Oatly Group AB Q4 FY2025 earnings call

• Oatly achieved its first full year of profitable growth, transforming from structurally unprofitable with slowing growth to structurally profitable with accelerating goals.
• Drove efficiencies throughout the organization, reducing cost of goods sold per liter by 23% and total SG&A by nearly $100 million (21% of revenue) while reinvesting in a refreshed growth playbook.
• Invested in new on-trend products like flavored Barista products, matcha varieties, and products for specific customer needs; invested in look books, events, and in-store executions to support brand and drive growth.

In the quarter, Oatly grew revenue 9.1% and 4.3% on a constant currency basis. Gross margin was 34.5%, an increase of 580 basis points compared to last year's Q4. Adjusted EBITDA was positive $11 million in the quarter, $17.1 million higher than last year's Q4. For the full year, revenue grew 4.7% (2.2% constant currency) and adjusted EBITDA was $6.8 million. European International grew volume by 13.9%, contributing to a $9.9 million increase in segment adjusted EBITDA. North America had an 8.8% revenue decline mainly due to a large customer's sourcing strategy change, but excluding that, the segment grew 10% in the quarter, with segment adjusted EBITDA increasing to $4.4 million, the highest ever quarterly profit.

• 2026 expected constant currency revenue growth of 3% to 5% and adjusted EBITDA of $25 million to $35 million.
• CapEx expected to be in the range of $20 million to $30 million for the full year, higher than 2025 due to projects moving from 2025 and capacity expansion in European International.
• Guidance assumes no direct impact from U.S. tariffs and consistent economic conditions and consumer behavior.

Q: I'm wondering if you could speak to North America foodservice. The expectation is there for 2026. I mean there's a partial year overhang from the large customer drag at the outset. But can you talk a little bit about the progress you're seeing in outlets aside from that customer? And how do you think about bringing the flavored varieties to the U.S. and landing new store doors within the broader growth of the coffee shop sector?

A: Daniel here. Good to hear you. Do you have a second question, John? Or it's only that one?

Q: It's great to see the continued outperformance of Oatly in the U.S. retail. But clearly, the oat milk category remains under pressure in U.S. retail. So I was hoping to get more color on what you believe is driving the continued oat milk category declines? And then also, what's embedded in your 2026 outlook for the oat milk category in U.S. retail?

A: Thank you, Max, Daniel, again. Good to hear from you. Yes, true, if you look at the hard data at the moment, in North America, category softness and I would like to underline in traditional retail, in traditional retail continues. So to add color, how do we see this Max? We see strong signs that the actions we have taken are yielding visible results and not just our results but category results.

Q: I guess a couple of questions -- well, first of all, congratulations, it's quite the win and quite the effort. A couple of things to maybe talk about the increasing household penetration, particularly in Europe, is that -- can you maybe talk about that customer? You mentioned that they're a bit younger, but is it the innovations that are bringing new customers in? Is it just general branding of the category and your brand itself? What maybe is driving the sort of -- it seems like an inflection in household penetration. And then shifting to the U.S., I'm sure you've seen there were new dietary guidelines for -- and part of that, and I guess on social media and such is there's this big whole milk craze that's starting to take off for whatever reason. I'm curious if you know how you're thinking about that, if that has any impact on your business or maybe even the view of the category in general.

A: Thank you, Kaumil. Daniel. I will start here and possibly JC will take the second part. Listen, thank you for picking up on penetration and I know very well, you understand how complex are not easy to get penetration back to growth. By the way, I would like to underline that both in the U.S. but especially in Europe, Oatly is the only brand that is driving and growing penetration, which tells you a lot about the playbook. So the answer to your question is pretty straightforward. It is the new growth playbook, commit. The inflection point that you called out very well, and we could have quoted a number of other markets as well, especially the new markets, which are also driving Oatly oat milk and plant-based category penetration in that order comes from the new playbook precisely from the new portfolio. So it is related. I prefer to talk about portfolio Kaumil, innovation, because innovation it feels like it could be random, but it's the point about making sure that consumers can have at home, the same type of signature drinks that are drinking when in coffee and food service. Be it at the matcha, be it the popcorn, all of those are driving new penetration. So -- and the numbers we have, the data points about the demographics are pretty impressive. So it really follows the exact same words that I used in my prepared remarks. Which is Gen Zs and Alphas. So really, really young consumers coming into the category as a cross-check with the new portfolio. So there is something on the pay strategy for sure. So it's mostly about that, Kaumil.

Q: I could continue a bit on the free cash flow that Max highlighted there. What is the underlying reason that we haven't seen improvement in free cash flow during the past 2 quarters? And what is the thing that's going to change in '26 given that you are now also guiding higher CapEx in '26 compared to '25. And you still seem confident that the free cash flow will be positive in '26?

A: So your question is about the free cash flow conversion Q3 versus Q4. Is that correct?

Q: No, it's perhaps that we haven't seen improvement from like sequentially the free cash flow when I looked. It hasn't been improved since Q2 and now you're expecting it to change in '26, seeking for a cash flow improvement ratio that you can see that the free cash flow is going to be positive in '26. So what is the underlying reason why we haven't seen that yet, and we'll see it in '26?

A: Yes. The variance is -- I think it's coming from -- so the short answer is the following. The first, as you noted, we do have some phasing in our different components, ever IFRS CapEx, IFRS tax, IFRS interest, that's point number one. Point number two, the biggest driver as well is coming from how the network in is evolving between quarters. So now I'm still explaining the fact that between 2025, again, if understood well between Q3 and Q4. So that's one explanation. Now going into 2026. What do we expect? We do expect EBITDA, so the free cash flow to increase and to be to continue to improve, as I just explained to Max, which is really about how we are going to accelerate to our stores, how we are managing our CapEx and you've heard in the prepared remarks that we have some phasing here in -- with regards to CapEx and how we are managing net working capital, which is our -- honestly, one d of our biggest levers that we still have to unleash and really leverage as we go through the year. So I hope I answered your question, but maybe you have a [indiscernible].