Q4 2021 Beyond Meat Inc Earnings Call

[music].

Okay.

Good afternoon, and welcome to beyond each fourth quarter earnings Conference call.

All participants will be in listen only mode.

Please signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be opportunity to ask questions.

Please note that this event is being recorded.

Now I'd like to turn the call over to Mr. Louis could do well.

P P F PNA and Investor Relations.

Thank you very much everyone.

Please go ahead Sir.

Thank you good afternoon and welcome joining me on today's call are Ethan Brown, founder, President and Chief Executive Officer, and Phil Hart, Chief Financial Officer and Treasurer.

By now everyone should have access to the Companys fourth quarter earnings press release, and Investor presentation filed today after market close.

These documents are available on the Investor relations.

Beyond <unk> website at Www dot beyond meat Dot com.

Before we begin please note that all information presented on today's call is unaudited and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws.

These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.

Forward looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold.

Please refer to today's press release, the company's quarterly report on Form 10-Q , the quarter ended October <unk> 2021, the Companys annual report on Form 10-K for the fiscal year ended December 31, 2021 to be filed with the SEC and other filings 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.

Please note that on todays call management may make reference to adjusted EBITDA adjusted gross profit and adjusted net loss, which are non-GAAP financial measures.

While we believe these non-GAAP financial measures provide useful information for investors any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Please refer to today's press release or the Investor presentation for a reconciliation of adjusted EBITDA adjusted gross profit and adjusted net loss to their most comparable GAAP measures.

I would now like to turn the call over to Ethan Brown.

Thank you Louis and good afternoon, everyone like many we saw challenges throughout 2021, including the fourth quarter.

Before delving more specifically into our quarterly and full year 2021 results I'd like to share our view.

Since 2018, our last year as a private company, we have grown our business, 428% or three year CAGR of 74%.

So we posted growth of 37% in 2020, we saw a much more modest increase of 14% in 2021.

Net revenues of approximately 465 million in the fourth quarter. It was roughly flat at $101 million were negative 1% year over year.

The key question is whether this reduced growth rate is an aberration or a harbinger of things to come.

As our 2022 guidance suggests we believe last year's growth rate to be temporary.

And the growth will build to higher levels. This year.

Our confidence springs from four general factors among others.

One we do not expect certain positive consumer trends that appear related to COVID-19 .

And that did not favor our category to persist chief among these trends were diminished focused on health oriented eating choices with consumers opting instead for comfort foods, and a reduced openness and ability to trial.

As you May recall in 2021, we prepared to launch our largest in store sampling program to date.

Only to scuttle those plans as the Delta variant took hold.

Today after two years with only relatively scarce in store sampling in the first half of this year, we expect to resume robust in store sampling programs for retail items.

These effective programs have long been a staple of our field marketing efforts given our conviction that tasting is believing.

Two throughout Covid, we've been investing heavily in product innovation and scaling with our strategic partners.

In many cases together, we have a weighted the pandemics abatement in the resolution of labor and supply chain challenges before further market activity.

As with the resumption of our broader sampling program. This period of delay appears to be coming to an end and several products are in various stages of market entry or expansion.

These include the recently concluded expanded test beyond the original Orange chicken at Panda Express.

Advertise tests occurring in Mcdonald's in Dallas, and San Francisco of the MC plant featuring a plant based Patty co developed with beyond meat.

Core menu placement.

MC plant featuring beyond meat on Mcdonalds <unk> across the U K.

The core menu placement of beyond Italian sausage crumbles at Pizza hut locations throughout Canada, and the core menu placement of three beyond meat toppings at pizza hut delivery locations across the UK and.

And the recent National limited time offering of beyond fried chicken at KFC locations nationwide.

And in retail in the coming weeks, we plan to launch an exciting and brand new product line via the planet partnership or joint venture with Pepsico.

Three as we discussed despite the strong and steady progress were making with our strategic USR partners. The majority of our foodservice business nearly 80% in 2021 as it remained concentrated across independent operators smaller chains hotels universities and others that were most impacted by Covid related.

<unk>.

In the absence of another variant or unforeseen disruption, we expect to build on our recent momentum in this segment in 2022.

Furthering our overall foodservice business growth.

Over the last two years, we've invested significant resources in our top priority global markets, the EU and China.

These investments have yielded a solid footing for growth.

We're a key part of our efforts to support global <unk> partners.

We have opened sizable retail and foodservice opportunities for existing and planned products in these markets.

Across 2021, we saw a 77% year over year growth in our international business and we expect to see continued positive results in 2022.

Finally.

Before providing a more detailed discussion of Q4 results. It will be helpful to share thoughts on operating expenses to be expected in 2022.

As I've said before it remains our objective to insulate our long term strategy from short term conditions.

Throughout 2021, when faced with the decision to maximize short term outcomes or pursue longer term strategy, which shows the ladder and made significant investments in future growth here in the U S EU and China.

The long term benefit of our decision, making further burdened from an opex and margin perspective.

<unk> that was already impacted by lower volumes.

Despite the adverse impact on the quarter. We are highly confident that these investments in terms of team infrastructure products scaling and more generally setting up strategic partnerships for success will generate strong returns in the years ahead.

With this solid foundation now in place.

So we will continue to invest in core parts of our business.

We do not plan to grow operating expenses significantly in 2022.

For example.

We do not anticipate expanding our head count save select critical positions.

We're actively increasing the efficiency of our operations.

We concluded certain consulting contracts among other measures.

If 2021 was a year of investment in scaling as we plan for the resumption in expansion of market activity.

'twenty two is the year of execution.

With that by way of context, I'll now review, our overall business performance in Q4 and full year 2021 in the U S results across our retail and foodservice channels were mixed for the year sales to U S. Foodservice customers increased 26% to a record $76 5 million rebounding nicely from the Cove.

And do slows a 2020.

However growth in food U S. Foodservice was more than offset by decline in U S retail, which decreased 8% year over year.

Broadly we believe the 2021 U S. Retail outcome reflects three main developments. These are slowed category growth heightened competitive activity and our own decision to focus on finalizing and scaling innovation for upcoming <unk> strategic partner launches versus bringing more new items, which are generally a source of <unk>.

<unk> to retailers in 2021.

Let me now offer more detail on these three factors.

First growth in the plant based meat category decelerated meaningfully in U S retail from 45% in 2020 to negative <unk>, 4% in 2021, we believe a number of factors contributed to this some of which I touched on earlier in my remarks.

These include a tough year ago comparison as the onset of Covid in 2020 spurred unprecedented consumer stockpiling, which did not repeat in 2021.

Consumer migration to fast food, particularly those would drive through where we were largely absent in.

And consumer trends around food choice as well as a reduction in our ability to sample.

Yeah.

As I noted we view these developments to be primarily pandemic related and indicative of an unstable period in the U S. In global economy. Accordingly, we expect to able to drive and realized renewed growth in retail sales provide the pandemic continues to recede.

We expect these gains to occur we expanded distribution.

The launch of new products.

Institution of our in store sampling.

And the implementation of our 2022 marketing program or.

While marketing initiative, leverages and ties into relevant advertising by some of our larger <unk> our partners as well as that of our planet partnership joint venture with Pepsico. This integrated approach, which represents our most comprehensive marketing program to date will meet the consumer across <unk> convenience and grocery.

Second competitive activity in U S retail intensified in 2021 marked by frequent aggressive discounting and new entrants into the category.

We continue to believe that the competitive environment, featuring high quality products and compelling marketing is a positive as it tends to grow the category.

In the case of 2021, we experienced intense increased competition during a period when the size of the price did not expand.

In this difficult dynamic we were quite pleased that we exited the year as we began.

The number one brand in the category of refrigerated plant based meats.

Further our brand awareness the highest across all plant based meats continued decline despite the number of companies buying for consumer attention.

Third as we look at U S focused innovation in 2021, we've made the decision to prioritize delivering on a number of <unk> relationships and preparing our product line for the first launch of our joint venture.

As a result, whereas in 2020, we launched several new items, including beyond breakfast sausage patties beyond breakfast sausage links and beyond meat balls and.

In 2021, we brought to retail markets beyond Burger three porno into a more limited extent a fall.

The launch of our beyond chicken tenders.

Though this allocation of focus may have had short term implications for our retail growth.

We believe it was the right long term prioritization for our business, particularly given the ongoing reduce stability in 2021 sample new products in U S retailers.

Turning to supply chain, our full year gross margin of 25, 2% was lower by approximately 500 basis points year over year.

Bill will walk you through more detail on margin for now I will provide general comments on the nature and endurance some of the higher costs we faced.

This overview it can be summarized across three main areas first we shifted a significant amount of volume to external co manufacturers for the following reasons one given the level of scaling activities underway to support tests and launches with strategic partners. We made the decision to shift production volume away from our internal facility in Pennsylvania.

And toward external manufacturers in order to free up line time for commercialization.

So we knew these actions would effectively replace lower cost internal production with higher external tolling fees as well as generate additional transportation and logistics costs. This allocation was the right decision given the long term importance of the supported projects.

We believe such trade offs should be alleviated once we complete our planned commercialization center here in Los Angeles, a large percentage of which we expect to be operational in the back half of this year.

Two we experienced longer than expected downtime on one of our lines to complete repairs, necessitating greater use of external capacity.

And three we start to prioritize volume to certain co manufacturers to maintain network capacity necessary for planned production in 2022.

Next we scaled new products that are at the beginning of their cost down curve.

As with many of our product launches, we introduced beyond chicken tenders in the latter half of 2021 for foodservice and more limited retail sales at a higher cost than what we expected long term run rate to be.

And these launches we used higher cost co manufacturing partners experienced lower throughput levels and other supply chain inefficiencies all typical of early production months.

We do not expect these higher costs to persist indefinitely, having already achieved improvements in production efficiency for our chicken products in some cases more than doubling throughput.

In similar fashion as we ramped up for an exciting new an entirely novel to us product launch, which will be announced later this quarter.

We incurred several of the same early production inefficiencies I just described for chicken.

We expect these higher costs persist or at least the first half of this year with significant improvements expected by year end.

And lastly, we've experienced a substantial increase in our manufacturing conversion costs recently, most of which we consider transitory key explanatory factors included.

One pivoting to external partners drove higher transportation costs as we move inventory across our network in response to the aforementioned factors.

Two as we reallocated certain volumes, we nonetheless absorbed fixed overhead cost at our facility without the corresponding output.

Three like others, we faced broad inflationary challenges related to transportation costs.

As we added production capacity in North America, the EU and China during a period of lower volume.

Our depreciation cost per unit are steadily increased although we expect this trend to stabilize and sooner versus the volume growth, especially in our nascent international locations.

Importantly, though we expect continued near term headwinds from some of these considerations. We are confident that none are structural in nature in.

In most cases initiatives are already underway to return margins to higher levels, including directing volume back toward internal capacity as we complete our commercialization center.

Simplifying production networks for our new items, and achieving higher throughput rates, particularly on these newer items.

At the same time, despite all the noise in our Cogs. This quarter, we have reduced material costs the output of our global cost down program and a subject I will return to before concluding my remarks.

With that broad reflection on 2021 complete let me now briefly discuss our fourth quarter results.

We generated strong growth across three of our four sales channels. However, our results in U S retail, where we saw a decline.

Offset gains from the other three channels.

Looking at recent trends in consumer takeaway in U S retail according to spins data for the 12 week period ended December 26 2021.

Sales of beyond meat products were down two 7% year over year compared to an increase of <unk>, 4% for the category.

For our brand modest growth in Hulu was more than offset by decline in natural and specialty channels, where we.

We over index relative to the category and where category growth has been especially challenged of late.

For perspective total category sales in natural and specialty channels declined eight 6% year over year during the 12 week period compared to a one 6% increase in modal.

To be clear the challenges in natural and specialty extend beyond the plant based meat category <unk>.

Expanded offerings of natural and organic foods at conventional grocers have likely contributed to the deceleration in natural and specialty.

We plan to reinvigorate our growth in this important channel through product differentiation versus our offerings in conventional grocers increased in store sampling and the introduction of new innovation.

Despite a 20% reduction in year over year U S retail sales for Q4 as measured by our net revenue versus performance in consumer takeaway data.

We continue to see enduring brand strength across the channel.

As noted beyond meat remains the number one brand in the refrigerated plant based meat category.

Moreover, according to spins IRI consumer panel data for the 52 weeks ended December 26 2021.

Solar penetration for the beyond meat brand continues to increase.

Rising 20 basis points sequentially to six 6% and 110 basis points on a year over year basis.

Additionally, our buyer rate purchase frequency and repeat rates continue to stack up well against our competition trailing only two category incumbents, each of whom enjoy the benefit of significantly broader product portfolios than us and U S. Move, though we are encouraged by our continued strength in terms of velocity, where on an absolute basis.

For the 12 weeks ended December 26, 2021 or.

Our brand velocity ranked highest among any of the top 20 plant based meat brands and was two six times greater than the category average.

This industry, leading velocity is joined by a brand awareness, where total and unaided brand awareness for the beyond meat brand in the U S increased to 65% and 34% respectively.

Each highest among all plant based meat brands.

We believe these and other robust brand metrics provide strong momentum for our retail business as we expand our product offerings and distribution footprint.

To improve our existing products on shelf.

And over time lower price points as we unlock savings via our cost down program.

Turning to U S foodservice as I alluded to earlier our performance during the year rebounded solidly from the Covid driven lows of 2020 to record net revenues of $76 5 million.

We reached this milestone despite limited activities with our major <unk> partners in 2021.

In the fourth quarter net revenues increased 35% year over year, and we began to see the gradual return of trial activity in the <unk> space and according to NPD data for the three months ended December 2021, we maintained our number one brand position with sales of beyond meat products, increasing 55%.

Year over year in the data set.

You will recall, primarily capture sales through broad line distributors and generally excludes large <unk> customers who tend to distract.

In international we wrapped up a strong year with retail channel sales up 123% year over year, and foodservice channel sales up 40% year over year.

I am proud of our progress in Europe , where we more than doubled the size of our business across retail and foodservice channels in 2021.

In the fourth quarter total international net revenues increased 23% year over year with retail sales up 11% year over year, and foodservice channel sales up 36% year over year.

In International Foodservice growth was driven primarily by <unk>, which again is encouraging.

We are excited to build on the momentum in our international business in 2020 to leveraging the investments in <unk> infrastructure and capabilities that we have made in the EU and China.

With that review I will now provide more detail on some of the exciting 2022 strategic initiatives I mentioned earlier, and which represented the focus of much of our commercialization and scaling investments across 2021.

On January 5th following a highly successful 250 store test in the U K Mcdonald's rolled out its first ever a plant based burger.

Featuring a patty co developed by beyond meat.

Every restaurant across the UK and Ireland nearly 500 stores.

The UK and Ireland launch is being supported by a robust joint marketing program that spans across television.

Radio out of home, social PR, Influencer mobile and digital elements.

In short succession after the Mcdonalds UK news KFC launched a nationwide test of beyond fried chicken in over 4000 U S locations on January 10th the test Mark the largest plant based chicken launch ever in the <unk> industry and.

And we are pleased that the consumer response and feedback and the media has been filled with positive excitement.

Being selected to create a plant based version of one of the most iconic menu items one of the world's most popular brands is a testament to the strength of our innovation and the recognition of these capabilities by industry Giants.

Only days later, we followed these two exciting announcements with yet another.

Together with Pizza Hut, Canada, we announced the debut of beyond Italian sausage crumbles, the permanent menu offering nationwide at over 450 locations.

The expansion filed a successful trial in Toronto, and Edmonton last summer with the reported rise and Flexitarian diets occurring in Canada. We're excited to increase the accessibility of plant based protein for Canadians everywhere.

Currently as we jointly announced on January 20th Mcdonald's expanded its use test of the MC plant Burger to approximately 600 participating locations in the San Francisco Bay, and Dallas Fort worth areas beginning on February 14th.

Also on Valentine's Day, ASW launched a limited time offering jalapeno lime beyond meat Burger at all this locations nationwide in Canada.

This product represents <unk> first fully plant based Burger build and furthers our strong partnership with one of our earliest <unk> partners.

Lastly, as I alluded to earlier, we have been working diligently towards launch of an exciting new product, which we expect to announce in coming weeks.

Turning to our ongoing cost out initiative is important to not let the aforementioned short term 2021 processing and logistics noise obscure the progress we're making on material cost reduction, where we successfully run 26 cents per pound from direct materials on a year over year basis in Q4.

We will continue to drive our global cost down program and remain confident we can achieve our goal of price parity with animal protein with in at least one category within the next two and a half years.

As we've shared before we are working through a robust pipeline of cost reduction opportunities, including in the area of raw ingredient procurement savings.

This reduction throughput improvement network optimization.

Warehousing and transportation efficiencies.

Local sourcing and production in our global markets and packaging optimization.

Finally.

Before closing I.

I'd like to highlight two key additions to our global leadership team.

In December we welcome Doug Ramsey and Bernie outcome, as Chief operating officer, and Chief supply chain Officer, respectively.

Both Doug and Bernie join Us from Tyson foods, and bring a wealth of experience and proven track records impressive operational excellence in the protein industry.

To Doug's 10 year Tyson he held top leadership positions, including group President history.

In this role he oversaw all domestic poultry business units driving market share through strategic integrated planning business acquisitions, and integration lean manufacturing and cost reduction.

He also served as president of the global Mcdonald's business for Tyson.

As with Doug Bernier.

Bernie arrives with a strong background of highly relevant leadership.

<unk>, most recently as Tysons, chief supply chain officer, helping to scale, the company's poultry business through cross functional strategic oversight.

And the integration of innovative technologies across the supply chain.

Doug and Bernie are already adding tremendous value and a full confidence in their abilities to guide our company. The next phases of growth and production cost optimization.

With that I will turn it over to Phil to walk us through our fourth quarter financial results and our outlook for 2022.

Thanks Ethan.

We achieved net revenues of $107 million in the fourth quarter of 2021, representing a decrease of one 2% compared to the fourth quarter of 2020. The decrease in net revenues was primarily driven by a 19, 5% year over year decrease in U S. Retail net revenues, partially offset by growth in U S. Foodservice.

International Foodservice and international retail.

All channels were negatively impacted by five fewer shipping days in Q4 2021 versus Q4 of 2020.

For Q4, 2021 average net revenue per pound was $5 19 down.

Down from $5 59 per pound in Q4 of 2020, primarily driven by mix to lower price Skus, especially in international foodservice and increased trade discounts.

Moving down the P&L to gross profit gross profit. During Q4, 2021 was $14 2 million or 14, 1% of net revenues as compared to $25 4 million or 24, 9% of net revenues in Q4 of 2020.

In addition to lower net revenue per pound year over year cost per pound increased to $4 46 per pound in Q4, 2021 up 26 versus Q4, 2020, which was driven primarily by increases in manufacturing costs, including depreciation and logistics costs, partially offset by improvements in materials cost.

Pieces and inventory write offs and reserves.

Factoring costs, including depreciation increased by 48 per pound a reflection of both expensive inventory created in Q3 as well as increased costs in Q4 with a pervasive headwind from new product launches.

Launched and still to be launched less volume than anticipated earlier in the year and variability of demand across products.

Cost increased for both the manufacturing, we do within our own facilities as well as the manufacturing we contract out to co manufacturers.

Our own finished goods manufacturing, we produced fewer units, resulting in significantly increased variable and fixed cost per unit versus prior periods.

We disrupted steady state manufacturing for multiple reasons, including to run commercialization trials run production of new product planned repairs to one of our lines demand variance to forecast and recovery from severe weather.

Although not a large driver of our margin change in Q4 to combat difficulty in hiring and maintaining our production staffing we raised factory wages in Q4.

And our co manufacturer network, we incurred fee increased fees to secure capacity for new product launches and utilize certain high cost producers based on availability.

We also saw headwinds from depreciation associated with additional capacity coming online both in North America as well as in the EU and China.

Logistics costs, including those associated with internal transportation and warehouse costs increased 13 per pound in Q4 2021 versus Q4 2020.

This excludes the outbound freight associated with shipping finished goods to our customers, which is included in our SG&A expenses.

The increase in transportation and warehouse cost per pound was primarily caused by increased transportation costs, where we experienced headwinds in both an increase in cost per mile caused by increases in the overall freight market as well as our use of spot market transportation rates in certain instances increased.

Increased miles driven per pound as we navigate a new manufacturing networks required for initial product launches as well as reallocated materials and volume to help our existing network recover from difficulties outlined in last quarter's call.

We view these increased costs are temporary and are making immediate steps to common network can push more volume into our manufacturing facilities.

Also currently progressing as part of our cost down program to increase manufacturing throughput standardized work more efficiently use our assets and labor.

Some examples of recent success include increasing the throughput of one of our extra date lines by 130% through downtime reduction efforts and installation of an automated cutter.

Another is the increase of 50% in capacity in finished good line throughput improved through improved staffing plans streamlining startup activities and reduction of blind downtime.

We also have the opportunity to postpone or avoid entirely some additional capital expenditures as we push our machinery to begin to run closer to manufacturer specified throughput capability.

We're also working to rationalize our co manufacturing network, eliminating high cost options and reallocating volume to our best performing and lowest cost producers.

We recently launched our new transportation management software that we believe over time will allow us to run our network more efficiently and we continue to actively seek to shorten miles driven per pound produced through optimizing per location smarter scheduling and ensuring our trucks are full.

In Q4, 2021, as Ethan noted ingredients and packaging costs decreased by 26 cents per pound versus Q4 2020.

Materials costs are impacted by mix yield an ingredient costs approximately <unk> of the improvement in materials costs was due to a charge from a supplier in Q4 of 2020 that we did not incur in Q4 2021.

Approximately <unk> of the decrease was due to a one time rebate received in Q4 2021.

As part of our cost down program further decreasing materials cost as a continuing area of focus for us and we have multiple efforts underway to negotiate more favorable pricing utilized less costly ingredients and streamline our packaging. These efforts take time and in many cases, we are in the midst of soliciting bids seen initial success in some cases, where incumbent suppliers.

<unk> offered us lower prices when forced to competitively bid their products and in others with big opportunities to reduce costs by shifting to alternate suppliers. We are currently qualifying these new lower cost suppliers and we will continue to phase in the lower cost ingredients as testing shows that meet our quality bar.

Also since we use average costing in our inventory we begin to see the benefits as we bring in ingredients at the lower cost, which will grow over time as we mix to a higher proportion of the inventory at that lower cost we expect to continue making progress in this area.

Inventory write offs also improved <unk> year over year, although the comparable period included approximately <unk> <unk> attributable to the initial surge of COVID-19.

Moving down the P&L to Opex.

Operating expenses for Q4, 2021 were $91 $9 million up $42 million from Q4 2020.

The year over year increase was driven by increases in marketing, including an acceleration of spending in the EU to drive brand awareness, which lags that of the U S. G&A, primarily driven by an increase in newly established consulting agreements.

By increasing non production head count cost based primarily on hiring that occurred earlier in 2021, as we've paused incremental hiring except for a few critical areas by increased commercialization spending as we work to commercialize new products and by increased restructuring fees associated with ongoing litigation.

Turning to our balance sheet and cash flow highlights our.

Our cash and cash equivalents balance was $733 3 million and total debt outstanding was approximately $1 1 billion as of December 31, 2021 for.

For the 12 months ended December 31, 2021, net cash used in operating activities was 301 4 million compared to $40.0 million in the year ago period.

Capital expenditures totaled $136 zero million dollars for the 12 months ended December 31, 2021, compared to 57 7 million for the year ago period the.

The increase in capital expenditures was primarily driven by continued investments in production equipment and facilities related to capacity expansion initiatives.

Next I will provide some commentary about our 2020 to outlook.

For the fiscal year 2022, we expect net revenues to be in the range of $560 million to $620 million.

Corresponding to year over year net revenue growth of between 21% and 33%.

We expect flat to modest net revenue growth in Q1 accelerating through the year, primarily due to newly secured distribution expansion in the U S retail new product launches acceleration in international markets. As a result of EU price resets and extended shelf life driving incremental distribution as well as growth in China anticipated limited time offerings at <unk>.

Our customers and as we lap easier comparison periods in the back half of the year.

Although we're not providing full year margin guidance at this time, we did want to provide some additional context for our Q1 2022 margins. We expect gross margin in the first quarter to fall well below more normalized levels again, driven by the aforementioned short term higher manufacturing and logistics costs that are in existing inventory with added pressure from a new product that will.

In the coming weeks, the new product initially uses an expensive process, which we expect to streamline significantly later this year, but it will represent an additional drag to our Q1 gross margin.

In 2021, Opex grew to 63% of revenue. This percentage is a function of lower than expected sales amidst continued investment to serve our strategic partners.

<unk> new products build operations in the EU, and China and advance our innovation brand and team objectives. We believe our opex basis, now largely adequate for our midterm growth objectives, and as such we intend to reduce our rate of spending growth substantially while we still believe we are in the early stages of what we expect will be a far larger business over the long term.

We are significantly reducing hiring holding many of our teams flat have concluded certain consulting engagements and are holding flat or reducing other areas of discretionary spending.

That I will turn the call back over to the operator to open it up for your questions. Thank you.

Thank you well now begin the question and answer session.

Good question you May Press Star then one on your phone problem.

Renewable speakerphone, please pick up your handset before pressing the keys.

What part of your question.

Please press Star then two.

At this time, we will pause momentarily to assemble the roster.

First question comes from Alexia Howard of Bernstein. Please go ahead.

Good evening everyone.

I like that.

So I appreciate all the detailed explanations remedial actions that you're taking to reaccelerate sales, particularly in the retail channels like the sampling marketing innovation and expanded distribution.

Could you say how quickly you expect to see that re acceleration, particularly in the retail side is it Q1 is it already happening do we have to wait until Q2.

And then as a follow up.

Do you expect this reacceleration of top line to materialize without incurring meaningfully incremental extra operating costs or put simply with Q4, the low point on gross margin EBIT, Darren cash spun and should and should we expect sequential improvements from here or do we have to wait until the second half it sounds.

That new product launch in Q1 could actually drive the gross margins and perhaps profits down even further in the near term. Thank you.

Thank you I appreciate it so I think the way that.

We're looking at this as we saw very good growth across three of our four channels.

Folks are obviously focused on U.

U S retail as they should.

And I think it's our approach to that really is around not necessarily waiting for that category to resume growth, but rather taking action across.

Our distribution to bring growth independent of whether or not the category.

Starts to recover.

We certainly think the category is going to recover and as it does we are in a great position that we still have the number one brand in the category of our household penetration continues to rise.

One brand velocity among all plant based top 20 plant based meats and we've got the number one brand awareness so.

Should that start to accelerate on its own.

We are well positioned but independent of that we have a number of actions.

We've taken that will allow us to seek new growth that's new distribution.

New innovation coming into the market a lot of in store sampling as you referenced tactical shopper marketing programs that seek to re engage the consumer with our brand and retail and then broader high level marketing that continues to attract attention to our brand and retail. So we feel good about our strategy for U S retail, but we're not relying on that alone for growth. Obviously, if you think about.

This past year and I'll touch on this most likely in a number of questions. We.

We didn't look at the short term impact of Covid and say you know what we're going to stop pursuing a long term opportunity. Our view on this opportunity is that it's a very very large one over a long period of time, we are well positioned as the number one brand in our category in retail and the number one brand in foodservice.

The best partnerships out there in terms of <unk> and CPG companies. So we wanted to continue to invest and we spent much of 2021, making very significant investments throughout our business. We are now in a position having done that scaling and if you look at the scaling we've done.

Evident in the market today, whether it's the products, we have with Mcdonald's in the UK or Ireland.

The tests that are going on in Dallas, and San Francisco with Mcdonald's KFC launch that recently occurred at MTO and express, which recently concluded pizza hut.

New placement there in Canada, and the U K and then of course is upcoming.

Launch that we've referenced with our joint venture with Pepsi. So all of those things are incredibly resource intensive in terms of scaling those products and getting them ready to go to market with some other launches that are coming this year.

With that activity done we're now in execution mode, and so it's really about bringing those opportunities to the consumer. So we believe we can do that as Phil alluded to without substantially increasing.

The amount of Opex so.

So the growth rate there I think you will see moderating quite a bit so.

So it's an opportunity to leverage the investments we've made realize the growth Thats ahead of us in <unk> and foodservice space, while taking discrete steps in in retail.

Invigorate growth independent of the category in terms of the cadence across the year I think there will be.

More activity in the second third and fourth quarters than there was in the first this is due to things like resets in our own product launches et cetera, but we feel very good about the year, we're we're optimistic and.

I think we did the right thing throughout 2021, ignoring the short term.

<unk> and continuing to invest against our long term strategy.

Thank you Adam.

The gross margin question so.

I alluded to in prepared remarks, we do have some some expensive inventory.

We will sell sell that and then there is additional pressure from the new product launch on gross margin. So we do anticipate Q1 will get worse and then we should get better throughout the year I think particularly in the second half as we already have a line of sight to a more cost effective way to manufacture the product.

Yeah.

Great. Thank you very much I'll pass it on.

Hello.

Thank you next question comes from Ken Goldman with Jpmorgan. Please go ahead.

Alright, thank you so much.

I wanted to ask Ethan.

As a fairly wide range understandably for the topline I know you gave in terms of your guidance I know you gave some of these parameters, but I just wanted to sort of get a little bit of a better sense of as youre thinking about whats driving the bottom end of that range, what's driving the top end of that range. What are some of the considerations that you're thinking about sort of signposts, we should look for as we can.

Think about how to get to that top end of the bottom end.

Sure. So I think it's in this case, because we rely so much on our own activities within retail in terms of new distribution, bringing new innovation into stores.

And things of that nature, I feel pretty good about those forecasts.

Wood.

Kris the upside quite a bit would be if the category were too to kind of re initiate growth on the foodservice side. What you could see from US is continued I think we had 35% or so.

Foodservice growth in the fourth quarter.

Expect to see some continued growth there throughout the year.

But these launches that we have with our large strategic partners.

The cadence of those particularly in the second half of the year.

Should signal that the investments, we're making are moving forward. So I would look for things like that so.

So an uptick in.

And the traction that youre getting from our products and retail, particularly the new ones that we're introducing.

As well as the <unk> activities and continued growth in U S. Foodservice those things will take us to the higher part of our range.

Great. Thanks, I know, we're running long.

Okay.

Yeah.

Thank you.

Robert Moskow Credit Suisse. Please go ahead.

I think you've kind of answered the question Ethan but.

Are you, saying.

That there is incremental upside if youre big <unk> customers.

Put these items on their permanent menu in the second half is that is that kind of like the unknown right now I know in the past you've tried to be conservative conservative there in terms of whether you put those things in your forecast or not like KFC and Mcdonald's are big chunky customers, but.

It's unclear I guess to me whether these items are going to be on the permanent menu is that really the swing factor.

I think it's one of the elements.

But continued recovery in foodservice generally is another one.

And continued.

Trials in <unk> with some of the customers that we've been involved with in the past.

But we are obviously working toward more permanent menu placement with all of our <unk> partners.

And should that start to materialize in.

In the second half of the year that would that would be a benefit to our plan.

Okay, and maybe a modeling follow up like like SG&A. I think you said you will have a slower growth.

Rate of your spend.

But youre also trying to increase more more marketing more advertising so.

Can you just kind of give us a route.

Range of of growth here in terms of SG&A it might be the one of the easier things for us to model if so.

Yes, I mean, I think what I can say is just so there'll be it'll be very meaningfully moderated in the way. We're accomplishing that is if you just think about the sheer number of products that we're bringing to market with different customers and partners. This year.

It's really time for us to focus on executing those.

Steady state production versus.

The amount of scaling that we were doing in 2021, so we expect to bring some cost out of that.

On the marketing side, we've made some pretty big investments in the fourth quarter, particularly in Europe , and so we're seeing good results from that.

So I think.

If you look at our marketing for the balance of 2022, it's a really good position to be in because we're marketing with our strategic customers with our <unk> activities, whether it's with KFC or.

Or with with Mcdonalds, then you look at our joint venture with Pepsi Youll see some activity from US and then there in terms of the planet partnership and then of course, our own marketing. So we're going to be coming at the consumer from a number of different.

<unk>.

Touch points in their lives and feel good about that.

Because of the ability to run more efficiently.

The rest of our business I don't think that will materially.

Our opex for the year.

Okay.

Okay alright. Thanks.

Hello.

Thank you Adam Samuelson with Goldman Sachs with the next question go ahead.

Yes.

Hi, This is Arthur on for Adam I was hoping you could provide details on your plans to lower.

<unk> costs on a per pound basis specifically.

The items that you mentioned, what timeline and how much in incremental savings you may achieve within that timeline and what those plans might cost. Thank you.

Yes, so as you know and we've talked about we have a very robust and global.

Cost down program.

And I set a goal.

<unk> three years ago.

<unk> within one category would be able to.

Get price parity or below with animal protein and I still feel good about that and we feel good about that as a team.

As we mentioned we are making good material progress.

In that regard.

So theres a lot of noise in our system right now because of the sheer number of activities in scaling and launch them we've done.

But.

Or alternate supplier perspective from being able to negotiate better terms to yield to mix all of these things where we're seeing some.

Some good progress in <unk>.

Have a major program in place. So that's actually one that I feel quite good about the affiliate wanted to detail sure. So we've got it split up across several work streams and I'll give you a very high level overview of each of those each work stream has an owner who has signed up for our goal for the year that we measure against and we as part of our monthly business reviews.

Give a.

Green Amber red status on that and talk about how we get back to Green, if we get off course I would.

Expect a lot of these take time so.

In the first example, something like P protein, we already have seen some good savings there which came through.

Some degree in the material savings, but a lot of the work that we've got to do there is there is a tremendous amount of difference in the price per pound of pea protein from different suppliers.

Not as simple as just swapping went out for another.

Can tend to have slightly different characteristics and so theres a lot of testing to make sure. The ingredients that are quality bar. Once we passed those tests, we didn't change our.

Manufacturing process to incorporate that other ingredient.

Then it takes time, because you start shifting over time and think that to work its way into your inventory and so all of that means that for initiatives like that you'll likely see more progress in the latter part of 2022. Another one for US is manufacturing we alluded to a couple of anecdotes that we've already seen in the prepared remarks.

There are a lot of that is really around just how do you run your equipment and your workforce as efficiently as possible standardizing work replicating what works on one machine at best practice to all of your others.

Some of that can be pretty fast it doesn't necessarily require more capital.

Largely just how you standardize the process.

And Youll see results there in the form of better leverage on fixed costs over time.

And better even leverage on your variable workforce costs. Their ingredients is similar to P protein, we've got a large request for pricing exercise going on there as.

As I mentioned in the prepared remarks in some cases, you find that existing suppliers, we were scrambling to find.

To get supply through the very early phases of beyond meat and so when we go back in a more formalized approach and been able to see some good wins with better pricing. There in other cases, we will have to look at alternative suppliers to supply some of the same ingredients as well as overtime figuring out less expensive ingredients to build into products, that's probably a longer arc.

Packaging also how do we take cost out of packaging, we think theres opportunity to also be better from an environmental standpoint, there that that will be a fairly time consuming one too because we have to get we have to redesign and then roll it through and we have existing inventory.

Logistics, how do we fill our trucks more I think there are some probably quick wins, we can get there we've been sort of.

Running trucks throughout the network as we mentioned in prepared remarks, how do we consolidate loads and make sure we're not running side loads, how do we get good quotes and move away from spot wherever we can through better planning.

And then there's a couple of others that are also in the early phases. So I would look to see we'll try to continue to give you. Some anecdotes as we go but a lot of this will not really take effect until later in the year as we can sort of adopt do practice and work through in the case of something like bringing in cheaper ingredients, where on average costs. It has to find its way into our inventory.

Our product and then ultimately get sold.

Very helpful. Thank you.

Thank you next question will come from Peter Galbo Bank of America. Please go ahead.

Hey, guys. Good afternoon, and thank you for taking the question.

Alright.

Wanted to go back to an earlier question just around cash burn.

Over the past three quarters now you've run anywhere from $120 million to $140 million of cash burn, including Capex per quarter.

Just want to understand on a go forward basis, whether or not that gets better or what causes that to get better.

And if not kind of whats the minimum level of cash you're willing to run with.

Yes.

So.

As I as I alluded to we had a very.

Resource intense year in terms of getting ready for <unk>.

A lot of the launches we're doing a lot of the activity with strategic partners.

We also spent a lot to stand up GM led organizations.

Facilities in China and in the EU.

And then as I mentioned, we did some some.

Marketing over in Europe towards the latter part of the year.

So all of these things.

Did contribute to a to a pretty high level of investment for the year, but we don't see them as ongoing.

We have the ability and we're taking the steps to moderate the growth in opex.

I really try to separate this in terms of.

We've been investing over the course of 2021, we've set up some really fantastic opportunities for us to execute against the next 12 to 18 months and we're moving into that phase now, where we're actually going to start bringing out some costs getting more efficient sweating, our assets better doing better inventory management, because we're now able to run some steady state production.

Things of that nature.

Other measures to bring down.

The level of investment.

I don't think about this.

In terms of the kind of near term.

Metrics I think about it more in terms of just keeping enough powder to continue to invest as opportunities present themselves, but I feel pretty good about our plan both on the revenue and on the on the Opex side to be able to to have cash to make future investments.

Taking us to <unk> so.

I know, it's not the most exact answer but it's what we can give right now.

I think that the biggest piece of information. We can give is that youll see a moderation in investment levels 'twenty two to 'twenty one.

Got it no that's helpful and maybe even just to go back to retail.

Your prepared remarks, you kind of commented on youre not expecting or you.

Rather that you are expecting kind of a health oriented consumer to come back versus more of the comfort food.

What are you seeing internally or in your own data, suggesting that that kind of the reverse that's going to happen or is it more.

Aspirational at this point thanks.

Very much.

Sure. So what we've tried to do is set aside for the moment the category performance basis or what can we control what can we do that seems installation about whether this is signaling something bigger about the category and I think as attractive as it is to try to.

Is it particular theory on what's going on there's so much noise.

In the market just because of the instability around.

Pandemic the different variants behaviors foodservice to retail that were just kind of sitting out of that discussion and say here's the things. We can control we're going to go after those as hard as we possibly can and we're going to grow our business. My sense is that from what we're seeing out of the <unk> space in terms of all the studies, we've done with our partners what we're seeing.

In other economies.

That as things normalize and consumers get back to normal behavior taken off sweats, putting on flocks go into work things like that you'll see.

A resumption of growth in the retail space as we get in there and start to demo one of the things. We did in 'twenty. One was we really focused on getting ready for some of these.

Strategic.

Launches in foodservice.

Here in the U S and in Europe .

And we didn't do as much as I mentioned in my remarks retail innovation and that's okay.

We have a major product, which actually have in my hands right now.

It's not going on during the call.

That took an enormous amount of time and energy to get ready and it's a fantastic product and we're launching it with our partners at Pepsi.

And thats going to bring excitement and I think to the retail space.

And we have some other products that come out later this year, so you'll see us get back on the retail game in a big way in 'twenty two.

Yeah.

Thank you next question will be from Michael operating Piper Sandler. Please go ahead.

Thank you and good evening.

I just wanted to follow up on the Pepsi JV and you've got excitement around those products and I think in the answer to the SG&A question touched on some of the spending.

But how should we think about that given that it's a joint venture.

Is that structured somehow that that rolls through your operations and are those revenues included in part of your guidance.

This is bill I'll take that one so we sell product into the joint venture.

And so you would see the revenue and cost directly that way.

Other place you see this in our income statement is the joint venture income or loss line and so if you are paying attention in the release you probably saw step up actually in our portion of the loss there and so we're selling product in and then we split the.

Split the proceeds the profit or loss from the JV based on kind of what they sell into retail them.

Okay. That's helpful.

Just coming back to the pricing as you try to push.

For parity or better against the animal protein.

I know we've seen some inflation.

Costs are higher than they've been but assuming that alone doesn't have bridged the gap I know you're pushing your own costs down I guess, just what would make you.

Back off of that ambition.

Sort of.

Almost all costs or does it depend on hitting the right hurdle.

<unk>.

Measured steps along the way.

Yes.

Yes, I don't think were going to back off of that I.

I know your question was what would make you.

If we had some sort of immovable obstacle that weren't able to overcome we'd obviously signaled that and say, but everything seems to be going on the materials side in the right direction, albeit.

Slowly.

But we're able to get I think in the next two and a half years.

The kind of production and we need to see particularly in one category.

So we do feel quite good about that all of this noise, where we've been.

We shut down for a while one of US part of one of our facilities just to do commercialization in the.

Of course is to put new production production in some of our co Packers as we explained so there's just a lot of noise in the system. Those things are reversible and we can we can.

We can affect that and these decisions again, just like the investments.

I am always thinking about how do we capture the biggest future opportunity and the biggest future value and we are well aware of the headlines that might generate and things of that nature, but it's very it's the right thing to do and asking people to it.

Judge the quality of our investments in the same quarter that we're making them I think is probably a difficult.

They're not productive ask what we what we're asking to do is look at these investments 18 to 24 months from now and see how you feel about them.

The strong and whether it's in a reduced margin today for something later on we're willing to make those those tradeoffs and so in the area of <unk>.

<unk>.

Rice parity goal will tease that out a little bit this year in certain markets you will see us run some some programs to test the elasticity around it.

But overall, we're making progress in that area.

Okay, great. Thanks, a lot.

Okay.

Thank you next question John Baumgartner with Mizuho. Please go ahead.

Good afternoon, and thanks for the question.

You said with regard to retail you mentioned I think that the disruption is temporary and you did lack of pretty massive comp in 2021 right now at the same time. This industry right now is pretty narrow and being built around ground meat items and I get the household penetration opportunity on paper. The how do you balance the total addressable market with the potential.

So that I guess at some point demand just gets exhausted.

What point do you say migrated to structured products, whether its stakes or chicken breasts to sort of capture a broader range of consumption occasions is there a need for that at this point and I guess, if there is and how far away is that technology do you think thank you.

Yeah sure. That's a good question. So I think there's still a tremendous amount of room in the core product.

Categories.

With its ground or the Burger sausage.

As we continue to improve the taste profile continue to make clear to the consumer the.

Health benefits, but as climate becomes more of a front.

Page issue for people I think I think we have a really strong case to make there and then ultimately price as we continue to March towards price parity.

This unwavering commitment to those three things regardless of what's going on I think will give us.

Wins over the next several years.

But certainly proliferating the portfolio.

Is something that.

We're equipped to do we've been working on some of the retail launches that youll see from us in the future, we'll certainly do that.

And we're excited about those products.

Tasting Selim yesterday that I think they are very strong so youll see us continue to evolve the portfolio.

And as you see things go into foodservice, whether it's with <unk> or.

Or an up and down the street mom and pop businesses.

Those into retail in those different form factors is different cuts breaded items et cetera, I think will help spur retail growth again, we are the leading brand as I mentioned in the category and I think when we emphasize and put so much effort into strategic partnerships, which was the right thing to do in 'twenty one.

We didn't put as much energy into retail and to have a real opportunity in 'twenty two given the innovation we've done over the last last year to to do that so we think that will help the category as well.

Okay, great. Thank you.

Mhm.

Thank you next question will be from Ken Zaslow Bank of Montreal. Please go ahead.

Hey, good evening guys.

Are there.

Let me ask two questions. One is what is the process.

For you guys to be able to convert and LTE to a permanent item and how much do you are you able to affect the change.

Yes, I mean the process is.

For us to make great products.

Consumer fit there and to be the best partner, we can be and the rest is really up to our partners.

A lot of work not everyone has.

It has to do with <unk>.

Different USR serve different segments of the economy and the value proposition is clear.

To some than others, depending on where you are so.

But overall if you look at our track record, we've done done well with continuing to maintain our relationships with our <unk> continues to go from test to.

Trials and then from trials to LTE goes and then from there to full launches and so.

But theres nothing in particular, we can do other than just perform well and they can each stage.

Okay, and then you have hired several new management.

Additions.

When you think about this in a year from now or a year and a half from now how will your operations different than they are now and what are these people going to truly add.

Change agent.

Yes, no great question and one I'm very pleased to talk about it.

It gets back to this theme of thinking about the long term opportunity and how to capture as much value as possible here in the United States and Europe and in China, and so when you make decisions to for example bring on.

Doug and Bernie who have been great additions to the team as I mentioned or Diana or wholesale or others.

These are forward decisions.

Folks are coming from very large organizations and.

Often global in nature.

And since the most recent ones are the adds we've made in operations I'll talk a little bit about that.

Just the.

The sense of.

Beginning to sweat our assets more we're going to be able to manage our inventory better continuing to drive this cost down program and even more aggressive way that you get.

When you were in the room with these guys is exciting.

Before at a massive scale and that bringing that type of thinking to beyond meat, and we're giving them plenty of freedom to do that.

So it's something that I think from <unk>.

My own perspective through to the organization down to the lines that we have up to the board we feel great about the team we've put together and again, we're coming out of 'twenty, one with a lot of investment in place a really strong team.

The mass mandates coming off on Friday here in.

In Los Angeles Tomorrow, we feel pretty good.

Great I appreciate it thank you.

Thank you that concludes our question and answer.

I'd like to turn the call back over to Mr. Ethan Brown for closing remarks. Please go ahead.

Yeah.

So I have none other than sit.

Hittite we're.

When we come back I think latter part of this year and given you guys. Some some some good results and looking forward to talking about it then.

Thanks very much.

Conference has now concluded thank you for attending today's presentation you.

You may now disconnect.

Okay.

Okay.

[music].

[music].

Good afternoon, and welcome to beyond each fourth quarter earnings Conference call.

All participants will be in listen only mode for us has been pretty signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions. Please note that this event is being recorded.

Now I'd like to turn the call over to Mr Little bit couture.

VP of DNA and Investor Relations.

Thank you very much everyone.

Please go ahead Sir.

Thank you good afternoon and welcome joining me on today's call are Ethan Brown, founder President and Chief Executive Officer.

Phil Hart, Chief Financial Officer and Treasurer.

By now everyone should have access to the company's fourth quarter earnings press release, and Investor presentation filed today after market close.

These documents are available on the Investor relations beyond meats website at www dot beyond meat Dot com.

Before we begin please note that all information presented on today's call is unaudited and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws.

These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.

Forward looking statements in the earnings release that we issued today along with the comments on this call are made only as of today and will not be updated as actual events unfold.

Please refer to today's press release, the company's quarterly report on Form 10-Q , the quarter ended October <unk> 2021, the Companys annual report on Form 10-K for the fiscal year ended December 31, 2021 to be filed with the SEC and other filings 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.

Please note that on todays call management may make reference to adjusted EBITDA adjusted gross profit and adjusted net loss, which are non-GAAP financial measures.

While we believe these non-GAAP financial measures provide useful information for investors any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Please refer to today's press release or the Investor presentation for a reconciliation of adjusted EBITDA adjusted gross profit and adjusted net loss to the most comparable GAAP measures.

I would now like to turn the call over to Ethan Brown.

Thank you Louis and good afternoon, everyone like many we saw challenges throughout 2021, including the fourth quarter.

Before delving more specifically into our quarterly and full year 2021 results I'd like to share our view.

Since 2018, our last year as a private company, we have grown our business, 428% or three year CAGR of 74%.

So we posted growth of 37% in 2020, we saw a much more modest increase of 14% in 2021.

Net revenues of approximately $465 million in the fourth quarter. It was roughly flat at $101 million were negative 1% year over year.

The key question is whether this reduced growth rate is an aberration or a harbinger of things to come.

As our 2022 guidance suggests we believe last year's growth rate to be temporary.

And that growth will build to higher levels. This year.

Our confidence springs from four general factors among others.

One we do not expect certain positive consumer trends that appear related to COVID-19 .

And that did not favor our category to persist chief among these trends were diminished focused on health oriented eating choices with consumers opting instead for comfort foods, and a reduced openness and ability to trial.

As you May recall in 2021, we prepared to launch our largest in store sampling program to date.

Only to scuttle those plans as the Delta variant took hold.

Today after two years with only relatively scarce in store sampling in the first half of this year, we expect to resume robust in store sampling programs for retail items.

These effective programs have long been a staple of our field marketing efforts given our conviction that tasting is believing.

<unk> throughout Covid, we've been investing heavily in product innovation and scaling with our strategic partners.

In many cases together, we have a weighted to pandemics abatement in the resolution of labor and supply chain challenges before further market activity.

As with the resumption of our broader sampling program. This period of delay appears to be coming to an end and several products are in various stages of market entry for expansion.

These include the recently concluded expanded test beyond the original Orange chicken at Panda Express.

Advertise tests occurring in Mcdonald's in Dallas, and San Francisco of the MC plant featuring a plant based Patty co developed with beyond meat.

The core menu placement.

MC plant featuring beyond meat on Mcdonalds <unk> across the U K.

The core menu placement of beyond Italian sausage crumbles at Pizza hut locations throughout Canada, and the core menu placement of three beyond meat toppings at pizza hut delivery locations across the UK and.

And the recent National limited time offering of beyond fried chicken at KFC locations nationwide.

And in retail in the coming weeks, we plan to launch an exciting and brand new product line via the planet partnership or joint venture with Pepsico.

Three as we discussed despite the strong and steady progress were making with our strategic USR partners. The majority of our foodservice business nearly 80% in 2021 as it remained concentrated across independent operators smaller chains hotels universities and others that were most impacted by Covid related.

<unk>.

In the absence of another variant or unforeseen disruption, we expect to build on our recent momentum in this segment in 2022.

Furthering our overall foodservice business growth.

Over the last two years, we've invested significant resources in our top priority global markets, the EU and China.

These investments have yielded a solid footing for growth.

We're a key part of our efforts to support global <unk> partners.

We have opened sizable retail and foodservice opportunities for existing and planned products in these markets.

Across 2021, we saw a 77% year over year growth in our international business and we expect to see continued positive results in 2022.

Finally.

Before providing a more detailed discussion of Q4 results. It will be helpful to share thoughts on operating expenses to be expected in 2022.

As I've said before it remains our objective to insulate our long term strategy from short term conditions.

Throughout 2021, when faced with the decision to maximize short term outcomes or pursue longer term strategy, which shows the ladder and made significant investments in future growth here in the U S EU and China.

The long term benefit of our decision, making further burdened from an opex and margin perspective, a quarter that was already impacted by lower volumes.

Despite the adverse impact on the quarter. We are highly confident that these investments in terms of team infrastructure products scaling and more generally setting up strategic partnerships for success.

Will generate strong returns in the years ahead.

With this solid foundation now in place.

So we will continue to invest in core parts of our business.

We do not plan to grow operating expenses significantly in 2022.

For example.

We do not anticipate expanding our head count save select critical positions.

We're actively increasing the efficiency of our operations.

We concluded certain consulting contracts among other measures.

If 2021 was a year of investment in scaling as we plan for the resumption in expansion of market activity.

'twenty two is the year of execution.

With that by way of context, I'll now review, our overall business performance in Q4 and full year 2021 in the U S results across our retail and foodservice channels were mixed for the year sales to U S. Foodservice customers increased 26% to a record $76 5 million rebounding nicely from the Cove.

And do slows a 2020.

However growth in food U S. Foodservice was more than offset by decline in U S retail, which decreased 8% year over year.

Broadly we believe the 2021 U S. Retail outcome reflects three main developments. These are slowed category growth heightened competitive activity and our own decision to focus on finalizing and scaling innovation for upcoming <unk> strategic partner launches versus bringing more new items, which are generally a source of <unk>.

<unk> to retailers in 2021.

Let me now offer more detail on these three factors.

First growth in the plant based meat category decelerated meaningfully in U S retail from 45% in 2020 to negative <unk>, 4% in 2021, we believe a number of factors contributed to this some of which I touched on earlier in my remarks.

These include a tough year ago comparison as the onset of Covid in 2020 spurred unprecedented consumer stockpiling, which did not repeat in 2021.

Consumer migration to fast food, particularly those would drive through where we were largely absent in.

And consumer trends around food choice as well as a reduction in our ability to sample.

As I noted we view these developments to be primarily pandemic related and indicative of an unstable period in the U S. In global economy. Accordingly, we expect to able to drive and realized renewed growth in retail sales provide the pandemic continues to recede.

We expect these gains to occur we expanded distribution.

A lot of new products <unk>.

Institution of our in store sampling.

And the implementation of our 2022 marketing program or.

While marketing initiative, leverages and ties into relevant advertising by some of our larger <unk> our partners as well as that of our planet partnership joint venture with Pepsico. This integrated approach, which represents our most comprehensive marketing program to date will meet the consumer across <unk> convenience and grocery.

Second competitive activity in U S retail intensified in 2021 marked by frequent aggressive discounting and new entrants into the category.

We continue to believe that the competitive environment, featuring high quality products and compelling marketing is a positive as it tends to grow the category.

In the case of 2021, we experienced intense increased competition during a period when the size of the price did not expand.

In this difficult dynamic we were quite pleased that we exited the year as we began.

The number one brand in the category of refrigerated plant based meats.

Further our brand awareness the highest across all plant based meats continued decline despite the number of companies buying for consumer attention.

Third as we look at U S focused innovation in 2021, we've made the decision to prioritize delivering on a number of <unk> relationships preparing our product line for the first launch of our joint venture.

As a result, whereas in 2020, we launched several new items, including beyond breakfast sausage patties beyond breakfast sausage links and beyond meat balls.

In 2021, we brought to retail markets beyond Burger <unk> into a more limited extent.

The launch of our beyond chicken tenders.

Though this allocation of focus may have had short term implications for our retail growth.

We believe it was the right long term prioritization for our business, particularly given the ongoing reduce stability in 2021 sample new products in U S retailers.

Turning to supply chain, our full year gross margin of 25, 2% was lower by approximately 500 basis points year over year.

Bill will walk you through more detail on margin for now I will provide general comments on the nature and endurance some of the higher costs we faced.

This overview it can be summarized across three main areas first we shifted a significant amount of volume to external co manufacturers for the following reasons one given the level of scaling activities underway to support tests and launches with strategic partners. He made the decision to shift production volume away from our internal facility in Pennsylvania.

And toward external manufacturers in order to free up line time for commercialization.

So we knew these actions would effectively replace lower cost internal production with higher external tolling fees as well as generate additional transportation and logistics costs. This allocation was the right decision given the long term importance of supported projects.

We believe such trade offs should be alleviated once we complete our planned commercialization center here in Los Angeles, a large percentage of which we expect to be operational in the back half of this year.

Two we experienced longer than expected downtime on one of our lines to complete repairs, necessitating greater use of external capacity.

And three we start to prioritize volume to certain co manufacturers to maintain network capacity necessary for planned production in 2022.

Next we scaled new products that are at the beginning of their cost down curve.

As with many of our product launches, we introduced beyond chicken tenders in the latter half of 2021 for foodservice and more limited retail sales at a higher cost than what we expected long term run rate to be.

And these launches we used higher cost co manufacturing partners experienced lower throughput levels and other supply chain inefficiencies all typical of early production months.

We do not expect these higher costs to persist indefinitely, having already achieved improvements in production efficiency for our chicken products in some cases more than doubling throughput.

In similar fashion as we ramped up for an exciting new an entirely novel to us product launch, which will be announced later this quarter.

We incurred several of the same early production and efficiencies I just described for chicken.

We expect these higher costs persist or at least the first half of this year with significant improvements expected by year end.

And lastly, we've experienced a substantial increase in our manufacturing conversion costs recently, most of which we consider transitory key explanatory factors included.

One pivoting to external partners drove higher transportation costs as we move inventory across our network in response to the aforementioned factors.

Two as we reallocated certain volumes, we nonetheless absorbed fixed overhead cost at our facility without the corresponding output.

Three like others, we faced broad inflationary challenges related to transportation costs.

As we added production capacity in North America, the EU and China during a period of lower volume.

Our depreciation costs per unit have steadily increased although we expect this trend to stabilize and sooner versus the volume growth, especially in our nascent international locations.

Importantly, though we expect continued near term headwinds from some of these considerations. We are confident that none are structural in nature in.

Most cases initiatives are already underway to return margins to higher levels, including directing volume back toward internal capacity as we complete our commercialization center <unk>.

Simplifying production networks for our new items.

In achieving higher throughput rates, particularly on these newer items.

At the same time, despite all the noise in our Cogs. This quarter, we have reduced material costs the output of our global cost down program and a subject I will return to before concluding my remarks.

With that broad reflection on 2021 complete let me now briefly discuss our fourth quarter results.

We generated strong growth across three of our four sales channels. However, our results in U S retail, where we saw a decline offset gains from the other three channels.

Looking at recent trends in consumer takeaway in U S retail according to spins data for the 12 week period ended December 26 2021.

Sales of beyond meat products were down two 7% year over year compared to an increase of <unk>, 4% for the category.

For our brand and modest growth in Hulu was more than offset by decline in natural and specialty channels, where we over index relative to the category and where category growth has been especially challenged of late.

For perspective total category sales in natural and specialty channels declined eight 6% year over year during the 12 week period compared to a one 6% increase in modal.

To be clear the challenges in natural and specialty extend beyond the plant based meat category.

Expanded offerings of natural and organic foods at conventional grocers have likely contributed to the deceleration in natural and specialty.

We plan to reinvigorate our growth in this important channel through product differentiation versus our offerings in conventional grocers increased in store sampling and the introduction of new innovation.

Despite a 20% reduction in year over year U S retail sales for Q4 as measured by our net revenue versus performance in consumer takeaway data.

We continue to see enduring brand strength across the channel.

As noted beyond meat remains the number one brand in the refrigerated plant based meat category.

Moreover, according to spins IRI consumer panel data for the 52 weeks ended December 26 2021.

Household penetration for the beyond meat brand continues to increase.

Rising 20 basis points sequentially to six 6% and 110 basis points on a year over year basis.

Additionally, our buyer rate purchase frequency and repeat rates continue to stack up well against our competition trailing only two category incumbents, each of whom enjoy the benefit of significantly broader product portfolios than us and U S. Mooloo. We are encouraged by our continued strength in terms of velocity, where on an absolute basis.

For the 12 weeks ended December 26, 2021 or.

Our brand velocity ranked highest among any of the top 20 plant based meat brands and was two six times greater than the category average.

This industry, leading velocity is joined by our brand awareness, where total and unaided brand awareness for the beyond meat brand in the U S increased to 65% and 34% respectively.

Each highest among all plant based meat brands.

We believe these and other robust brand metrics provide strong momentum for our retail business as we expand our product offerings and distribution footprint.

To improve our existing products on shelf.

And over time lower price points as we unlock savings via our cost down program.

Turning to U S foodservice as I alluded to earlier our performance during the year rebounded solidly from the Covid driven lows of 2020 to record net revenues of $76 5 million.

We reached this milestone despite limited activities with our major <unk> partners in 2021.

In the fourth quarter net revenues increased 35% year over year, and we began to see the gradual return of trial activity in the <unk> space and according to NPD data for the three months ended December 2021, we maintained our number one brand position with sales of beyond meat products, increasing 55%.

Year over year in the data set.

You will recall, primarily capture sales through broad line distributors and generally excludes large <unk> customers who tend to distract.

In international we wrapped up a strong year with retail channel sales up 123% year over year, and foodservice channel sales up 40% year over year.

I'm proud of our progress in Europe , where we more than doubled the size of our business across retail and foodservice channels in 2021.

In the fourth quarter total international net revenues increased 23% year over year with retail sales up 11% year over year, and foodservice channel sales up 36% year over year.

In International Foodservice growth was driven primarily by <unk>, which again is encouraging.

We are excited to build on the momentum in our international business in 2020 to leveraging the investments in team infrastructure and capabilities that we have made in the EU and China.

With that review I will now provide more detail on some of the exciting 2022 strategic initiatives I mentioned earlier, and which represented the focus of much of our commercialization and scaling investments across 2021.

On January 5th following a highly successful 250 store test in the U K Mcdonald's rolled out its first ever a plant based burger.

Featuring a patty co developed by beyond meat.

Every restaurant across the UK and Ireland nearly 500 stores.

The UK and Ireland launch is being supported by a robust joint marketing program that spans across television.

Radio out of home, social PR, Influencer mobile and digital elements.

In short succession after the Mcdonalds UK news KFC launched a nationwide test of beyond fried chicken in over 4000 U S locations on January 10th the test Mark the largest plant based chicken launch ever in the <unk> industry and.

And we are pleased that the consumer response and feedback and the media has been filled with positive excitement.

Being selected to create a plant based version of one of the most iconic menu items one of the world's most popular brands is a testament to the strength of our innovation and the recognition of these capabilities by industry Giants.

Only days later, we followed these two exciting announcements with yet another.

Together with Pizza Hut, Canada, we announced the debut of beyond Italian sausage Crumples, the permanent menu offering nationwide at over 450 locations.

The expansion followed a successful trial in Toronto, and Edmonton last summer with the reported rise and Flexitarian diets occurring in Canada. We're excited to increase the accessibility of plant based protein for Canadians everywhere.

Currently as we jointly announced on January 20th Mcdonald's expanded its use test of the MC plant Burger to approximately 600 participating locations in the San Francisco Bay, and Dallas Fort worth areas beginning on February 14th.

Also on Valentine's Day, <unk> launched a limited time offering jalapeno lime beyond meat Burger at all of those locations nationwide in Canada.

This product represents <unk> first fully plant based Burger build and furthers our strong partnership with one of our earliest <unk> partners.

Lastly, as I alluded to earlier, we have been working diligently towards launch of an exciting new product, which we expect to announce in coming weeks.

Turning to our ongoing cost down initiatives, it's important to not let the aforementioned short term 2021 processing and logistics noise obscure the progress we're making on material cost reduction, where we successfully run 26 cents per pound from direct materials on a year over year basis in Q4.

We will continue to drive our global cost down program and remain confident we can achieve our goal of price parity with animal protein with at least one category within the next two and a half years.

As we've shared before we are working through a robust pipeline of cost reduction opportunities, including in the area of raw ingredient procurement savings.

This reduction throughput improvement network optimization work.

Warehousing and transportation efficiencies.

Local sourcing and production in our global markets and packaging optimization.

Finally.

Before closing I'd.

I would like to highlight two key additions to our global leadership team.

In December we welcome Doug Ramsey and Bernie <unk>, as Chief operating officer, and Chief supply chain Officer, respectively.

Both Doug and Bernie join Us from Tyson foods, and bring a wealth of experience and proven track records of impressive operational excellence in the protein industry.

Through Doug's tenured Tyson he held top leadership positions, including group President military.

In this role he oversaw all domestic poultry business units driving market share through strategic integrated planning business acquisitions, and integration lean manufacturing and cost reduction.

He also served as president of the global Mcdonald's business for Tyson.

As with Doug.

Burning arrives with a strong background of highly relevant leadership, including most recently as Tysons chief supply chain officer, helping to scale, the company's poultry business through cross functional strategic oversight.

And the integration of innovative technologies across the supply chain.

Doug and Bernie are already adding tremendous value and I have full confidence in their abilities to guide our company. The next phases of growth and production cost optimization.

With that I will turn it over to Phil to walk us through our fourth quarter financial results and our outlook for 2022.

Thanks Ethan.

We achieved net revenues of $107 million in the fourth quarter of 2021, representing a decrease of one 2% compared to the fourth quarter of 2020. The decrease in net revenues was primarily driven by a 19, 5% year over year decrease in U S. Retail net revenues, partially offset by growth in U S. Foodservice.

International Foodservice and international retail.

All channels were negatively impacted by five fewer shipping days in Q4 2021 versus Q4 2020.

For Q4, 2021 average net revenue per pound was $5 19 down.

Down from $5 59 per pound in Q4, 2020, primarily driven by mix to lower price Skus, especially in international foodservice and increased trade discounts.

Moving down the P&L to gross profit gross profit. During Q4, 2021 was $14 2 million or 14, 1% of net revenues as compared to $25 4 million or 24, 9% of net revenues in Q4 2020.

In addition to lower net revenue per pound year over year cost per pound increased to $4 46 per pound in Q4, 2021 up 26 versus Q4, 2020, which was driven primarily by increases in manufacturing costs, including depreciation and logistics costs, partially offset by improvements in materials costs and <unk>.

<unk> and inventory write offs and reserves.

Manufacturing costs, including depreciation increased by 48 per pound a reflection of both expensive inventory created in Q3 as well as increased costs in Q4 with a pervasive headwind from new product launches, both launched and still to be launched less volume than anticipated earlier in the year and variability of demand across.

<unk> products.

Cost increased for both the manufacturing, we do within our own facilities as well as the manufacturing we contract out to co manufacturers.

Our own finished goods manufacturing, we produced fewer units, resulting in significantly increased variable and fixed cost per unit versus prior periods.

We disrupted steady state manufacturing for multiple reasons, including to run commercialization trials run production of new product planned repairs to one of our lines demand variance the forecast and recovery from severe weather.

Although not a large driver of our margin change in Q4 to combat difficulty in hiring and maintaining our production staffing we raised factory wages in Q4.

And our co manufacturer network, we incurred fee increased fees to secure capacity for new product launches and utilize certain high cost producers based on availability.

We also saw headwinds from depreciation associated with additional capacity coming online both in North America as well as in the EU and China.

Logistics costs, including those associated with internal transportation and warehouse costs increased 13 per pound in Q4 2021 versus Q4 2020.

This excludes the outbound freight associated with shipping finished goods to our customers, which is included in our SG&A expenses.

The increase in transportation and warehouse cost per pound was primarily caused by increased transportation costs, where we experienced headwinds in both an increase in cost per mile caused by increases in the overall freight market as well as our use of spot market transportation rates in certain instances increased.

Increased miles driven per pound as we navigated new manufacturing networks required for initial product launches as well as reallocated materials and volume to help our existing network recover from difficulties outlined in last quarter's call.

We view these increased costs temporary and are making immediate steps to common network and push more volume into our manufacturing facilities.

Also currently progressing as part of our cost down program to increase manufacturing throughput standardized work more efficiently use our assets and labor.

Some examples of recent success include increasing the throughput of one of our extra date lines by 130% through downtime reduction efforts and installation of an automated cutter.

Another is the increase of 50% in capacity in finished good line throughput improved through improved staffing plans streamlining startup activities and reduction of line downtime.

We also have the opportunity to postpone or avoid entirely some additional capital expenditures as we push our machinery to begin to run closer to manufacturer specified throughput capability.

We're also working to rationalize our co manufacturing network, eliminating high cost options and reallocating volumes of our best performing and lowest cost producers.

We recently launched our new transportation management software that we believe over time will allow us to run our network more efficiently and we continue to actively seek to shorten miles driven per pound produced through optimizing per location smarter scheduling and ensuring our trucks are full.

In Q4, 2021, as Ethan noted ingredients and packaging costs decreased by 26 cents per pound versus Q4 2020.

Materials costs are impacted by mix yield an ingredient costs approximately <unk> of the improvement in materials costs was due to a charge from a supplier in Q4 2020 that we did not incur in Q4 2021.

<unk> approximately <unk> of the decrease was due to a one time rebate received in Q4 2021.

As part of our cost down program further decreasing materials cost as a continuing area of focus for us and we have multiple efforts underway to negotiate more favorable pricing utilized less costly ingredients and streamline our packaging. These efforts take time and in many cases, we are in the midst of soliciting bids seen initial success in some cases, where incumbent suppliers.

<unk> offered us lower prices when forced to competitively bid their products and in others with big opportunities to reduce costs by shifting to alternate suppliers. We are currently qualifying these new lower cost suppliers and we will continue to phase in the lower cost ingredients as testing shows they need a quality bar.

Also since we use average costing in our inventory we begin to see the benefits as we bring in ingredients at the lower costs, which will grow over time as we mix to a higher proportion of the inventory at that lower cost we expect to continue making progress in this area.

Inventory write offs also improved <unk> year over year, although the comparable period included approximately <unk> <unk> attributable to the initial surge of COVID-19.

Moving down the P&L to Opex.

Operating expenses for Q4, 2021 were $91 9 million up $42 million from Q4 2020.

The year over year increase was driven by increases in marketing, including an acceleration of spending in the EU to drive brand awareness, which lags that of the U S. G&A, primarily driven by an increase in newly established consulting agreements.

By increasing non production head count cost based primarily on hiring that occurred earlier in 2021, as we've paused incremental hiring except for a few critical areas.

By increased commercialization spending as we work to commercialize new products and by increased restructuring fees associated with ongoing litigation.

Turning to our balance sheet and cash flow highlights our.

Our cash and cash equivalents balance was $733 3 million and total debt outstanding was approximately $1 1 billion as of December 31, 2021.

For the 12 months ended December 31, 2021, net cash used in operating activities was $301 4 million compared to $40 zero million dollars in the year ago period.

Capital expenditures totaled $136 zero million dollars for the 12 months ended December 31, 2021, compared to $57 7 million for the year ago period the.

The increase in capital expenditures was primarily driven by continued investments in production equipment and facilities related to capacity expansion initiatives.

Next I will provide some commentary about our 2020 to outlook.

For the fiscal year 2022, we expect net revenues to be in the range of $560 million to $620 million.

Corresponding to year over year net revenue growth of between 21% and 33%.

We expect flat to modest net revenue growth in Q1 accelerating through the year, primarily due to newly secured distribution expansion in the U S retail new product launches acceleration in international markets. As a result of price resets and extended shelf life driving incremental distribution as well as growth in China anticipated limited time offerings at <unk>.

Our customers and as we lap easier comparison periods in the back half of the year.

Although we're not providing full year margin guidance at this time, we did want to provide some additional context for our Q1 2022 margins. We expect gross margin in the first quarter to fall well below more normalized levels again, driven by the aforementioned short term higher manufacturing and logistics costs that are in existing inventory with added pressure from a new product that will.

In the coming weeks, the new product initially uses an expensive process, which we expect to streamline significantly later this year, but it will represent an additional drag to our Q1 gross margin.

In 2021, Opex grew to 63% of revenue. This percentage is a function of lower than expected sales amidst continued investment to serve our strategic partners.

<unk> new products build operations in the EU and China and advance our innovation brand and team objectives. We believe our Opex base is now largely adequate for our mid term growth objectives and as such we intend to reduce our rate of spending growth substantially while we still believe we are in the early stages of what we expect will be a far larger business over the long term.

We are significantly reducing hiring holding many of our teams flat have concluded certain consulting engagements and are holding flat or reducing other areas of discretionary spending.

That I will turn the call back over to the operator to open it up for your questions. Thank you.

Thank you well now begin the question and answer session.

Good question you May Press Star then one on reports from phone.

You don't Speakerphone, please pick up your handset before pressing the keys.

What part of your question.

Please press Star then two.

At this time, we will pause momentarily to assemble the roster.

First question comes from Alexia Howard of Bernstein. Please go ahead.

Good evening everyone.

Yes.

I like that.

So I appreciate all the detailed explanations remedial actions that you're taking to reaccelerate sales, particularly in the retail channels like the sampling marketing innovation and expanded distribution.

Could you say how quickly you expect to see that re acceleration, particularly in the retail side is it Q1 is it already happening do we have to wait till Q2.

And then as a follow up.

Do you expect this reacceleration on the top line to materialize without incurring meaningfully incremental extra operating costs or put simply with Q4, the low point on gross margin EBIT, Darren cash spun and should and should we expect sequential improvement from here or do we have to wait until the second half it sounds.

So that new product launch in Q1 could actually drive the gross margins and perhaps profit down even further in the near term. Thank you.

Thank you I appreciate it so I think the way that.

We're looking at this as we saw very good growth across three of our four channels.

Obviously focused on U.

U S retail as it should.

And I think it's our approach to that really is around not necessarily waiting for that category to resume growth, but rather taking action across.

Our distribution to bring growth independent of whether or not the category starts to recover.

I think the category is going to recover and as it does we are in a great position, we still have the number one brand in the category. Our household penetration continues to rise.

The one brand velocity among all plant based top 20 plant based meats and we've got the number one brand awareness so.

Should that start to accelerate on its own.

We are well positioned but independent of that we have a number of actions.

We've taken that will allow us to see new growth and new distribution.

New innovation coming into the market a lot of in store sampling as you referenced.

Tactical shopper marketing programs that seek to re engage the consumer with our brand and retail and then broader high level marketing that continues to attract attention to our brand and retail. So we feel good about our strategy for U S retail, but we're not relying on that alone for growth. Obviously, if you think about this past year and I will touch on this most likely in a number of questions.

Didnt look at the short term impact of Covid and say.

Stop pursuing a long term opportunity our view on this opportunity is that it's a very very large one over a long period of time, we are well positioned as the number one brand in our category in retail and the number one brand in foodservice.

We have the best partnerships out there in terms of <unk> and CPG companies. So we wanted to continue to invest and we spent much of 2021, making very significant investments throughout our business. We are now in a position having done that scaling and if you look at the scaling we've done.

Evident in the market today, whether it's the products, we have with Mcdonald's in the UK or Ireland.

The tests that are going on in Dallas, and San Francisco with Mcdonald's KFC launch that recently occurred with <unk> Express, which recently concluded pizza hut.

Menu placement there in Canada, and the U K and then of course is upcoming.

Launch that we've referenced with our joint venture with Pepsi. So all of those things are incredibly resource intensive in terms of scaling those products and getting them ready to go to market with some other launches that are coming this year with that activity done. We're now in execution mode and so it's really about bringing those opportunities to the consumer. So we believe we can do.

As Phil alluded to without substantially increasing.

The amount of Opex so.

So the growth rate, there I think youll see moderating quite a bit.

So it's an opportunity to leverage the investments we've made realize the growth. That's ahead of us in <unk> and foodservice space, while taking discrete steps in in retail.

Invigorate growth independent of the category in terms of the cadence across the year I think there will be.

More activity in the second third and fourth quarters than there was in the first this is due to things like resets in our own product launches et cetera, but we feel very good about the year. We're we're optimistic.

I think we did the right thing throughout 2021, ignoring the short term.

<unk> and continuing to invest against our long term strategy.

Thank you Adam.

The gross margin question so.

I alluded to in prepared remarks, we do have some some expensive inventory.

We will sell sell that and then there is additional pressure from the new product launch on gross margin. So we do anticipate Q1 will get worse and then we should get better throughout the year I think particularly in the second half as we already have a line of sight to a more cost effective way to manufacture the prana.

Yeah.

Great. Thank you very much I'll pass it on.

Hello.

Thank you next question comes from Ken Goldman with Jpmorgan. Please go ahead.

Alright, thank you so much.

I wanted to ask Ethan.

It's a fairly wide range understandably for the topline I know you gave in terms of your guidance I know you gave some of these parameters, but I just wanted to sort of get a little bit of a better sense of as youre thinking about whats driving the bottom end of that range, what's driving the top end of that range. What are some of the considerations that you're thinking about sort of signposts, we should look for as we can.

Think about how to get to that top end and the bottom end.

Sure.

In this case, because we rely so much on our own activities within retail in terms of new distribution, bringing new innovation into stores.

And things of that nature, I feel pretty good about those forecasts.

What would.

Increase the upside quite a bit would be if the category were too.

To kind of re initiate growth on the foodservice side, what you could see from US is continued I think we had 35% or so.

Foodservice growth in the fourth quarter.

We expect to see some continued growth there throughout the year.

But these launches that we have with our large strategic partners.

The cadence of those particularly in the second half of the year.

We should signal that the investments, we're making are moving forward. So I would look for things like that so so an uptick in.

And the traction that youre getting from our products in retail, particularly the new ones that we're introducing.

As well as the <unk> activities and continued growth in U S. Foodservice those things will take us to the higher part of our range.

Great. Thanks, I know, we're running long.

Okay.

Thank you next question will be.

Robert Moskow Credit Suisse. Please go ahead.

Yes.

I think you kind of answered the question Ethan but.

Are you, saying.

That there is incremental upside if you're big <unk> customers.

Put these items on their permanent menu in the second half is that is that kind of like the unknown right now I know in the past you've tried to be conservative conservative there in terms of whether you put those things in your forecast or not like KFC and Mcdonald's are big chunky customers, but it's unclear I guess to me whether these.

Items are going to be on the permanent menu is that really the swing factor.

I think it's one of the elements.

Continued recovery in foodservice generally is another one.

And continued.

Trials in <unk> with some of the customers that we've been involved with in the past.

But we are obviously working toward more permanent menu placement with all of our <unk> partners.

And should that start to materialize in the <unk>.

Second half of the year that would that would be a benefit to our plan.

Okay, and maybe a modeling follow up like like SG&A. I think you said you will have a slower growth rate.

Rate of your spend.

But youre also trying to increase more more marketing more advertising. So can you just kind of give us a route.

A range of of growth here in terms of SG&A it might be the one of the easier things for us to model if so.

Yes, I mean, I think what I can say is that it'll be it'll be very meaningfully moderated in the way. We're accomplishing that is if you just think about the sheer number of products that we're bringing to market with different customers and partners. This year.

It's really time for us to focus on executing those.

At a steady state production versus.

The amount of scaling that we were doing in 2021, so we expect to bring some cost out of that.

On the marketing side, we made some pretty big investments in the fourth quarter, particularly in Europe , and so we're seeing good results from that.

So I think if you look.

At our marketing for the balance of 2022, it's a really good position to be in because we're marketing with our strategic customers with our <unk> activities, whether it's with KFC or <unk>.

Or with with Mcdonalds, then you look at our joint venture with Pepsi Youll see some activity from US and then there in terms of the planet partnership and then of course, our own marketing. So we're going to be coming at the consumer from a number of different.

Sure.

Touch points in their lives and feel good about that.

But because of the ability to run more efficiently.

The rest of our business I don't think that will materially raise our opex for the year.

Okay.

Okay alright. Thanks.

Hello.

Thank you Adam.

Goldman Sachs with the next question. Please go ahead.

Hi, This is Arthur on for Adam I was hoping you could provide details on your plans to lower unit costs on a per pound basis specifically.

The items that you mentioned, what timeline and how much in incremental savings you may achieve within that timeline and what those plans might cost. Thank you.

Yes, so as you know and we've talked about we have a very robust and global.

Cost down program.

And I set a goal.

They almost three years ago.

<unk> within one category would be able to.

Get price parity or below with animal protein and I still feel good about that and we feel good about that as a team.

As we mentioned we are making good material progress.

In that regard.

Theres a lot of noise in our system right now because of the sheer number of activities in scaling and launch them we've done.

But.

Alternate supplier perspective from being able to negotiating better terms to you.

Yield to mix all of these things where we're seeing some.

Some good progress in.

A major program in place. So that's actually one that I feel quite good about the affiliate want to give a little detail sure. So we've got it split up across several work streams and I'll give you a very high level overview of each of those each work stream has an owner who has signed up for our goal for the year that we measure against and we as part of our monthly business reviews.

Give a.

Green Amber red status on that and talk about how we get back to Green. If we get off course, I would expect a lot of these take time so.

In the first example, something like P protein, we already have seen some good savings there.

<unk> came through <unk> to some degree in the materials savings, but a lot of the work that we've got to do there is there's a tremendous amount of difference in the price per pound of pea protein from different suppliers, but it's not as simple as just swapping went out for another.

Tend to have slightly different characteristics and so theres a lot of testing to make sure. The ingredients that are quality bar once we pass those tests, we didn't change our manufacturing.

The manufacturing process to incorporate that other ingredient and then it takes time because you start shifting over time and things have to work its way into your inventory and so all of that means that for an initiative like that you'll likely see more progress in the latter part of 2022. Another one for US is manufacturing we alluded to a couple of.

Notes that we've already seen in the prepared remarks, there are a lot of that is really around just how do you run your equipment and your workforce as efficiently as possible standardizing work replicating what works on one machine at best practice to all of your others.

Some of that can be pretty fast it doesn't necessarily require more capital.

It's largely just how you standardize the process.

And Youll see results there in the form of better leverage on fixed costs over time.

Even leverage on your variable workforce costs. Their ingredients is similar to Pea protein, we've got a large request for pricing exercise going on there.

As I mentioned in the prepared remarks in some cases, you find that existing suppliers, we were scrambling to find.

To get supply through the very early phases of beyond meat and so when we go back in a more formalized approach we've been able to see some good wins with better pricing. There in other cases, we will have to look at alternative suppliers to supply some of the same ingredients as well as over time figuring out less expensive ingredients to build into products, that's probably a longer arc.

Packaging also how do we take cost out of packaging, we think theres opportunity to also be better from an environmental standpoint, there that that will be a fairly time consuming one too because we have to get we have to redesign and then roll it through and we have existing and morry.

Logistics, how do we fill our trucks more I think there is some probably quick wins, we can get there we've been sort of.

Running trucks throughout the network as we mentioned in prepared remarks, how do we consolidate loads and make sure we're not running side loads, how do we get good quotes and move away from spot wherever we can through better planning.

And then there's a couple of others that are also in the early phases. So I would look to see we'll try to continue to give you. Some anecdotes as we go but a lot of this will not really take effect until later in the year as we can sort of adopt your practice and worked through in the case of something like bringing in cheaper ingredients, where on average cost that has to find its way into our inventory.

Our product and then ultimately get sold.

Very helpful. Thank you.

Thank you next question will come from Peter Galbo Bank of America. Please go ahead.

Hey, guys. Good afternoon, and thank you for taking the question.

Alright.

Wanted to go back to an earlier question just around cash burn.

Over the past three quarters now you've run anywhere from $120 million to $140 million of cash burn, including Capex per quarter.

Just want to understand on a go forward basis, whether or not that gets better or what causes that to get better.

And if not kind of whats the minimum level of cash you're willing to run with.

Yes.

So.

As I as I alluded to we had very.

Resource intense year in terms of getting ready for <unk>.

A lot of the launches we are doing a lot of the activity was strategic partners.

We also spent a lot to standup GM led organizations in.

Facilities in China, and the EU.

And then as I mentioned, we did some some.

Marketing over in Europe towards the latter part of the year.

So all of these things.

Did contribute to a to a pretty high level of investment for the year, but we don't see them as ongoing.

We have the ability and we're taking the steps to moderate the growth in opex.

I really try to separate this in terms of wood.

We've been investing over the course of 2021, we've set up some really fantastic opportunities for us to execute against the next 12 to 18 months and we're moving into that phase now, where we're actually going to start bringing out some costs getting more efficient sweating, our assets better doing better inventory management, because we're now able to run some steady state production and.

Things of that nature.

Other measures to bring down the.

The level of investment.

I don't think about this.

Terms of the kind of near term.

<unk> I think about it more in terms of just keeping enough powder to continue to invest as opportunities present themselves, but I feel pretty good about our plan both on the revenue and on the on the Opex side to be able to to have cash to make future investments without taking us to <unk>. So.

I know, it's not the most exact answer but it's what we can give right now.

I think that the biggest piece of information. We can give is that youll see a moderation in investment levels 'twenty two to 'twenty one.

Got it that's helpful and maybe even just to go back to retail in your prepared remarks, you kind of commented on youre not expecting or you rather that you are expecting kind of a health oriented consumer to come back.

This is more of the comfort food.

What are you seeing internally or in your own data, suggesting that that kind of the reverse that's going to happen or is it more.

Aspirational at this point thanks.

Much.

Sure. So what we've tried to do is set aside for the moment. The category performance. This is or what can we control what can we do that seems installation about whether this is signaling something bigger about the category and I think as attractive as it is to try to.

Posit particular theory on what's going on there's so much noise.

In in the market just because of the instability around.

Pandemic different variance behaviors food service to retail that were just kind of sitting out of that discussion and say here's the things. We can control we're going to go after those as hard as we possibly can and we're going to grow our business my sense is.

From what we're seeing out of the <unk> space in terms of all the studies, we've done with our partners what we're seeing in other economies.

That as things normalize and consumers get back to normal behavior taken off sweats, putting on flocks go into work things like that you'll see.

Resumption of growth in the retail space as we get in there and start to demo one of the things. We did in 'twenty. One was we really focused on getting ready for some of these strategic.

Strategic.

Launches in foodservice.

Here in the U S and in Europe .

And we didn't do as much as I mentioned in my remarks retail innovation and that's okay.

We have a major product, which I actually have in my hands right now.

Staffing on during the call.

That took an enormous amount of time and energy to get ready and it's a fantastic product and we're launching it with our partners at Pepsi.

And.

And that's going to bring excitement I think to the retail space.

And we have some other products that come out later this year, so youll see us get back on the retail game in a big way in 'twenty two.

Thank you next question will be from Michael operating Piper Sandler. Please go ahead.

Thank you and good evening.

Alright, I just wanted to follow up on the Pepsi gave me and you.

You've got excitement around those products and I think in the answer to the SG&A question touched on some of the spending.

How should we think about that given that it's a joint venture.

Is that structured somehow that that rolls through your operations and are those revenues included in part of your guidance.

This is Phil I'll take that one so we sell product into the joint venture.

And so you would see the revenue and cost directly that way.

The other place you see this in our income statement.

Is the joint venture.

Income or loss line and so if you are paying attention in the release you probably saw step up actually in our portion of the lost there and so we're selling product in and then we saw.

<unk>.

Split the proceeds the profit or loss from the JV based on kind of what they sell into retail them.

Okay. That's helpful.

Just coming back to the pricing piece as you try to push.

For parity or better against the animal protein.

I know with local inflation.

Costs are higher than they've been but assuming that alone.

Bridged the gap I know, you're pushing your own costs down I guess, just what would make you.

<unk> back off of that ambition.

Sort of that.

<unk>.

Almost all costs or does it depend on hitting the right hurdle.

Measured steps along the way.

Yes.

Yes, I don't think were going to back off of that.

I know your question was what would make you.

Yes, if we if we had some sort of immovable obstacle that werent able to overcome with obviously signal that and say, but everything seems to be going on the materials side in the right direction, albeit.

Slowly.

But we're able to get I think in the next two and a half years.

The kind of production that we need to see particularly in one category.

So we do feel quite good about that all of this noise, where we've been we've shut down for a while one of US part of one of our facilities just to do commercialization and that forced us to put new production or production in some of our co Packers as we explained so theres just a lot of noise in the system. Those things are reversible and we can we can.

We can affect that and these decisions again, just like the investments.

I am always thinking about how do we capture the biggest future opportunity and the biggest future value and we are well aware of the headlines that might generate and things of that nature, but it's very it's the right thing to do and asking people to.

Judge the quality of our investments in the same quarter that we're making them I think is probably a difficult and.

And then not productive asked what we what we're asking to do is look at these investments.

18 to 24 months from now and see how you feel about them because I think there.

The strong and whether it's in <unk>.

<unk> margin today for something later on we're willing to make those those tradeoffs and so in the area of <unk>.

The price parity goal will tease it out a little bit this year in certain markets Youll see us run some some programs to test the elasticity around it.

But overall, we're making progress in that area.

Okay, great. Thanks, a lot.

Okay.

Thank you next question John Baumgartner with Mizuho. Please go ahead.

Good afternoon, and thanks for the question.

You said with regard to retail you mentioned I think that the disruption is temporary and you did lack of pretty Mastercard in 2021 right now at the same time. This industry right now is pretty narrow and being built around ground meat items and I get the household penetration opportunity on paper, but how do you balance the total addressable market with the protector.

Will that I guess at some point in demand just gets exhausted what.

<unk> migrated to structured products, whether its stakes or chicken breasts to sort of capture a broader range of consumption occasions is there a need for that at this point and I guess, if there is and how far away is that technology. Thank you.

Yeah sure. That's a good question. So I think there's still a tremendous amount of room in.

Core product.

Categories.

With its ground or the Burger sausage.

And as we continue to improve the taste profile continue to make clear to the consumer the.

Benefits, but as climate becomes more of a front.

Page issue for people.

We have a really strong case to make there and then ultimately price as we continue to March toward price parity.

<unk> commitment to those three things regardless of what's going on I think will give us.

Wins over the next several years.

But certainly proliferating the portfolio.

Is something that.

We're equipped to do we've been working on some of the retail launches that youll see from us in the future, we'll certainly do that.

And we're excited about those products.

We're taking some of them yesterday I think they are very strong so youll see us continue to evolve the portfolio.

And as you see things go into foodservice, whether it's with <unk> or.

Or in the up and down the street mom and pop businesses, bringing those into retail in those different form factors is different cuts spread items et cetera, I think will help spur retail growth again, we are the leading brand as I mentioned in the category and I think when we emphasize and put so much effort into strategic partnerships, which was the right thing to do in <unk>.

One.

We didn't put as much energy into retail and to have a real opportunity in 'twenty two given the innovation we've done over the last last year to to do that so we think that will help the category as well.

Okay, great. Thank you.

Okay.

Yes.

Thank you next question will be from Ken Zaslow Bank of Montreal. Please go ahead.

Hey, good evening guys.

Are there.

Let me ask two questions. One is what is the process.

For you guys to be able to convert to a permanent item and how much do you are you able to affect the change.

Okay.

Yes.

<unk> is.

For us to make great products.

The right consumer fit there and to be the best partner, we can be and the rest is really up to our partners.

A lot of work not everyone has.

It has to do with.

Different USR serve different segments of the economy and the value proposition is clear.

To some than others and depending on where you are so.

But overall if you look at our track record, we've done done well with continuing to maintain our relationships with our <unk> continues to go from test to.

Trials, and then from trials to LCR, and then from there through to full launches and so.

But theres nothing in particular, we can do other than just performed well and they can each stage.

Okay, and then you have hired several new management.

Additions.

When you think about this in a year from now or year and a half from now how will your operations different than they are now and what are these people going to truly add.

Change agent.

Yes, no great question and one I'm very pleased to talk about.

So if it.

It gets back to this theme of thinking about the long term opportunity and how to capture as much value as possible here in the United States and Europe and in China, and so when you make decisions to for example bring on.

Doug and Bernie who have been great additions to the team as I mentioned or Diana fill or others.

These are forward decisions that these folks are coming from very large organizations and.

Often global in nature.

And since the most recent ones are the adds we've made in operations I'll talk a little about that.

Just the.

The sense of.

Beginning to sweat our assets more we're going to be able to manage our inventory better beginning to drive this cost down program and even more aggressive way that you get.

When you were in the room with these guys as exciting they've done it before at a massive scale and then bringing that type of thinking to beyond meat, and we're giving them plenty of freedom to do that.

So it's something that I think from <unk>.

My own perspective through to the organization down to the lines that we have up to the board we feel great about the team we've put together and again, we're coming out of 'twenty, one with a lot of investment in place a really strong team.

The mass mandates coming off on Friday here in.

In Los Angeles Tomorrow, we feel pretty good.

Great I appreciate it thank you.

Thank you that concludes our question and answer.

I'd like to turn the call back over to Mr. Ethan Brown for closing remarks. Please go ahead.

Yeah.

So I have none other than sit.

Sit tight.

Sure.

And we're coming back I think latter part of this year and given you guys. Some some good results in <unk>.

Look forward to talking about them.

Thanks very much.

Yes.

Conference has now concluded thank you for attending today's presentation.

You may now disconnect.