Oatly (OTLY) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, July 22, 2026 at 8:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Jean-Christophe Flatin
• Global President and Chief Operating Officer - Daniel Ordoñez
• Chief Financial Officer - Marie-José David
• Vice President of Investor Relations - John Baumgartner

TAKEAWAYS

• Revenue -- $240,095,000, representing a 15.2% increase driven by strong volume growth and positive product mix.
• Constant Currency Revenue -- 12.7% growth, reflecting organic demand-led value creation across all geographic segments.
• Sold Volume -- 156.1 million liters, growing 11.2% year over year as the company expanded distribution in retail and food service.
• Adjusted EBITDA -- $422,000, an improvement of $4 million from the prior year period despite incremental brand reinvestment.
• Gross Margin -- 33.9%, increasing 140 basis points due to supply chain efficiencies and fixed cost absorption.
• Free Cash Flow -- Negative $592,000, an improvement from negative $5.2 million last year primarily due to higher operating results and working capital benefits.
• Europe and International Revenue -- $143,067,000, rising 18% in constant currency behind strong Barista product volumes.
• North America Revenue -- $66,919,000, increasing 5.9% in constant currency as growth in retail offset historical food service headwinds.
• Greater China Revenue -- $30,109,000, growing 5.6% in constant currency despite high competition in the food service channel.
• Full-Year Revenue Guidance -- 8% to 10% constant currency growth, raised from the prior range of 3% to 5% due to stronger conversion from the growth playbook.
• Full-Year Adjusted EBITDA Guidance -- $25 million to $35 million, with management targeting the low end of the range to account for ongoing Middle East logistics costs.
• Capital Expenditures Guidance -- $20 million to $30 million for 2026, remaining unchanged as the business plan remains fully funded.
• Total Distribution Points -- 22% in the United States, increasing from 17% last year as the brand gained share of shelf.
• Sweden Category Share -- Gained nearly 2 percentage points in the past year, reflecting household penetration growth in the company's home market.
• Europe Expansion Growth -- 82% year over year in second quarter, driven by new markets reaching critical mass.
• Price Mix -- Positive 1.5% impact, contributing to revenue momentum alongside volume gains.
• Fixed Cost Absorption -- Provided a 210 basis point benefit to gross margin, reflecting facility optimization and higher volume throughput.
• Inflation Headwind -- 100 basis point negative impact on margin, primarily resulting from fuel-related logistics and packaging costs.
• Cash and Equivalents -- $44,647,000 as of June 30, 2026, down from $64,345,000 at the end of 2025.
• Total Debt -- $517.8 million, comprised of Nordic Bonds, convertible notes, and liabilities to credit institutions.

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RISKS

• Flatin stated, "The global cost impact has been largely fuel related, either directly in logistics or indirectly through areas such as packaging," noting that the conflict in the Middle East continues to create inflationary pressure and supply chain volatility.

SUMMARY

Management reported that **Oatly Group AB** (NASDAQ:OTLY) achieved profitable growth during the quarter, driven by a strategic shift toward becoming a full-service beverage company. The company stated that volume-led revenue momentum exceeded internal expectations, particularly in Europe and North America. According to the report, structural profitability is improving through supply chain optimization and fixed cost absorption, though these gains are partially offset by geopolitical cost pressures. Management indicated that a strategic review of the Greater China segment remains ongoing, with a completion target set for late 2026. The company remains focused on driving penetration among younger consumers through product innovation and increased brand relevance across multiple consumption occasions.

• Global President Ordoñez noted that the company introduced 63 new drinks, stating these represent "the backbones for Oatly's progressive innovation" and drive differentiation in the beverage market.
• Management reported that the sales headwind from the loss of its previously largest North American food service customer has substantially ended.
• The company announced a second iteration of its partnership with Nespresso, with planned distribution in over 220 boutiques across 26 markets.
• CEO Flatin stated, "Our second quarter capped a very successful first half with strong volume growth and positive mix driving our revenue momentum."
• Management indicated that brand penetration in Sweden is currently three times higher than any other key plant-based market, such as the United Kingdom.
• The After Taste event in New York generated over 70 million media impressions and reached nine million people online, according to company reports.
• Ordoñez reported that Oatly now generates 30% of total oat milk category sales in the United States.

INDUSTRY GLOSSARY

• Barista Edition: A specific formulation of oat milk designed to foam and pair effectively with coffee.
• Constant Currency Revenue: A financial metric that eliminates the effects of foreign exchange rate fluctuations to show underlying business performance.
• TDP (Total Distribution Points): A measure of the breadth and depth of a product's distribution across retail outlets.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for one-time or non-cash items such as restructuring or share-based compensation.
• Free Cash Flow: Net cash flow from operating activities minus capital expenditures.
• Strategic Review: A formal evaluation of a business segment to determine future options, such as a potential sale, carve-out, or operational restructuring.

Full Conference Call Transcript

Operator: Hello and welcome everyone joining today's Oatly second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to John Baumgartner, Vice President of Investor Relations. Please go ahead.

John Baumgartner: Good morning, 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-José David. Please review the cautionary statement regarding forward-looking statements and other disclaimers on slide three, which are integrated into this presentation and include the Q&A that follows. Please also 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.

Jean-Christophe Flatin: Thank you, John, good morning, everyone. Slide five features our key messages. First, our second quarter capped a very successful first half with strong volume growth and positive mix driving our revenue momentum. The results reinforce the success of our growth playbook and notably innovation that solidifies our identity and appeal as a full beverage company. The positive impact of our execution is evident in our expanded distribution in both retail and food service outlets. Second, we are driving improvements in our strategic mix of channels, customers, and products to enhance our underlying profit margin. As expected, the second quarter included headwinds from cost pressure due to the conflict in the Middle East.

In addition to absorbing this financial impact, we are choosing to invest for growth while continuing to improve our structural profitability. Third, looking at our full-year guidance, we are raising our revenue guidance while remaining confident in maintaining our outlook for 2026 adjusted EBITDA. With what we know today, our full-year outlook for EBITDA takes into account absorption of increased costs, including from the Middle East conflict, which remains unchanged relative to expectations communicated in April. Our plan also reflects continued investments for further growth. Turning to slide six. Here you can see our solid second quarter scorecard for important KPIs. Our revenue grew by 15.2% and 12.7% in constant currency.

Our gross margin reached 33.9%, which represents an improvement of 140 basis points compared to last year. Our adjusted EBITDA was positive $0.4 million and 0.2% of our net sales. This is an improvement of $4 million versus last year, despite reinvestment and the absorption of headwinds, including from the Middle East conflict. Revenue momentum and a resilient bottom line show progress in building a stronger growth model in a profitable manner. Finally, our free cash flow in the quarter was a negative $0.6 million, which is an improvement of $4.6 million versus last year.

Our business plan remains fully funded, and we maintain focus on achieving positive free cash flow, a milestone that will be reached through putting on all available levers, including continued improvement in the P&L and working capital. Slide seven reiterates our focus areas for the rest of 2026. As Daniel will soon outline, we continue to see positive traction from our investments and brand building. As results exceed our expectations, we remain focused on executing our growth playbook. Second, we continue to navigate the uncertainty and volatility created by the conflict in the Middle East. I'm pleased to report that our proactive approach has helped us manage the related impact on our business.

In the second quarter, costs matched our expectation, and based on what we know today, the pressure that we expect in the second half of 2026 remains consistent with our initial outlooks communicated in April. The global cost impact has been largely fuel related, either directly in logistics or indirectly through areas such as packaging. As a reminder, we are utilizing this disruption in part to evaluate and improve the flexibility in our supply chain. Finally, as it pertains to China, our strategic review is ongoing, and we intend to complete this review prior to the end of the year. We continue to evaluate a range of options, including a potential carve-out.

Our goal is to accelerate growth and maximize the value of this business. We will update the market on our progress as necessary. In closing, slide eight summarizes our guidance. In 2026, we expect stronger conversion from the rollout of our refreshed growth playbook. We now expect to drive constant currency revenue growth of 8%-10%, up from our prior outlook for growth of 3%-5%. Further, we expect to maintain our ability to mitigate the cost impact of the Middle East conflict. Despite this inflationary impact and growth-fueling spending, we believe we are on course to deliver adjusted EBITDA towards the low end of the range of $25 million-$35 million, consistent with our outlook from last quarter.

With that, dear Daniel, over to you.

Daniel Ordoñez: Thank you, J.C., and good morning, everyone. I will start my discussion on slide 10. As we enter the second half of the year, our confidence remains strong on the results brought by the methodical deployment of our growth playbook. Over the past two years, we have focused on the barriers to consumption, creating new occasions, and driving consumer relevance. We remain well-positioned to serve the lactose-intolerant community and those who are primarily environmentally conscious in their choice. However, these segments represent only a portion of our addressable market opportunity.

As shown by the success of our growth playbook across European markets, established or new, multiple new doors are opening as Oatly pivots to become a full-on beverages company, which is relevant to a much broader population and across multiple new occasions, still anchored on the same brand uniqueness, generational relevance with taste, health, and sustainability at the core. Our expanding portfolio of flavors and formats drive differentiation in the beverages market and they're going significant change as customers are eagerly renovating their menus and shelves to be more relevant in meeting the rising expectations of younger generations. Closing the loop, relevance is manifested again through the brand's iconic live events and digital presence.

First, let's discuss our thought leadership in setting global beverage trends on slide 11. As we did in Berlin with Oatly on the Rocks in October last year, last month, we hosted 250 key players from the food and beverage industry at the After Taste event at the Flatiron District in New York. Attendance included members of the media, trendsetting leaders in coffee and beverage, key commercial partners, cultural opinion leaders, and creators. In addition to sharing some of our newest flavors and exciting drinks innovation, we hosted forums that explored how new generations are changing the coffee culture, social media's influence on beverage development, and other discussions at the forefront of this space.

In the following weeks, the event generated over 70 million media impressions and reached over nine million people online globally. The event was one of our largest brand investments in North America this far, a clear manifestation of what local relevance with global scale means for the Oatly brand. Building on this, on slide 12, you see the latest iteration of our recipes lookbook that is hitting this summer in full. So far, we have introduced 63 new drinks, many of which have become category standard. Like for instance, Coconut Matcha Cloud, Salty Banana Split, and the Matcha Jello Shots.

They are open to the public, representing the backbones for Oatly's progressive innovation, and we're highly confident in our ability to continue to surprise and set the industry space. On slide 13, you can see how prompted by the lookbook and with the recent expansion of our iconic barista offering, notably with the launch of Cold Foam, Oatly becomes increasingly relevant to the growing refreshment and mixology movement, significantly expanding the creativity of our food service partners. The most promising drinks make it all the way into the retail space for in-home consumption.

As seen on slide 14, with the recent successful launches of Barista Popcorn Flavour, Barista Churros Flavour, and Barista Coconut Flavour, as well as the expanding matcha range. This model explains why we're growing penetration most strongly with younger consumers, and we view this demographic as strong foundation for multi-years growth. On slide 15, you see a concrete example of the cultural relevance of the Oatly brand at global scale with the recently announced second iteration of our partnership with Nespresso, present in over 220 boutiques across 26 markets during the coming months. Next, let's turn to a discussion of our regions to link our strategic initiatives with market success.

In the Europe and International segment on slide 17, second quarter's constant currency revenue grew by 18%, driven by very strong volume growth. This is particularly impressive as we allowed volume growth of 9.4% in the last year's second quarter. Contributions are balanced from established and expansion markets and included growth in household penetration across our long-standing markets. At category level, growth in retail takeaway for plant-based beverages has remained solid in absolute terms. Up high single digits driven by volume and far above the rate of GDP growth. In our case, the story's even better. oat milk is outgrowing other plant-based milks, Oatly is the main driver with strong market share gains across all markets.

We believe the growth opportunity across this segment is promising, I like to emphasize the reasons why we are outperforming the market on Slide 18. First, we are engaging the broader beverages industry and seeing strong traction as taste, refreshment, and health combined are particularly relevant to the young. Secondly, we're steadily evolving our strategic choices on channels and portfolio to be decisively accretive to our profit margin and volume, together with a pipeline of new retail and food service customers that underscore our outlook for continued strong growth.

Finally, the conscious choice we made to decisively expand our geographic footprint in multiple new markets is paying off handsomely as they continue gaining critical mass with growth rates that keep accelerating as we see with an impressive 82% growth year-on-year for quarter two. On slide 19, I would like to emphasize the brand's cultural relevance, being part of the local communities in key cities and generating disproportionate global impact, thanks to a seamless brand playbook and efficient social media strategy. Two very concrete examples. In Mexico City, our Losers Café consoled the fans of losing World Cup teams through free drinks such as the Lost Matcha or Dulce Defeat, reaching so far more than 600 million people globally.

In Amsterdam, our bike tour paired some of Europe's best coffee roasters with Oatly-inspired signature drinks in one of the bicycle capitals of the world. It not only delighted the local consumers but has reached so far over 100 million people globally. Slide 20 shows the power of our playbook as we see now significant market share and penetration gains in Sweden, our home market. Brand penetration in Sweden is three times higher than any other key plant-based market, like for instance, the U.K., is home to the most affluent plant-based consumer there is. Growth in Sweden had been flat since J.C. and I joined back in 2022.

18 months following the execution of the beverages playbook, we're now seeing increasing household penetration, notably among younger consumers. More trial and stronger velocities are driving accelerating growth in our share of milk alternative shelves, up 10 percentage points since 2023, and we have also gained nearly two percentage points of category market share in the past year. This gives us confidence that there is no such thing as a mature market. Slide 21 shows how our beverages stance drives significantly bigger stand out in retail display, geared to both ambient and chilled temperatures. For at home or on the go consumption, this impactful presence reflect our importance to retailers to better engage shoppers.

Shifting now to North America on slide 23. I am very happy to report that growth keeps accelerating. In the second quarter, the segment constant currency revenue grew by 5.9% year-on-year, driven by positive volume growth of nearly 2%. This performance clearly exceeds the milk alternative category and includes decisive incremental mix effects. At a retail market level, the macro backdrop remains challenged by tight household financial conditions and the saturation of protein-fortified products. Retail takeaway of plant-based products continue to trail traditional cow's milk dairy. As we have seen in Europe two years ago, macro category dynamics can't be explained by the retail performance alone, especially when that doesn't represent the new beverages playbook.

We are conscious and at the same time optimistic about our ability to change this dynamic. On slide 24, we see that in retail measured channels, we have reached our near record high market shares in both oat milk and plant-based beverages. Let's look at our out-of-home channel performance on slide 25. As previously discussed, we see growing consumer and customer excitement in this space, which is way closer to culture. For us, defines more clearly the underlying category dynamics I am very pleased to report that momentum from new and existing customers will soon eliminate the headwind from the customer who was previously our largest in this channel.

At the end of the second quarter, the related year-on-year headwind to sales has substantially ended, and we have made significant progress diversifying our customer base. This will provide greater balance and resiliency for the channel in the future. On a like-for-like basis, our go-forward food service portfolio continues to grow strong, following the beverage playbook with drinks adapted to the local consumer, posting an exceptional 18% growth this quarter. As we discussed before, our confidence is not simply anchored on our growth in the channel, but the fact that we see an identical evolution in the beverage space driven by preferences of the younger generations.

As you see on slide 26, we're driving significant penetration gains, all stemming from capturing these young generations of consumers. Not enough yet to return the category around in retail, but we're confident it is a matter of persevering in execution. Moving forward, as you see on slide 27, we expect to gain share of category distribution and new consumers from the full expansion of the new range. We also expect to build breadth and depth across key customers in the mass, club, and natural channels. This builds on already solid year-to-date volume growth in the retail and club channel. Our growing appeal among retailers is particularly evident in off-cycle product uptakes.

Retailers will list all the products outside of the traditional category reset window starting later this year, a significant sign of momentum for our brand. Last, shifting to Greater China on slide 28. Although macro headwinds persist in the food service channel, our second quarter growth was encouraging. Constant currency revenue grew by 5.6% and included volume growth of 5.5% on a positive offset from the retail channel. Segment sales largely recovered from last year's decline of 6.6%. As JC mentioned, we intend to complete the strategic review this year. To wrap the business update, I would like to focus on the trajectory of the key business metrics on slide 29.

Strong growth continues to drive a direct positive effect on cost absorption and profit margin. Put simply, steady progress on our model to drive profit growth through demand generation, essential to future value creation. With that, I will now turn the call over to Marie-José. MJ?

Marie-José David: Thank you, Daniel, and good morning, everyone. Slide 31 summarize our solid financial delivery for the second quarter. Aside from strength in Europe, this quarter marked our second consecutive period of positive volume growth in North America following declines throughout 2025. In Q2, we grew net revenue 15.2% and 12.7% on a constant currency basis. Gross margin was 33.9%, an increase of 140 basis points compared to last year's Q2, and the result of efficiencies including facility optimization, volume absorption, productivity improvements, and favorable mix. Q2 adjusted EBITDA was a positive $0.4 million and an improvement of $4 million relative to last year's Q2.

Although the magnitude of year-on-year improvement was smaller than Q1's $8.7 million, this year's Q2 absorbed incremental headwinds from a full quarter of cost pressure due to the Middle East conflict and the anticipated phasing of brand reinvestment. As a reminder, our investment in the growth playbook has been more concentrated in Q2 than the expected average for the year. Considering the strong growth in household penetration and consumption, we are pleased with the return on our brand investment. We also remain very pleased with the underlying trajectory of structural profit improvement. I will now provide more detail about our financial performance. Slide 32 shows the bridging items of our revenue growth. Volume grew 11.2%. Price mix increased by 1.5%.

Foreign exchange was a 2.5% tailwind compared to 7.5% last quarter. Moving on to slide 33 and the year-over-year gross margin bridge, which shows the 140 basis point improvement. This improvement is explained by 210 basis points from fixed cost absorption and supply chain efficiencies, 30 basis points from product and channel mix, 10 basis points from foreign exchange currency tailwinds, and partially offset by a negative impact of inflation for 100 basis points. Slide 34 shows the quarter two year-over-year improvement in our adjusted EBITDA. The $4 million improvement was driven by $13.7 million increase in gross profit, partially offset by $9.7 million increase in SG&A and overhead.

In SG&A, the increase is driven nearly in equal parts by customer distribution costs, which are linked to sold volumes and an increase in branding and advertising spend, in addition to foreign exchange headwinds that are offset by cost-cutting initiatives. As a volume-driven business, our cost structure scales with growth, and we remain focused on delivering profitable growth over time. Slide 35 shows segment-level detail. Europe and International grew net sales by 18% in constant currency. Brand reinvestment and cost inflation related to the Middle East conflict limited year-over-year growth in segment adjusted EBITDA to $0.7 million, yet still achieved a solid adjusted EBITDA margin of 17.5%. North America's revenue grew 5.9%.

Segment adjusted EBITDA increased by $3.1 million to $0.7 million, identical with last quarter, as we proactively manage incremental headwinds from brand investments and costs related to the Middle East conflict. Greater China constant currency revenue increased by 5.6%. Increase was explained by growth in the retail channel that more than offset strong competition and weak macros in the out-of-home channel. The segment reported negative $1.5 million in adjusted EBITDA. In Q2, corporate expenses was $1 million lower year-over-year, as our continuous focus on increasing efficiencies has more than offset foreign exchange headwinds. Turning to our cash flow on slide 36. I reaffirm that our business plan remains fully funded.

We remain focused on bringing the company to positive free cash flow following the positive inflection on our adjusted EBITDA. In Q2, free cash flow was a net outflow of $0.6 million, which is $4.6 million better than last year. Year-over-year improvement results from growth in EBITDA, smaller capital expenditures, and benefit from net working capital. Improvement exceeded our expectations and reflects our efforts to structurally improve profitability and cash generation. We believe that our progress is increasingly evident and see opportunities for further improvement across all levers of cash flow.

We maintain our expectation that we do not anticipate positive free cash flow for the full year 2026, given the impact of seasoning factors in the second half, including larger inventories to support volume growth as well as capital expenditures. Turning to our 2026 outlook on slide 37. As Jean-Christophe mentioned at the top of the call, we are raising our outlook for constant currency revenue growth from 3%-5%, now up to 8%-10%. Our outlook implies year-over-year growth deceleration in second half, it is a result of a harder comparison relative to first half.

A reported basis, considering recent FX rates and assuming no change for the rest of the year, we estimate FX to add approximately 200-250 basis points to net sales, a stronger tailwind relative to our prior expectations for a benefit of 100-200 basis points. For adjusted EBITDA, we maintain our outlook to deliver towards the low end of the existing range of $25 million-$35 million, including absorption of the cost impact of the Middle East conflict. Based on what we know today, our expectation for related cost pressure is unchanged from our forecast in April. We are pleased that proactive management has allowed us to maintain the EBITDA guidance range that we provided pre-conflict in February.

We expect support from favorable reinvestment saving in SG&A and sustained improvement in gross profit from revenue growth and operating leverage. Our price mix is offsetting cost pressure from the conflict in the Middle East and the tight market for freight in North America. A reminder, our outlook is provided in the context of what we know today and set against elevated macro volatility. Our fundamentals remain strong, and we continue to execute against our growth playbook while maintaining agility to adapt to external factors. Last, our guidance for CapEx remains unchanged in the range of $20 million-$30 million for the full year. This concludes our prepared remarks. Operator, we are now prepared to take questions.

Operator: Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star and one to ask a question. We will pause for a moment to allow everyone a chance to join the queue. We will take our first question from Kaumil Gajrawala with Jefferies. Please go ahead. Your line is open.

Kaumil Gajrawala: Good morning, everybody. Well, I guess good afternoon, guys. Well done on the revenue front, on the volume front. If we could maybe break down a little bit, Daniel, on some of your comments on the drivers of that growth, specifically, is it bringing in new users? Is it existing users consuming more? Is there maybe a pricing component to it? Just more of a breakdown on what is driving some of the acceleration in your revenue growth would be helpful.

Daniel Ordoñez: Hi, Kaumil. Great hearing from you. Thank you for the well done. That's certainly the sentiment here. Agree with you, we see momentum getting stronger. The specific answer to your question, is it existing or new? It is certainly both. In both regions, if I focus in North America and in Europe and international, it's existing and new. It's existing consumers and new consumers. It's existing customers and new customers. It's existing, I would say, countries and new countries. That's the kind of in a nutshell, the balance that we see between existing and new. Now, giving you a bit more color on both regions, Kaumil. We see growth accelerating.

If I start with Europe, I take a couple of minutes. It's accelerating after two strong consecutive quarters of volume-driven growth with mix on top, we're lapping. In this quarter in particular, we're already lapping an almost 10% volume growth in 2025. We're really seeing incremental demand. We also went fully back to this dynamic where the Oatly growth brings oat milk growth on top, and certainly outweighs or outgrows plant-based in general. Plant-based, by the way, is in solid high single-digit growth. Outlook positive in this region, in Europe and international. Why? Going back to your point about existing and new.

We see relevance of the beverage new portfolio with focus on new usage occasions, again, new, that allow the taste strategy to lead this reframing of the space. Coffee that now is full on beverages, with solidifying mix effect. The other thing that is working really well, as you saw with 82% growth in Europe and international, is the new markets maintaining the growth, but gaining in critical mass. This concludes Europe and international, Kaumil, with a very nice flywheel. As we always insist, 70% of penetration growth ahead of us, right? The users that still haven't adopted the category.

If you allow me one more minute unpacking North America for you or your colleagues on the call, very encouraged with the progress we have done, still step by step. Two key dynamics here. Again, very strong, as strong as in Europe, dynamics in out of home, at the back of the identical consumer strengths. Coffee, flavors, tastes, signature drinks, et cetera. This segment now is one quarter of the total revenues of this segment and counting. We're very excited about that. I'm glad not having any questions about legacy customers here, but we are nicely lapping all that legacy effects. On top of that's my final remark for you and your colleagues.

In the retail space, still soft, but clearly outperforming and gaining penetration. Again, gaining penetration, gaining share, gaining share of shelf, and gaining penetration with very strong velocities and new TDPs already in the making. Much more to come in the remaining parts of 2026, but also the early parts of 2027. That's the summary on the drivers, Kaumil.

Kaumil Gajrawala: Very useful. Thank you very much.

Operator: Thank you. We will move next with Max Gumport with BNP. Please go ahead. Your line is open.

Max Gumport: Hey, thank you for the question. You had another strong quarter of top-line momentum, you've meaningfully raised your top-line outlook for the year. It seems like the costs associated with the Middle East conflict remain unchanged from your estimate in April. Just looking for more color on why your EBITDA outlook was not raised today. It seems like it's likely largely due to increased reinvestment. If that's true, can you talk a bit more about that increased reinvestment? Thanks very much.

Jean-Christophe Flatin: Thanks a lot, Max, for the question. Great to hear from you. J.C. speaking here. Let me unpack our EBITDA guidance for you, I will split it in three inputs. First, we're clearly harvesting the demand-generated growth of margin, and we do that both through volume growth and positive price mix effects. We are confident that this momentum will continue in H2. That's the first part of the equation. Second, when it comes to the Middle East conflict impact, we continue not only to monitor but to absorb it. As I said, it's mostly on logistics and tax, our full-year estimate remains in line with what we have said.

Practically, that means that when you think of Q3 and Q4, we expect a Middle East conflict impact that is broadly in line with what we had in quarter two.

Daniel Ordoñez: Finally, because we are confident in our beverage playbook, because we see this momentum, we have decided, despite the Middle East conflict headwinds, to consciously and carefully reinvest behind the growth in Europe and international in order to fuel the success. How are we doing that? These choices are done meticulously, market by market, channel by channel. Of course, we will calibrate these choices going forward based on our overall profit delivery equation. From a pure phasing standpoint, you heard MJ say in her remark that probably Q2 was the strongest of these growth investments, therefore you can expect them to continue, but probably on a slightly lower hand. By the way, we continue to monitor them.

When I group these three factors together as a net impact in an environment that remains super volatile and unpredictable, we choose to be conservative and to confirm our expectation to deliver adjusted EBITDA towards the low end of the range of SEK 25 million-SEK 35 million.

Max Gumport: Okay, great. Very helpful. I'll leave it there. Thanks very much.

Jean-Christophe Flatin: Thank you, Max.

Operator: Thank you. We'll move next with Andrew Lazar with Barclays. Please go ahead. Your line is open.

Andrew Lazar: Great. Thanks so much. Appreciate it. I was hoping maybe to get into a little bit more detail on some of the drivers of growth in North America, because obviously you're seeing pretty solid growth despite the category remaining weak and despite still in the quarter having been lapping some of the loss of a food service customer. Also maybe just a little bit on what is going on with the oat milk category specifically, even though obviously Oatly is outperforming. Thanks so much.

Daniel Ordoñez: Thank you, Andrew. I will try my best not to repeat myself, but if I do, I apologize upfront. How to bundle? The drivers of performance were clearly outperforming the market. Market share of shelf, velocities, all the classic metrics of how we measure success in terms of our competitiveness, the strength of the brand, the resilience of our portfolio. Remember, as we are lapping, we have fully lapped portfolio delisting, right? I hope you appreciate I'm giving you more level of detail now, right? 97%, 98% of our portfolio is clean beverages, all with strong velocities. That's one driver. Customer base, you see we are just clean and neat.

Moving forward, what we see the drivers of category growth, we see two things that make us feel very optimistic about the outlook. Number one is the out-of-home performance. I know you asked about retail, but we insist. Out-of-home is where the category is created, and that is where it's giving us growth at the level growth rates that we see in Europe with the exact identical dynamics. Some of the innovations may be slightly different, but we see the same dynamics. The second one is penetration. You saw the chart of penetration, especially on Gen Z. We are recruiting new consumers into the brand and into the category.

Of course, I will pause there because you see why in aggregate that builds up to soft category total. I cannot comment about the other competitors in the field, right? You see movements there that are perhaps not helping with the mathematics. That's why controlling the controllables, we are obsessively focused on executing. Before moving into the outlook, I have another very good data point here to provide, which is our share of oat milk. TDP is now 22% up from 17% last year. We generate 30% of the oat milk category sales and growing. We have significant opportunity for further share of shelf gains.

As we said before, we are engaged in a retail, old traditional school retail wake-up call for the retail space to adopt what we see in the dynamics on out-of-home. We have every hope that the new portfolio, when you see what's happening now, and that's my last data point, the off-cycle uptakes in retail, which means normally you would start getting the new distribution, new TDPs coming in February 2027. You will see them coming in late in quarter three and quarter four already. That gives us hope, or I would remove the word hope.

That is a proof point of the relevance of the portfolio we're bringing in front of consumers and the velocities that they see could be coming. That's pretty much the double-click on the question I answered to Kaumil at the beginning, Andrew. Let me know if that's okay.

Andrew Lazar: Thank you for that. A quick follow-up would be anything of note on just the competitive environment in retail oat milk in North America that's worth calling out, just because you are picking up, as you mentioned, pretty significant share of shelf and market share. I didn't know if there were some that were, whatever, de-emphasizing their competitiveness in some way or changing how they're thinking about competing in the category. If not, that's fine too, but just curious. Thank you.

Daniel Ordoñez: Thank you, sir. Two data points. First, I will insist with our velocities, but if you see our highest ever shares first, that is telling you something, right? With both execution distribution plus velocities gives you that ever highest share. I think it's 31-something for oat milk. It's the highest ever, and we're really closing in to be, in the near future, number one, right? That's number one. Number two, hey, I'm not going to quote other brands by name, but we all see the same data, right? Some relevant brands losing significant share. I don't want to quote numbers because you're better at mathematics than me, Andrew, but we're taking the lion's share of that.

Very significant lion's share of those dynamics, right? We expect to take share, but I would like to come back to the beginning of your question and Kaumil's, which is, we're not here only to take share. Take share is good because it means the brand is up there and the velocities are there. We're here to grow this category. I would like to go back to 22% penetration of oat milk in the U.S. There is an ocean for us to grow this category and multiply growth and multiply value creation. That's our obsession.

Jean-Christophe Flatin: Thank you.

Operator: Thank you. Once again, that is star and one on your telephone keypad, if you would like to join the queue. We will move next with Dara Mohsenian with Morgan Stanley. Please go ahead. Your line is open.

Dara Mohsenian: Hey, guys. Just wanted to expand on that last point you had mentioned on shelf space opportunity. Clearly accelerated North American momentum from a top-line perspective. You mentioned some of the drivers behind that. Consumer strength also gives you more shelf opportunity going forward. Can you give a bit more specifics there, both in terms of existing accounts, the shelf space opportunity this might afford you going forward, and also, are there new partner opportunities that are emerging for you as you look out to 2027? Thanks.

Daniel Ordoñez: Dara. Yes. You know our ACV numbers, right? We're up there. I think when J.C. and I walked in, we were at 32%. We're closing into 50%, which means that we have made significant progress in terms of presence in most accounts. Believe significant, without penetrating the least accretive accounts, we have significant headspace to grow in ACV. We have significant growth opportunities in clubs as well, which it qualifies as a non-measured channel and which we're doing pretty well. You see, I prefer not to go into specific details or names here, but we have significant opportunities on TDPs and ACV, right?

If I look at 2027, it's more TDPs than ACVs, and I'm giving you a bit of a hint. The emphasis is more on that, this is why the TDPs are now ACVs. I go back to the root cause of the wake-up call to the retail space, the traditional retail space, which is portfolio, right? The mother of all opportunities for this category is to adopt the new beverage playbook, the new beverage dynamics, the dynamics that Gen Z is enjoying in North America at the moment when they go to a food service account. That's what we need to see in this old and traditional space. That's portfolio.

Therefore, when you look at where we are in Europe, what we call the taste-driven portfolio, this is what progressively you will see the different accounts adopting in North America. We chose not to make a specific remark today, but we are super excited, Dara, on how, in the U.S. and as well in Europe, the search and the uptake for gut health and fibers seems to be significantly increasing. As we are an oat milk company that comes from the good of oats, we see a significant opportunity there. Nothing to announce today, but stay tuned because we have exciting stuff coming up in the next few months.

Dara Mohsenian: Great. That's helpful. I just wanted to get a bit of an update on the cost side. Obviously, more reinvestment this year looks like it's working with the revenue yield you're getting from that. Although sometimes revenue upside can lead to more reinvestment also. There's a bit of chicken and egg dynamic there. Just as you think and look out to 2027, do you expect generally to increase the pace of investment in advertising spend over time? How do you think about that conceptually?

Also, as part of that, just as you look at your pipeline of productivity, maybe give us an update on your progress in 2026, but also some of the key priorities from a productivity standpoint as you look out to 2027.

Jean-Christophe Flatin: Thank you, Dara. I think far too early to discuss 2027. I'll focus on 2026. The first point is volume is clearly yielding cost improvement for us on both sides of the Atlantic, and it's volume absorption, but it also allows us to bring more efficiency in the system. Of course, why you don't see that fully panning out in our gross margin on the EBITDA is because of the Middle East conflict impact we have been quoting. What you see at the moment is really the net between these two pictures. Where are we?

We are pleased and confident about the delivery of our productivity improvements, and they continue along the same lines that we have been pursuing since 4 years, since Daniel and I joined the business, which is simplification, lean asset model, and continue to push efficiency and quality at the same time across our supply network. Not the place to go into infinite details, but just to let you know, do we have a plan? Yes. Is that yielding what we expect? Yes. Do you see the full picture of that? Not yet, because of the Middle East impact. We believe in continuous improvement.

I will end up there with that philosophy, which mean, of course, we have a permanent pipeline of improvement projects that keep going and will continue in 2027.

Dara Mohsenian: Great. Thank you.

Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to John Baumgartner for closing comments.

John Baumgartner: Thanks, Nikki. Thanks everyone for your participation today. Feel free to reach out with any follow-ups. Have a good day.

Daniel Ordoñez: Thank you.

Jean-Christophe Flatin: Thank you. Take care. Bye.

Operator: Bye.

Jean-Christophe Flatin: Thank you, Nikki.

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

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