Q1 2024 Beyond Meat Inc Earnings Call

Welcome to the beyond 'twenty 'twenty four first quarter conference call. All participants will be in merchandising I should you need assistance. Please signal a conference specialist by pressing the star keep all that bad.

Operator: Welcome to the Beyond Meat 2024 First Quarter Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key and one on your touchtone button. To withdraw your question, please press star then two.

Operator: After todays presentation, there will be an opportunity to ask questions can I ask a question to Michael sake, and one that's had some fun.

Operator: Got.

Operator: To withdraw your question. Please press Star then two.

Operator: Please note this event is being recorded. I would now like to turn the conference over to Paul Shepherd, Vice President, FP&A, and Investor Relations. Please go ahead. Paul Shepherd, Vice President, FP&A, and Investor Relations

Operator: Please note this conference being recorded.

Paul Shepherd: I would now like to turn the conference over propulsion.

Speaker Change: Last question of P&I and Investor Relations. Please go ahead.

Paul Shepherd: Thank you. Hello everyone, and thank you for your participation on today's call. Joining me are Ethan Brown, Founder, President, and Chief Executive Officer, and Lubi Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to our first quarter 2024 earnings press release filed today after market close. This document is available in the Investor Relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all the information presented today is unaudited and that during the course of this call, management may make forward-looking statements within the meaning of the federal securities law.

Paul Shepherd: Thank you Hello, everyone and thank you for your participation on today's call. Joining me are Ethan Brown, founder, President and Chief Executive Officer, and <unk>, Chief Financial Officer and Treasurer.

Paul Shepherd: By now everyone should have access to our first quarter 2024 earnings press release filed today after market close.

Paul Shepherd: This document is available in the Investor Relations section of beyond meat website, www dot beyond meat Dot com.

Paul Shepherd: Before we begin please note that all the information presented today on all of it and that during the course of this call management may make forward looking statements within the meaning of the federal Securities laws.

Paul Shepherd: 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 our earnings release, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. We refer you to today's press release, our quarterly report on Form 10-Q for the quarter ended March 30, 2024, to be filed with the SEC, and our annual report on Form 10-K for the fiscal year ended December 31, 2023, along with 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.

Paul Shepherd: These statements are based on management's current expectations and beliefs and involve risks and uncertainties.

Paul Shepherd: That could cause actual results to differ materially from those described in these forward looking statements.

Paul Shepherd: Forward looking statements in our earnings release, along with the comments on this call are made only as of today and will not be updated as actual events unfold.

Paul Shepherd: We refer you to today's press release.

Paul Shepherd: Until he reports on Form 10-Q for the quarter ended March 32.

Paul Shepherd: 2024 to be filed with the FTC.

Paul Shepherd: Annual reports on Form 10-K for the fiscal year ended December 31st 2023, along with 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.

Paul Shepherd: Please also note that on todays call management May reference adjusted EBITDA adjusted loss from operation.

Paul Shepherd: Please also note that on today's call, management may reference adjusted EBITDA, adjusted last-term operating, 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 for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. And with that, I would now like to turn the call over to Ethan Brown. Thank you, Paul, and good afternoon, everyone.

Ethan Brown: Adjusted net loss, which are non-GAAP financial measures.

Paul Shepherd: 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.

Ethan Brown: Please refer to today's press release for a reconciliation of these non-GAAP financial measure to their most comparable GAAP measure.

Paul Shepherd: And with that I would now like depend niccolo, but Ethan brown.

Ethan Brown: Thank you Paul and good afternoon, everyone I'll.

Ethan Brown: I'll begin with a brief overview of our Q1 2024 performance; afterwards, I'll provide updates on the five priorities I outlined on our previous earnings call and how we are building toward our goal of sustainable operations and return to growth. Total net revenue is above the top end of our 70 to 75 million dollar guidance range, at $75.6 million, an 18% decline from Q1 of the previous year. Growth Margin was 4.9%.

Ethan Brown: I'll begin with a brief overview of our Q1 2024 performance after which I'll provide updates on the five priorities I outlined.

Ethan Brown: On our previous earnings call.

Ethan Brown: We are building towards a sustainable operation and return to growth.

Ethan Brown: Total net revenue above the top end of our $70 million to $75 million guidance range.

Ethan Brown: $75 6 million.

Ethan Brown: One 8% decline from Q1 in the previous year.

Ethan Brown: Gross margin was four 9% higher than each of the three previous quarters, but a reduction from six 7% Q1 2023.

Ethan Brown: Higher than each of the three previous quarters, but a reduction from 6.7% in Q1 2023. While we are pleased to return to positive gross profit and gross margin this quarter, this fell short of our expectations due to, among other factors, trade discounts running a bit higher than planned, transitional and startup costs related to bringing production in-house as we continue to consolidate our network, and incremental accelerated depreciation of certain fixed asset disposals.

Ethan Brown: We were pleased to return to positive gross profit gross margin. This quarter. This fell short of our expectations due to among other factors trade discounts running a bit higher than planned transitional and startup costs related to bring production in house as we continue to consolidate our network and incremental accelerated depreciation of certain fixed asset disposals.

Ethan Brown: At this positive swing in margin occurred prior to the enactment of price increases the first tranche of which began rolling out last week.

Ethan Brown: As this positive swing in margin occurred prior to the enactment of our price increases, the first tranche of which began rolling out last month, prior to completion of our network consolidation work, as well as being impacted by the aforementioned accelerated depreciation, we're optimistic regarding margin improvement across the balance of the year. Operating expenses in Q1 were $57.1 million, a $6.8 million reduction year over year. This operating expense total includes a $7.5 million accrual for Consumer Class Action Settlements, which without operating expenses would have been $49.6 million.

Ethan Brown: Prior to completion of our network consolidation work.

Ethan Brown: As well as being impacted by the aforementioned accelerated depreciation.

Ethan Brown: We're optimistic regarding margin improvements across the balance of the year.

Ethan Brown: Operating expenses in Q1 were $57 1 million.

Ethan Brown: $6 8 million dollar reduction year over year.

Ethan Brown: This operating expense total includes a $7 $5 million accrual.

Ethan Brown: For consumer class action itself.

Ethan Brown: Its about operating expenses.

Ethan Brown: $49 6 million.

Ethan Brown: A reduction of $14.3 million year-over-year. This reduction in operating expense helped reduce our loss from operations to $53.5 million in Q1-24 compared to $57.7 million in the year-ago period. Adjusted loss from operations was $46 million, reflecting the exclusion of the $7.5 million accrual for the Consumer Class Act itself.

Ethan Brown: A 14.3 million year over year.

Ethan Brown: This reduction in operating expense helped reduce our loss from operations to $53 5 million in Q1 24.

Ethan Brown: <unk> to $57 7 million in the year ago period.

Ethan Brown: Adjusted loss from operations was $46 million, reflecting the exclusion of the $7 5 million dollar approval.

Ethan Brown: Consumer class action settlements.

Ethan Brown: We will continue to drive efficiencies throughout the organization in support of further operating expense reductions throughout 2024. Turning to our balance sheet and cash flow, inventory fell to $122.5 million, down by $7.8 million from Q4 2023 and down by almost $100 million from Q1 2023. And our cash consumption of $32.5 million in Q1 2024 was down significantly from $49 million in the same period in 2023.

Ethan Brown: We will continue to drive efficiencies throughout the organization supporting further operating expense reductions throughout 2024.

Ethan Brown: Turning to our balance sheet and cash flow inventory fell to $122 5 million down by $7 8 million in Q4 2023.

Ethan Brown: And down by almost 100 million from Q1, 2023, and our SaaS consumption of $32 5 million Q1 2024.

Ethan Brown: Significantly for $49 million in the same period in 2023.

Speaker Change: I should note that inventory so the first quarter does represent a period of inventory build as we prepare for higher demand during our peak selling quarter.

Ethan Brown: I should note that while inventories fell, the first quarter does represent a period of inventory build as we prepare for higher demand during our peak selling quarters. This bill, which included inventory for the Beyond Burger 4 and Beyond Beef 4 launches, meant that we parked more cash in finished goods inventory this quarter than we did in Q4 2023. Coming off of this first quarter of the year and looking across 2024, we will remain focused on driving further reductions in cash consumption.

Ethan Brown: This bill which included inventories for the beyond Burger four and beyond before launch.

Ethan Brown: We parked more cash finished goods inventory this quarter than we did in Q4 23.

Ethan Brown: Coming off of this first quarter of the year and looking across 2024.

Ethan Brown: We remain focused on driving further reductions in cash consumption.

Speaker Change: With that brief overview I will now.

Ethan Brown: With that brief overview, I will now run more fully through the progress we're making against each of our five priorities for 2024, while Lubi will follow in more detail on our overall finance performance in Q1 2020. First, get in here.

Ethan Brown: Now run more fully through the progress, we're making against each of our five priorities for 2024, well then we will follow with more detail on our overall financial performance in Q1 2020.

Ethan Brown: First getting here.

Ethan Brown: The first quarter of 2024 provides a clear proof points that our operations continue to get leaner and more efficient.

Ethan Brown: The first quarter of 2024 provides a clear proof point that our operations continue to get leaner and more efficient, and we realized a positive gross margin despite a lower revenue base for reducing operating expenses, inventory, and cash consumption relative to the same period in 2023. Our continued emphasis on leaning out our operations also entails tightening our focus with regard to product portfolio, markets, consumer targets, claims, and messaging, which leads me to our second priority, Beyond 4.

Ethan Brown: We realized a positive gross margin despite a lower revenue base, while reducing operating expenses inventory and cash consumption relative to the same period 2023.

Ethan Brown: Our continued emphasis on leaning out our operations also entails tightening our focus with regard to product portfolio markets consumer targets claims and message.

Ethan Brown: Which leads me to our second priority the encore.

Ethan Brown: In February we unveiled beyond Burger four and beyond before and across April. These products began rolling out in grocery stores nationwide, including Walmart Kroger.

Ethan Brown: In February, we unveiled Beyond Burger 4 and Beyond Beef 4, and across April, these products began rolling out in grocery stores nationwide, including Walmart and Kroger. Through this fourth-generation project, which we expect will be fully distributed by Memorial Day, we took a leap forward on a continuous improvement journey that is a rapid and relentless innovation program. As you will recall, we iterate our product lines across morning galactic properties in a framework referred to as FAAT for flavor, aroma, appearance, and texture, while driving improvements in nutrition, cost, and other considerations. In the BEYOND4 platform, as discussed previously, we placed considerable emphasis on unlocking further health gains.

Ethan Brown: Through this fourth generation projects, which we expect to be fully distributed by Memorial day, We took a leap forward a continuous improvement journey.

Ethan Brown: As a rapid and relentless innovation program.

Ethan Brown: As Youll recall, we iterate our product lines to cross border Galactic properties in a framework referred to.

Ethan Brown: A tea flavor aroma appearance and texture, while driving improvements in nutrition costs and other considerations.

Ethan Brown: Beyond four platform as discussed previously we placed considerable emphasis on unlocking further help games to this and we're intensely getting medical nutrition experts as we built this next generation.

Ethan Brown: To this end, we work intensely with leading medical and nutrition experts as we build this next generation. Together with his network, our team, in my view, delivered a home run, an improved sensory experience with a nutritional build so impressive that it goes to market with a host of important validation. These include becoming the first plant-based meat brand to be recognized by the American Diabetes Association's Evidence-Based Nutritional Guidelines for Better Choices for Life Program, being featured in a collection of heart-healthy recipes certified by the American Heart Association's Heart Check, as well as an upcoming American Heart Association and Beyond Meat cookbook.

Ethan Brown: Together with this network our team in my view delivered a homerun and improves sensory experience with nutritional build so impressive that it goes to market with a host of important validation.

Ethan Brown: These include.

Ethan Brown: Becoming the first plant based meat brand to be recognized by the American diabetes Association's evidence based nutritional guidelines works better choices for life program.

Ethan Brown: Being featured in the collection of heart healthy recipes certified by the American Heart Association's architectural reps as well as an upcoming American Heart Association and beyond cookbook.

Ethan Brown: Earning Good Housekeeping's coveted nutritionist-approved emblem, which assesses food products based on specific nutritional criteria, as well as taste, simplicity, and transparency. And finally, becoming the first plant-based meat products to be clean label project certified. As has been the case with other disruptive innovations in history, innovations that are today commonplace everyday items.

Ethan Brown: Ernie good housekeeping coveted nutritionists approved.

Ethan Brown: Assesses food products based on specific nutritional criteria as well as taste simplicity and transparency.

Ethan Brown: And finally, they come into the first plant based meat products to be clean label project certified.

Ethan Brown: As has been the case with other disruptive innovation history innovations that are today commonplace everyday items one of the biggest challenges are branded space. It's work, Australia misinformation regarding our product lines.

Ethan Brown: One of the biggest challenges our brand has faced is orchestrated misinformation regarding our product line. As Beyond Burger 4 and Beyond Beef 4 approaches full distribution, we will launch our 2024 marketing program, which highlights their strongly validated health benefits, Built with protein from yellow peas, red lentils, brown rice, and fava beans. Together with Heart Healthy Avocado Oil, Beyond Burger 4 and Beyond Beef 4 provide consumers with 21 grams of clean protein with only 2 grams of saturated fat per serving.

Ethan Brown: As beyond Burger for beyond before approaches full distribution, we will launch our 2024 marketing program, which highlights their strongly validated helpfulness built with protein from yellow Ts Red Lentils Brown rice.

Ethan Brown: Together with heart healthy avocado.

Ethan Brown: Beyond Burger four and beyond before provides consumers with 21 grams of clean protein with only two grams of saturated fat per serving.

Ethan Brown: That said beyond four platform rolls out to more stores. We are pleased with the positive though still anecdotal feedback is receiving from consumers as well as members of the health and wellness community, including Nutritionists and dietitians.

Ethan Brown: As the Beyond4 platform rolls out to more stores, we are pleased with the positive, though still anecdotal, feedback it's receiving from consumers, as well as members of the health and wellness community, including nutritionists and dieticians. I won't waste our time today with a lengthy review of what has been a very gratifying initial introduction, but will instead share perhaps one of my favorite headlines thus far. This is from Good Housekeeping, which simply states, "Our Registered Dietitians Can't Stop Talking About Beyond Meat's Newest Launch."

Ethan Brown: I wont consumer time today, but a lengthy review what has been a very gratifying initial introduction, but will instead share perhaps one of my favorite headlines thus far with some good housekeeping, which simply states are registered dietitians can stop talking about Amit Lewis launch.

Ethan Brown: This headline is particularly important to me. It represents our promise that we will build plant-based meats that are not only delicious but serve an important role in human health. This and other similar reviews are also important because they help create strong relevance for large swaths of consumers, where they're quantified as roughly 160 million Americans who have some type of cardiovascular disease, the 97 million Americans who are pre-diabetic, or the 38 million Americans who are diabetic, or the 25 million Americans who have high cholesterol.

Ethan Brown: This headline is particularly important to me it represents a promise that we built that basically not only delicious, but serve an important role in human health.

Ethan Brown: This and other similar reviews are also important because they help create strong relevance for large swathes of consumers.

Ethan Brown: Quantify this is roughly 160 million Americans, who have some type of cardiovascular disease. The 97 million Americans were pre diabetic with a 38 million Americans, who are diabetic or the 25 million Americans, who have high cholesterol we believe.

Ethan Brown: We believe, as do the nutritionists, institutions, and dieticians standing behind Beyond Four, that we offer consumers a delicious yet powerful choice that can help them and their loved ones live healthier lives. The aforementioned 2024 marketing campaign, which we are rolling out imminently, will bring this message to life across a variety of media throughout the summer grilling season and beyond. Moving on from products, I should note that we announced a newly renovated and expanded line of three different Beyond Crumbles.

Ethan Brown: Nutritious institutions and Dieticians standing behind beyond four and we offer consumers a delicious yet powerful choice they can help them and their loved ones to live healthier lives.

Ethan Brown: <unk> mentioned 2020 for marketing campaign, which we are rolling out in Italy will bring this message to life across a variety of media throughout the summer grilling season and beyond.

Ethan Brown: To be more for products I should note that we announced a newly renovated and expanded line of three different beyond crumbles original feisty Italian style.

Ethan Brown: Original, feisty, and Italian style. These tasty bite-sized crumbles go from frozen to finished in just a few minutes and provide a delicious and healthy protein option throughout the day. Beyond Crumbles have 12 grams of protein per serving, less than one gram of saturated fat, and no cholesterol.

Ethan Brown: These tasty bite size crumble skillful frozen to finish just a few minutes and provide a delicious and healthy protein options throughout the day.

Ethan Brown: Beyond crumbles of 12 grams of protein for.

Ethan Brown: Less than one gram of SaaS, where to start and no cholesterol.

Ethan Brown: These are intended to join beyond stake in the frozen aisle.

Ethan Brown: These are intended to join Beyond Steak and the Frozen Isle. And as with Beyond Steak, the Beyond Crumble lineup has been certified by the American Heart Association's Heart Check Program and the American Diabetes Association's Better Choices for Life Program. Moving forward, we expect to be introducing yet another delicious product set to this heart-healthy lineup later this year. I'll turn now to our third priority, implementing changes to our U.S. trade and pricing programs, beginning in Q2, which we believe will meaningfully impact gross margin.

Ethan Brown: And as with beyond stake beyond Trumbull lineup, that's been certified by the American Heart Association Heart check program at the American diabetes Association's better choices for life program.

Ethan Brown: Moving forward, we expect to be introducing get another delicious product set to this heart healthy lineup later this year.

Ethan Brown: I'll turn now to our third priority implementing changes to our U S trade pricing programs beginning in Q2, which we believe will meaningfully impact gross margin.

Ethan Brown: Our overarching goal is to store margins to previous levels achieved in 2019 2020 over time.

Ethan Brown: Our overarching goal is to restore margins to previous levels achieved in 2019 and 2020 over time. As we reported, we've just passed through the second major tranche and the majority of our pricing actions for the year. These measures reflect a series of tiered pricing changes following a thorough analysis regarding the elasticities in our frozen and fresh product ranges and the introduction of BEYOND4 and its more premium ingredients, among other things. Fourth, we are nearing completion of the difficult task of consolidating our production network.

Ethan Brown: As we report just pass through the second major tranche and majority of our pricing actions for the year.

Ethan Brown: These measures reflect a series of tiered pricing changes following a thorough analysis regarding elasticities.

Ethan Brown: Frozen and fresh product offerings and the <unk>.

Ethan Brown: Production at beyond four and it's more premium ingredients among other factors.

Ethan Brown: Fourth we are nearing completion of the difficult task of consolidated our production network.

Ethan Brown: Though our decision regarding the degree of consolidation reflects myriad factors, depending on the co-manufacturing partner, we expect this comprehensive action to substantially contribute to margin as we emphasize the term of production to benefit from better asset utilization, overhead absorption, production, and logistics efficiencies, while also providing for better management of logistics and quality control. Finally, fifth, we are investing in our European business and related strategic partners. We continue to make progress with our quick service restaurant business in Europe and the UK, even as the quarter's year-over-year numbers were impacted by the lapping of product loading and promotional activities in the year-ago period that did not repeat in Q1 2024, a consumption trend toward value items in a certain geography, reflecting broader macroeconomic conditions.

Ethan Brown: So our decision regarding the degree of consolidation reflects myriad factors depending on the co manufacturing partner, we expect this comprehensive action to substantially contribute to margin as we emphasize the term production benefited from better asset utilization.

Ethan Brown: Net absorption production and logistics efficiencies, while also providing better management logistics and quality control.

Ethan Brown: Finally, fifth we are investing in our European business and related strategic partners.

Ethan Brown: We continue to make progress with our quick service restaurant business, Europe, and the U K, even as the quarters year over year numbers were impacted by the lapping of product load in and promotional activities in the year ago period did not repeat in Q1 2020 for the consumption trends towards value items, and certain geography, reflecting broader macroeconomic.

Ethan Brown: Looking forward just today, Mcdonald's, Germany kicked off his famous meals promotional campaigns all restaurants across Germany.

Ethan Brown: Looking forward, just today, McDonald's Germany kicked off the same as meals promotional campaigns at all restaurants across Germany. The campaign features two celebrity favorite meals built around plant burgers and plant nuggets exclusively. Additionally, in Q1, McDonald's expanded availability of the plant burger across the Baltic countries of Latvia, Lithuania, and Estonia. In Europe, more broadly, we launched Beyond Steak for food service in the Netherlands and at retail in Belgium, as well as expanded availability of the Beyond Burger at co-op stores across the UK.

Ethan Brown: <unk> features to celebrity favorite meals built around the plant or plant Nuggets exclusively.

Ethan Brown: Additionally, Q1, Mcdonald's expanded availability of the plant Burger across the both the countries of Latvia, Lithuania and Estonia.

Ethan Brown: And Europe more broadly we launched beyond stake for foodservice in the Netherlands and in retail in Belgium, as well as expanded availability of the beyond Burger at co op stores across the U K.

Lubi Kutua: Furthermore, we are excited that we will soon be expanding our presence in retail in Germany given our recent satisfaction with local shelf life requirements and see continued opportunity for further distribution expansion in the EU and other international markets. To conclude, we believe that 2024 is a pivotal year for change and progress for Beyond Meat. We began the year making solid strides along our 2024 strategy and, correspondingly, a path to sustainable operations and a return to growth.

Ethan Brown: Further we are excited that we will soon be expanding our presence at retail in Germany, given our recent satisfaction local shelf life requirements and see continued opportunity for further distribution expansion in the EU and other international markets.

Lubi Kutua: To conclude we believe the 2024 is a pivotal year for change and progress for beyond meat.

Lubi Kutua: We began the year, making solid strides along our 2024 strategy and correspondingly a path to sustainable operations and a return to growth, we believe that our determination to sharply reduce our operating expenses and cashews consolidated production network implement pricing changes to help restore margins and launch from a significant rent.

Lubi Kutua: We believe that our determination to sharply reduce our operating expenses and cash use, consolidate our production network, implement pricing changes to help restore margins, and launch our most significant renovation to date, Beyond 4, for purposes of reinforcing, as well as raising the bar on, the health benefits of our plant-based meats amidst sustained misinformation campaigns is beginning to pay off. We expect to continue to reap benefits from these actions across the balance of the year and beyond.

Lubi Kutua: To date, the encore for purpose reinforcement as well as raising the bar on the health benefits of our plant based meats amidst sustained misinformation campaigns are beginning to pay off.

Lubi Kutua: We expect to continue to harvest benefits from these actions across the balance of the year and beyond these.

Lubi Kutua: These powerful measures and their early dividends, coupled with our initiative to bolster our balance sheet this year, infuse us with cautious optimism as we look forward. And with that, I'll turn the call over to Lubi to walk us through our Q1 financial results in greater detail, as well as provide our outlook for 2024.

Lubi Kutua: These powerful measures in their early dividends, coupled with our initiative to bolster our balance sheet. This year.

Lubi Kutua: Use us with cautious optimism as we look forward.

Lubi Kutua: And with that I'll turn the call over to Luke to walk us through our Q1 financial results in greater detail as well as provide our outlook for 2024.

Lubi Kutua: Thank you Ethan and good afternoon, everyone.

Lubi Kutua: Thank you, Ethan, and good afternoon, everyone. I'll begin by reviewing our first quarter financial results before providing an update on our 2024 outlook. Net revenues decreased 18% to $75.6 million in the first quarter of 2024 compared to $92.2 million in the year-ago period. The decrease in net revenues was driven by a 16.1% decrease in volume of products sold, and to a lesser extent, a 2.3% decrease in net revenue per pound

Lubi Kutua: Begin by reviewing our first quarter financial results before providing an update on our 2020 for outlook.

Lubi Kutua: Net revenues decreased 18% to $75 6 million in the first quarter of 2024 compared to $92 2 million in the year ago period.

Lubi Kutua: The decrease in net revenues was driven by a 16, 1% decrease in volume of products sold and to a lesser extent, a two 3% decrease in net revenue per pound.

Lubi Kutua: Taking a closer look by channel, net revenues in our US retail and food service channels decreased by 16% and 16.2%, respectively, primarily due to a decrease in the volume of products sold and reflecting continued macroeconomic and category specific headwinds. Net revenues in our international retail and food service channels decreased by 12% and 28.7%, respectively. Softness in our international retail channel mainly reflected the lapping of large initial pipeline orders in Europe for our chicken innovation launches from a year ago, as well as softer demand in the Canadian market for certain of our beef and pork items.

Lubi Kutua: Taking a closer look by channel net revenues in our U S retail at foodservice channels decreased by 16% 16, 2%, respectively, primarily due to a decrease in the volume of products sold and reflecting continued macroeconomic and category specific headwinds.

Lubi Kutua: Revenues in our international retail and foodservice channels decreased by 12% and 28, 7% respectively.

Lubi Kutua: In our international retail channel, mainly reflected the lapping large initial pipeline orders in Europe for our chicken innovation launches from a year ago as well as softer demand in the Canadian market for certain of our beef and pork items a.

Lubi Kutua: The year-over-year decline in our international food service channel primarily reflected the lapping of strong sell-in of burger and chicken items to a large QSR customer in the year-ago period, as well as generally softer demand in the UK. With regard to the UK, recessionary pressures appear to be dampening demand both in our retail and food service channels, although we believe this to be a transitory effect.

Lubi Kutua: The year over year decline in our international Foodservice channel, primarily reflected the lapping a strong sell in a burger and chicken items to a large <unk> customer in the year ago period.

Lubi Kutua: Well, it's generally softer demand in the UK.

Lubi Kutua: With regard to the U K recessionary pressures appear to be dampening demand both in our retail and foodservice channels.

Lubi Kutua: Believe this to be a transitory effect.

Lubi Kutua: It's also worth noting that while the EU and Canada remain our two largest markets in the international space by some margin, we do have presences in Mexico, Australia, and certain parts of Asia, among other regions, where we did experience some idiosyncrasies that also impacted our first quarter results, albeit to a lesser extent. Earnings to gross profit Gross profit in the first quarter of 2024 was 3.7 million, or a gross margin of 4.9%, compared to 6.2 million or a gross margin of 6.7% in the year-ago period.

Lubi Kutua: It's also worth noting that while the U S. Canada remain our two largest markets in the international space by some margin.

Lubi Kutua: President, Mexico, Australia, and certain parts of Asia, among other regions, where we did experience. Some idiosyncrasies that also impacted our first quarter results, albeit to a lesser extent.

Lubi Kutua: Turning to gross profit gross profit in the first quarter of 2024 was $3 7 million or gross margin of four 9% compared to $6 2 million or gross margin of six 7% in the year ago period.

Lubi Kutua: The year over year change in gross profit and gross margin reflected higher manufacturing costs, including depreciation higher materials costs and reduced net revenue per pound, partially offset by lower inventory reserves and lower logistics cost per pound within manufacturing cost, although we realized solid benefits from our.

Lubi Kutua: The year-over-year change in gross profit and gross margin reflected higher manufacturing costs, including depreciation, higher materials costs, and reduced net revenue per pound, partially offset by lower inventory reserves and lower logistics costs per pound. Within manufacturing costs, although we realized solid benefits from our network consolidation efforts, we did also see transitional costs such as temporary labor and increased overtime in our own facilities as we brought in substantially higher production volumes in a short period of time.

Lubi Kutua: Network consolidation efforts did also some transitional costs such as temporary labor.

Lubi Kutua: Greece overtime in our own facilities as we brought in substantially higher production volumes in a short period of time.

Lubi Kutua: However, we saw encouraging sequential trends within the quarter and I expect our meaningful in sourcing production volume.

Lubi Kutua: However, we saw encouraging sequential trends within the quarter and expect our meaningful insourcing of production volume to pay dividends in terms of reduced costs and improved quality in the coming period. Operating expenses were $57.1 million in the first quarter of 2024, compared to $63.9 million in the year-ago period. The decrease in operating expenses was primarily due to reduced non-production headcount expenses, lower marketing expenses, and reduced selling expenses, partially offset by an increase in general and administrative expenses.

Lubi Kutua: Dividends in terms of reduced costs and improve quality in the coming periods.

Lubi Kutua: Operating expenses were $57 1 million in the first quarter of 2024 compared to $63 9 million in the year ago period.

Lubi Kutua: The decrease in operating expenses was primarily due to reduced non production head count expenses, lower marketing expenses and reduced selling expenses, partially offset by an increase in general and administrative expenses.

Lubi Kutua: General and administrative expenses included a $7 5 million accrual for a consumer class action settlement.

Lubi Kutua: General and administrative expenses included a $7.5 million accrual for a consumer class action settlement associated with certain lawsuits that originated in 2022. Of the aforementioned settlement amounts and subject to court approvals, we anticipate making a cash payment of approximately $250,000 in 2024 and the remainder in 2025. Overall loss from operations was $53.5 million in the first quarter of 2024, compared to $57.7 million in the year-ago period. Adjusted loss from operations, which excludes the aforementioned class action settlement accrual, was $46 million in the first quarter of 2024.

Lubi Kutua: And it was a sudden loss in that originated in 2022.

Lubi Kutua: Of the aforementioned settlement about subject court approvals, we anticipate making a cash payment of approximately $250000 in 'twenty 'twenty four and the remainder in 2025.

Lubi Kutua: Overall loss from operations was $53 $5 million in the first quarter of 2024 compared to $7 $7 million in the year ago period.

Lubi Kutua: Adjusted loss from operations, which excludes the aforementioned class action settlement accrual with $46 million in the first quarter of 2024.

Lubi Kutua: Net loss was $4 4 million or <unk> 84 per common share in the first quarter of 2024 compared to a net loss of $59 million or 92 cents per common share in the year ago period.

Lubi Kutua: Net loss was $54.4 million, or $0.84 per common share, in the first quarter of 2024, compared to a net loss of $59 million, or $0.92 per common share, in the year-ago period. Adjusted net loss was $46.9 million, or $0.72 per common share, in the first quarter of 2024. Adjusted EBITDA was a loss of $32.9 million in the first quarter of 2024 compared to an adjusted EBITDA loss of $45.8 million in the year-ago period. While we still have a lot of work to do, this represents our smallest adjusted EBITDA loss going back to the second quarter of 2021.

Lubi Kutua: Adjusted net loss was $46 9 million or 72 cents per common share in the first quarter of 2024.

Lubi Kutua: Adjusted EBITDA was a loss of $32 9 million in the first quarter of 2024 compared to an adjusted EBITDA loss of $45 8 million a year ago.

Lubi Kutua: Yes.

Lubi Kutua: While we still have a lot of work to do this represents our smallest adjusted EBITDA loss going back to the second quarter of 2021.

Lubi Kutua: Turning now to our balance sheet and cash flow highlights, our cash and cash equivalents balance, including restricted cash was $173 5 million and total debt outstanding was $1 1 billion as of March 30 of 2024.

Lubi Kutua: Turning now to our balance sheet and cash flow highlights, our cash and cash equivalents balance, including restricted cash, was $173.5 million, and total debt outstanding was $1.1 billion as of March 30, 2024. Net cash used in operating activities was $32.2 million in the quarter ended March 30, 2024, compared to $42.2 million in the year-ago period. Capital expenditures totaled $1.2 million in the quarter ended March 30, 2024, compared to $5.3 million in the year-ago period.

Lubi Kutua: Net cash used in operating activities was $32 2 million in the quarter ended March 32024.

Lubi Kutua: Third to $42 2 million in the year ago period.

Lubi Kutua: Capital expenditures totaled $1 2 million in the quarter ended March 30 of 2024 compared to $5 3 million in the year ago period.

Lubi Kutua: Finally, I'll conclude my remarks by commenting on our 2020 for full year outlook, which we are largely reaffirming as follows net.

Lubi Kutua: Finally, I'll conclude my remarks by commenting on our 2024 full-year outlook, which we are largely reaffirming as follows. Net revenues are expected to be in the range of $315 million to $345 million for the full year. Net revenues for the second quarter of 2024 are expected to be in the range of $85 million to $90 million. Gross margin is expected to be in the mid to high teens range for the full year 2024 and is expected to be higher in the second half of the year relative to the first half.

Lubi Kutua: Net revenues are expected to be in the range of $350 million $345 million for the full year net.

Lubi Kutua: Net revenues for the second quarter of 2024, I expect it to be in the range of 85 million to $90 million.

Lubi Kutua: Gross margin is expected to be in the mid to high teens range for the full year 2024 and is expected to be higher in the second half of the year relative to the first half.

Lubi Kutua: Operating expenses, excluding the $7 $5 million consumer class action settlement.

Lubi Kutua: Good to be in the range of $170 million to $190 million weighted slightly more towards the first half of the year.

Speaker Change: Lastly, capital expenditures are expected to be in the range of 15 million to $25 million and with that I'll turn the call back over to the operator to open it up for your questions. Thank you.

Lubi Kutua: Operating expenses, excluding the $7.5 million consumer class action settlement, are expected to be in the range of $170 million to $190 million, weighted slightly more towards the first half of the year. Lastly, capital expenditures are expected to be in the range of $15 million to $25 million. And with that, I'll turn the call back over to the operator to open it up for your questions. Thanks. We will now begin.

Lubi Kutua: We will now begin the question and answer session ask a question you May Press Star then one on your Touchtone phone.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing G. To withdraw your question, please press star, then two. Your first question comes from Alexia Howard on Bernstein.

Operator: Using a speakerphone please pick up your handset before pressing the teams to.

Operator: Can we draw your question. Please press Star then two.

Operator: Your first question comes from Alexia Howard with banks.

Alexia Jane Burland Howard: Good evening everyone.

Operator: I went to see Pigger.

Alexia Jane Burland Howard: Hey, there.

Alexia Jane Burland Howard: Hi, so I guess my main question is around the confidence that you have in the sales outlook. It feels as though last quarter the pricing was down quite a bit, and volumes improved, and this time, obviously, we've seen a big sequential increase on the pricing side, but volumes have deteriorated. So as you look out, what gives you the confidence to be able to reiterate the four-year guidance? What improves over the summer, during grilling season, and so on? Thank you.

Alexia Jane Burland Howard: Hi, So I.

Alexia Jane Burland Howard: I guess my my main question is around the confidence you have in the sales outlook it feels as though last quarter.

Alexia Jane Burland Howard: The pricing was down quite a bit and the volumes improved in this time, obviously, we've seen a big sequential increase on the pricing side, but the volumes have deteriorated. So as you look out what gives you the confidence to be able to reiterate the full year guidance for improved that'd be the summer during the grilling season.

Speaker Change: So thank you.

Ethan Brown: No, thank you for the question. So I think, you know, we were rolling out toward the end of the first quarter some of the earliest shipments of the Beyond 4 product. So those are hitting stores now, and we expect to be in full distribution by Memorial Day.

Speaker Change: No. Thank you for the question so I think.

Speaker Change: We were rolling out towards the end of.

Speaker Change: The first quarter some of the most early shipments of the beyond four product.

Speaker Change: So those are hitting stores now and we expect to be in full distribution by ma'am.

Speaker Change: Memorial Day.

Ethan Brown: And so a lot of the focus for us as a company has been on that reset. You know, I've spoken about this many times. If you look at what has led to the deceleration of growth in the entire plant-based meat category, we believe it is perception around the health benefits of the products, which were quite strong. If you think about 2020, for example, where survey results suggested that 50% or more of Americans felt that plant-based meat was healthy for them, whereas in 2022, that number was down at 38%. And, you know, my strong belief is that it declined further in subsequent years.

Speaker Change: And so a lot of the focus for us as a company has been on.

Ethan Brown: And that reset.

Ethan Brown: I've spoken about this many times if you look at.

Ethan Brown: What has led to the deceleration of growth in the entire plant based meat category. We believe it is a perception around the health benefits of the products, which were quite strong. If you think about 2020 for example, where I'm sure my results suggest that they were.

Ethan Brown: It was 50% or more of American smelting plant based meat was healthy for them.

Ethan Brown: Whereas in 2022 that number was down at 38%.

Ethan Brown: And my strong belief is that it declined further in subsequent years.

Ethan Brown: And so we wanted to tackle that directly and try to make our products as unassailable on the health side as they are on the climate, environment, and animal welfare side of things. And so, over this three-year period of working with doctors, nutritionists, and dieticians, we have, in my view. And this product, which is now reaching full distribution later this month, has been so well received by not only the medical community but the nutrition and registered dietician community that we have high confidence that it addresses the number one issue in the category.

Ethan Brown: And so we wanted to tackle that directly and tried to make our products as unassailable on the health side.

Ethan Brown: They are on the climate and environment and animal welfare side of things.

Ethan Brown: And so over this three year period of working with doctors nutritionists and dietitians, but we did that in my view.

Ethan Brown: And this product that is now reaching full distribution later this month.

Ethan Brown: Has been so well received by.

Ethan Brown: The not only medical community, but the nutrition and registered dietitian community.

Ethan Brown: That we have high confidence in.

Ethan Brown: It addresses the number one issue in the category and so if you think about the type of endorsements that I went through on the on the script there.

Ethan Brown: And so if you think about the type of endorsements that I went through in the script there, whether it's the American Heart Association Recipe Program, whether it's the American Diabetes Association, whether it's the Clean Label Project Certification or Good Housekeeping, Sealed Nutrition, all of these things are a signaling mechanism to the consumer that, regardless of the misinformation out there, the orchestrated campaigns to suggest it's unhealthy, you can trust that this product has And so that's a very different scenario than the one we were facing a year ago, where there was just so much negative noise that was being drummed up about the category.

Ethan Brown: Whether it's the American Heart Association recipe program, whether it's American Diabetes Association, whether it's C. Clean label project certification or good housekeeping seal of nutrition.

Ethan Brown: All of these things are signaling mechanism to the consumer that regardless of the misinformation out there in the orchestrated campaigns to suggested some healthy.

Ethan Brown: You can trust that this product has the health benefits that you would expect it to have and so that's a very different.

Ethan Brown: Scenario than the one we were facing a year ago, where there was just so much negative noise that was being drummed up about the category and although we had studies wanted to work with Stanford we.

Ethan Brown: And although we had studies, and we had to work with Stanford, we did not have this kind of overarching framework of endorsements and support from the nutrition and health and wellness community. And if I could, if you look at some of the earliest reviews of these products, whether it's Good Morning America saying we've raised the bar on nutrition for plant-based meats, or it was Eat This, Not That, we were featured as one of the best new grocery products at 24.

Ethan Brown: We did not have this kind of overarching framework of endorsement and support from nutrition and health and wellness community and if I could like if you look at some of the earliest reviews of these products.

Ethan Brown: You know whether it's good morning America, and we've raised the bar on nutrition, a plant based meat or he was eat this not that we were featured as one of the best New grocery products had 24 prevention magazine put us as you know the number one product for plant based meat eating well I think had.

Ethan Brown: Prevention Magazine put us as the number one product for plant-based meats. Eating Well, I think, had a really great review by a nutritionist or a registered dietitian around how this is a heart-healthy option and particularly relevant for people who are struggling with cardiovascular issues, which, by the way, are 160 million Americans, as I mentioned in my prepared remarks. And then Women's Health selected it as their number one favorite, rather team favorite, plant-based meat.

Ethan Brown: You got really great review by a nutritionist or a registered dietitian around how this is a heart healthy option and particularly relevant people who are struggling with cardiovascular issues, which by the way is 160 million Americans I mentioned in my prepared remarks, and then women's health selecting it is their number one.

Ethan Brown: Favorite rather team favorites.

Ethan Brown: Plant based meat. So it took a lot of time a lot of discipline about effort, but we wanted to fix that fundamental perception issue around the category and so as we roll out in this pivotal year. We've taken all of these steps, which I went through in my remarks, whether it was bringing operating expenses down.

Ethan Brown: So it took a lot of time, a lot of discipline, a lot of effort, but we wanted to fix that fundamental perception issue around the category. And so as we roll out in this pivotal year, we've taken all these steps, which I went through in my remarks, whether it was bringing operating expenses down, continuing to bring our cost of goods down across the balance of this year, or whether it's the price increases we're taking.

Ethan Brown: Continuing to to bring our cost of goods down across the balance of this year, whether it's the price increases we're taking we're stabilizing the business and then rolling out this very significant products. So we.

Ethan Brown: We are stabilizing the business and then rolling out this very significant product. We think, for that reason, that we will see some acceleration across the balance of the year on the pricing that did not go into effect until, let me see you, April 5th was the first tranche, and then May 5th roughly was the second tranche. So that wouldn't have impacted results in the first quarter.

Ethan Brown: We think for that reason that we will see.

Ethan Brown: Some acceleration across the balance of the year on the pricing that did not go into effect until you see April 5th was the first tranche and then maybe Seth roughly it was the second tranche. So that wouldn't have impacted results in the first quarter.

Ethan Brown: In that case, may I follow up and ask whether you're seeing any preliminary price elasticity as you've introduced those price increases over the last month?

Speaker Change: In that case, Matt last follow up at all whether your preliminary price elasticity as you introduce those price increases over the last month.

Speaker Change: So we have it's too early to tell I mean, I think we were pleased with some of the some of what we've seen so far but it's just too early too early to tell.

Ethan Brown: We have, it's too early to tell. I mean, I think we were pleased with some of what we've seen so far, but it's just too early. But the picture is somewhat clouded, right? Because not only are we introducing new pricing, but we're also introducing a new premium product, right? So there's a different value proposition for the consumer. So we'll wait and see, but we're optimistic.

Ethan Brown: But it is that the picture is somewhat clouded right because not only are we introducing new pricing, but we're also introducing a new premium product right. So there's just different value proposition with the consumer so well.

Ethan Brown: We'll wait and see but we're optimistic.

Alexia Jane Burland Howard: Okay, great. I'll pass it on. Thank you.

Speaker Change: Okay, Great I'll pass it on thank you.

Alexia Jane Burland Howard: Yes.

Alexia Jane Burland Howard: Your next question comes from Ben Theurer with Barclays.

Operator: Your next question comes from Ben Theurer with Barclays.

Benjamin M. Theurer: Yeah. Hey, good afternoon, Ethan and Lubi.

Benjamin M. Theurer: Yeah, Hey, good afternoon.

Benjamin M. Theurer: So first of all.

Benjamin M. Theurer: Just wanted to follow up a little bit on that.

Ethan Brown: So, first of all, just wanted to follow up a little bit on that, on the initiatives you've laid out in order to just focus on the new products, like a little bit of premiumization, getting the right price points. So, it felt like that in the quarter, prices were still, on average, slightly down. So, can you help us understand how we should think about the cadence of the new product flowing into results and how that price point's potentially going to move as you have this more differentiated approach as to pricing? So, how should we think about the cadence here for the coming quarters?

Ethan Brown: Unlike the initiatives as you've as you've laid out.

Ethan Brown: Order to just focus on the new products like a little bit of a premium amortization gets.

Ethan Brown: Getting the right price points. So it felt like that in the quarter prices were still on average slightly down.

Ethan Brown: So can you help us understand how we should think about the cadence of the new product flowing into our results and how that price points potentially going to move as you have like this more differentiated approach as to pricing. So how should we think about the cadence here for the coming quarters.

Ethan Brown: Yes, we won't get a full benefit from that in this quarter, although you will definitely see some benefit from it, because it, again, is just reaching full distribution, and the pricing, you know, went through in those two tranches, April 5th and May 5th. So I think you can expect this quarter to see a meaningful increase in net revenue per pound in the U.S., and then, of course, we also have some activities elsewhere that are also, I think, going to be accretive to us from a market perspective globally.

Speaker Change: Yes, we won't get a full benefit from that in this quarter, Although you will see.

Ethan Brown: Definitely some benefit from it because again, it's just reaching full distribution in the pricing went through in those two tranches.

Ethan Brown: Makes it.

Ethan Brown: So I think you can expect this quarter to see meaningful increase in net revenue per pound.

Ethan Brown: In the U S.

Ethan Brown: And then of course, we also have some activities elsewhere that are that are also I think going to be accretive to us from a margin perspective globally.

Benjamin M. Theurer: Okay, and then just a quick follow-up as to the performance in international, which used to be the stronger market but felt a little softer this time, just on a year-over-year basis. Was there anything in particular that you could point us to, what happened in the international markets that drove, particularly the volume decline?

Speaker Change: Okay, and then just a quick follow up as to the performance of international which.

Benjamin M. Theurer: Used to be the stronger market, but felt a little softer. This time just on the on a like a year over year basis.

Benjamin M. Theurer: There anything in particular that you could point us to what happened in the international markets.

Benjamin M. Theurer: Particularly with volume decline.

Ethan Brown: Yeah, I think we remain very bullish about Europe and about some of our other international markets, Canada, etc. There are two main factors. I'll address retail first. We sold quite a bit of a new product in the first quarter of 23 in Europe, that's our chicken product, and we're lapping that in Q1 of 24. And then the second, we do have some exposure to both. Obviously, the UK is a good and healthy market for us from an overall demand perspective, as well as Canada.

Benjamin M. Theurer: Yes, I think we we remain very bullish about Europe.

Ethan Brown: About some other international markets.

Ethan Brown: Canada et cetera.

Ethan Brown: Two to two main factors I'll address retail first.

Ethan Brown: We did sell in quite a bit of.

Ethan Brown: A new product in the first quarter of 'twenty three in Europe.

Ethan Brown: So chicken product and we're lapping that in Q1 of 'twenty four.

Ethan Brown: And then the second we.

Ethan Brown: We do have some exposure to both obviously the U K is a good and healthy market for us from an overall demand perspective, as well as Canada, but in both cases, you see some recessionary factors in place there and some consumer trading around looking more for value at the moment.

Ethan Brown: But in both cases, you see some recessionary factors in place there and some consumers trading around looking more for value at the moment. So those two issues on the retail side, I think, led to some of the lumpiness in that story. I think on the international food service side, somewhat similar in the sense that we were lapping a year ago selling chicken to one of our largest QSRs, as well as some additional burger sales load.

Ethan Brown: So those two issues on the retail side I think led to lead to some of the Lumpiness in that story I think on the international foodservice side.

Ethan Brown: Somewhat similar in the sense that we were lapping a year ago selling of chicken to one of our largest kyocera as well as some additional burger sales.

Ethan Brown: Loading.

Ethan Brown: And then.

Ethan Brown: And then in two of the markets mentioned, the UK and Canada, there's overall slower sales in some of our QSRs, not necessarily related to our category. So those two factors, and I think some of it, particularly on the QSR side, really can be explained by timing. We did see a pretty decent level of orders at the end of the fourth quarter of 23, and we did see some pretty healthy orders coming in as we started the second quarter here. So had those moves been a few weeks, one or the other direction, I think we would have been a little bit different story. Okay, perfect.

Ethan Brown: And.

Ethan Brown: Two two of the markets I just mentioned.

Ethan Brown: U K and Canada, there's overall slower sales and some of our <unk>.

Ethan Brown: Necessarily ready to to our category.

Ethan Brown: Those two factors and I think some of it is particularly on the kyocera side really can be explained by timing, we did see a pretty decent level of.

Ethan Brown: Orders at the end of the fourth quarter of 'twenty, three and we did see some pretty healthy orders coming in as we started the second quarter here. So.

Ethan Brown: Those moves you know a few weeks one or one of the other direction I think we would have been a little bit different story.

Benjamin M. Theurer: Okay, perfect. Thank you very much, Ethan.

Speaker Change: Okay perfect. Thank you very much Ian.

Benjamin M. Theurer: Yeah.

Benjamin M. Theurer: Next question comes from Adam Samuelson with Goldman Sachs.

Operator: This question comes from Adam Samuelson with Goldman Sachs.

Adam L. Samuelson: Yes, thank you. Good afternoon, everyone. Hi.

Adam L. Samuelson: Oh, yes. Thank you good afternoon, everyone.

Adam L. Samuelson: So, Ethan, Lubi, I was hoping to maybe get a little bit more color on the phasing of pricing and gross margins between the first half and the second half. Just trying to think about full year, getting to the mid to high teens when we're at 4% in the first quarter or 5% in the first quarter, excuse me, and revenues for the first half and second half look to be about equally split dollars-wise based on the second quarter guidance.

Adam L. Samuelson: Hi.

Adam L. Samuelson: Ethan I was hoping to maybe get a little bit more color on the phasing.

Adam L. Samuelson: Pricing and gross margins between.

Adam L. Samuelson: The first half and the second half.

Adam L. Samuelson: Just trying to think about full year getting to the mid to high teens when we're at.

Adam L. Samuelson: <unk>, 4% in the in the first quarter.

Adam L. Samuelson: 5% of the Freestor excuse me and then.

Adam L. Samuelson: Revenues first half second half looks to be about equally split in dollars wise based on the second quarter guidance.

Adam L. Samuelson: And so, as we think about getting to that mid to high teens for the back half, it would seem to imply the back half gross margins are comfortably north of 20%, kind of implied in that outlook. Can you just help us think about the magnitude of the kind of pricing uplift that helps push it there versus the magnitude of unit cost reductions and COGS that would improve gross margins. It seems like there are anticipated contributions from both. Thanks.

Adam L. Samuelson: And so as we think about getting to that mid to high teens for the for the back half it would seem to imply the back half gross margins our.

Adam L. Samuelson: Comfortably north of 20% kind of implied in that outlook and if that's correct can you just help us think about the magnitude of kind of pricing uplift that get that that helps push it there versus the magnitude of unit cost reductions in Cogs that would improve the gross margins today.

Adam L. Samuelson: It seems like there is anticipated contributions from both yes.

Ethan Brown: Thanks. Yeah, thank you. That's a great question.

Speaker Change: Thank you and that's a great question and you're absolutely right.

Speaker Change: We do see obviously some significant benefit from the pricing increase but I think also in so much work has gone into this I do want to pause on it for a minute the consolidation of our network and we did this for a number of reasons in some case quality in some case cost and things of that nature.

Ethan Brown: You're absolutely right. We do see, obviously, some significant benefit from the pricing increase, but I think also, and so much work has gone into this, I do want to pause on this for a minute, the consolidation of our network. We did this for a number of reasons, quality, cost, and things of that nature, but we wanted to begin the year with a lot more production under our own roofs, and we were able to do that.

Ethan Brown: But we wanted to.

Ethan Brown: Begin the year.

Ethan Brown: With a lot more of the production under one roof and and we were able to do that there was something significant transitory costs in there from a transitioning perspective, whether it was temporary label labor overtime some logistics.

Ethan Brown: There were some significant transitory costs in there from a transitioning perspective, whether it was, you know, temporary labor or overtime, some logistics, some startup costs, and things of that nature that did bring the overall margin for the quarter down. But if you look at the overhead absorption, which we expect to see across the balance of the year as well, the efficiencies of being under one or two roofs and then also, you know, reduce logistics and things of that nature, you can begin to see quite a significant spread between the price that we're charging and the cost of our production.

Ethan Brown: Some some startup costs and things of that nature.

Ethan Brown: That did bring the overall margin for the quarter down, but if you look at the overhead absorption, we expect to see across the balance of the year as will the efficiencies of being under one or two roofs and then also.

Ethan Brown: Uh huh.

Ethan Brown: Logistics and things of that nature, you can begin to see quite a significant spread occurring between the price that we're charging in the cost of our production. So we do feel good about it for the balance of the year the amount of throughput that's flowing through our facilities right now is pretty impressive relative to where it was.

Ethan Brown: So we do feel good about it for the balance of the year. The amount of throughput that's flowing through our facilities right now is pretty impressive relative to where it was. So it's a lot of work, but it's the right thing. And, you know, if you look at these steps we're taking, I think one of the reasons I'm so optimistic about where we're headed is that, you know, the business is getting leaner from an operations perspective.

Ethan Brown: So it's a lot of work, but it's the right thing and if you look at the steps, we're taking I think one of the reasons I'm. So optimistic about where we're headed is that.

Ethan Brown: He is getting leaner from an operations perspective.

Ethan Brown: If you look at the $14 million out year over year at.

Ethan Brown: You know, if you look at the $14 million out year over year, you know, once you adjust for the settlement, you know, we continue to bring down the overall size of the network, and we're going to realize very significant cost savings on a COGS basis for that raising price. So there you're going to get additional margin. The new products that are coming out address these problems very squarely. You know, we could have just proliferated SKUs.

Ethan Brown: Once you adjust for the settlement.

Ethan Brown: We continue to bring down.

Ethan Brown: The overall size of the network and we're going to realize very significant I think cost savings on a cogs basis for that raising price. So there you're going to get additional margin.

Ethan Brown: The new products that are coming out address very squarely, we could've just proliferating skus, we could've just said hey, we're going to launch this product and that product, but we wanted to address the fundamental issue going on with the category as a category leader and I think we've done that.

Ethan Brown: We could have just said, hey, we're going to launch this product and that product. But we wanted to address the fundamental issue going along with the category as a category leader, and I think we've done that. And by the way, that's opening up some new markets for us as we work with the American Heart Association and others to address some of the disease states that are out there. So all of these things, to me, are addressing the fundamental issues around the business and going to allow us this year to have the type of return to growth, whether it happens, you know, 12 months from now, 16 months from now, I can't say, but that we've been And so, you know, net, net, I feel very good about where the business is, and we're going to continue to make these changes across the balance of the year.

Ethan Brown: And by the way that's opening up some new markets for us as we work with the American Heart Association and others to address some of the disease states that are out there.

Ethan Brown: So all of these things to me are addressing the fundamental issues around the business and are going to allow us. This year to have the type of return to growth whether it happens as you know 12 months from now 16 months now I can't say.

Ethan Brown: But that we've been anticipating and so.

Ethan Brown: So net net I feel very good about where the businesses and we continue to make these changes across the balance of the year.

Lubi Kutua: And, Adam, I'll just add to that. So, you know, I think it's a good question regarding, you know, what the margin trajectory looks like for the balance of the year, just given where we finished in Q1. A couple of things I'll say about Q1, and we mentioned this in the prepared remarks. So, first off, you know, we have been, and we talked about this for the last couple of earnings calls, sort of phasing out some of the promotional activities that we were doing that were more on the aggressive side.

Ethan Brown: Yes.

Speaker Change: Adam I'll, just add to that so I think it's a good question.

Lubi Kutua: Regarding what the.

Lubi Kutua: The margin trajectory looks like for the balance of the year, just given where.

Lubi Kutua: We finished in Q1, a couple of things I'll say about Q1, and we mentioned this in the prepared remarks so.

Lubi Kutua: First off we have been and we've talked about this for the last couple earnings calls sort of phasing out the some of the promotional activities that we were doing that were more on the aggressive side and what I will say is that we were.

Lubi Kutua: And what I will say is that, you know, we were encouraged to see that, sequentially, as we progressed through the quarter, our level of trade spend came down pretty nicely. The other thing, and Ethan mentioned this in his prepared remarks, is that, you know, there was some, we identified some incremental assets in the quarter. You know, we're still really just kind of wrapping up most of the heavy lifting as it relates to our network consolidation efforts.

Lubi Kutua: Encouraged to see that sequentially as we progressed through the quarter.

Lubi Kutua: Our level of trade spend came down pretty nicely.

Lubi Kutua: The other thing in <unk>.

Lubi Kutua: <unk> mentioned this in his prepared remarks is there was some we identified some incremental assets in the quarter you know we're still.

Lubi Kutua: Really just kind of wrapping up the most of the heavy lifting as it relates to our network consolidation efforts and there were some incremental fixed assets that we that we identified and so that drove some higher depreciation costs in Q1.

Lubi Kutua: And there were some incremental fixed assets that we identified. And so, that drove some higher depreciation costs in Q1. And then, lastly, we mentioned this as well, that there was some, just, you know, we identified some fixed assets that we identified. And so that drove some higher depreciation costs in Q1. On the direct labor side, right, some temporary labor and overtime and things like that, that drove up our direct labor costs.

Lubi Kutua: And then lastly.

Lubi Kutua: We mentioned this as well that there was some.

Lubi Kutua: Just.

Lubi Kutua: On the direct labor side, right, some temporary labor and overtime and things like that that drove up our direct labor costs most of those rates should be substantially.

Lubi Kutua: Less of a <unk>.

Lubi Kutua: Drag in the balance of the year.

Lubi Kutua: Most of those right should be substantially less of a drag in the balance of the year. The other thing, too, is that as pricing will become, we'll have the benefit of a full quarter's worth of pricing in the back half, right? We'll start to see some of that benefit in Q2, but then it kicks in in a more meaningful way in the back half. And I'll just remind you that, you know, as it relates to price, not only is there pricing in terms of what we're doing from a list price perspective, but we've also rolled back promotions.

Lubi Kutua: The other thing too is as you know pricing will become.

Lubi Kutua: We'll have the benefit of a full quarter's worth of pricing in the back half right well, we'll start to see some of that benefit in Q2, but then it kicks in in a more meaningful way in the back half.

Lubi Kutua: I'll, just remind you that as it relates to price.

Lubi Kutua: Not only are there is there pricing in terms of what we're doing from a list price perspective, but we've also rolled back promotions.

Lubi Kutua: And then, you know, all of the various efforts that we have going on in terms of, you know, the network consolidation, which should drive much better fixed cost absorption. We're seeing logistics cost savings. I think we're really encouraged by the sequential progress that we saw in the first quarter in terms of our production costs. And so, you know, we feel pretty, pretty good about, you know, our assumptions for the balance of the year.

Lubi Kutua: Then all of the various efforts that we that we have going on in terms of the network consolidation.

Lubi Kutua: Should drive much better fixed cost absorption, we're seeing logistics cost savings I think we were really encouraged to see the sequential progress that we saw.

Lubi Kutua: In the first quarter in terms of our production costs.

Lubi Kutua: So we feel pretty pretty good about.

Lubi Kutua: Our assumptions for the balance of the year and then you you asked the question about the relative magnitude.

Lubi Kutua: And then, you know, you asked the question about the relative magnitude as it relates to pricing versus cost. You know, I think price, for sure, is a significant component of it. But we are expecting to see some efficiencies from a cost perspective as well.

Lubi Kutua: As it relates to pricing versus cost, but you know I think price for sure.

Lubi Kutua: Significant component of it but we are expecting to see some efficiencies from a from a cost perspective as well.

Adam L. Samuelson: Okay, that's all very helpful. I'll pass it on. Thank you.

Speaker Change: Okay. That's all that's all very helpful. I'll pass it on thank you.

Adam L. Samuelson: Thanks.

Adam L. Samuelson: Your next question comes from Ken Goldman with JP Morgan.

Operator: Our next question comes from Ken Goldman with J.P. Morgan.

Kenneth B. Goldman: Alright, thank you.

Kenneth B. Goldman: Hi, thank you. I wanted to follow up on the line of questioning about pricing. A few here, right?

Kenneth B. Goldman: I wanted to follow up on new line of questioning about pricing.

Kenneth B. Goldman: A few here right one how are your customers reacting.

Kenneth B. Goldman: One, how are your customers reacting, given that you're raising prices as your costs decline, and the category is still struggling a little bit? I guess the second one is, what should we think about your competitors' reactions to your raising prices? What are you seeing or thinking you're going to see in the market? And then, thirdly, what's in your guidance? I mean, I don't need an exact number, but just are you being conservative enough on price elasticity in the markets where you're taking those meaningful increases? So, I know that's a lot. I just wanted to kind of dig in a little bit. Thank you.

Kenneth B. Goldman: Given that you are raising prices as your cost decline and the category is still struggling a little bit.

Kenneth B. Goldman: I guess the second one is how should we think about your competitors' reactions to your raising prices what are you seeing or thinking youre going to see in the market and then a third is what's in your guidance I mean, I don't need an exact number but just are you being conservative enough on price elasticity in the markets, where you're taking those meaningful increases. So I know that's a lot I just wanted to kind of dig.

Kenneth B. Goldman: In a little bit thank you.

Kenneth B. Goldman:

Speaker Change: Sure. So I think on the first question what are we seeing from some customers will roll this out.

Ethan Brown: Sure. So I think on the first question, what are we seeing from customers as we roll this out? It's just too early to tell.

Speaker Change: It's just too early to tell I mean, just hitting the shelf now.

Ethan Brown: I mean, it's just hitting the shelves now. We did have long discussions with a lot of the main retailers we work with about why we're doing this. And with limited exception, most were accepting. And we're doing this at a time when we're also offering a more premium set of products. And so I think that made the discussions a lot easier. From a competitor perspective, we're largely following a lot of price increases, and obviously in retail more generally. But also, if you look at our largest competitor, they went through a similar process about a year before us. So I don't... anticipate, you know, much in terms of

Ethan Brown: We did have.

Ethan Brown: Long discussions with a lot of the the main retailers we work with around why are we doing this.

Ethan Brown: And with limited exception most were accepting.

Ethan Brown: And.

Ethan Brown: Doing this at a time when we're also offering a more premium set of products and so I think that made the discussions a lot easier.

Ethan Brown: From a competitive perspective, we're largely following a lot of price increases and obviously in retail more generally but also if you look at our largest competitor they went through a similar process.

Ethan Brown: About a year before us so I don't.

Speaker Change: Do you anticipate much.

Ethan Brown: Much in terms of.

Ethan Brown: Kind of strategic interplay from them I mean, they are also trying to do what we're trying to do which as you know.

Ethan Brown: Drive their business towards profitability. So I don't think we're going to see a very strong.

Ethan Brown: But discounting or something of that nature, but I can't I can't promise that.

Ethan Brown: And then on guidance.

Ethan Brown: Just what's in it.

Ethan Brown: Yeah, we do think that we are being appropriately conservative. We did a significant amount of work with an external consultant as we went through this price increase, and we did it at www.beyondmeatinc.com Baking into our estimates for the balance of this year an elasticity that's lower than one, but it's, you know, we feel like there's some conservatism baked into that.

Ethan Brown: Yeah.

Ethan Brown: We do think that we are being appropriately conservative.

Speaker Change: We did.

Ethan Brown: A significant amount of work with.

Ethan Brown: External.

Ethan Brown: Consultant as we went through this.

Ethan Brown: Price increase in.

Speaker Change: We did.

Ethan Brown: Various studies consumer studies to try to gauge what elasticity might look like we are.

Ethan Brown: Baking into our estimates for the balance of this year and the elasticity that's lower than one but it's.

Ethan Brown: But it's you know we feel like there is some conservatism baked into that.

Speaker Change: Okay. Thank you for that and then I appreciate the help with guidance for two Q sales.

Kenneth B. Goldman: Okay, thank you for that. And then I appreciate the help with guidance for 2Q sales. Just thinking about the other factors in terms of, I know there's been questions about the cadence of the gross margin. You know, how do we think about, you know, where would you like it to be, generally? I'll just ask it directly for the gross margin in 2Q. And then EBITDA, the streets modeling, I think negative 25 million for adjusted EBITDA. Just how reasonable do you think that is in light of, you know, where you're pointing people to?

Kenneth B. Goldman: Just thinking about the other factors in terms of I know, there's been questions about the cadence of the gross margin.

Kenneth B. Goldman: How do we think about where would you like it to be generally I'll just ask it directly for the gross margin into Q and then EBITDA. The street's modeling I think negative $25 million for adjusted EBITDA, just how reasonable do you think that is in light of where you're pointing people to for the top line.

Speaker Change: Yeah in terms of in terms of margin I would say, we would expect to see.

Lubi Kutua: Yeah, in terms of, in terms of margin, I would say we would expect to see, you know, a pretty decent sequential improvement, obviously, from Q1 to Q2, and Q2 does tend to be our highest volume quarter as well, just, you know, as we're entering grilling season, things like that. So, usually, we will see some benefit from just fixed cost absorption, but then, obviously, with the price increases starting to kick in, and as I mentioned, you know, our trade rate has been coming down, we would expect to see a pretty meaningful sequential improvement.

Lubi Kutua: Pretty decent sequential improvement obviously from Q1 to Q2.

Lubi Kutua: The Q2 does tend to be.

Lubi Kutua: Our highest volume quarter as well just as we're entering grilling season and things like that so usually we will see some benefit from just fixed cost absorption, but then obviously with the with the price increase is starting to kick in and as I mentioned are our.

Lubi Kutua: Trade rate has been coming down we would expect to see a pretty.

Lubi Kutua: Meaningful sequential improvement and then in the back half.

Lubi Kutua: And then, in the back half, we also, you know, would expect to see, you know, probably you wouldn't see the same step as we would expect to see going from Q1 into Q2, but we would expect there would be some incremental improvement versus Q2 in the back half, just as a result of, you know, the fact that we'll have additional, you know, that we'll have a full quarter's benefit of the price The question on EBITDA, could you just remind me what the question was there again?

Lubi Kutua: We also would expect to see probably you wouldn't see the same step as well we would expect to see going from Q1 into Q2.

Lubi Kutua: But we would expect there would be some incremental improvement versus Q2 in the back half just as a result of.

Speaker Change: The fact that we will have additional.

Lubi Kutua:

Lubi Kutua: We'll have a full quarter's benefit of the price increase is the main driver in both quarters in Q3 and Q4.

Speaker Change: And then.

Speaker Change: Please go ahead.

Speaker Change: The question on EBITDA could you just remind me what was the question there I'm just trying to figure out a way to ask if the consensus number of negative $25 million is kind of in the ballpark of where you'd like us to be.

Lubi Kutua: Yeah, I'm just trying to figure out a way to ask if the consensus number of negative 25 million is kind of in the ballpark of where you'd like us to be. Uh, yeah, I don't want to provide specific items by quarter for EFTA, so...

Speaker Change: Yeah, we don't I don't want to provide specific guidance by quarter for EBITDA. So.

Speaker Change: Well I believe that yes.

Kenneth B. Goldman: If I can ask a quick one, Lubi, not to take up too much of your time, but the EBITDA guidance for the year, does that include or exclude the $7.5 million accrual, just to be clear?

Speaker Change: Yes, if I can ask a quick one maybe I'm not to take too much time, but the EBITDA guidance for the year does that include or exclude the $7 5 million accrual just to be clear.

Speaker Change: We didn't guide to EBIT, David We did guide to operating expenses and that excludes the $7 5 million.

Lubi Kutua: We didn't guide to EBITDA, but we did guide to operating expenses, and that excludes the $7.5 million. Right. That's right. Thank you.

Kenneth B. Goldman: Right, that's right. Thank you. I apologize.

Speaker Change: All right that's great. Thank you I apologize.

Speaker Change: No problem.

Kenneth B. Goldman: Your next question comes from Michael Library with Piper Sandler.

Operator: Your next question comes from Michael Lavery with Piper Sandler.

Operator: Yes.

Michael Scott Lavery: Thank you and good afternoon.

Michael Scott Lavery: Hey, good afternoon.

Michael Scott Lavery: Thank you. Have a good afternoon. Just curious if you could update us on sort of the State of the Union for SDKU rationalization and how much of that work is done or midstream versus still to come, and obviously you've given the revenue guidance that wraps it all together. But how do we think about that as a piece of one of the moving parts for revenue?

Michael Scott Lavery: Just curious if you could update us on sort of the.

Michael Scott Lavery: State of the Union for S. SKU rationalization and how much of that work is done or midstream versus still to come in.

Michael Scott Lavery: Honestly, you've given the revenue guidance.

Michael Scott Lavery: Perhaps it altogether, but how do we think about that as a piece of.

Michael Scott Lavery: One of the moving parts for revenues.

Ethan Brown: Thanks for the question. So obviously, we continue to complete the process of exiting jerky. In terms of the overall emphasis on SKUs, you'll see us very much lean into the BEYOND4 platform this year, including launching a very, I think, impactful and significant marketing campaign as we roll into Memorial Day. But in terms of announcing any major SKU reductions or things of that nature, we're not in a position to do that.

Speaker Change: Yeah no. Thanks for the question. So obviously, we continue to complete the process of exiting jerky.

Ethan Brown: In terms of the overall emphasis in Skus, you'll go on Skus, you'll see us very much leaned into the beyond four platform this year.

Ethan Brown: Including launching a very I think it can be impactful and significant marketing campaign as we roll into memorial.

Ethan Brown: More of it.

Ethan Brown: But in terms of announcing any major SKU reductions or things of that nature, where we're not in a position to do that.

Speaker Change: Okay. That's helpful.

Michael Scott Lavery: Okay, that's helpful. And maybe a little bit at a higher level, can you help us understand? Maybe if your target consumer has changed at all. And I appreciate there are definitely some health and wellness-seeking consumers, but certainly even quite a lot of them prioritize taste. And I'd say, historically, when you talked about targeting mainstream consumers, it would seem like that's an even bigger priority. And our survey work always points to that.

Michael Scott Lavery: Just maybe a little bit of a higher level can you help us understand.

Michael Scott Lavery: Maybe if your target consumer has changed at all in.

Michael Scott Lavery: I appreciate theres definitely some some health and wellness seeking consumers, but certainly even quite a lot of them prioritize taste and I'd say historically, when you've talked about targeting mainstream consumers it would seem like.

Michael Scott Lavery: That's an even bigger priority than in our survey work always points to that so.

Michael Scott Lavery: I know you've called out some.

Michael Scott Lavery: And dietitian support for for beyond four but.

Michael Scott Lavery: So, I know you've called out some doctor and dietitian support for Beyond 4, but... For the consumer who doesn't pay attention or care, is that just not your audience the way it might have been in the past, or how do we think about, you know, just, the universe of consumers and how to excite them all? Yeah, no, that's a great question.

Michael Scott Lavery: For the consumer who doesn't pay attention or care is that just not kind of your audience. The way that might've been in the past or how do we think about just.

Michael Scott Lavery: The universe of consumers and how to excite them all.

Michael Scott Lavery: No that's a great question.

Michael Scott Lavery: My emphasis on the health side of things is simply because of the misinformation campaign.

Ethan Brown: My emphasis on the health side of things is simply because of the misinformation campaign. We would not make these changes at the expense of taste. And, in fact, the team was able to score higher on sensory tests with the BEYOND4 platform versus BEYOND3. So we do large testing; it's called CLT, central location testing with consumers.

Ethan Brown: Would not make these changes at the expense of taste.

Ethan Brown: And in fact, the team was able to.

Ethan Brown: Score higher on <unk>.

Ethan Brown: One century tests with it beyond four platform versus beyond three.

Ethan Brown: So we do large testings called C. L T central location testing with consumers and don't move forward unless or some statistical significant benefit that we see and so we did gain on the century side as well as on on the health side and the reason that that I'm, so focused on making sure people understand the health benefits as well.

Ethan Brown: And we won't move forward unless there's some statistically significant benefit that we see. And we did gain on the sensory side as well as on the health side. And the reason that I'm so focused on making sure people understand the health benefits is one: we want to bring back that very close early adopter consumer that maybe has been scared away. And so I think these changes are starting to do that.

Ethan Brown: We want to bring back in that very close in early adopter consumer that maybe hasnt been scared away.

Ethan Brown: And so I think these changes are starting to do that and whether it's you know the inclusion of more premium ingredients, we got red lentils, fava beans, CLO <unk> and Brown Rice for example, avocado oil, bringing the saturated fat down to just two grams, so you're sitting down having a barbecue.

Ethan Brown: And whether it's the inclusion of more premium ingredients, we have red lentils, fava beans, yellow peas, and brown rice, for example, avocado oil, bringing the saturated fat down to just two grams. So you're sitting down to have a barbecue, you've got either an animal protein that is eight and a half grams or so of saturated fat, or you have BEYOND, which has two grams of heart-healthy avocado And so it's not an either or; we have to satisfy both.

Ethan Brown: Got either an animal protein in at eight and a half grams or so of saturate fatter, you beyond which is two grams or heart healthy avocado oil and that saturated fat.

Ethan Brown: And so.

Ethan Brown: It's not an either or we have to satisfy both and I think that that's the magic of beyond immediate we've done that in this case.

Ethan Brown: And I think that that's the magic of BEYOND Meat is that we've done that, in this case, discouraged from partaking, but we also do open ourselves up to be a real solution for consumers that whether they're, you know, I think if you saw the video we did, we had a doctor, Dr. Hossfeld, on there talking about, you know, between the ages of 12 and 14, two-third So, you know, whether this is about providing your family and your children with something that's going to benefit them over the long run or it's about addressing any concerns you have about your own health, this is a really important solution for that, which is different than just saying, you know, this tastes just like meat.

Ethan Brown: And in doing that.

Ethan Brown: Not only do we bring back some of those consumers that maybe we are.

Ethan Brown: We're kind of discouraged from from are taking but.

Ethan Brown: But we also do open ourselves up to be a real solution for consumers that weather there.

Ethan Brown: You saw the video we did.

Ethan Brown: We had a doctor to Doctor Hospital, and they're talking about between the ages of 12 and 14 up two thirds of American youth have early signs of high cholesterol disease of cholesterol disease, rather so whether this is about providing your family and your children was something that's going to benefit them over the long run or this about addressing any concerns you have about your own health.

Ethan Brown: This is a really important solution for that which is different than <unk>.

Ethan Brown: Just saying you know what this tastes just like meat and so we are going to emphasize that as we move forward and.

Ethan Brown: And so we are going to emphasize that as we move forward, and it opens up obviously those much bigger categories that I talked about, and it's necessary because there has been a very sophisticated campaign to suggest that our products aren't healthy, and so we wanted to come back and, you know, as I said before, Iron Sharpens Iron, just become even more clear on the health benefits. I think at some point, the opponents to all of this will overstep themselves and overstate their case, you know, because at the end of the day, what they're doing is discouraging people from making a choice that could really help them become healthier, right?

Ethan Brown: And it opens up obviously theres much bigger categories that I talked about.

Ethan Brown: And as necessary because there has been a very sophisticated campaign to suggest that our products aren't healthy and so we wanted to come back in.

Ethan Brown: Is it before iron Sharpens iron just become even more.

Ethan Brown: Clear on the health benefits I think at some point the opposition to all of this will overstep themselves and overstate their case.

Ethan Brown: Because at the end of the day, what Theyre doing is discouraging people from making a choice that could really help them become healthier right and at some point that cynical approach is going to become a parent and I think the more doctors nutritionists and register adaptations that come on board in support of what we're trying to do to improve human health I think the more dangerous that tactically.

Ethan Brown: And at some point, that cynical approach is going to become apparent, and I think the more doctors, nutritionists, and registrations that come on board in support of what we're trying to do to improve human health, I think the more dangerous that tactic is.

Speaker Change: Okay. Thanks, I'll pass it on.

Ethan Brown:

Ethan Brown: Our next question comes from Andrew <unk> with BMO.

Operator: Our next question comes from Andrew Strelzik with BMI.

Operator: Hi, This is Daniel on for Andrew.

unknown: Hi, this is Daniel speaking on behalf of Andrew Strelzik. Thanks for taking my question. The release mentions ongoing further slowdown in plant-based meat category trends. How do you juxtapose that with keeping the guidance?

Daniel: For taking my question.

unknown: Sure.

Daniel: Grace mentioned ongoing further slowdown in plant based meat category trends, how do you juxtapose that with keeping the guidance.

Ethan Brown: Yeah, I think this all gets back to, we've been looking at this, trying to crack this nut for three or four years now, right, and what's going to bring back growth to the category. And we've done a ton of consumer research and analysis and just lived through it, right? And so I think these products, whether it's Beyond Steak, which was, again, the number one new item in retail last year, or that Beyond Four is rolling out now to really strong accolades from the right communities, or the Beyond Crumble we just launched, we are addressing the fundamental issue with the category.

unknown: What.

Daniel: I think this all gets back to we've been looking at this trying to crack this nut for three or four years, now and what's going to bring back growth category.

Ethan Brown: And we've done a ton of consumer research and analysis and just lived through it right and so I think these products with this beyond steak, whether it's which was again was the number one new item in retail last year.

Ethan Brown: Or beyond for what's rolling out now to really strong accolades from from the right communities.

Ethan Brown: Or beyond crumble, we just launched we're addressing the fundamental issue with the category.

Ethan Brown: And so we really do believe that that will change the growth trajectory of the category and of Beyond Meat. Second, if you look at Europe, right, and while there's some, you know, lumpiness in the data there, Let's not forget that today, McDonald's announced this very significant promotion around their Famous Meals, a Famous Order program. And you know, the quote from the press release on that, to me, says a lot about where this whole category is moving and where Beyond Meat is moving.

Ethan Brown: And so we really do believe that that will change the growth trajectory of the category and up Gamete second as you look at Europe, right and while there is some.

Ethan Brown: Bumpy newness and the data there.

Ethan Brown: Let's not forget that today Mcdonald's announced this very significant promotion.

Ethan Brown: Around their famous meals, a famous order program.

Ethan Brown: And the quote from the press release on that to me says a lot about where this whole category is moving and where.

Ethan Brown: Amit is moving and so I actually think I printed it out I don't want to share a little bit of it.

Ethan Brown: It was two musicians.

Ethan Brown: And so actually, I think I printed it out, and I'd like to share a little bit of it. There were two musicians, similar to what they did here in the United States with folks like Travis Scott, etc.

Ethan Brown: Similar to what they did here in United States with folks like Travis Scott et cetera.

Ethan Brown: And a quote in the McDonald's press release was this: Like most people, McDonald's has been with us all our lives, this is the musician speaking, so it was a childhood dream come true for us. McDonald's asked us if we wanted to create our own menus and burgers. We both want to give up meat more and more often ourselves, so we wanted to create menus that offered a real great alternative, right? So here is McDonald's promoting the Beyond McPlant, and it's called the Beyond McPlant in this press release, actively, and not only having one bill, but two bills around it, as well as serving the Beyond Nuggets for their chicken McNuggets. So there's a lot of noise around the category, but it's still very early days.

Ethan Brown: And in the Mcdonald's Press release was this like most people Mcdonald's has been with US all of our lives.

Ethan Brown: Speaking so it was a childhood dream come true for Us Mcdonald's assets, we wanted to create our own menus and burgers.

Ethan Brown: We both want to give up more people give up meat more and more often ourselves. So we wanted to create menus that offer a real great alternative right. So youll hear us at mcdonalds promoting the beyond Mcclatchy and it's called the beyond meat plant in this press release.

Ethan Brown: Actively and not only having one bill, but two builds around it as well as serving.

Ethan Brown: Beyond Nuggets.

Ethan Brown: Are there for the chicken mcnuggets, so theres a lot of noise around the category. It's very early days still I can point to.

Ethan Brown: At least half a dozen.

Ethan Brown: It doesn't allow us to get to profitability. So that as this thing turns we remain the category Captain and we're doing it all the fundamental things, we're doing whether it's leaning out our operating costs raising our prices to restore margin, reducing our cost of goods sold to ensure margin.

Ethan Brown: to get to profitability, so that as this thing turns, we remain the category captain, and we're doing that. All the fundamental things we're doing, whether it's leaning out our operating costs, raising our prices to restore margin, reducing our cost of goods sold to restore margin, and continuing to focus on getting the right products to the right consumers, all of these things position us to continue to lead the category.

Ethan Brown: We continue to focus on getting the right products to the right consumers all of these things position us to continue to lead the category.

Speaker Change: That's really helpful.

Ethan Brown: That's really helpful. One different question just on what your outlook is on cash burn and what that cadence might look like and kind of what would drive you to raise more cash at, like, what level?

Ethan Brown: One.

Speaker Change: Different question just on what.

Ethan Brown: What your outlook is on cash burn and what that cadence might look like and.

Ethan Brown: Kind of what would.

Ethan Brown: Drag you to raise more cash and like at what levels.

Speaker Change: Sure. So I'll answer that in a general sense, then turn it over to Luis.

Ethan Brown: Sure, so I'll answer that in a general sense and then turn it over to Lubi. We continue to bring, on an overall trajectory, cash consumption down. The first quarter of the year is obviously different for us because we end up parking more cash, as I mentioned in my comments, in inventory and things of that nature. But quarter over quarter, I think you'll continue to see a nice reduction across the balance of the year. And we are taking steps, as I mentioned, to bolster the balance sheet, and so that should Yeah, not really much.

Ethan Brown: We continue to bring on it overall.

Ethan Brown: Trajectory.

Ethan Brown: Cash consumption down.

Ethan Brown: The first quarter of the year is obviously different for us because we end up partner more cash as I mentioned in my comments and inventory things of that nature, but.

Ethan Brown: Quarter over quarter, I think you'll continue to see nice reduction across the balance of the year than.

Lubi Kutua: And then we are taking steps as I mentioned to bolster the balance sheet and so that should that should help as well.

Lubi Kutua: Yeah, not really much to add to that so we don't guide to set a projected cash burn by quarter or anything like that but.

Lubi Kutua: Yeah, not really much to add to that. So we don't guide to, you know, sort of projected cash burn by quarter or anything like that. But, you know, as Ethan said, all of the measures that we're taking to really improve gross margin. And, you know, we also said that our operating expenses are expected to be more front loaded than back. All of these measures, right, we expect will translate into reduced cash consumption in the latter part of the year.

Lubi Kutua: As Ethan said.

Lubi Kutua: All of the measures that we're taking to really.

Lubi Kutua: You know improve gross margin and we also said that we are operating expenses are expected to be more front loaded than back like all of these measures right.

Lubi Kutua: We expect will translate into reduced cash consumption in the latter part of the year. So we would expect the re.

Lubi Kutua: Of.

Lubi Kutua: Of our cash consumption in the balance of the year to be lower.

Lubi Kutua: So we would expect the rate of cash consumption in the balance of the year to be lower. But, you know, as Ethan also mentioned, and we've said before, bolstering our balance sheet is still a top priority for us. So that's something that we still anticipate we will complete this year.

Lubi Kutua: But as Ethan also mentioned and we've said before we're sort of bolstering our balance sheet is still a top priority for us. So that's something that we still anticipate we will complete this year.

Speaker Change: Great. Thank you.

Operator: Your next question comes from Peter Saleh with BTIG.

Lubi Kutua: Sure. Your next question comes from Peter Saleh with <unk>.

Peter Mokhlis Saleh: Great. Thanks for taking the question.

Peter Mokhlis Saleh: Great. Thanks for taking the time to answer the question. Ethan, on Beyond 4, you gave us a list of all the endorsements from the accredited health institutions that back this product, so I'm just curious, how do you really get this word out in mass to really change perception? Is there a way to showcase this at the point of sale or on the packaging or any other way to just think outside the box to get this message out, to really enact some kind of step change going forward here?

Speaker Change: Ethan I wanted to ask on the beyond for you you gave us.

Peter Mokhlis Saleh: A list of all the endorsements from the accredited health institutions.

Peter Mokhlis Saleh: Back here in this product.

Peter Mokhlis Saleh: So I'm just curious how do you really get this word out.

Peter Mokhlis Saleh: In math.

Peter Mokhlis Saleh: It really change perception is is there a way.

Peter Mokhlis Saleh: To showcase this at the point of sale or on the packaging.

Peter Mokhlis Saleh: The other way to just think outside the box to hit this message out to really enact.

Peter Mokhlis Saleh: Kind of step change going forward here.

Ethan Brown: Great question. It's something I talk all the time about internally here. And so, you know, from the air game all the way down to what you see in the store, what I want our marketing to be doing is to have each of these emblems, you know, present front and center on product literature, to the extent that we can on the product packaging. And so you'll see some of that. But whether it's the American Heart Association Recipe Certification Program, whether it's the American Diabetes Association or the Clean Label Certification, good housekeeping policy, those should be front and center for the consumer because it is a signaling mechanism that cuts through the noise.

Ethan Brown: Great question, it's something I talk all the time about internally here and so.

Ethan Brown: From the air game, all the way down to what you're seeing in the store.

Ethan Brown: What I want our marketing to be doing is to have each of these emblems.

Ethan Brown: Present front and center.

Ethan Brown: On product literature to the extent that we can on our product packaging and so you'll see some of that but whether it's the American Heart Association recipe certification program, whether it's the American diabetes or clean label certification that housekeeping, obviously, those should be front and center for the consumer because it is a signaling mechanism it cuts through the noise.

Ethan Brown: We've worked so hard to formulate the products to achieve those. I want everyone to understand that. Right. And so we are launching a very significant campaign in terms of the messaging around the healthfulness of the products. So, you know, I went so hard after this and it really wasn't, you know, something that happened overnight.

Ethan Brown: We've worked so hard to formulate the products to achieve those I want everyone to understand that right and so.

Ethan Brown: We are launching a very significant campaign in terms of the messaging.

Ethan Brown: Around the helpfulness of the products and that'll be as we roll into Memorial day, we have a terrific agency working on that with us they've done some fabulous work that.

Ethan Brown: Including the Super Bowl AD. This year that I think most people would really say is it's a great piece of work and.

Ethan Brown: So we're gonna be launching that.

Ethan Brown: And we expect that to begin to change perception.

Ethan Brown: To beat back some of the false narrative.

Peter Mokhlis Saleh: We had a member of our team here create this ecosystem, and she was able to pull in the right doctors, nutritionists, and folks within this community that got so much support and almost ownership, right, over these changes we're making to the product. So there's a lot of pride from that community in what we'll be able to accomplish here, and they're going to be vocal on our behalf. And you can see it when we make announcements.

Ethan Brown: No.

Ethan Brown: I went so hard after this and it really wasn't something that it was.

Peter Mokhlis Saleh: Overnight, we had a member of our team here create this ecosystem and she was able to pull in the right doctors nutritionists and folks within this community that got so much support.

Peter Mokhlis Saleh: And it almost ownership rate over these changes were made to the product. So so there's there's a lot of pride from that community and won't be able to accomplish here and theyre going to be vocal on our behalf and you can see it if we make announcements you can see people tagging in and suggesting in his great work and things of that nature. So as we move forward. The campaign will be very clear on its messaging around these <unk>.

Peter Mokhlis Saleh: You can see people tagging in and suggesting, you know, this is great work and things of that nature. So as we move forward, the campaign will be very clear in its messaging around these endorsements. It'll be very clear in its messaging around what type of health benefits this can drive. And so we're looking forward to it.

Peter Mokhlis Saleh: <unk> will be very clear in its messaging around what type of health benefits as can drive and so we're looking forward to.

Ethan Brown: So, when you say front and center, are you talking about you can use these or will use these or plan on using these emblems on the actual packaging so that consumers see them down the aisle?

Peter Mokhlis Saleh: So when you say.

Ethan Brown: Front and center.

Ethan Brown: Are you talking about.

Ethan Brown: Use these are will use these or plan on using these emblems.

Ethan Brown: On the actual packaging, so that consumers see it down the aisle.

Peter Mokhlis Saleh: Yes, so some of the packaging has them directly on it, and others will have to signal it through, you know, point-of-sale materials and advertisements, things of that nature. Not all of them will be on the package, but more and more as we go forward, you'll see them on.

Speaker Change: Yes, so some of the packaging has directly on it.

Peter Mokhlis Saleh: Others will have to signal it through <unk>.

Peter Mokhlis Saleh: Point of sale materials, and advertising and things of that nature and not all of them will be on the back but more and more as we go forward, you'll see them on but for example.

Ethan Brown: But for example, I believe the steak already has the AHA certification on it. You know, ADA is on some of our packaging as well. The Clean Label Project is on some of our packaging. So yeah, I mean, we're going to try to be as overt as possible.

Ethan Brown: I believe the steak already has.

Ethan Brown: H a certification on it.

Ethan Brown: 80, a is on some of our packaging as well clean label project is on some of our packaging. So yes, I mean, it'll be we're trying to be as <unk> as possible.

Ethan Brown: Okay.

Speaker Change: Excellent. Thank you very much.

Peter Mokhlis Saleh: Excellent. Thank you very much. Yep.

Peter Mokhlis Saleh: Your next question comes from Robert Moscow, with TD time.

Operator: Your next question comes from Robert Moskow with T.D. Cowan.

Robert Bain Moskow: I guess I guess two quick questions I think on the last call you said that for to bolster the balance sheet you would look at.

Robert Bain Moskow: I guess two quick questions. Lubi, I think on the last call you said that to bolster the balance sheet, you would look at a combination of possibilities, either debt or equity. Is that still the case?

Robert Bain Moskow: A combination of possibilities either debt or equity is that still the case.

Lubi Kutua: And secondly, to Ethan, you know, you've talked a lot about growing the category. Have you done any internal testing in terms of the taste of your product versus your number one competitor? Anecdotally, I've heard, you know, that some prefer the competitor versus yours, but I'm sure you've done a lot of testing on your own. So, you know, how does your product compare with the competition? And, you know, what are the what are the differences?

Lubi Kutua: And secondly, you've talked a lot about growing the category.

Lubi Kutua: Have you done any internal testing in terms of the taste of your product versus your number one competitor anecdotally I've heard that.

Lubi Kutua: Some prefer the competitor versus yours, but I'm sure you've done a lot of testing on your own so.

Lubi Kutua: How does your product compare with competition and what are the what are the differences.

Ethan Brown: I'd be happy to introduce you to a better one.

Speaker Change: I'd be happy to do should do a better crowd Rob.

Ethan Brown: Oh, okay. I would enjoy a better crowd.

Ethan Brown: Okay.

Ethan Brown: I would I would enjoy a better crowd gets a little around hitting it.

Ethan Brown: I'm just joking. No, first of all, our competitor does a nice job. Great.

Ethan Brown: Okay.

Speaker Change: First of all our competitor does a nice job they are a good company enjoy competing with them.

Ethan Brown: They're a good company, and I enjoy competing with them. So it's not an adversarial relationship at all.

Speaker Change: So it's not not a adversary relationship at all and they do a nice job.

Ethan Brown: They do a nice job. We, of course, test them. We're very competitive and all that other stuff. I think what's interesting is that ground meat in a patty form without seasoning actually tastes kind of okay, right? It's not a thing that blows people away.

Ethan Brown: Of course test that we're very competitive in all of the other stuff and I think what's interesting is that the.

Ethan Brown: The ground meat.

Ethan Brown: Patty form without seasoning actually taste kind of okay right. It's not it's not a thing that goes away. So when we do sensory testing right you'd be surprised at how much both products.

Ethan Brown: So when we do sensory testing, you'd be surprised at how much both products really resemble or at least score at parity with animal protein. And so we do do a lot of tests relative to our competition. We feel good about the results. We don't move forward if we don't. Let me put it that way. And then Rob, on your first question.

Ethan Brown: Resemble.

Ethan Brown: Or at least score at parity.

Ethan Brown: With animal protein.

Ethan Brown: And so we do do a lot of tests relative to our competition.

Ethan Brown: We feel good about the results we don't move forward, if we don't put it that way.

Ethan Brown: And then Rob answering your first question regarding the balance sheet, Yes, nothing has really changed since the last time around a call and so yes, we would consider all of those options that you mentioned.

Ethan Brown: And then, Rob, on your first question regarding the balance sheet, yeah, nothing has really changed since the last time we were on the call, and so, yes, we would consider all of those options that you mentioned.

Speaker Change: Great. Thank you.

Ethan Brown: Sure.

Eaton Vance: This concludes our question and answer session I would like to turn the conference back over to Eaton Vance.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Ethan Brown, CEO, for any closing remarks. Thank you.

Speaker Change: Our next.

Ethan Brown: Thank you.

Ethan Brown: Thank you. You know, not to be repetitive, but just to be clear, we really do believe that we are at the early stages of a terrific and pivotal year for Beyond Meat. The leaning out of our operating expenses, the stabilization of pricing, and the lowering of our cost of goods.

Speaker Change: Not to be repetitive, but just to be clear.

Ethan Brown: We really do believe that we are at the early stages of a terrific and pivotal year for beyond meat.

Ethan Brown: The leaning out of our operating expenses.

Ethan Brown: Stabilization of pricing.

Ethan Brown: The lowering of our cost of goods.

Ethan Brown: Improvements were gonna see across margin, they're addressing the number one issue in the category.

Ethan Brown: Coming out with products that are not only winning on century, but also receiving such accolades from from such important institutions around the health benefits. We're doing the things you need to do to to get through a period that is challenging and resume.

Ethan Brown: So I'm excited I think the team here is excited we're looking forward to reporting to the mill.

Ethan Brown: Most of the year and it will.

Speaker Change: Be in touch.

Ethan Brown: [music].

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