperformance Oatly has ex-frozen versus oat milk broadly and all plant-based milk is pretty meaningful. Are you seeing that help drive rationalization of competitors at retail or distribution gains for yourself? How is that playing out on shelf?

Sorry, do you mind repeating the question, Michael? It's a bit crooked the signal, so I need to do the math.

Yes, no problem. So as you outperform both oat milk and all of plant-based milk, are you seeing that drive better distribution for yourselves? Just how is the shelf space evolving?

It's accompanying that. It relates to the question I answered before. We like to use a more robust and solid bold drinks portfolio that accompanies coffee and accompanies beverages is starting to grow and expand on shelves. Of course, we are not walking away from the adjacent categories. As you saw on Frozen, we're adapting and recalibrating, but you should expect definitely that was your question, Michael, expect us to grow in share of shelf in the core oil drinks, both in chilled and in ambiance. If you go into the double click of the scan data, you will see some disproportionate growth in the ambient shelf, which needs new light as well across the ocean.

The next question comes from Ken Coleman with JPMorgan. Please go ahead.

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

Thank you, Elsa. Are you referring specifically to the U.S, or is it a general question?

Yes. To the brand that's being made in the U.S.

where the beginning of my discussion. based facts In the U.S. yeah, in the U.S. I think. Thank you for the clarification. It has to do with the way we're managing the business as a whole. You see, we present a very solid, according to ourselves, a solid track record on EBITDA progression and margin progression. So as you can see, we're all the time balancing growth with margin and with profit. When it comes to a game of resource allocation, expect us to start fully deploying or starting to deploy more strongly the new playbook in North America in the second part of the year. So that's hopefully as much as I can share with you at the moment. I would like to stress that as much as we provided color into how this new strategy is coming out in Europe with promising signs, I would like to underline that we don't expect a full category turnaround overnight. These things take time.

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

Good morning. Thanks for the question. Maybe, first off, coming back to foodservice, I'm curious of the feedback that you're hearing from operators, where you're seeing momentum from those operators who haven't adopted plant-based and are doing so now or maybe those who dialed back on plant based and now want to return, are there any common themes you're hearing? Is it primarily that plant-based needs to be offered as a creamer to keep up with competitors? Is it that plant-based is recognized more as a significant product innovation driver itself, as the main ingredient in beverages, and that's being seen as a traffic driver? Just how are you seeing some of these newer customers utilizing plant based on the menu? Thank you. Daniel Ordoñez: Thank you. Good to speak to you, John. Listen, very good question, because I think these paints the color we're observing, the macro picture of the market, And there are two big, big dynamics going on here that affects not just the plant-based milk category, but affect foodservice in general, which is, how coffee is massively, drastically evolving from hot latte art a few years ago only, where millennials were driving the world of coffee into Gen Z, who are driving beverages and cold beverages. In some cases, I'm sure you hear a lot of statistics, but we're talking about very significant amounts. In some cases, cold beverages have overtaken hot coffee, and I'm sure you've read about the Matcha phenomenon. There's no coffee on Matcha, and yet it's the same space. So, you've asked me a general question about foodservice. Foodservice is evolving and we see many of our -- most of our very large customers trying to evolve catch-up with that trend. What I'm observing, and you can see what JC and I post normally on this topic, is that small to medium-and medium-large foodservice customers are adapting faster to this trend and are adopting faster our playbook and are seeing very disproportionate growth serving Gen Z with this type of offering. Now I don't expect this to be simply a ingredient story for us, John, as we have discussed many times before. Of course, a, we believe we have the absolute relevance of our full-service package to be the It's the brand, it's the product, Barista, our amazing army of Barista market developers around the world. We have intimacy with this space. And then, this eventually, as it happened a decade ago with oat milk, will travel into the retail space. So watch this space for some of us. If you look at The Nordics, at the moment, we are offering with great initial success, flavored offerings, so cold beverage drinks, oat milk based with espresso, EspressoHouse, one of our key customers in the Nordics market. So be on the look for more stuff like that. So not just an ingredient, but certainly surfing the way from hot coffee into cold beverages, with our distinctive brand uniqueness and service package. That's what we see. Hopefully, I'm painting a picture of both the market and how we try continue to be at the leading edge of that.

Yes. Thanks, Daniel. And I guess maybe to follow-up, coming back to the mention and the presentation of the significant reduction in negative media that you're seeing for the category, and presumably, the work you're doing is good, but your resources alone, I don't think are sufficient to affect that kind of a shift in isolation. Are there any other sources or contributors that you're seeing out there, that are sort of adding support to the debate in favor of plant based right now? And then, I guess moving forward, thinking about that support and plant-based meat, we've seen some endorsements or positive recognitions for products from the American Diabetes Association, the Heart Association. I know from a product claim perspective, it's very difficult to make claims yourself on products, but, I mean, do you see an opportunity for plant-based beverage to kind of pick up some of these endorsements or support from, I guess, recognizing a third-party medical or health organizations? Daniel Ordoñez: The answer to that is definitely, yes, John but, we are not under any illusion that, our size is enough to do what you just suggested but allow me to provide a couple of data points or sentiment. We see -- we were quite conservative as to what we shared on the prepared remarks and the evolution we see on this point of disinformation on health. In the two key markets, we'll generate a bounce off of each other on the noise front, which are the UK and the U.S,, right? They operate as one market. What we now see is that just by simply by consumers getting tired about this noise and see how many pimples you will get by drinking oat milk or the depression you will get after brew Monday in the UK. Thanks to oat milk, which is, of course doesn't have a doesn't make a lot of sense. To this work, a lot of science and data provided by the key opinion leaders, nutritionists and dietitians that have worked with us that we see our tracking shows us that science-based data is already starting to spread, and so is for instance some positive signs about fibers and gut health, which we have not heard for a while. So, we don't believe those things are just pure coincidence, right? So, people getting tired and some of the good information coming across. We are indeed building alliances, be it in Brussels or at The Hill, be it with some think alike partners of ours and why not public education. This is something that was discussed in the past, and we're active with schools. You will see It's the brand, it's the product, Barista, our amazing army of Barista market developers around the world. We have intimacy with this space, and then, this eventually, as it happened a decade ago with oat milk will travel into the retail space. So, watch this space for some of us. If you look at The Nordics, at the moment, we are offering with great initial success, flavored offerings, so cold beverage drinks, oat milk based with espresso, EspressoHouse, one of our key customers in the Nordics market. So be on the look for more stuff like that. So not just an ingredient, but certainly surfing the way from hot coffee into cold beverages, with our distinctive brand uniqueness and service package. That's what we see. Hopefully, I'm painting a picture of both the market and how we try continue to be at the leading edge of that.

Yes. Thanks, Daniel. And I guess maybe to follow-up, coming back to the mention and the presentation of the significant reduction in negative media that you're seeing for the category. And presumably, the work you're doing is good, but your resources alone, I don't think are sufficient to affect that kind of a shift in isolation. Are there any other sources or contributors that you're seeing out there, that are sort of adding support to the debate in favor of plant based right now? And then, I guess moving forward, thinking about that support and plant-based meat, we've seen some endorsements or positive recognitions for products from the American Diabetes Association, the Heart Association. I know from a product claim perspective, it's very difficult to make claims yourself on products. But, I mean, do you see an opportunity for plant-based beverage to kind of pick up some of these endorsements or support from, I guess, recognizing a third-party medical or health organizations? Daniel Ordoñez: The answer to that is definitely yes, John. But, we are not under any illusion that, our size is enough to do what you just suggested. But allow me to provide a couple of data points or sentiment. We see -- we were quite conservative as to what we shared on the prepared remarks and the evolution we see on this point of disinformation on health. In the two key markets, we'll generate a bounce off of each other on the noise front, which are The UK and The U.S,, right? They operate as one market. What we now see is that just by simply by consumers getting tired about this noise and see how many pimples you will get by drinking oat milk or the depression you will get after brew Monday in The UK. Thanks to oat milk, which is of course doesn't have a doesn't make a lot of sense. To this work, a lot of science and data provided by the key opinion leaders, nutritionists and dietitians that have worked with us that we see our tracking shows us that, that science-based data is already starting to spread. And so is for instance some positive signs about fibers and gut health, which we have not heard for a while. So we don't believe those things are just pure coincidence, right? So, people getting tired and some of the good information coming across. We are indeed building alliances, be it in Brussels or at The Hill, be it with some think alike partners of ours and why not public education. This is something that was discussed in the past, and we're active with schools. You will see us starting to do that some efforts in the US this year with schools. John so all of that to say absolutely yes, it will take time but we've decided to go there.

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

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

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