Oatly Group AB (OTLY) Q1 2026 Earnings Report, Transcript and Summary

Hello, and welcome to Oatly's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that today's call is being recorded, and I'll be standing by. It is now my pleasure to turn the meeting over to Blake Mueller. Please go ahead, sir.

Good morning, and thank you for joining us today. On today's call are our Chief Executive Officer, Jean-Christophe Flatin; our Global President and Chief Operating Officer, Daniel Ordoñez; and our Chief Financial Officer, Marie-Jose David. 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 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, 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 a 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. I'd now like to turn the call over to Jean-Christophe.

Thank you, Blake, and good morning, everyone. Slide 5 are the key messages I want you to take away. First, we have delivered a solid performance in quarter 1, both on top line and bottom line. This continues to build our confidence in our journey to accelerate profitable growth. Second, we continue to see clear signs that our growth playbook is working. It's already driving real impact in Europe and International as well as increasingly so in North America. We are, therefore, focusing on executing against this playbook more broadly in order to continue to drive further incremental demand. And finally, we are reaffirming our 2026 guidance in a context where the impact of the conflict in the Middle East is already visible in our costs from March onwards and brings further uncertainty for the rest of the year. Turning to Slide 6. Here, you can see our solid quarter 1 scorecard on our most important KPIs. Our revenue grew by 15.6% and 8.1% in constant currency. Our gross margin reached 33.4%, which represents an improvement of 188 basis points as compared to last year, while our adjusted EBITDA reached positive $5 million, which represents 2.2% of our net sales and an improvement of $8.7 million versus last year. This combined improved performance on top line and bottom line confirms that we remain focused on driving growth and impact in a disciplined and profitable way. We believe that this is a winning recipe for our company. Finally, our free cash flow in the quarter was a negative $11.7 million, which is an $8.8 million improvement versus last year. Our business plan remains fully funded and bringing the company to structurally positive free cash flow is important to us. We fully intend to drive the business to that milestone, not just from improvements in the P&L, but also from putting on all available levers, including working capital. Slide 7 confirms our focus areas for 2026. As Daniel will outline, we are seeing very positive traction on our refreshed growth playbook, and we will be doubling down on its execution. While we do not have a detailed update for you today, in 2026, we plan on completing the strategic review of the Greater China segment. We continue to evaluate a range of options, including a potential carve out with the goal of accelerating growth and maximizing the value of the business. We will update the market on our progress as necessary. Finally, we are navigating the context of uncertainty and volatility created by the conflict in the Middle East with a clear objective to minimize as much as possible its impact on our performance. We are permanently adapting our end to end supply chain choices to ensure we could serve consumers and customers. When it comes to the global cost impact, they are so far mostly fuel prices related, either directly in logistics or indirectly like in packaging. We are mobilizing our culture of efficiency and frugality in order to mitigate those and continue to adapt with agility to this pretty unpredictable context. In this context, Slide 8 reaffirms our guidance. In 2026, we expect the continued rollout of our refreshed growth playbook to drive an acceleration in our profitable growth. Specifically, we expect to drive constant currency revenue growth of 3% to 5%. And with what we know today about our ability to mitigate the cost impact of the Middle East conflict, we expect to deliver adjusted EBITDA towards the low end of the range of $25 million to $35 million. With that, Daniel, over to you.

Thank you, JC, and good morning, everyone. I will start my discussion on Slide 10. Over the past 2 years, we have methodically deployed this new playbook with the objective to attack barriers to consumption, drive relevance and increase availability. We are confident it is working, as we see continued positive results in Europe and increasingly so in North America, as we will discuss today. Staying true to what makes Oatly, this playbook change is founded on the strategic choice to be relevant to a much broader population, a decision not just to aim at growing consumption within our historical consumer base, the lactose intolerant and the environmentally conscious, but to also expand our target market to the upcoming younger generations to drive true incremental consumption growth. That means we're focusing on our strength within beverages. This is taste and health instead of trying to mimic dairy in all its forms. In this exciting space, the room for penetration growth is enormous, and it is precisely where our strengths and assets are rooted. As you heard us say, an alternative to dairy no more, but an experience canvas for the beverages market, working with customers to renovate their menus and shelves to be more relevant, more provocative and more on trend with today's consumer. Taste & Health defined a clear high ground for the new generations, in particular for this category, but we have also adapted how we communicate to them. They are digital natives, and we have migrated from analog heavy individual advertising to a more relevant, integrated and digital first approach, always blended with iconic culture making life events. So as we say we're doubling down on the playbook, let me show you some examples of what we mean by that and in which specific areas we do invest. On Slide 11, you see how we're doubling down on our taste leadership in beverages. Our iconic Barista product remains our top selling item and continues to grow very fast. And the flavored Baristas such as the caramel, vanilla and popcorn flavors keep showing healthy growing velocities, proven to be a hit with consumers. As anticipated last time, we have launched in the last few days additional flavors in selected markets such as churros or coconut, and we're expanding the matcha range with the addition of a strawberry flavor, which is the most popular combination in foodservice. This will enable customers to create an even wider range of drinks. I am particularly excited to say that our Cold Foam Barista has already reached the menu of many of our top customers. It can be added on top of any beverage, hot or cold. Plant based cold foam options weren't widely available in the market thus far. So this is a breakthrough product that delights consumers and elevates the experience for our foodservice customers. See, taste is a new platform for Oatly and for the category. This is not just random innovation. Slide 12 shows the foundation of our unique and differentiated model. We have over 60 beverage market developers around the world who spend over 1,500 hours a week with our out of home customers, deploying our lookbooks and designing recipes to make our customer menus more on trend and therefore, more relevant to their customers. We are doubling down. We continue to steadily increase coverage across this space, considering every different customer type and adapting our route to market accordingly. As you can see on this slide, I am particularly proud to see how we are sophisticating our service package to be relevant on and offline and deploying a tailored neighborhood attack approach with our already famous Oatly Week concept, like you see in the Barcelona example here. Finally, I am very excited to see how this is working in the U.S., having experienced it myself in the streets of Brooklyn and the Lower East Side in Manhattan or Venice and the Arts District in L.A. Slide 13 shows you selected examples of the types of outdoor communications we do, in this case, in the streets of Warsaw in Poland, so Oatly, but the new Oatly in its essence. Slide 14 shows you another example of the sort of culture creating experiences we do. In this case, a collaboration with AVAVAV, one of the most talked about indie fashion brands at the Fashion Week Milan some weeks ago. While guests and models could enjoy Oatly signature drinks live, the social media impact of this collaboration spread across Europe and North America at the very same time as a true global event. On Slide 15, you can see the latest and greatest of our social media presence, where most of our brand investment is being deployed, both with brand generated but also user generated content by our brand ambassadors. Finally, on Slide 16, we demonstrate how the new strategy is helping us to make shelves more exciting and relevant, occupying more space than before, but not only for Oatly, but also for the category as customers start sensing a new momentum. I am particularly excited to see the first in store executions of the new strategy in Canada. Our team there are doing a phenomenal job anticipating what we're capable of doing in North America. When we look at the growth trajectory on Slide 17, we see accelerating growth, which gives us additional confidence that the strategy is working. Europe and International keeps on strengthening with another quarter at 14.5% growth in constant currency. That's a stellar performance and a very healthy mix of growth in both the established and in the new markets. I am very pleased to say that at the back of strong performance across all channels, the North America segment has seen growth in the quarter of 12.3%, excluding the segment's largest foodservice customer, or 3.8% total net growth when you click through to Slide 18. So step by step, we're bringing this segment into its growth path following the European model footsteps. As we said, we expect it will take longer than in Europe because of the time lag in retail, but we are mildly optimistic that we're reaching a tipping point in this segment.Moving forward, we will continue to focus on the controllables and the deployment of the growth playbook. Slide 19 shows that we continue to consistently outperform our competition in the tracked channel data, more than ever before. We continue to expand our retail market share in every single European market that we measure, whether it is an established or an expansion market. And in the U.S., as we continue to lap last year's portfolio delistings, our drinks portfolio consolidated the growth trajectory we started in the fourth quarter at the back of sustained strong velocities and strong distribution gains in the core portfolio, showing record highest TDPs and ACV. Slide 20 shows that when we look at the European markets in aggregate, since the implementation of the new playbook last year, oats keeps gaining momentum, showing its decisive role in driving the overall category upwards despite most other crops that continue to lose traction. Slide 21 shows 2 important dynamics that prove the core objective of the new strategy, generate incremental consumption from new younger consumers. First, switching analysis in the core European market shows the ability of the new portfolio to drive incremental sales. Second, as we dig into the data, we see that consumers that are coming into the category via the new portfolio tend to be younger consumers, which we find very encouraging. As we move into Slide 22, many of you might be thinking how fast can we replicate this in the U.S. Well, first things first, controlling the controllables, we have progressively taken this segment into positive growth and profit. Out of home continues to grow steadily, 12.4% growth outside the largest customer and at the back of the identical model we've implemented in Europe, enamoring the new coffee and beverages space with Oatly's Magic. Having signed a partnership with Onyx, recently named one of the most notable coffee specialty brands in the world, is a concrete sign of what's happening in the U.S. Excluding that large customer, this channel represents over 25% of this segment, and we expect it to continue to grow by increasing coverage and by driving more customer diversification. In retail, our core beverages portfolio now represents over 95% of the channel's revenue. We continue to gain strong distribution points within this portfolio, taking the measured retail channel to 10.5% growth in the quarter and to the record highest market share, breaking the 30% for the first time. To this, we should add the 150% growth in clubs with opportunities to continue to expand velocities and regions. So the outlook is good. So while category softness in the measured retail channel continues, we expect that will start changing the moment we are able to list the new portfolio. And I'm happy to say that early customer conversations for the upcoming reviews seem promising. Now that we have discussed the past, I want to give you a preview of our future plans, as you see on Slide 23. And this is simply a confirmation of the last discussion. You should not expect any significant change, but a relentless consolidation of the new playbook execution. First, we will be decisively leveraging our fiber credentials by campaigning about the fiber content of our product. Many global health authorities estimate that people have a fiber deficiency of about 10 grams per day. As a company that is rooted in science, our visionary founders have historically advocated for the benefits of fiber in people's diets. So what you see here is just the first step, and you should expect to see more from us in the near future. Second, step by step, we are working to accelerate the introduction of the new portfolio in the U.S. retail during the upcoming range reviews. While we expect the new listings to start taking place at the back of this year, we also expect that the full rollout will move well into next year. On Slide 24, I will refer to the progress we're making in China. Consistent with previous discussions, the general context and the price pressure in the foodservice business continues. At the same time, I am pleased to report that the strong development of the retail channel accelerated, doubling in quarter 1 year on year and representing already close to 1/3 of the segment's revenue. Finally, as JC mentioned, we intend to complete the strategic review during this year. To finish this business update, I would like us to step back and pay attention to the trajectory of the key business metrics of the year since JC and I joined the business, taking quarter 1 as a reference to make the comparison like for like with today's results disclosure. Here, you can see how the growth evolution is yielding a direct positive effect in cost absorption and muscle building margin. This has allowed us to continue to reinvest in growth while steadily reducing SG&A, and in so doing, building a more resilient business able to better navigate one off effects like the volatile context we described during the introduction. Way further to go, but we're confident we're making significant decisive steps in the right direction. With that, I will now turn the call over to Marie-Jose, MJ?

Thank you, Daniel, and good morning, everyone. Slide 27 highlights our ability to execute globally with continued strength in the European and International segment and increasingly so in North America. As an illustration, this quarter marked our first period of positive volume growth in North America since Q4 2024, an encouraging signal our growth playbook is working. In Q1, we grew revenue 15.6% and 8.1% on a constant currency basis. Gross margin was 33.4%, which is an increase of 188 basis points compared to last year's Q1. This was a result of efficiencies across the organization, including facility optimization, volume absorption and ongoing productivity improvements, in addition to a strong mix in Europe and International. Adjusted EBITDA was a positive $5 million in the quarter, which is $8.7 million higher than last year's Q1. The significant increase in adjusted EBITDA was a result of strong top line growth and gross margin expansion. I will now provide more detail about our financial performance. Slide 28 shows the bridging items of our revenue growth. In the quarter, volume grew 5.6%, price/mix increased by 2.5%. Foreign exchange was a 7.5% tailwind compared to 4.8% last quarter. The increase in revenue comes from the execution of our growth playbook, which includes increased consumer relevance through new flavors and formats. Moving into Slide 29 and the year over year gross margin bridge, which shows the 188 basis points year over year improvement. This improvement is explained by 110 basis points from fixed cost absorption and supply chain efficiencies, 110 basis points from product and channel mix, 40 basis points from foreign exchange currency tailwinds, partially offset by a negative impact of inflation for 80 basis points. Slide 30 shows the Q1 year over year improvement in our adjusted EBITDA. The $8.7 million improvement was driven by a $14 million increase in gross profit, partially offset by a $5.3 million increase in SG&A and overhead. In SG&A, our ongoing cost savings actions in areas such as indirect procurement were more than offset by $7.2 million year over year FX headwinds as well as customer distribution costs, mostly linked to higher volumes sold. As a volume driven business, our cost structure scales with growth, and we remain focused on delivering profitable growth over time. Slide 31 shows segment level detail. Europe and International grew net sales by 14.5% in constant currency, which is another proof that the growth playbook is working. This helped drive a $16 million increase in the segment adjusted EBITDA versus first quarter of 2025. North America's revenue grew 3.8% in the quarter. The segment adjusted EBITDA decreased by $0.5 million to $0.7 million, driven by higher cost of goods sold, explained by an increase in freight and warehousing costs. Greater China constant currency revenue declined by 6.4% in the quarter. The decline was explained by strong competition in the out of home channel and partially offset by growth in retail. The segment reported negative $0.8 million in adjusted EBITDA. Despite these challenges, our team continues to work together to navigate the macroeconomic headwinds in the region while managing the ongoing strategic review. In the quarter, corporate declined by $4.5 million, mostly as a result of FX headwinds and timing of global branding and advertising expenses. These expenses were partially offset by the ongoing efforts to increase efficiency of spend. Turning to our cash flow on Slide 32. First, I want to remind everyone that our business plan remains fully funded, and we are focused on bringing the company to structurally positive free cash flow. For the quarter, free cash flow was a net outflow of $11.7 million, which is $8.8 million better than last year. It is worth highlighting that the free cash flow in the quarter includes annual bonus payments, which would not occur again this year, as well as $3.5 million payments linked to the exit from our production facility in Singapore, which will finish in first quarter of 2027. I continue to see good progress throughout the company on all levels of cash flow, and I believe we still have room for improvement. While we do not anticipate delivering positive free cash flow for the full year 2026, we do expect that the biggest drivers of our improvement will come from higher adjusted EBITDA and working capital improvements. We will continue to maintain discipline in our investment choices. Turning to our 2026 outlook on Slide 33. As Jean-Christophe mentioned at the top of the call, we are reaffirming our outlook for 2026. We expect constant currency revenue growth in the range of 3% to 5%. Based on recent FX rates and assuming no change for the rest of the year, we estimate FX to add approximately 100 to 200 basis points to full year net sales growth. On adjusted EBITDA, as we navigate the impact of the Middle East conflict, we now expect to deliver towards the low end of the range of $25 million to $35 million. As we stand today, we anticipate Q2 to be lower than our first quarter with visible negative impact from the Middle East conflict, combined with a strong brand investment season. As we move through the year, we expect performance to improve meaningfully in the back half. This is supported both by a normalization of near term volatility and by the continued rollout of our growth playbook, where investments in selling, branding and distribution, which are front half weighted, are building benefits over time. As a reminder, this is, of course, only based on what we know today. Importantly, we do not currently view any change in the underlying health of the business. The fundamentals remain strong, and we are continuing to execute against our growth playbook while remaining agile in our ability to adapt when necessary. Lastly, our guidance for CapEx remains unchanged, which we expect to be in the range of $20 million to $30 million for the full year. This concludes our prepared remarks. Operator, we are now prepared to take questions.

[Operator Instructions] Our first question will come from John Baumgartner with Mizuho.

Maybe first off for MJ. I'm wondering if you can touch a bit on Europe, the EBITDA delivery there in Q1, how much of that strength was driven by maybe beneficial timing shifts from reinvestment as opposed to delivery that's more structural and more sustainable in nature from operating leverage or product mix?

Yes. So thank you for your question, John. The way to look at Q1, to be clear, and I'm sure you'll recall prior conversations where we always explain our phasing between first half and second half. So if you look at how we invest, which was your question, we usually weight more on first half than second half. That's point number one. As we continue as well, if I go below just the branding investment, there is as well investment when it comes to the business and the way that we operate for our initiatives. So if you have to think about the full year, Q1 is weighted more when it comes to investment, branding, selling expenses, initiatives when it comes to SG&A will go more for the year. Did I answer your question, John?

Yes. Perfect. And then, Daniel, a follow up. The prepared comments noted that the brand communications are emphasizing taste and health. And I'm curious how you think about the health component. If plant based no longer needs to be positioned as an alternative to cow's milk because the category can stand on its own, well, that overlaps now non plant beverages trying to differentiate by including the prebiotics and fiber that's already core to oats. So the trends seem to be coming to oats overall. It's obviously early days, but how expansive do you think these health efforts can be? Does it open additional opportunities in products like yogurt? Is it possible to leverage health organizations for product claims? Just how do you think about communicating or scaling the health benefits going forward?

Very good. So I could notice 3 questions in one, John, and I would love to take a double click on MJ's answer as well to give you comfort about how we're building EBITDA in Europe. Listen, 3 things to unpack there. First, as far as Oatly is concerned, we don't see a shift in terms of communication focus. Taste & Health has been part of the brand's voice and vision from the very beginning, at least since the 2012 inception of the contemporary brand vision, right? That's absolutely number one. Number two, there is no either/or when it comes to the focus on target market, right? It is true, however, as we have said for many quarters to date that there was a bit of a limitation when it comes to lactose intolerant target audience and environmentally conscious, you would say, the epitome of the alternative to cow's milk target audience. When we look at the young generations, both Gen Z and Alpha, we see that they look at this with a much broader perspective. It's not that being an alternative to milk to cows is irrelevant. It's that they look at taste and health combined as the primary area of attraction to our appeal to consumption, right? And of course, with a double click on sustainability, if you want, or being an alternative to dairy. And then when it comes to health, we do see momentum. We discussed with you in these discussions before. There is a significant momentum growing in both sides of the Atlantic when it comes to fibers, prebiotics, gut health, and we really, really welcome that with open arms. So there is an incrementality on that. Definitely, yes. But there is also an incrementality when it comes to the whole combination of taste and health. Mind you, when you see the results that we have just posted, both in the U.S. and in Europe, you see the new consumers coming into the category. And that is not just taste, but it's both taste and health combined, John. So yes to that, but the incrementality will not only come from health, but from taste and health combined.

Our next question will come from Max Gumport with BNP.

It's nice to see the continued momentum in Europe and the improved growth in North America. And along those lines, with the growth playbook clearly working and gaining traction, I was hoping to get an updated view of how you think about the long term top line growth for both your North America business and your Europe and International business.

Thank you, Max. Is that -- you have a second question, you want to double click on that one?

I will have a second. Let me start with that one.

Very good. Thank you. Just checking. Listen, let me unpack that to you. You saw first on Europe, we do see the momentum continues to build, right? So before going into the outlook, allow me 1 minute to focus on the now. We have just posted, as you saw, 2 consecutive quarters on the mid teens, and we're clearly generating new incremental demand. So the important thing here is that we see growth consolidating at Oatly. It's doubling the growth of oat milk and almost tripling the growth of plant based milk. And you see that is a platform that makes us look into the future with different parties. This combined is giving us a sustained growth momentum in plant based milk of mid single digits, which is strong compared to where we were a couple of years ago. So that sets you already for a trend. Going into the future, the first thing we look at is that very, very important data point, which the growth comes from younger generations of consumers entering the category. We now have abundant evidence that, that is the case. So then definitely looking into the future, we look at the 70% penetration headroom we have in front of us. And that's why we believe the opportunity is enormous. In terms of where we see the growth coming from, number one, a much stronger portfolio, which is fully focused on beverages. And in a way, I'm using this question from you to come back to something that John was asking before. We will remain for the foreseeable future focused on drinks because it's where we have our assets, where we have our strength, where we have our superiority and where we're winning. And there's a lot of opportunity. And the other thing to give you a lever for Europe, Max, is the new markets, what we call the expansion markets of the International markets, whether it's France or Poland or Mexico in this segment. You're talking about markets that are large, large in their potential and are building really critical mass. So the 2 of them combined, a new portfolio and channel expansion in the established markets and the expansion in the new markets, gives you a real, real sweet spot for us to think on a second revolution for plant based drinkers in Europe. If I now move the attention to North America in the now, I am very encouraged. We are very encouraged by how things are developing in the U.S. First, what we see happening in coffee and foodservice. We're spending a lot of time with the teams there, and I'm very encouraged to report the progress that you see. For us, why this is important is because it's the best marker for category momentum. This channel is where habits are created. And excluding the largest customer, this channel represents already over 25% of the segment's revenue and has been growing in double digits for some quarters now. So when we look ahead, we only see opportunities, Max. And finally, just to round up on the U.S., on North America, the category remains soft, but there is a very significant part in traditional retail only. And it is strengthening. If you have checked the latest scanning data, the more Oatly gains traction, the more the category strengthens. And now we're winning, we're outperforming market and competitors with crossing the line of 30% share in oat milk for the first time. So as the outlook for North America, I would say controlling the controllables. And at the top of the controllables, we put the category development. Now we do put the category development. And for that, you will see 2 things. First, more visible brand investment, step by step, of course, because you know how we manage, how rigorous we are about our financial equation. And secondly, a step change in the U.S. traditional retail adopting the kind of portfolio you see in Europe. And I have to underline, step by step, you will see some this year, but the progress will go well into 2027. Hopefully, that gives you a full picture, Max.

Our next question comes from Tom Palmer with JPMorgan.

It's Elsa on for Tom. So you now expect EBITDA to be at the low end of the full year range, just given some cost headwinds related to the Middle East conflict. Can you walk us through how those cost headwinds have impacted results in the first quarter? And what impact do you expect to see going forward, including any levers you potentially have to offset those costs as we move throughout the year?

Thank you. It's Jean-Christophe. I'll take this one. I mean it's a very important topic, as you can imagine. So I'll take the time to unpack that. Starting by the key statement that to date, we don't see an impact on demand because of the Middle East conflict. This is why I'm only answering on cost and EBITDA. So quickly, if we step back, what's the context of this guidance? Remember, everything we discuss today is only with what we know today. We continue to face daily unpredictability and volatility, and we really need to mobilize our agility to react and adapt. So now going to the heart of your question, when you look at the COGS, what do we see? On one hand, some of our COGS benefit from the fact that we have hedging on a number of energy contracts in our Europe factories. We have a number of advanced contracts on raw materials, and we have some structural advantages, which are related to choices we have made, like we have a pellet boiler in our Landskrona factory. We have an electric truck fleet in our Europe and International freight to warehouse network. All of that is helping us. However, on the other hand, the Middle East conflict has brought impacts into our P&L from the month of March onwards, and these costs are specifically fuel price related. The biggest one, shipping and logistics costs, both in Europe and International as well as North America. The second noticeable one is packaging costs worldwide. So when we do the net of the advantages we have and the new costs we see from the conflict, the net of the 2 is showing a total COGS and logistics net increase, which is already visible in March P&L and that we now expect to be fully at play in quarter 2. And honestly, too early to be much more precise than that for what could come after quarter 2, which is why when we had to review the full year outlook for this conversation, beyond the normal course of business, it means we have to evaluate both the potential full year cost impact of the conflict on one hand and our a bility to mitigate that on the other hand. And having done that, we now expect to deliver adjusted EBITDA towards the low end of the range of $25 million to $35 million.

Our next question will come from Samu Wilhelmsson with Nordea Markets.

A few questions from my side. I could start with North America. You mentioned that North American EBITDA was pressured by warehousing and transportation. So I was just wondering, is there a timeline or any measures in place to structurally fix the distribution economics? And do you project that it requires any additional CapEx?

Sam, would you like to add to your list? Or is that the only -- you suggest that you have more questions?

Yes, there are a few related to the cash flow. I can take them combined with.

No, I'll take that from a business operation standpoint. I mean, listen, warehouse and transport, there are 2 ways to discuss that. There is the ongoing business as usual. We are dealing with that, and this is part of both the reports you have seen of quarter 1 and how we expect for the outlook of the market. There is -- of course, there is progress, but it has to do with the business as usual, nothing to highlight, to be honest with you. And then, of course, we're dealing with some of the consequences of the context that JC was just describing. All of that is blended on the guidance. So there is nothing structural and to be concerned about when it comes to the actual business operation in North America to highlight in this earnings call.

And to the double click of your question, Samu, there is no specific CapEx required or considered to deal with that.

All right. Got it. Then on the free cash flow, first of all, maybe like thinking that how should we think about the Greater China strategic review's impact on free cash flow? Obviously, you can't comment on investment proceeds, but maybe from a point of view of the restructuring cash costs and from potential working capital release, is there anything relating to those that you would be willing to elaborate further? And then on the follow up, have you tracked what kind of revenue gross margin improvement levels you would need to get to a structural free cash flow, of course, excluding the effect of Greater China from that?

Thank you, Samu. I'll start with the context of your question, which is the strategic review. And here, as you know, our answer, our messaging is exactly the same as the last quarters. We continue to evaluate a range of options, including a potential carve out, with the very clear objective to accelerate growth and maximize value. As we work on that, we remain committed to our team, customers and suppliers. And it's a great opportunity for us, I think, to pay tribute to our great China team, who have remained focused on the business and continue to fight every day as we execute the ongoing strategic review. So a shout out to them at this occasion. MJ, I think you want to double click on the specifics.

Yes. The only specific, Samu, is on the allocation. We do not allocate any corporate costs to any individual segment. So just keep that in mind as well.

All right. Then perhaps last question, a follow up with previous analysts regarding the guidance. You mentioned some rationale behind the guidance and what you have done there. But what kind of uncertainties would you see around the guidance, given that if the situation continues as planned, does that support your ongoing guidance? Or what would need to happen in order you to go back to the table or revise your guidance assumptions?

Thank you, Samu. Perhaps let me first repeat, to date, we are not seeing a demand impact from the Middle East conflict. So the question so far, with what we know today, the answer to your question is only on cost and therefore EBITDA. And when it comes to that, I think, honestly, I cannot predict the unpredictable or be any certain on the uncertainty. I think we flagged to you, like a lot of industries, most of the cost impact is fuel, so oil leading to fuel and then fuel leading to a few categories. These are the areas we are currently and constantly looking at and monitoring. So if there is one space we need to continue to pay attention daily to see what could happen, it is that.

We'll take our last question from Andrew Lazar from Barclays.

You mentioned that so far, you've not seen any impact on demand from the Middle East conflict. Organic sales were up 8% in the first quarter, and you're still looking for 3% to 5% for the full year. So I'm curious if there is something sort of discrete that you know of that will cause organic sales growth to decelerate from here to get into that 3% to 5% range for the full year? Or you're just being, I guess, prudent and thoughtful in case you see some impact on demand going forward?

Thank you so much, Andrew. And I think you just provided me with 2 great objectives that I will use again. But first, positioning ourselves on guidance is a balancing act. So let me unpack that for you. On one hand, as you can imagine, our recent quarter's performance definitely gives us confidence in our sales guidance. We just posted Q1. We drove very good growth in Europe and International. We see a return to positive volume and sales growth in North America. All of that are great signs of progress. It means our growth playbook is working, reinforcing the strategy, and therefore, we really focus ourselves on execution, controlling the controllables. That's on one hand. On the other hand, there are 3 considerations I want you to have in mind. First, you know better than me, 1 quarter does not make the year. Second, Europe and International sales strongly picked up in the second part of last year, which means we will compare ourselves to a stronger comp base in H2. And finally, as you said, even if to date we don't see a demand impact from the Middle East conflict, we all know how volatile and dynamic the current environment is and remains. And therefore, as you very well highlighted in your second option, we choose to be conservative and maintain our current outlook for the moment. And we will, of course, continue to monitor the conditions closely and come back to you. So I think you used prudent. I totally subscribe to that.

Great. And then one last quick one. You mentioned that EBITDA in Q2 likely below the level that we saw in Q1. This might be getting too prescriptive, but would -- is your expectation that EBITDA could still be positive in Q2? Or based on what you know today, we should be thinking it's potentially even a bit negative year over year?

Andrew, this is MJ. So what we said is that Q2 will be lower than Q1. And what you've just heard is that we are managing current situation with all levers that we have. I'm not going to say more than that. We are definitely confirming our guidance. So I think with those 3 topics, you can take it.

That does reach our allotted time for Q&A. I'll now turn the call back over to our presenters for any final or closing remarks.

Thank you very much.

Thank you, everyone. Thank you for joining, and have a great day. Have a good day.

Thank you very much.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.