Oatly Group AB (OTLY) Earnings

Management highlights

- Overall Financial & Strategic Progress * Q2 2026 delivered 15.2% reported net revenue growth (12.7% in constant currency), with gross margin improving 140 basis points year-over-year to 33.9%. Adjusted EBITDA was positive $0.4 million, a $4 million year-over-year improvement. Free cash flow was a negative $0.6 million, a $4.6 million improvement year-over-year. * The pivot to a full beverage company, centered on taste, health and sustainability for younger consumers, is driving strong momentum, with outperformance of the broader plant-based beverage category across markets. * Oatly's growth playbook emphasizes innovation, new consumption occasions, expanded distribution, and building cultural relevance via events and digital strategy. - Brand & Innovation Initiatives * Hosted a major industry event (Aftertaste) in New York for 250 industry stakeholders, generating over 70 million global media impressions and 9 million online reach as one of the largest North American brand investments to date. * Launched a summer recipe lookbook with 63 new innovative drinks that have become category standards, driving expanded relevance in food service mixology and refreshment, with top innovations moving to retail for in-home consumption. * Announced a second expanded partnership with Nespresso, rolling out across 220 boutiques in 26 markets, and executed high-impact local cultural campaigns in Mexico City and Amsterdam that generated hundreds of millions of global impressions. * New product launches include cold foam barista oat products, and new flavors (popcorn, churros, coconut) alongside an expanded matcha range, driving strong penetration growth among younger consumers. - Regional Operational Highlights * Europe and International: Established markets delivered growing household penetration and strong market share gains, with new expansion markets growing 82% year-over-year. In the mature home market of Sweden, 18 months of beverage playbook execution delivered 10 percentage points of shelf share growth and nearly 2 percentage points of category market share gain in the past year, proving growth is possible in mature markets. * North America: Growth is accelerating, with market share reaching near-record highs for oat milk and plant-based beverages. The out-of-home/food service channel grew 18% year-on-year, and the year-over-year sales headwind from the exit of the former largest food service customer has fully ended, with a diversified customer base now in place. Retailers are approving off-cycle product listings outside of traditional annual reset windows, a strong signal of brand momentum. * Greater China: An ongoing strategic review (including a potential carve-out) is on track to complete by the end of 2026, focused on accelerating growth and maximizing business value. - Margin Improvement Progress * 140 basis points of gross margin improvement was driven by 210 basis points from fixed cost absorption and supply chain efficiencies, plus 30 basis points from favorable product/channel mix, partially offset by 110 basis points of net inflation and Middle East conflict-related cost pressure.

Guidance

- Constant currency full year 2026 revenue growth guidance was raised to 8-10%, up from the prior guidance of 3-5%. Reported net revenue is expected to get a 200-250 basis point foreign exchange benefit, up from the prior expectation of 100-200 basis points. - Adjusted EBITDA guidance is maintained at the 25-35 million range, with management expecting to deliver towards the low end of this range, unchanged from prior outlook. The guidance already includes full absorption of all expected Middle East conflict-related cost increases, which remain in line with April estimates. - Full year 2026 capital expenditure guidance is unchanged at 20-30 million. - Positive full year 2026 free cash flow is not expected, due to planned inventory builds to support volume growth and capital expenditure phasing, though the business remains fully funded and on track to reach positive free cash flow over time.

Segment performance

1. Europe and International: Net sales grew 18% year-over-year in constant currency. Segment adjusted EBITDA grew $0.7 million year-over-year, reaching an adjusted EBITDA margin of 17.5%. This segment contributed the strongest volume growth among Oatly's three geographic segments, with 82% year-over-year growth in newer expansion markets. 2. North America: Revenue grew 5.9% year-over-year in constant currency, with positive volume growth of nearly 2%. Segment adjusted EBITDA increased $3.1 million year-over-year to $0.7 million, matching the prior quarter level after managing incremental Middle East conflict-related cost headwinds and brand investment. 3. Greater China: Constant currency revenue grew 5.6% year-over-year, with 5.5% volume growth; retail channel growth offset continued headwinds in the food service channel. The segment reported negative adjusted EBITDA of $1.5 million. Corporate expenses were $1 million lower year-over-year, as efficiency gains offset foreign exchange headwinds.

Risks & headwinds

- Elevated cost pressure from the ongoing Middle East conflict, primarily impacting fuel-related logistics and packaging costs, which has absorbed margin gains from volume growth and efficiency improvements in 2026. - Macroeconomic headwinds including tight household financial conditions in North America, which have weighed on overall retail plant-based beverage category growth. - Persistent market headwinds and strong competition in the Greater China food service channel. - General elevated macroeconomic volatility and unpredictability that could impact actual results relative to guidance.

Analyst Q&A

• Q: The analyst asked for a breakdown of whether Oatly's revenue acceleration is driven by new users, existing users consuming more, pricing, or other factors.

  A: Growth is balanced across all dimensions: new and existing consumers, new and existing customers, and new and existing markets across both Europe and North America. In Europe, growth is driven by new beverage portfolio that opens new usage occasions, and rapidly growing critical mass in new expansion markets. In North America, out-of-home food service delivers very strong 18% growth, and retail is outperforming the weak category with ongoing penetration and share gains.

• Q: With revenue guidance raised and Middle East conflict cost estimates unchanged from April, why wasn't adjusted EBITDA guidance also raised? Is the decision driven by higher reinvestment?

  A: Three factors drive the decision to keep EBITDA guidance unchanged: first, volume growth and positive price mix are delivering solid margin momentum that will continue in H2. Second, Middle East conflict cost pressure is expected to remain consistent with Q2 levels in H2, matching prior April estimates. Third, management is deliberately reinvesting the incremental revenue upside across European and international markets to fuel further growth, with Q2 representing the peak of reinvestment phasing. Management chose to maintain conservative guidance amid ongoing volatility and confirmed delivery towards the low end of the existing 25-35 million range.

• Q: What is driving Oatly's solid North American growth despite a weak overall category and lapping the loss of a large food service customer, and what is the outlook for the oat milk category specifically?

  A: Oatly's outperformance comes from a fully cleaned portfolio with 98% of SKUs now strong beverage products with strong velocities, plus ongoing penetration gains especially among Gen Z consumers. Oatly now holds 22% category penetration (up from 17% last year) and captures 30% of total oat milk category sales, taking the majority of share lost by other major brands. While total retail category growth remains soft, strong out-of-home growth and retail off-cycle product approvals confirm the relevance of Oatly's beverage strategy, with significant room to grow the overall category.

• Q: Can you provide specifics on shelf space opportunities in North America for 2027, including existing accounts and new partner opportunities?

  A: Oatly has grown retail ACV coverage from 32% to nearly 50% in recent years, with further headroom for growth, especially in the club channel. Most upcoming opportunity is for additional TDPs (product SKUs) rather than new ACV (new accounts), as retailers adopt Oatly's new beverage playbook aligned with Gen Z preferences. Oatly also noted growing consumer demand for gut health and fiber products, which positions oat-based offerings well for exciting new product launches in coming months.