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Oatly(OTLY) - 2024 Q3 - Earnings Call Transcript
OTLYOatly(OTLY)2024-11-07 19:32
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Financial Data and Key Metrics - Constant currency revenue growth accelerated to nearly 10% YoY, with all segments driving volume-led growth [10] - Adjusted EBITDA improved significantly, reporting a quarterly loss of 5million,markingthefifthconsecutivequarterofsequentialimprovement[11]−Grossmarginimprovedby1,240basispointsYoYto29.85 million, marking the fifth consecutive quarter of sequential improvement [11] - Gross margin improved by 1,240 basis points YoY to 29.8%, with a 60 basis point sequential improvement from Q2 [44] - Volume growth accelerated to 13% YoY, with each region reporting solid growth [13] - Free cash flow performance in Q3 was the best since the company's IPO [58] Business Segment Performance Europe and International - Revenue growth of 6% (4% on a constant currency basis), with a 46% YoY increase in adjusted EBITDA [21] - Retail volume grew by 5% and foodservice by 7% YoY [22] - Established markets grew by 5%, while expansion markets in Europe saw 25% volume growth [23] - International expansion markets, primarily Southeast Asia, saw a 4% volume decline due to increased competition [24] North America - Revenue grew by 18%, with a 11 million YoY improvement in adjusted EBITDA [36] - Retail sales grew by 16%, and foodservice by nearly 20% [37] - Market share in the plant-based milk category reached an all-time high, with dollar velocities per point of distribution nearly 3x higher than competitors [38] - Chilled oat milk distribution points increased by 45% YoY, with ACV up 500 basis points to 44% [39] Greater China - First quarter of profitable growth, with 12% constant currency sales growth and adjusted EBITDA of 2million,an2 million, an 18 million YoY improvement [40] - Oatly-based cold drinks are being promoted across major customers, with momentum expected to continue into colder months [42] Market and Competitive Landscape - The company continues to gain market share in nearly every European market, including the UK, despite sluggish category growth [25] - The Barista product line remains a strong growth driver, particularly in the coffee space, with new formats and concepts driving consumer adoption [27] - Advertising campaigns in the UK and Germany are designed to expand consumer adoption by addressing taste perceptions and leveraging local preferences [29][33] Strategic Direction and Industry Competition - The company is focused on driving structural, consistent profitable growth, with investments in branding and advertising to stimulate demand [18][19] - SG&A cost savings program is largely complete, with exits from US and UK manufacturing facilities on track [20] - The company is evaluating Asian supply chain options to optimize production and improve efficiency [20] Management Commentary on Operating Environment and Future Outlook - Management expects constant currency revenue growth to be near or slightly below the low end of the previously provided range of 6% to 10% for the full year [9] - Adjusted EBITDA is expected to be near the favorable end of the range of minus 35milliontominus35 million to minus 50 million, with capital expenditure below 55million[10]−Thecompanyremainscommittedtoachievingprofitablegrowth,withafocusondistributiongains,marketshareimprovement,andcategorycreationinexpansionmarkets[66]OtherImportantInformation−Thecompanyendedthequarterwithastrongliquiditypositionof55 million [10] - The company remains committed to achieving profitable growth, with a focus on distribution gains, market share improvement, and category creation in expansion markets [66] Other Important Information - The company ended the quarter with a strong liquidity position of 322 million, including 119millionincashand119 million in cash and 203 million in undrawn credit facilities [56] - The exit of US and UK manufacturing facilities resulted in a net 3millioncashinflowinQ3,withacumulativeimpactof3 million cash inflow in Q3, with a cumulative impact of 10 million cash outflow [57] Q&A Session Summary Question: What is driving the deceleration in revenue growth to around 7% in Q4 2024, and what is the exit rate going into 2025? - The deceleration is primarily due to sluggish category growth in Europe, particularly in the UK, despite the company's focus on consumer engagement and advertising [62][63] Question: Are there any factors that could prevent the company from achieving positive adjusted EBITDA in 2025? - The company is committed to achieving profitable growth, with significant progress in gross margin and SG&A recalibration, but no specific 2025 guidance was provided [65][66][67]