Oatly Group AB

Good day and welcome to the Oatley second quarter earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Brian Carney from Investor Relations.

Please go ahead. Good morning, and thanks for joining us today. On today's call, our Chief Executive Officer, Jean-Christophe Platon, our Chief Operating Officer, Daniel Ordonez, and our Chief Financial Officer, Marie-José David. Before we begin, please review the disclaimer on slide three. 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, OLE 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 five are the key messages I want you to take away from today's presentation. First, during the second quarter, we continue to make good progress on strengthening the business and moving towards achieving profitable growth. you can see that clearly in our accelerated top line growth and improved margins, as well as how we are activating the brand in each of our markets. This continued improvement is driven by our progress on our 2024 strategic priorities of bringing the OT magic to more people, continuing our calibration of resources, and a continued focus on executional excellence. Finally, given our solid performance through the first half of the fiscal year and an increased confidence in our second half performance, we are updating our full year guidance to be slightly more favorable than the previous outlook. We now expect Constant currency revenue growth in the range of 6 to 10 percent compared to our prior guidance of 5 to 10 percent. Adjusted EBITDA in the range of minus 35 to minus 50 million compared to our prior guidance of minus 35 to minus 60 million. and capital expenditures to be below $70 million compared to our prior guidance of below $75 million. Turning now to our report card on slide 6, here you can see we continue to make good progress on our journey towards profitable goals. As you can see, total company volume accelerated to a strong 10% year-over-year increase in the quarter, as we drove volume growth in every region. Growth margin increased sequentially by approximately 200 basis points in this quarter to 29%, which is 10 full percentage points higher than last year's second quarter. This is a significant improvement from the 11% margin we reported for the full year 2022. We still have plenty of work to do to get to our longer-term targets, but we are clearly making good progress. Similarly, we have made noteworthy progress on our adjusted EBITDA. In 2022, we reported quarterly losses between $53 million to $83 million. Today, we are reporting a quarterly loss of just $11 million. and our fourth consecutive quarter of sequentially improving adjusted EBITDA. Slide 7 gives you an update on where the operating segments are on their respective improvement plans. Recall that we have been methodically applying the same transformation formula to each region. We started our work with our Europe and international segments. Our progress in Europe builds our confidence in our approach. We then applied the same framework to our North America segment, and we gained further confidence. And one year ago, we began applying the framework to our Greater China segment. As such, our European and international segment is the furthest along, and it has been consistently driving profitable growth while reinvesting in brand building and innovation. The next stage of this segment will be increasing demand-generating investments to drive accelerated growth via new markets and new occasions. Our North America segment has been making continued progress, and I'm pleased to report the North America segment reported its full quarter of profitable growth in the second quarter. This segment will continue to focus on driving awareness, trial, and repeat purchases across all channels while continuing to be disciplined on cost. As you all know, our Greater China business has been executing very well on its improvement plan we announced just one year ago on our second quarter 2023 earnings call. After a year of focused execution, I am proud to announce the segment generated positive adjusted DBA for one month during the quarter. I recognize that one month is just one month, but this is a clear sign the segment is moving in the right direction. And as we move forward, this segment will be balancing growth and profitability as we continue to execute on the improvement plan. Slide 8 is a reminder of the strategic pieces we are focused on in 2024. The first one is bringing the ultimate magic to more people. In Europe and international, we are engaging with new consumers in new occasions while also making very good progress in our geographical expansion strategies. In the U.S., we have increased our distribution compared to one year ago. And in Greater China, we have seen positive test results with China's largest copy chain, which is helping us expand our reach in a disciplined manner. Our second pillar is to continue to work on the calibration of resources across SG&A and the supply chain. We remain on track. with both our previously announced SG&A consulting program as well as our previously announced exit of our manufacturing facilities in the U.S. and the U.K. And we are continuing to evaluate our options in our Asian supply chain. The final pillar we are focused on this year is execution of excellence. As I work with our teams across the globe, I am glad to see our culture is maintaining the disruptive mindset that may not be a global phenomenon, while also being increasingly disciplined on execution. Having both at the same time within the same organization is rare, and therefore, I believe our culture is truly unique. Turning to slide nine, where I want to bring this pillar to life a bit more. Our work on these three strategic pillars are not necessarily discrete projects that fall neatly into one individual bucket. Our partnership with ES Pro Cycling is a good example of how we are executing on these three strategic priorities all in one project. First, this partnership is clearly focused on bringing the OT magic to more people by increasing awareness of our brand. ES Pro Cycling is extremely focused on nutrition, and we are excited to partner with them as their official performance partner. This partnership also demonstrates how we are continuing to be efficient with our resource allocation to benefit all three operating segments. More specifically, let's reflect on the fact that ES Pro Cycling is an American team that just finished competing in a European race but as a global audience. Finally, our team's execution of this partnership has been fantastic so far, announcing it right as the Tour de France media frenzy kicked off. And their team is executing as well. Richard Carapaz wore the yellow jersey for one day early in the race and then had multiple achievements later on, which has helped draw a significant amount of attention to the team and to our brand. Turning to slide seven. During the quarter, we started reclaiming our why and our reason for being. We know we have a unique brand voice that can gain a lot of attention. So we decided to pivot from using our brand voice in a slightly less self-indulgent way, but to lead the conversation of the necessary transformation of our food system, reconciling health for people and the planet. We ran a campaign to urge European citizens to vote and to keep climate change in mind as they do so. At the same time, we engage with thousands of coffee customers and consumers, offering free oatmeal coffee to the many who voted. We know our unique tone of voice gains attention, but we also know substance generates relevance. So, as we move forward, our brand campaigns will keep the unique coffee voice and we will be bubbling down on substance, relevance, and demand generation so that we can drive forward our company's mission. Before I turn the call over to Daniel, I want to turn to slide 11 and give you our priorities for the second half of the year. The organization will be completing our work on the calibration of resources. We will continue to invest in demand generation to drive conversion and an acceleration of growth. As we invest, we will maintain cost discipline and ensure we are focused on high return investments. And finally, we will maintain our north star of driving the business towards structural, consistent, profitable growth. With that, my dear Daniel, over to you.