Oatly (OTLY) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, February 11, 2026 at 8:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Jean-Christophe Flatin
• Chief Operating Officer — Daniel Ordonez
• Chief Financial Officer — Marie-Jose David
• Head of Investor Relations — Brian Kearney

TAKEAWAYS

• Profitable Growth Milestone -- Management announced the first full year of profitable growth since IPO, with positive adjusted EBITDA and solid constant currency revenue growth.
• Revenue Growth -- Full-year revenue increased by 4.7%, or 2.2% on a constant currency basis; Q4 revenue grew 9.1%, with constant currency growth at 4.3%.
• Adjusted EBITDA -- Q4 adjusted EBITDA was $11 million, a $17.1 million improvement over prior year Q4; full-year adjusted EBITDA reached $6.8 million.
• Gross Margin -- Q4 gross margin was 34.5%, up 580 basis points from prior year, driven by supply chain restructuring and product/customer mix.
• Cost Structure -- Cost of goods sold per liter reduced by 23% since restructuring, and total SG&A decreased by nearly $100 million, or by 21% of revenue.
• Free Cash Flow -- 2025 free cash flow was a net outflow of $39 million, a $117 million improvement from the previous year.
• Segment Performance -- Europe and International segment posted volume growth of 13.9% and a $9.9 million segment adjusted EBITDA increase; North America's revenue, excluding the largest foodservice customer, grew 10% in Q4 and set a segment record for quarterly profit at $4.4 million.
• Guidance for 2026 -- 2026 constant currency revenue growth is expected at 3%-5% and adjusted EBITDA at $25 million to $35 million.
• CapEx Outlook -- 2026 CapEx expected at $20 million to $30 million, up from 2025 due to project timing and capacity expansion in Europe and International.
• Strategic Review -- Company plans to complete the strategic review of the Greater China segment in 2026, including a potential carve-out.

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RISKS

• Marie-Jose David stated, "While we do not expect to deliver positive free cash flow for the full year 2026, we do expect to improve from 2025 level," indicating continued negative free cash flow in the near term.
• Guidance includes an approximately 200 basis point revenue headwind in 2026 from a large North America customer, impacting total growth potential.
• Gross margin headwind of 30 basis points cited from inflation during Q4.

SUMMARY

Oatly Group AB (NASDAQ:OTLY) delivered its first year of positive adjusted EBITDA and revenue growth since IPO, supported by a 580 basis point gross margin improvement and aggressive cost reductions. The company's 2026 outlook targets 3%-5% constant currency revenue growth and higher adjusted EBITDA, despite continuing negative free cash flow and a projected revenue headwind from a key North America customer. Oatly's ongoing strategic focus includes innovation in beverages, expanded capacity in Europe, a pending strategic review for Greater China, and disciplined investments to further scale its profitable growth playbook.

• Management highlighted a new era of "structurally profitable" growth underpinned by both top-line expansion and a disciplined reinvestment of cost savings to drive incremental demand.
• The refreshed growth playbook prioritized beverage category innovation and a focus on younger demographics, which management credited for increased household penetration and an inflection in category growth in core markets.
• New product launches, such as additional Barista flavors and fiber-emphasized beverages, are set to further diversify the portfolio and cater to evolving consumer trends.
• Quarterly results indicated that volume growth, not merely price/mix, is fueling top-line gains, and each reporting segment outperformed management's expectations according to adjusted EBITDA contribution.
• Oatly signaled the intention to enhance brand investments in both Europe and North America, with an emphasis on deploying its innovation pipeline across both geographies to sustain momentum.

INDUSTRY GLOSSARY

• Baristamatic: A specialized Oatly beverage product formulated for automatic coffee machines in the foodservice segment.
• Cold Form Barista: A plant-based cold foam beverage topping, introduced as a unique addition for hot or cold drinks in foodservice channels.

Full Conference Call Transcript

Jean-Christophe Flatin: Thank you, Brian, and good morning, everyone. I want to begin today's discussion with Slide 4 by emphasizing how grateful and proud I am of the entire Oatly team for delivering our first full year of profitable growth. We have achieved a major milestone of transforming Oatly from structurally unprofitable with slowing growth to a company that is now structurally profitable with accelerating goals. So thank you from the bottom of my heart to all the Oatly employees for making this happen and for continuing to nourish and grow our brand while staying true to our mission. This is truly a significant milestone. Moving to Slide 5, which has the key messages I want you to take away.

First, for the first time since our IPO and for the first time in 7 years, we drove profitable goals for the full year with solid constant currency revenue growth and positive adjusted EBITDA. I'm also proud of how we have delivered these results. We continue to drive efficiencies throughout the organization, while simultaneously reinvesting behind our refreshed growth playbook. And we are seeing clear signs that our playbook is working and having a real impact in every market where we have fully deployed it. We are truly embedded a culture that is focused on the impact of our investments.

As we look forward, we expect to accelerate this impact as we continue to execute our growth strategy and drive incremental demand. These results, we are driving with our refreshed growth playbook proposed with the visibility we have to additional growth drivers give us the confidence to expect even stronger profitable growth than what we drove in 2025. We continue to see significant potential ahead of us, and we are confident that we are taking the right steps to turn that potential into tangible results. Turning to Slide 6. Here, you can see the improvements in three of our most important KPIs.

Since beginning our turnaround in 2022, we have grown revenue 19%, improved adjusted EBITDA by $275 million and improved free cash flow by $436 million. And in 2025, we drove solid top line growth and positive adjusted EBITDA, which officially enter us into our profitable growth era. While we are turning the page from one chapter to the next, our story does not fundamentally change. We remain focused on driving growth and impact in a disciplined and profitable way. Part of that disciplined building will be continued focus on improving our free cash flow, which have significantly improved each year but is not yet where we want it to be.

Our business plan remains fully funded and bringing the company to structurally positive free cash flow is important to us. And we fully intend to drive the business to that milestone, not just from improvement in the P&L, but from pulling on all available levers, including working capital. Slide 7 goes one level deeper on our transformation. Here, you can see that the underlying health of our business has continued to improve as we have driven toward profitability. In 2025, we sold more volume than ever before and 18% more than in 2022. At the same time, we continue to improve our gross margin to over 32%, which is 2,100 basis points higher than 2022.

And on Slide 8, you can see the results on the cultural obsession with driving efficiencies to provide fuel for growth-driving investments. Since Daniel and I joined the company, we have reduced our cost of goods sold per liter by 23%, reflecting the significant restructuring of our supply chain, including the strategic partnership in North America that led to a consolidation of co-packers the closure of our Singapore facility and the creation of a culture obsessed with efficiency and continuous improvement. We have also reduced our total SG&A by nearly $100 million or 21% of revenue, while continuing to invest to support our brand.

We have taken a portion of these savings and redeployed them in a very disciplined and deliberate manner by ensuring that our investments are all rooted in our refreshed growth playbook that Daniel will describe. So let me give you just some examples in the next few slides. We have invested in new on-time products that are extremely relevant to today's consumer. We have launched new flavors such as the flavored Barista products. We have launched new product varieties, such as matcha. And we have launched new products for specific customer needs such as the baristamatic that is formulated specifically for automatic coffee machines.

We invested in our look books and future of taste reports, both of which actively inspire customers and consumers to think about, use and consume Oatly while also solidifying us as the global taste authority. We invested in events that introduce our products to new customers and consumers while also being a cultural experience that people share on their personal social media platforms. And we invested in [ car-stopping ] in-store executions to ensure that consumers makes us part of their daily lives. As you can see, our journey to profitable growth has not just been a cost-cutting exercise. We have been shaping and building this business to sustainably drive profitable growth far into the future.

Slide 15 shows our focus areas for 2026. As Daniel will outline, we are seeing very positive traction on our refresh growth strategy, and we will be doubling down on its execution. We will, of course, maintain our culture of efficiency, continuous improvement and impact. This cultural obsession continuously generates fuel for growth-driving investments and deploy those investments in a very disciplined manner. And finally, while we do not have a detailed update for you today, in 2026, we plan on completing the strategic review of the Greater China segment. We continue to evaluate a range of options, including a potential carve-out with the goal of accelerating growth and maximizing the value of the business.

We will update the market on our progress as necessary. Slide 16 shows our guidance. In 2026, we expect the continued rollout of our refresh growth playbook to drive an acceleration in our profitable growth. Specifically, we expect to drive constant currency revenue growth of 3% to 5% and adjusted EBITDA of $25 million to $35 million. With that, dear Daniel, over to you.

Daniel Ordonez: Thank you, JC, and good morning, everybody. Today, I will outline how our growth playbook is working and what to expect as we move forward. Slide 18 shows the three pillars of the playbook that we have been executing against increased relevance, attack barriers to conversion and increase availability to consumers. Slide 19 summarizes our focus over the past 2 years. We have methodically deployed this playbook, staying true to our unique strength but radically transforming the way in which we look at the category and the way in which we deploy our brand.

As part of our cultural session with efficiency, focus and impact that JC was referring to, we made the strategic choice to fully leverage our iconic brands, our outstanding core product and our unique Barista market developers team by focusing them on the areas of highest impact. So staying true to what makes Oatly, Oatly, this playbook change is founded on the strategic choice to be relevant to a much broader population, a decision not just to aim at growing consumption within our historical consumer base, the lactose intolerant and the environmentally conscious but also to expand our target market to the upcoming younger generations to drive true incremental consumption growth.

That means we're focusing on our strength within beverages, as opposed to trying to mimic dairy in all its form, from cheese to yogurt, ice cream and on and on, an alternative to dairy no more, but an experience canvas for the beverages market. By simplifying our focus on beverages, we have been able to simultaneously broaden our attention from primarily coffee to the much larger and faster-growing beverage space. from coffee to matcha to cold forms to dirty soda and beyond. We are working with customers to renovate their menus and expand their shelves to be more relevant, more provocative and more on trend with today's consumers.

As we help customers become more relevant, we are gaining more space and visibility on menus and on shelves. To attract these consumers, we knew we had to evolve alongside them. And while sustainability will always remain the core of the Oatly mission, we know that the biggest sustainability impact we can have is through growing and converting more people. We also know that taste is a top driver for adoption. Therefore, as we say internally, we live with taste and reaching with mission. We have also adapted how we communicate Gen Z and Alpha are digitally native and we have migrated from analog heavy individual advertising to a more relevant integrated and digital-first approach.

And ultimately, the proof is in the results. It's a clear sign that this strategy is working, and we have moved from slowing growth to accelerating growth, not only Oatly being the driving force of oat milk and plant-based milk in that order, what I'm particularly excited to see household penetration on the rise for the first time in years. Slide 20 shows that our strategy has driven broad-based global growth in 2025. In the Europe and International segment, we saw a solid 7% growth in our established markets and fantastic 54% growth in our expansion markets. North America has also driven solid 7% growth in both retail and foodservice when excluding the largest food service customer.

Greater China has grown 5% in its key food service channel and its entry into the retail cloud channel more than doubled the retail business in the segment at the back of a more decisive move into clubs with the right high fiber portfolio. When we look at the underlying growth on Slide 21, we see accelerating growth, which gives us additional confidence that the strategy is working. Europe and international constant currency revenue growth accelerated throughout the year and reached 14% in the fourth quarter. Similarly, excluding a large food service customer, North America revenue growth accelerated to 10% in the fourth quarter. And Slide 22 shows that we consistently outperformed our competition in the track channel data.

During the second half of this year, we expanded our retail market share in every single European market that we measure, whether it is an established or an expansion market. Unlike in Sweden, Switzerland, Norway and Austria, we have recently became the #1 plant-based drink brand in Germany which is an amazing feat given that Oatly is a single crop competing among multi-crop brands. And in the U.S., as we start to lap last year's portfolio delistings, our drinks portfolio returned to growth in the fourth quarter at the back of sustained strong velocities and distribution gains in the core portfolio. Importantly, our growth is being fueled by new consumers entering the category.

On Slide 23, you can see that most of our major markets have increased household penetration in the past year. As we dig into the data, we see that consumers are coming into the category tend to be younger gentry, which we find very encouraging. Now that we have discussed the past, I want to give you a preview of our future plans. Put simply, we are doubling down on our growth playbook. Since its initial rollout, we have found that it works in every market where it is fully executed. So we intend to continue executing on the 3 pillars: Increased relevance, attack barriers to conversion and increase availability to consumers and our upcoming innovation launches clearly demonstrate them.

Slide 25 shows how we're going to further expand of Barista lineup in 2026. Our iconic Barista product remains our top-selling item and the Flavor of Barista such as the caramel, vanilla and popcorn flavors have been a hit with consumers. In 2026, we will be launching additional flavors such as churros and coconut. This will enable customers to create an even wider range of drinks with on-trend flavors. I am particularly excited to announce the launch of our cold form Barista that can be added on top of any beverage hot or cold as plant-based cold form options aren't available in the market yet.

This is a breakthrough product that will elevate the experience for our food service customers and will delight consumers. We will also be capitalizing on the success of our new matcha line up. Half of our matcha drinks have added flavors. So we're making easier and more convenient for both customers and consumers by launching matcha products in retail with the flavors they have proven to like the most in food service. And unless you have been ignoring all social media for the past year, you will know that consumer awareness of the importance of fiber has been rapidly increasing. Consumers are fiber maxing to boost gut health increased satiety and lose weight.

As a company that is rooted in science, only has historically advocated for the benefits of fiber and people's diets. In fact, many global health authorities estimate that people in the Western world have a fiber deficiency of 10 grams per day. So we will be decisively leveraging our fiber credentials by campaigning about the fiber content of our products. But this is just the first step, and you should expect to see more from us on this topic in the future. As you can see, these new product launches are incredibly relevant to today's consumers.

They directly attack barriers to conversion to on-trend flavors and convenience and we have concrete plans to increase their availability to consumers around the world. With that, I will now turn the call over to Marie-Jose. MJ, please?

Marie-Jose David: Thank you, Daniel. Good morning, everyone. Slide 29 shows the quarterly and full year P&L. This quarter, we grew revenue 9.1% and 4.3% on a constant currency basis. Gross margin was 34.5%, which is an increase of 580 basis points compared to last year's Q4. Adjusted EBITDA was positive $11 million in the quarter, which is $17.1 million higher than last year's Q4. For the full year, I am proud to report that we have driven our first full year of profitable growth. We grew revenue 4.7% or 2.2% on a constant currency basis. And adjusted EBITDA was $6.8 million. Slide 30 shows the bridging items of our revenue growth.

In the quarter, volume grew 2.9% and Price/mix increased by 1.4%. Foreign exchange was a 4.8% tailwind. Slide 31 shows our year-over-year gross margin bridge. The benefit of absorption and supply chain efficiencies improved margin by 400 basis points. This reflects the positive impact of the closure of our Singapore manufacturing facility at December as well as volume absorption and productivity. Pricing and product mix added 200 basis points to gross margin in the quarter, mainly driven by our strategic mix management in Europe and international and customer mix in North America. We experienced a 30 basis point headwind from inflation. Finally, the impact of foreign exchange movements will withstand the strong headwind.

Slide 32 show the Q4 year-over-year improvement in our adjusted EBITDA. The $17.1 million improvement was driven by $90.1 million increase in gross profit partially offset by $2 million increase in SG&A and other. In SG&A, our ongoing cost savings actions in areas such as indirect procurement were more than offset by a $7 million headwind from FX. Slide 33 shows segment level detail. In the quarter, each segment outperformed our top line expectations. Importantly, the outperformance was driven by volume, which highlights that our growth label is working and driving incremental consumer demand. European international grew volume by 13.9%, which helped drive a $9.9 million increase in the segment adjusted EBITDA.

North America 8.8% revenue decline was driven mainly by the change in sourcing strategy at a large customer. As Daniel mentioned, excluding this large customer, the segment grew 10% in the quarter. The segment adjusted EBITDA increased to $4.4 million, which was the segment highest ever quarterly profit. Greater China constant currency revenue declined slightly. Recall that last quarter, we said that certain customers' orders shift from Q4 to Q3, which impacted the growth rates in the quarters. The segments reported $1.1 million in adjusted EBITDA. Corporate segment improved $3.5 million, and we continue to rightsize our cost structure. Turning to our cash flow on Slide 34.

For the full year, free cash flow was a net outflow of $39 million, which is $117 million better than last year. I continue to see good progress throughout the company on all levels of cash flow and believe we still have room for improvement. As JP mentioned, our business plan remains fully funded and we are very focused on bringing the company to structurally positive free cash flow. While we do not expect to deliver positive free cash flow for the full year 2026, we do expect to improve from 2025 level. In 2026, the biggest driver of our free cash flow improvement are expected to come from our higher adjusted EBITDA as well as working capital improvement.

We will continue to discipline in our investment process. During the fourth quarter, we closed our refinancing activity that we announced in September. While there is not material impact for free cash flow. We continue to expect approximately $5 million of noncash interest expense savings that we discussed last quarter, with the savings being mainly driven by a reduction in our outstanding convertible notes. Turning to our 2026 outlook on Slide 35. We expect constant currency growth in the range of 3% to 5%. This growth includes an approximately 200 basis point headwind from a large customer in North America. Despite this headwind, we expect the North America segment to both sell in 2026.

Based on recent FX rates, I'm assuming no change for the rest of the year. we estimate FX to add approximately 100 to 200 basis points to full year net sales growth. For adjusted EBITDA, we expect to be in the range of $25 million to $35 million. The year-on-year improvement is expected to mainly come from gross profit improvement, driven by sales growth, outsourced benefits as well as efficiencies in the supply chain. We expect to support the continued rollout of our growth playbook with strong brand building investment. Especially in the first half of the year. Our guidance continues to assume no direct impact from U.S. tariffs.

We also assume that the current economic conditions and consumer behavior will remain largely consistent for the year. We expect CapEx to be in the range of $20 million to $30 million for the full year. This is higher than 2025, driven by two factors. First, some projects that were originally planned for 2025 have moved to 2026. And second, we had on increasing capacity in our European International segment to support and enable its continued growth. We are being very disciplined with this capacity expansion and we expect it to generate a higher return on investment. Finally, on an administrative note, due to our recent entrance of Nordic bonds.

Going forward, we will start seeing an aggregated quarterly report for the fourth quarter in addition to our annual 20-F. This concludes our prepared remarks. Operator, we are now prepared to take questions.

Operator: [Operator Instructions]. The first question comes from John Baumgartner with Mizuho.

John Baumgartner: 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?

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

John Baumgartner: My follow-up was more on the innovation side as well.

Daniel Ordonez: Good, good. Good to hear you. Listen, our story is very consistent on this front on foodservice partnerships in general for the -- for the last 3 years, we have been diversifying the customer base. We added a significant amount of new customers in the channel and with visible success. As you saw the double-digit growth in the last quarter, which has been sustained for a few quarters now. These -- the segment outside this large customer now represents 30% of the total segment and with very, very good accretive mix. So these customers, which we expect to continue to grow strongly, they believe in the Oatly playbook and are committed to growing the category profitably.

So this is, as you heard us saying before, this is our controllable. And moving forward, we will decisively take them more and more of them on board. So I'm giving you more of the precise outlook there. We expect to continue to follow this growth pattern moving forward. As far as the specific customer that you referred to, it's now below 10% of this segment's revenue in the quarter. And you know John very well where we come from when JC and I took over the business 3 years ago, right? So from a much, much larger number.

And you heard MJ talking about what to factor in, in the model when it comes to the headwind as we move forward. So we focus on the controllables, and that's it. From -- what we are seeing, and I know you are in tune with what's happening in Europe from an NPV standpoint, we see food service in North America is -- coffee and food service, I would say, because they are segments within the same space, which we internally call out of home, it's beaming. We see a very similar dynamic as you see when you walk into any of them like we see in Europe is beaming and growing very, very consistently.

So the type of signature drinks you see in Europe, and you could see the look book, you start to see them more and more in the U.S. And I would draw your attention to the latest collab. If you want to spend a few minutes in Instagram, you can go for kids of immigrants and you see the type of stuff that the brand is doing collabing with a barista community and the food service community that really, really are committed to driving us forward.

And therefore, there is very, very stock similarity between the signature drinks that you see in Europe, the signature drinks you see in food service in the U.S. and the kind of momentum we are driving. When it comes to specific innovations, you would have seen that we have not made a distinction between European innovation and North America's innovation. And that's the decision following the consumers we have addressed in the last earnings call, the similarities we see in the Oatly space, in the coffee space and beverage space. And therefore, everything we're talking here from baristamatic to cold form, plant-based cold foam, you will eventually see that in your home market very soon. So that's the destination, John.

John Baumgartner: Great. And then to follow up on the innovation front, it looks as though you're really enhancing the focus on fiber, which I guess, naturally ties in with your own ingredients there. But I'm curious, one of your largest competitors in the U.S. has recently launched a high-protein fortified plant-based beverage. And yes, just sort of think about the functionality of the category, how are you thinking about enhancing protein content, especially as you see more of the food service operators leading towards protein-oriented innovation?

Daniel Ordonez: Very good, John. And again, consistent with what we talked about, we stayed true to who we are. Remember, when 2 years ago, we started to pick up the noise and misinformation in the category, and we really stay tuned towards science says and what we stand for in the end. And what science says is that the Western world's population has a fiber deficit of approximately 10 grams per day. And at the same time, there is a protein surplus. So you see there is that we follow what everybody else is doing or we follow not just our instincts, but who we are.

And as you saw in our prepared remarks, we do see a very, very significant trend, fiber maxing trend based on gut health, both in the U.S., North America and in Europe. So that's what we will have as focused doing. And Oatly glass-full closes the gap, the fiber gap by 20%, 1 only glass of Oatly. So what we are convinced about is that the world needs more oats and on the power oats. So we're very, very excited to see fibers and gut health racing in popularity, especially with Gen Z, and we will be very active on this space, not only advocating and campaigning for it.

But as you are pointing out, focusing on delivering an enhanced portfolio in this space.

Operator: The next question comes from Max Gumport with BNP Paribas.

Max Andrew Gumport: 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?

Daniel Ordonez: 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. The Reshape portfolio, you see what -- you remember where we come from. Playing in 3 or 4 different categories. Now is 95% drinks, approximately 95% drinks is yielding the results you see in the last quarter, number one.

Number two, as I replied to John before, the coffee and food service playbook is in full motion in the U.S. and is growing consistently at double digit. Thirdly, we made big steps in clubs that continue to move from strength to strength and as an extra bonus, we have opened Canada as a greenfield on top. So these are the things -- these are the measures that we have taken to drive the category forward. These actions underpin the underlying performance that you've seen in the segment, the highest sales on record in both channels with 10% underlying growth in the quarter.

And going specifically into retail, you see how we are outperforming the market and competitors with the highest ever shares in both categories, oat milk and plant based in the last 4 weeks period. So of course, all of us, you and us included, were asking ourselves a question, okay, that's good. Therefore, your strategy is one of share taking. Of course, not. We know that we believe that we know when Oatly grows, so does the category. And we start seeing the first results on penetration, Max. We're growing penetration. Again, this is something that JC and I have not seen in the U.S. since we are building the business.

So this is now being fit and moving decimals of penetration is not an easy feat. So we're indeed converting consumers and the momentum is building in the U.S., too. So what's coming, two very important points. What's coming? So we turn these early results into strong category growth, which is the top of our controllables leased in the U.S. First, in line with our selective investment choices and having reached the profitable growth milestone as a company that both JC and MJ referred to, you should expect us to progressively see this year more visible brand investments behind demand generation, as you have seen in Europe in a sustained manner.

I was mentioning before the kids of immigrant workwear for the Barista community, which is really, really breaking more records at the moment in social and within the Barista community. So that's number one, investment behind the brand investment behind the mat. Second, the big missing piece here, Max, is to see in the U.S. traditional trade the kind of portfolio you can see in Europe, where we can turn all this feeding growth in food service and out-of-home and coffee into the retail space. And the teams were ready to deploy, by the way, all these products you see are ready to deploy and some of them are very close to be deployed.

The teams are head down on the case. But here is the point that you know very well. The U.S. market is very large and it's more complex. So the trends we observe in out-of-home or Expo West in a couple of weeks, take time to appear on shelf. The most notable difference being the timing of shelf of retail resets typically once a year with very strong and narrow windows. So expected to get progress but only step by step. So to your point, as you can hear, we're very pleased that we see signs that we're moving in the right direction.

And if I can talk for two seconds about Europe as well, we will maintain the core to sustain momentum in Europe and fully turn the corner in North America. We can get these two things: investment behind the brand and demand and the retail space transformation as we move forward. That we believe will make our algorithm totally work.

Max Andrew Gumport: Great. And then as a follow-up on free cash flow. So it's clear you've made sizable progress yet again in '25 on free cash flow, and you expect continued progress in '26, although it sounds like you still expect free cash flow to be negative. You noted your plans are fully funded. I'm wondering what do those fully funded plans embed for when free cash flow turns positive?

Marie-Jose David: Sure. Max, this is MJ. Look, thank you first for recognizing all the progress, and it's absolutely true, and we've been consistent, repeating that our business plan is fully funded and cash is important, not only to me, but you've heard me as well saying that the culture within the company has changed significantly. So how are we looking at that moving into 2026. First, clearly, you've heard all the things we are doing in order to drive the growth.

So the combination of driving the top line, continuing to be offset by driving efficiencies as well as the progress that we've been doing on working capital with strong discipline on CapEx, comment, this is a combo that give us the full confidence that this business will be free cash flow positive. Now lastly, it's a matter of time because we know and we see the building blocks in place. So clearly, if you allow me to say that, we will continue to give you an update as we go with in 2026. But first now, we are not giving more than what we just said.

Operator: The next question comes from Kaumil Gajrawala with Jefferies.

Kaumil Gajrawala: 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.

Daniel Ordonez: 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.

Jean-Christophe Flatin: Thank you, Kaumil. JC, taking over. First of all, thank you so much for your words of recognition for the journey. It means a lot. It has been quite a journey. So happy to hear. I'm taking your two points, cow's milk. What we see is cows milk in volume continues to decline. And it's a decline that started years ago. There is one very specific segment within cow's milk that is uptick, which is the one with protein. Protein-enriched cow's milk is the only one that is seeing an uptick. The rest is going down. So just to clarify the way we look at that. Now when it comes to the new U.S. dietary guidelines.

I look at it with mixed links to be honest. The first, on one hand, I'm heartened and I see very positively the normalization of non-dairy milk in the Whole Milk for Healthy Kids Act, meaning that no children in more schools around the U.S. will have an easier access to nutrition sustainable nondairy options on their lunch price. I think that's great. But on the other hand, when I look at the DPA heavy push for diet to include more whole cow's milk, animal proteins and animal-based fats. I find it both concerning an a missed opportunity.

Concerning because the leading cardiologists have warned that encouraging an increase in meat and full fat while neglecting fiber goes against clinical advice ignores decade of clinical evidence and risk increasing evidence and incidence of hard disease for Americans, which already is the leading cause of death in America. And when it comes to the planet terms perspective, we know that meat and dairy alone represent half of all climate emissions produced by our food system. So where does that bring me? I still believe that dietary guidelines are a great starting point for national public health policy and they can make an enormous difference in improving the well-being of citizens farmers on the planet.

And when I look at the positive example, I took to look at Denmark, the first country in the world to create a government-led action plan to shift it towards more sustainable sources of protein and other nutrients, including fiber and healthy fats, which is for me, the best existing example out there.

Operator: the next question comes from Samu Wilhelmsson with Nordea Markets.

Samu Wilhelmsson: 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?

Marie-Jose David: So your question is about the free cash flow conversion Q3 versus Q4. Is that correct?

Samu Wilhelmsson: 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?

Marie-Jose David: 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].

Samu Wilhelmsson: Yes. I think that's a good answer to that question. But just shortly on the CapEx also just minor detail, but given that you mentioned a capacity increase for '26 in terms of CapEx, are you ability disclose that what was the capacity utilization of your existing facilities at the end of the year?

Daniel Ordonez: Thank you so much. So as you can see, we -- from a toll-based standpoint, we have everything we need, and we are very confident that we can fulfill the foreseeable growth with the old based capacity we have. because of the accelerated growth in Europe and International, which is obviously a great challenge to have, we will be adding a few filling capacity, and this is what's included in our CapEx guidance.

Samu Wilhelmsson: Okay. Got it. And one last question from my side. It's regarding your equity position given that you currently have million equity in your balance sheet. Is this a risk that you are currently assessing given the near-term earnings development? And how we should think of your equity position to develop going forward?

Marie-Jose David: So clearly, I think I said it already, we are always looking at our opportunities when it comes to how to manage the balance sheet and the value creation from the balance sheet. So I honestly don't have a lot to say today. But yes, we are looking at everything.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Brian Kearney, for any closing remarks.

Brian Kearney: Great. Thank you. Thank you, everybody, for joining us today. If you have any follow-up questions, please feel free to reach out to me, and we can set something up. Have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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