Oatly(OTLY) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company's financial statements show a Q3 profit driven by financing activities and improved liquidity Statement of Operations Q3 2023 shows improved gross profit and a net profit driven by significant non-operating finance income Consolidated Statement of Operations Highlights (in thousands of U.S. dollars) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 187,595 | 183,026 | 579,227 | 527,170 | | Gross Profit | 32,561 | 4,982 | 104,305 | 48,974 | | Operating Loss | (67,348) | (104,368) | (214,397) | (270,954) | | Finance Income/(Expenses), Net | 112,841 | (7,491) | 99,333 | (4,507) | | Profit/(Loss) for the period | 44,011 | (107,949) | (118,285) | (267,398) | | Basic EPS ($) | 0.07 | (0.18) | (0.20) | (0.45) | Statement of Comprehensive Income/(Loss) Q3 2023 comprehensive income improved significantly, though the nine-month period shows a comprehensive loss Comprehensive Income/(Loss) Summary (in thousands of U.S. dollars) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Profit/(Loss) for the period | 44,011 | (107,949) | (118,285) | (267,398) | | Other Comprehensive Loss | (6,886) | (43,223) | (100,405) | (126,389) | | Total Comprehensive Income/(Loss) | 37,125 | (151,172) | (218,690) | (393,787) | Statement of Financial Position The balance sheet reflects increased assets and liabilities due to recent financing, resulting in lower total equity Financial Position Highlights (in thousands of U.S. dollars) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | 1,307,835 | 1,225,197 | | Cash and cash equivalents | 283,184 | 82,644 | | Inventories | 83,537 | 114,475 | | Property, plant and equipment | 501,923 | 492,952 | | Total Liabilities | 716,675 | 434,054 | | Convertible Notes | 281,541 | - | | Liabilities to credit institutions | 125,503 | 52,590 | | Total Equity | 591,160 | 791,143 | Statement of Changes in Equity Total equity declined significantly due to comprehensive losses from operations and financing instruments - Equity attributable to shareholders of the parent decreased from $791.1 million on December 31, 2022, to $589.3 million on September 30, 2023[10] - The main drivers for the equity decrease were the net loss for the period and other comprehensive losses, including a $(72.7) million fair value change on Convertible Notes due to credit risk and a $(199.2) million foreign currency translation reserve[10][85] Statement of Cash Flows Cash position improved significantly due to strong financing inflows, offsetting operational and investment cash usage Cash Flow Summary (in thousands of U.S. dollars) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Net cash flows used in operating activities | (151,479) | (215,224) | | Net cash flows (used in)/from investing activities | (9,636) | 51,856 | | Cash flows from/(used in) financing activities | 362,033 | (9,981) | | Net increase/(decrease) in cash | 200,918 | (173,349) | | Cash and cash equivalents at end of period | 283,184 | 105,603 | Notes to Financial Statements Notes detail segment performance, asset sales, major financing activities, legal settlements, and key subsequent events - Segment Performance (9M 2023): EMEA revenue grew to $297.0M, Americas revenue grew to $184.4M, while Asia revenue declined to $97.9M[26] - YYF Transaction: The company closed the sale of its Ogden, UT and Dallas-Fort Worth, TX facilities to Ya YA Foods (YYF) for an aggregate purchase price of approximately $102.6 million, including cash, a promissory note, and credits[79][80] - Financing: The company issued a total of $335 million in 9.25% Convertible Senior PIK Notes due 2028 and entered into a new $130 million Term Loan B Credit Agreement[92][105][109] - Legal Settlement: The company reached a settlement in principle for securities class action litigation, agreeing to pay $9.25 million, which is contingent upon court approval[124] - Subsequent Events: The company decided to discontinue construction of new production facilities, expecting a $110-$150 million non-cash impairment charge in Q4 2023, and received a Nasdaq non-compliance notice for its stock price falling below the $1.00 minimum bid requirement[126][128] Management's Discussion and Analysis (MD&A) Management discusses strategic shifts toward profitability, improved gross margins, and enhanced liquidity Results of Operations Q3 revenue growth was driven by EMEA, with significant gross margin expansion and lower operating expenses Q3 2023 vs Q3 2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $187.6M | $183.0M | +$4.6M | +2.5% | | Gross Profit | $32.6M | $5.0M | +$27.6M | +553.6% | | Gross Margin | 17.4% | 2.7% | +14.7 p.p. | N/A | | SG&A Expenses | $87.1M | $103.8M | -$16.6M | -16.0% | - The increase in gross profit margin was mainly due to price increases in EMEA and improved operational efficiency, including lower inventory write-offs[166] - The decrease in SG&A expenses was driven by reductions in employee-related expenses, customer distribution costs, marketing, and professional fees[171] Liquidity and Capital Resources Liquidity was significantly strengthened through new debt facilities and convertible note issuance - As of September 30, 2023, the company had $283.2 million in cash and cash equivalents and $203.6 million available in undrawn bank facilities[179][180] - Financing activities in 2023 included a new $130 million Term Loan B Credit Agreement and the issuance of Convertible Notes totaling $335 million in aggregate principal amount[181][184][189] - Net capital expenditures for 2023 are projected to be below $75 million, reflecting a shift in capital allocation strategy[178] Non-IFRS Financial Measures Non-IFRS measures like Adjusted EBITDA and Free Cash Flow show significant year-over-year improvement Adjusted EBITDA Reconciliation (in thousands of U.S. dollars) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Profit/(loss) for the period | 44,011 | (107,949) | (118,285) | (267,398) | | Adjustments (Taxes, Finance, D&A, etc.) | (98,800) | 25,246 | (78,815) | 60,001 | | Adjusted EBITDA | (35,998) | (82,703) | (138,339) | (207,459) | - Constant currency revenue was flat in Q3 2023 compared to Q3 2022, and grew 11.0% for the nine-month period[208] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign exchange, interest rate, credit, and liquidity risks - Primary market risks are identified as foreign exchange, interest rate, credit, and liquidity risk[220] PART II – OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings aside from a disclosed class action settlement - The company is not a party to any material legal proceedings, other than those disclosed in the financial statement notes[221] Risk Factors Key risks include potential Nasdaq delisting, significant impairment charges, and ongoing litigation - Nasdaq Listing Risk: On November 6, 2023, the company received a notice from Nasdaq for non-compliance with the minimum $1.00 bid price requirement, which could result in delisting if not remedied[223] - Impairment Charges: The company expects to record non-cash impairment charges of $110 million to $150 million in Q4 2023 related to the discontinuation of construction at new production facilities[225] - Litigation Risk: The company is subject to securities class action lawsuits and has reached a settlement in principle for $9.25 million, which is pending court approval[227] Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities Information regarding the use of proceeds is incorporated by reference from a prior SEC filing - Information regarding the use of proceeds is incorporated by reference from a prior SEC filing[228] Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None[229]