Oatly Group AB Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Profitability and Growth: Achieved first quarter of profitable growth since IPO, with solid constant currency revenue growth and positive adjusted EBITDA. Refreshed growth playbook working, driving positive category momentum in Europe and International, with early progress in North America foodservice.
• Segment Execution: Europe and International rolled out growth playbook, saw 12% revenue growth with 8% volume growth and 18% EBITDA margin. North America faced headwinds but showed underlying progress with 5% revenue growth excluding headwinds. Greater China continued strong performance with strategic review ongoing.
• Capital Structure and Cash Flow: Improved free cash flow, with working capital contributing to cash flow improvement, cash conversion cycle below 40 days.

Segment Performance

• Europe and International: Revenue grew 12% in the quarter, driven by 8% volume growth. EBITDA margin was 18%, 700 basis points higher than last year's third quarter. Volume grew by 8.4%, contributing to a $9.5 million increase in segment adjusted EBITDA.
• North America: 10.1% revenue decline mainly due to a large customer sourcing change. Excluding headwinds, revenue grew 5% in the quarter and 4% year-to-date.
• Greater China: Grew constant currency revenue by 28.7%, drove positive adjusted EBITDA in the quarter and year-to-date.

Guidance

• Reaffirmed 2025 guidance: constant currency revenue growth flat to 1%, adjusted EBITDA $5M to $15M, CapEx ~$20M. Remain on track for first full year of profitable growth.
• Greater China strategic review ongoing, evaluating options to accelerate growth and maximize value.

Risks

• Headwinds in North America due to large customer sourcing change and frozen SKU rationalization.
• Inflation impacts on gross margin, especially higher labor costs in European supply chain.
• Foreign exchange movements affecting financial results.

Question and Answer

Q: Thoughts on 2026 sales growth considering lapping headwinds in North America and Europe momentum A: Daniel Ordonez stated Europe shows solid continuity of growth playbook with profit growth via demand generation. North America sees step-by-step progress, lapping one-offs in 2026, with foodservice and clubs as growth drivers.

Q: Attribution of European retail oat milk category acceleration A: Daniel Ordonez attributed it to experience and taste strategy driving consumer relevance and category demand, hitting Gen Z preferences for flavor, excitement, well-being, and sustainability.

Q: Learnings from Europe applicable to North America A: Daniel Ordonez mentioned similar consumer trends in coffee and foodservice, but U.S. market is more complex with slower retail shelf resets. Focus on taste-focused approach and adapting nuances.

Q: Margin evolution in North America A: Daniel Ordonez said underlying growth seen in foodservice and clubs, with focus on driving consumer demand to achieve profit growth through volume and demand generation.

Q: Competitive environment in Europe for oat milk vs other plant-based varieties A: Daniel Ordonez stated category is in infancy with 30% penetration, creating new consumer demand. Oat milk commands premium, with growth outpacing other plant-based varieties, and not derailed by price competition.