Beyond Meat, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Beyond Meat, Inc. 2020 First Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require operator assistance during the program, please press star then 0. I would now like to introduce for this conference call, Luby Katun, you may begin.

Thank you.

Good afternoon and welcome to Beyond Meat's first quarter 2020 earnings conference call and webcast. On today's call are Ethan Brown, founder, president, and chief executive officer, and Mark Nelson, chief financial officer and treasurer. By now, everyone should have access to the company's first quarter earnings press release and investor presentation filed today after market close. These documents are available on the investor relations section of Beyond Meat's website at www.beyondmeet.com. Before we begin, please note that all the financial information presented on today's call is unaudited, and during the course of this call, management may make forward-looking statements within the meaning of the Federal Securities Law's 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. Please refer to today's press release, the company's annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 19, 2020. The company's quarterly report on Form 10-Q for the quarter ended March 28, 2020, to be filed with the SEC and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note that on today's call, management will refer to adjusted EBITDA, which is a non-GAAP financial measure. While the company believes this non-GAAP financial measure provides useful information for investors, the presentation of 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 adjusted EBITDA to its most comparable measure prepared in accordance with GAAP. Now, I'd like to turn the call over to Ethan Brown, President and Chief Executive Officer of BeyondMeet.

Thank you, Luby. Good afternoon, everyone. Before discussing our first quarter results, I'd like to comment on the COVID-19 global health crisis. This is a time of extraordinary challenge and sorrow, the one that we can emerge from with insights that can make us stronger as communities, as a country, and as a global society. On behalf of the entire company, I want to extend our deepest sympathies to families around the globe who've been affected by the pandemic. We cannot overstate our gratitude and respect for the frontline responders who risk, and in many cases have given, their own lives to care for the sick and help keep the healthy safe. Behind each rise in the global toll, there are cherished and irreplaceable lives that have been lost and countless more impacted. And it is this context and meaning that must remain front and center as we navigate this global challenge. At Beyond Meat, the health and safety of our team members and their families and that of our consumers, customers, and supply chain partners is the number one priority. I am proud of how swiftly our entire organization has responded to the COVID-19 crisis. We have established an internal task force and brought in qualified advisors. including an epidemiologist on the faculty at UCLA to help guide us in planning and the implementation of steps to help minimize the possibility of COVID-19 occurrences within our operations. Consistent with gubernatorial directives, we've closed our headquarters and have employees working remotely. Additionally, for any essential activities at our Manhattan Beach Project Laboratory, we are strictly limiting the number of employees allowed in the building. We are prohibiting outside visitors. and we have implemented physical distancing protocols and comprehensive preventative hygienic measures. Likewise, at our manufacturing facilities, we have implemented a series of physical distancing and hygienic practices to support the health and safety of our manufacturing teams and their families. We've also modified our PTO requirements temporarily so that employees do not have to deduct sick time from their PTO if they're feeling unwell. Collectively, We believe these actions have been crucial to our thus far successful risk mitigation efforts. Our task force, which is being led by our chief people officer, is monitoring information from the World Health Organization, the Centers for Disease Control and Prevention, and the U.S. State Department, among other resources, and we will make necessary adjustments to existing protocols as the situation evolves. We continue to strengthen our supply chains, support business continuity, and mitigate risk. We source ingredients from multiple suppliers around the world, with our plant-based proteins coming from suppliers in the United States, EU, China, and India. More generally, in addition to having an improved redundant supply chain in the majority of our ingredients, we maintain inventory positioned near our manufacturing operations, as well as floor stock agreements with many of our vendors. Throughout this dynamic situation, our operations team has shown flexibility in keeping up the demand for our products and even as we've had a significant shift in demand mix from food service to retail customers. Nevertheless, even with the above considerations and very strict COVID-19 health and safety measures in place, like others in our industry, we are still subject to heightened risk of disruption to our supply chain. Externally, we continue to offer the highest level of support we can to our food service and retail customers during this period. We hope it is clear at this point that we view our customers as partners, and our role is being of service to them as they take their lead from consumers. In this spirit, we are in frequent communication with our quick-serve restaurant partners as they address significant disruptions to their businesses. As has been our consistent refrain, our focus is on the long term, and there are few things more important in that regard than being a truly supportive partner during periods of instability. Finally, Before turning to our first quarter results, I'd like to share some comments on our Feed a Million Plus pledge. In late March, we launched a program to provide more than one million Beyond Burgers and nourishing meals at no cost to frontline workers addressing the pandemic, as well as to organizations that serve the most economically vulnerable of our society. It has been gratifying to see our broader family go beyond ambassadors, as well as friends of the brand, spearhead this initiative with us, including, among others, Kyrie Irving, Kevin Hart, Snoop Dogg, Lindsey Vonn, T.K. Sullivan, Billie Eilish, Carly Kloss, Jewel, Ludacris, DeAndre Hopkins, Aaron Andrews, Ashanti, Todd Gurley, and Kenny Stills, each of whom have joined us in giving Beyond Burgers a way to frontline workers and those in need, reinforcing a sense of community during this challenge. I'd like to thank each of them, along with our entire team, from production through to sales and marketing, the strong execution of this initiative across the country. Now, turning to the first quarter, our results continue to validate the strength of the broader plant-based meat movement and our leadership position therein. We achieved net revenues of $97 million in Q1 2020, an increase of 141% compared to the first quarter last year, despite growth being negatively impacted toward the end of the quarter by the pandemic. Mark will walk you through our financial results in greater detail, including an estimate of the impact of COVID-19-related demand shifts in our food service and retail businesses. However, at a high level, I will share that we began the year with strong momentum across our enterprise, following by a meaningful slowdown in our food service business during the latter half of March as various regions around the world implemented stay-at-home orders. Although we did see a simultaneous boost in sales to retail customers, this was not enough to offset the deterioration of demand in our food service business. Nevertheless, we believe our dual-pronged approach of aggressively expanding availability of Beyond Meat products in both retail and food service outlets served us well and helped to mitigate even more significant COVID-19-related disruptions to our revenues. In U.S. retail, sales of Beyond Meat products were up 190% year-over-year, with velocity growth of 158%, contributing to a 770 basis point increase in market share. According to SPIN's data for total U.S. multi-outlet, natural, and specialty channels for the 12-week period ended March 22, 2020, while the plant-based meat category as a whole was up 54%. During this period, Beyond Meat continued to own the top four best-selling SKUs in all plant-based meat and outpaced its closest competitor in terms of year-over-year sales growth by a factor of roughly six times. Furthermore, during the four-week period ended March 22, 2020, in which retailers saw stockpiling by consumers as stay-at-home orders proliferated. Sales of Beyond Meat products were up 233% year-over-year, with velocity growth of 195%, outperforming the plant-based meat category as a whole, which rose 93%. First quarter 2020 net revenues in our food service doubled versus a year ago, despite the impact of COVID-19 in late March. This increase was primarily driven by growth in the number of food service outlets carrying our products versus a year ago. As in retail, our growth in food service outpaced that of the category as a whole. According to NTD data for the first quarter of 2020, dollar sales of plant-based meat products to U.S. food service locations were up 18.4% on a year-over-year basis, but beyond these, growth was up 51.9% over the same period. Reflecting the impact of COVID-19 on the food service segment, MPV track sales of plant-based meats were down 25% sequentially during the month of March as compared to February 2020. As a reminder, MPV data captures approximately 80% of the U.S. broad line distribution and excludes cash and carry and direct delivery customers. As such, MPD will not correlate perfectly with our own reported sales to U.S. food service customers, but is nonetheless directionally informative. After launching Beyond Breakfast Sauces with Starbucks in Canada in early March, in April, we announced together with Starbucks our entry into mainland China. The April 22, 2020 launch of Beyond Beef items at Starbucks throughout China represents an important milestone for Beyond Meat. It has long been our aspiration to be a global protein company. and being of service to the growing demand for high-quality protein in China is a key part of our strategy. We applaud Starbucks for making and acting upon a strong commitment to advance health and sustainability and are pleased to partner with this trusted brand as they seek to tackle that which matters most. We believe the new Beyond Beef items at Starbucks Menus throughout China deliver on our promise of enabling consumers to eat what you love, while enjoying the nutritional and environmental benefits of plant-based protein. In addition to our partnership with Starbucks, we finalized a distribution agreement with China with a leading local distributor, Synodus, to unlock a network of distribution opportunities across retail and food service. We have further established a Chinese language website, as well as branded Weibo and WeChat accounts, in order to engage with the Chinese consumer and support the brand's introduction in this important market. We remain committed to our goal of establishing a production footprint in Asia before the end of 2020, having further developments with the COVID-19 pandemic. The magnitude of the opportunity in Asia merits significant investment, and reflecting such recent disruptions in the region's protein supply due to African swine flu, we are proceeding with a sense of urgency appropriate for the challenge and opportunity alike. As I have often said, at our core, we strive to be an innovation engine, using technology to source the core parts of meat directed from plants, relying on non-GMO plant-based ingredients. Even as the size and complexity of our organization grows, we strive to sharpen our innovation capabilities and quicken the pace of the Beyond Meat rapid and relentless innovation program. We are pleased with the initial outputs of our new center of commercialization and believe this cross-functional initiative will, one, further strengthen our ability to rapidly innovate on behalf of our QSR partners, and two, accelerate the way in which we improve our beef, pork, and poultry platforms in pursuit of our true north of plant-based meat that is indistinguishable from its animal protein equivalent. In the marketplace, we launched our Beyond Breakfast sausage in select retailers across the United States beginning in late March, previously only available in select QSR apartments including Dunkin', Hardee's, Carl's Jr., and Starbucks Canada. Beyond Breakfast Sausage offers 11 grams of protein per serving, peas and brown rice, 50% less total fat, 35% less saturated fat and sodium, and 33% fewer calories than a leading brand of pork sausage patties. Furthermore, Beyond Breakfast Sausage, which is a certified kosher and halal, is made without GMOs, soy, or gluten, and it has no cholesterol, no nitrates or nitrites, no antibiotics, no hormones, and no artificial ingredients. These nutritional wins embody what we seek to achieve throughout our products without sacrificing important qualities such as taste, texture, and other sensory attributes of popular animal protein products. Although we are excited about the prospects for the retail rollout of Beyond Breakfast Sausage, we do anticipate it will be slower than normal given the impact of COVID-19 on retailer operations. Before closing, I want to be as clear as possible with respect to our view on the impact of the current pandemic on our business. It is having and will continue to have a negative impact in the short term. This impact is largely due to the disruption of normal business operations within the food service sector. We can neither predict when or in what form normalcy will resume for our customers in this segment, nor when we see a resumption of any expansion plans for our product lines for those QSR customers who are in trial or test phase. For these reasons, we are joining many other companies in the food and beverage industry who are drawing guidance until further notice. Nevertheless, we are not idly waiting for circumstances to accommodate our planned growth trajectory. I am proud of how our management team and all of our team members have reacted to this challenging environment. As the pandemic began to interrupt the world economy, we created offensive and defensive teams across the company to guide our navigation of the changing landscape. Offensive measures include switching food service production lines over to retail products, developing value packs for interested retailers, and offering aggressive pricing or the strategic opportunity to encourage consumer trials during this period of disruption in the animal protein market. Defensive measures have primarily been focused on trimming discretionary spend and activities in areas where effectiveness has been impeded by the pandemic, for example, certain marketing programs. or delaying until later in the year or until 2021 makes sense under the circumstances. To reiterate a prevailing perspective that runs through Beyond Meat, we are only getting started. Even with our significant traction to date, we represent an exceedingly small fraction of the $1.4 trillion global meat category today. For example, according to our most recent Nielsen panel data, in the U.S., our household penetration stands at slightly less than 4%. Now, though our products are now available in approximately 94,000 retail and food service outlets and in 75 countries worldwide, we have only a small number of SKUs available in retail, unlimited distribution with many of our food service partners, and are just scratching the surface with the vast majority of the economies we are in globally. Despite the current disruption, we remain highly optimistic about our long-term growth prospects and continue to accomplish milestones along our exciting upward trajectory. We remain focused on the consumer and customer alike, seeking to delight the former while being an exceptional, dedicated service to the latter, thinking and behaving like a long-term partner who is investing in their success as well as our own. For the balance of 2020, you will see us tell our story on health, ingredients, and process with content across digital and print media. You'll see us push forward on global growth and expansion, as evidenced by our recent launch with Starbucks in China, You'll see us invest in research and development to advance and expand our product roadmap across beef, pork, and poultry platforms while pursuing long-term fundamental science in pursuit of step-change progress across sensory, nutritional, and cost objectives. And we will continue to keep pace on our steady march toward our long-term objective of being able to underprice animal protein in certain product lines. In short and in closing, we remain steadfastly committed to constructing the building blocks today that are necessary to become the global plant-based protein company we envision for tomorrow. I'd like to now turn the call over to Mark Nelson, our Chief Financial Officer, who will walk us through the first quarter financial results in detail.

Thank you, Ethan, and good afternoon, everyone. We are pleased with our first quarter financial results, which we achieved amidst an increasingly challenging pandemic. operating environment due to the COVID-19 global health crisis. Our strong Q1 results largely reflect demand that exceeded our expectations in January and February, followed by softer results in March as we experienced a deterioration in sales to food service customers as domestic and international stay-at-home orders became more widespread. However, we did experience a significant boost in retail demand during the quarter as consumers shifted towards more at-home consumption, partially offsetting the deceleration in food service sales. Overall, as Ethan indicated, net revenues in the quarter were $97.1 million, up 141% compared to the first quarter of last year. Growth in net revenues for the first quarter of 2020 was primarily driven by an increase in volume sold partially offset by lower net price per pound. Growth in volume sold was driven by expansion in the number of distribution points, both domestically and abroad, higher sales velocities at existing retail customers, and contribution from new products introduced subsequent to the first quarter of 2019. Looking at our distribution channels, Retail net revenues increased 185% while food service net revenues increased 100% versus the first quarter of 2019. Sales to international customers across retail and food service channels represented 25% of our net revenues during the quarter compared to 30% in the prior year period. As a reminder, beginning this quarter, we are now breaking out international separately in our revenue by channel presentation. And we now include sales to our Canadian customers within this international bucket. Additionally, as we mentioned on our last earnings call, we will no longer be reporting a product category breakout between our fresh and frozen platforms beginning with this quarter. Our fresh or ready to cook product platform now represents substantially all of our consolidated net revenues. And as such, we determined that delineating between sales of fresh and frozen products no longer provides additional insight into the company's results. Gross profit during the first quarter of 2020 was 37.7 million or 38.8% of net revenues compared to 10.8 million or 26.8% of net revenues in the first quarter of 2019. The 1,200 basis point year-over-year improvement in gross margin was primarily due to an increase in the volume of products sold, production yield improvements, direct materials and packaging cost savings, and improvements in direct labor and other variable overhead costs relative to the first quarter of 2019. The combination of these factors led us to achieve the company's best ever quarterly cost of goods sold per pound and reinforce our belief in our long-term goal to take cost out of our manufacturing operations and narrow the price gap of our products relative to animal protein. While we are extremely pleased with our strong gross margin performance in Q1 2020, we do expect near-term headwinds at the gross profit level associated with volume deleveraging and repackaging costs as we repurpose a certain portion of our existing food service inventory into retail SKUs. In light of these factors, we expect our gross margin to be sequentially lower in Q2 2020 compared to our strong margin performance in Q1 2020. As you have heard me mention previously, over the long term, We continue to believe that gross margin improvements will be delivered primarily through improved volume leverage, increases in throughput, greater internalization of our manufacturing footprint, materials and packaging input cost reductions, tolling fee efficiencies, and improved supply chain logistics and distribution costs. We remain committed to passing a portion of these cost savings on to the consumer as we pursue our goal to achieve price parity with animal protein in at least one of our product categories by 2024. In addition to leveraging our cost of goods sold, we were also able to achieve year-over-year operating cost leverage in Q1 2020. Operating expenses were 37% of net revenues in the first quarter of 2020, as compared to 40% in the first quarter of 2019. Net income was $1.8 million or $0.03 per common diluted share as compared to a net loss of $6.6 million or $0.95 per common share in Q1 last year. The strong improvement was primarily the result of the increase in net revenues and gross profit as well as operating expense leverage compared to the first quarter of 2020. Adjusted EBITDA was 12.7 million or 13.1% of net revenues in the first quarter of 2020 compared to an adjusted EBITDA loss of 2.1 million or negative 5.3% of net revenue in the first quarter of 2019. We note that the increased level of share-based compensation expense, which is an add-back to adjusted EBITDA, was largely due to appreciation in our stock price, as well as substantially higher staffing levels versus the prior year period. Now looking at our capital structure, the company's cash and cash equivalent balance was $246.4 million. Total debt outstanding was $30.6 million as of March 28, 2020. Net cash used in operating activities was $15.9 million for the quarter ended March 28, 2020, compared to $13.3 million for the prior year period. Capital expenditures totaled $13.7 million for Q1 2020, compared to $3.8 million for the prior year period. The increase in capital expenditures in Q1 2020 was primarily driven by growth capital production equipment purchases related to our capacity expansion initiatives. On April 22, 2020, we announced that the company has entered into a new $150 million five-year revolving credit facility, replacing our previous secured credit arrangements. This new credit facility, which includes an accordion feature for up to an additional $200 million, increases our borrowing capacity, lowers our cost of capital, and enables greater strategic flexibility for future global growth initiatives. We appreciate the strong support of our lenders in completing this transaction. Finally, as we noted in today's press release, and as Ethan alluded to earlier, given the unprecedented disruption and ongoing uncertainty related to the COVID-19 pandemic, including uncertainty regarding the magnitude and duration of the impact to the food service channel in particular, we are suspending our 2020 outlook previously provided on February 27, 2020 until further notice. We believe this is the most prudent approach considering the extraordinary circumstances facing our global community from consumers to businesses and governments alike. Over the long term, we remain committed to our strategic and financial objectives anchored on innovation, including improving existing products and launching new ones, expanding brand awareness, growth of our distribution channels, and investments in infrastructure and capacity to be able to serve beyond meets global market demand. With that, I'll now turn the call back over to Ethan.

Thank you, Mark. In closing, we are very pleased with the results for the first quarter of 2020. Although we face difficult challenges in the near-term operating environment as a result of the COVID-19 pandemic, we remain optimistic about the long-term prospects for our business and believe that Beyond Meat continues to be well-positioned to lead the global movement toward increased adoption of plant-based meats. I would now like to turn the call over to the operator for your questions.

Ladies and gentlemen, if you have a question or comment at this time, please press the star and the one key on your touchtone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound key. In the interest of time, we ask that you limit yourself to one question and one follow-up. Our first question comes from Ben Thurow of Barclays.

Hey, good afternoon, Ethan, Mark. First of all, congrats on that strong result in the first quarter and hope you're all safe and sound. So my question would be, you've alluded to it partially already. So you said March versus February was down around about 25% within food service, but clearly March was only partially impacted. Could you share some insights on how April then trended versus March and what you're seeing more towards the end? Because we've gotten some commentary from companies, from protein companies, that some of the food service has found ways in the QSR segment to kind of go back. So the question is, have you seen a stabilization on a lower level in more recent days, weeks? versus the initial drop and if you could share how much within your food service is actually QSR and how much is more like the other more the real food service and delivery system, et cetera. So that would be my main question.

Great, thank you. So I'll speak qualitatively to the first part of your question just around the impact in April because we're not necessarily ready to share the April numbers. Of course. But, you know, overall, we did have a tremendous score, as noted, with revenues, net revenues doubling year over year. But we did see that last two weeks of March become more problematic. I think if you look at the split, as you've mentioned, between large QSRs and the rest of operators in the food service segment, we're about 33% of the strategic QSRs, and the rest are smaller, either regional or mom-and-pop organizations. So the larger QSRs were able to continue to generate business through drive-throughs and things of that nature, although diminished. And so we did see some sell-through occurring because of their ability to stay open as well as to use services like DoorDash and Grubhub, et cetera, which we've partnered with and have been working well with. And so I'll get into this, I think, in other questions as well, but We really look at this challenge as how do we both reroute and repurpose. And in rerouting, we're thinking about how do we continue to get to the consumer, even though the consumer's normal patterns may be interrupted by this particular issue. And so we partnered with many of our organizations in the food service space to do that. But in constant communication, whether it's Subway or KFC, McDonald's, Dunkin', Starbucks, Hardee's, Carl's Jr., Del Taco, we've been in dialogue with them around how do you How can we serve them as a partner during this period of distress? And I think we found that patience is one of the biggest things we can contribute at the moment. You know, they are trying to right the ship. I think they're doing a good job of doing that. None of them have indicated that there's going to be any change in decision to move forward with us or continue to expand with us. But they do need time now to reset their model, and we're giving them that time. We've also done some good things through them. such as our Give a Million campaign. If you look at Hardee's, where we teamed up with Aaron Anders and Ludacris to give out product, or Carl's Jr. with DeAndre Hopkins giving out product, and Del Taco, more recently with Juul Nevada, giving out product to those in need. So we've tried to be a partner throughout this period to each of our quick-serve restaurants here in the U.S. and in Canada as they sought to move through this crisis.

Okay. Perfect. Thanks. And then on the deal with Starbucks in China, so I remember you've initially and you've mentioned that you still have the plans to get manufacturing into China. Now, launching already with Starbucks in China, clearly a great opportunity. How much, considering the COVID-19 situation, is that early start actually with them in China a logistical headwind to not be present over over there and to get product from your current production facilities over to China and to the stores. There's certain disruption at the beginning, and by when should we actually expect to start to see some of the products in the Starbucks in China?

It's been great, and I think we just were really fortuitous in our timing there. We didn't see much disruption at all based on the pandemic. There was maybe a slight delay. but they have executed flawlessly in getting this project up and running. So we're getting some great results on social regarding the consumer acceptance of the product and looking forward to doing a lot more in mainland China, as we've discussed. But Starbucks has been an exceptional partner in this regard.

Okay, perfect. I'll leave it here and pass it on. Thank you. I can't wait to get in.

Thank you. Our next question comes from Rupesh Prakash with Oppenheimer.

Good afternoon. This is actually Erica Eiler on for Rupesh. Thanks for taking our questions. So I guess first I was hoping that you could talk a little bit more about your ability to convert that food service supply into the grocery retail channel, so maybe a little bit more color on what you're doing there.

Sure. I'd be happy to. And, again, we set, as I mentioned in my comments, very early on we set up a strategy, both offensive and defensive, to continue to grow throughout this period, and I think that's been paying dividends recently. And around the particular issue of shifting over from food service to retail demand, there's some very concrete things we did in terms of repurposing. We shifted food service lines over to retail production. We've been repacking food service into retail sale units and doing things like launching an Amazon Fresh nationwide. We're also establishing our own direct-to-consumer system that will launch later this quarter. Working very hard with partners such as DoorDash and others, as I mentioned, to help get the product to the consumer, even if it's still in the QSR system. And then going much more aggressively in Club, so we can get consumers value packs and allow them to have more at home. We are also offering lower-cost value packs, not just in the Club channel, but to retailers everywhere. nationwide that are interested in taking advantage of lower cost pricing and higher quantities. And so it'll be interesting to see the uptake there given the spike in beef prices that'll be rolling out in the next couple weeks. And then more generally, you know, as we shift more and more the production, just very temporarily, right? I don't think the food service situation is going to persist for that much longer, but temporarily we are putting more and more resources into retail. we're doing so at a pricing and cost structure that will allow us to get closer to the animal protein equivalent pricing given the very significant surge in beef prices that's just occurred.

Okay. No, that's helpful. And then just kind of shifting to kind of marketing and R&D. I mean, so you mentioned potentially, you know, delaying some of that marketing expenses as, you know, circumstances warrant it. I mean, can you maybe just talk a little bit about how we should think about marketing and R&D expenses going forward in light of the current environment? And then as we think about what's going on in the QSR channel, how has support and advertising there changed towards your product in light of the environment?

Yeah, so I think we take the marketing first. We really have sought to try to take care of our QSR partners, and so we've offered to do deals with them. We also are very focused on what we can communicate about our brand during this period, and so I think the Give a Million campaign is representative of that. We want to be part of the solution, and so instead of doing a lot of typical marketing, we sought to put resources into distributing free food to people in need and to frontline responders. So I think that was something that we all felt strong about at the company. I don't think you'll see us launch major campaigns right now. I don't think this is the right time to do that. We'll continue to try to be a solution, and one of the ways we can be a solution is to offer lower pricing. And so you'll see us do more discounting this summer than normal just because of the opportunity to be relevant to the consumer as animal protein prices are spiking and supplies in short order. So It's those type of commercial moves we'll make versus more standard marketing. Innovation, you know, we'll always spend on innovation. And so it doesn't much matter what's going on in the world. We'll continue to do that. You know, we've made adjustments across our budget in various areas to make sure that we're still being very fiscally responsible. But we are, as I mentioned, an innovation engine, and that's what we are at our core. And we have some long-term goals, and, you know, the short-term environment is not going to affect that.

Okay, great. Thank you so much. I'll pass it on.

Our next question comes from Steve Strykula with UBS.

Hi, good afternoon, and congratulations on a very strong margin quarter. So the first question would be just more backward looking. How do we think about why the gross margin was so strong in the fiscal first quarter? I mean, your calls per pound were at record low levels, but what really drove favorable unit economics there? as we think about deconstructing that. And then I've got a forward-looking question.

Sure. This is Mark. So we saw really good performance in the first quarter. Improvements year over year were balanced. A portion of that came from, like, the variable cost inputs, direct materials and packaging. And balance came from labor efficiencies and and some overhead and variable efficiencies. So, you know, we're starting to see improvement in those variable cost items as well. A lot of our earlier gains had been really leveraging fixed costs, and we'll still see some of that going forward. But, you know, where we are starting to get some traction now is also in the material and labor variable cost inputs, and that will, you know, be an area we can continue to reduce costs in.

I think just to add on to that, I mean, what I'm very proud of is the work that the operations team has done to get our pricing to be the lowest it's ever been, our cost structure to be the lowest it's ever been, rather. That is an important milestone on our path to underpricing animal protein eventually. And so we're going to continue to try to protect margin over the long run. We'll make some adjustments in this quarter, given the summer situation. that help us grow our customer base and consumer base. But, you know, we're going to drive at this thing through cost reduction.

Great. And, Ethan, it sounds like you're being – you have an organization being a very good partner to your end customers right now during this period. How do we think about – you touched on the QSR channel specifically, what you guys are doing. But what are you doing on the retail angle and more like the independent part of the restaurant or food service business, if you will, to really drive value? You mentioned trying to narrow some of the price gaps. What are they asking for in terms of innovation? Maybe slate that a little bit later in the year. Any type of new LTOs out there in the marketplace, that would be very helpful. Thank you.

Sure. So I think on the LTO and new innovation, both on the retail side, I think, again, patience being the word of the moment here. These guys and gals are dealing with so much complexity, even in the retail space, right, with just they're closing their stores early now sometimes just to be able to restock. So the last thing you want to do is complicate their lives with a massive reset and try to bring in three or four different new items. But where you can be helpful is where they are in need, and right now they're in need of basic protein. And so I think the move that we're making toward value packs and allowing the consumer to buy 10, 12 at a time burgers and bring them home, I think is the right move, and so that's helping retailers who have an issue with filling their shelves with protein. It helps consumers because it provides very healthy and reasonably priced protein for them during this period. On the QSR side, I think it's very complicated right now to do LTOs. We've certainly been – we have great fluid discussions with our major partners and I think we're waiting for things to stabilize a little bit more before we begin to introduce any complexity on their menu in terms of pricing schemes and things like that. But you will see that from us as the year moves on. Great. Thank you.

Our next question comes from Ken Golden with JP Morgan.

Hey, good afternoon, everybody. Ethan, You mentioned that QSRs are not making any major decisions right now as far as your products. I did want to make sure, though, on slide 11, just looking at the text there, it says McDonald's Canada, that that test happened between January and April of 2020. And it's the only customer on that slide with an end date. Am I reading too much into that line, or did the test end last month? I just wanted to see if I'm missing something there.

Yeah, no, not at all. I mean, that is – the test was for that period, and it did conclude, but with no – for no negative reason at all. I mean, you know, we feel very good about our relationship with McDonald's and what's going to be happening both there and potentially elsewhere. So, you know, by nature of it being a test at a beginning and an end.

Can I follow up on that? Because typically – if the test did well, the retailer wouldn't end it, they would expand it. So can you just help us understand a little bit why it stopped rather than going the other direction?

I mean, I think it would require me to open up the broader discussion. I can assure you there's no issue with McDonald's, let me put it that way. You know, this is the way that it's been planned and the way it's being executed, and there's been no change at all. I can't promise you that, you know, we'll see a massive expansion tomorrow, but there's been no change in information since we began this test and got good results in the beginning and got good results at the end.

Okay. I'll leave it there. Thank you, Ethan.

Yep. Our next question comes from Alexia Howard with Bernstein.

Good evening, everyone.

Hey, how are you doing?

Good. Okay, can I ask about the pricing dynamic? You mentioned the pricing was maybe down in the quarter. Are you able to quantify that? And I guess looking out, you talked about the shift to value packs and wanting to do sort of discount, more discounting. That's kind of a different stance from what you've focused on in the past, which was to really hold pricing down. I'm just curious about whether we would expect to see net pricing per pound down more significantly as we roll forward. Thank you, and I have a quick follow-up.

For sure. And so, Alexa, in the quarter, you know, we look at a volume. We actually sold 16,652,000 pounds. And if you calculate, our sales per pound was $5.83. Over a year, that's very similar to a year ago. We were at about $5.88. So we haven't seen net sales price erosion in that period. I think some of the discussion around, you know, what we saw in discounting was lighter in the first quarter, which allowed us to kind of maintain that net sale price per pound. And maybe, you know, looking forward, you know, some of the things we talked about is introducing more value-packed oriented products and possibly increasing discounting. We still, you know, feel confident in our ability to kind of match that with our cost reduction. But as we look to deliver some of these more value-priced items and deliver cost savings to the consumer, we're going to look at – you know, continuing to drive that cost up.

Great. And just a quick follow-up. You've given us an update pretty much each quarter about what the receipt purchase numbers look like. I can imagine that might have been disruptive given everything that's going on. But do you have another number and is it still in the mid-40s?

Yeah, I believe that was, I think, last year. We had some information that talked about repeat purchase activity. It's 45.

It's basically 46%.

That's correct. I don't think we have an update to that.

Okay. Thanks very much. I'll pass it on.

Sure. Our next question comes from Robert Moscow with Credit Suisse.

I thank you. I might have missed it, but I think at the beginning of the year you said that you had some significant spending on consumer education programs about, I guess, the health and wellness of your product. And I want to know, are those still happening, or did you say that you're going to kind of taper those off and put that spending into price instead? And then I had a follow-up.

So we did a lot of work to develop content, which we're holding, given the complexity of the global situation. And we will release it at the point at which we feel, you know, that the environment's right. So I wouldn't say it's necessarily a tradeoff between doing that and putting directly into pricing. We've held off on discounts in the past and just feel now. But we actually don't feel any competitive pressures. You can tell by the 38% margin we enjoyed this quarter. but we do think it's the right opportunity to take advantage of. You know, look at beef. Now it's $4.10 a pound wholesale. You know, assuming retail markups take it up to about $6.80 or so, you know, we're in pretty good shape to begin to make some inroads toward not necessarily price parity, but being the same consideration set for the consumer. So you will see us spend and have more trade as a result.

Okay, but, Ethan, I thought what you needed to do was kind of defend the ingredients and your processes against some targeted campaigns that had been leveled against you. Is that what you're referring to? That's kind of in your back pocket now, is that right?

A hundred percent, yeah. We have a ton of good development work going on in our content, and I just think people don't want to hear that right now. The global concerns are elsewhere between, you know – us clashing our swords with the incumbent industry. That's probably not the right idea.

Right. And then my follow-up is I saw a headline today saying that Impossible is launching in Kroger. You said that your price efforts here are really to show the value versus beef. But to what extent are you and Impossible able to both grow together at these Kroger stores? Is that your expectation and Or do you have to be price competitive against them also?

My honest expectation is to win there, for sure. But I think there's a place for both of us. And I think that it's two different consumers that are probably looking at those products. You know, I think we, Impossible does a nice job. They're a great company, good people. I think it's a different value proposition. You know, we've been very clear on non-GMO, and they have been obviously in another camp, not bad or good, truly. I mean, but I think that does appeal to a different consumer set. So it'll be interesting to see how that unfolds as they increase their distribution. I think we're now in 90-plus thousand points of distribution, 75 countries. So, you know, I think we've got a pretty good head start, and I keep it that way.

Okay. Does that mean that your price cuts will go into place in those stores in which you're head-to-head?

It depends. I mean, so, you know, I want to give the right impression here. So I think one of the biggest focal points for me during this period is around these value packs, and I want to make them available to any retailer that will take them. We will do heavier discounting on some of our products as long as this disruption continues in the animal protein market. I haven't really even thought about it relatively possible, to be honest. I'm much more focused on the animal protein market. I did want to clarify just on this, on the idea that a test somehow, beginning and ending, signals good or bad information. It's really just not the case. If you look at KFC, for example, You know, that was a very successful test that had a beginning and an end. So I don't want people to read into that. It's part of the, you know, maybe ask them that on the next call. It's part of their process of evaluating information. Again, they don't always go from test, right, to launch. Okay. Thank you.

Our next question comes from Brian Holland with DA Davidson.

Thanks. Good afternoon. Good afternoon. I was curious if you could talk about, you know, there's been some commentary that, you know, consumers are migrating towards, you know, familiar products and brands in this environment, you know, whether that's just a pressured wallet or migration towards comfort foods. On its face, that seems problematic for an emerging category such as plant-based meat. Can you share any insight on what the consumer engagement is telling you about their willingness or non-plant-based adopters' willingness to trial in this environment?

I think we have snuck in just in the right amount of time into the national dialogue and consciousness on this. Our aided awareness, brand awareness, is about 52%. So I think when people think about plant-based meat, they're thinking about Beyond. And so if they're going to make any kind of trial during this period, we favor or we come out pretty well on that because of the familiarity with our brand. So, you know, we're not Campbell's, right, but we're not so new that it seems foreign or novel in some regards.

Okay, fair enough. And then, you know, I guess you talked about maybe pulling back on some of the marketing spend. It sounds like you'll go to price discounting, understand that. Certainly with the, you know, reduced foot traffic or impacted consumer mobility as it pertains to the food service channel, which I believe is a, you know, huge driver of awareness and trial for you guys. How else can you offer – I mean, is it just pure just get the traffic that's coming to retail, see, you know, the price discounted, see the value pack, see the availability? Do you feel comfortable that's enough? Are there other alternatives you can look at here? to sort of drive traffic and engagement right now? If you're going to move off of some conventional methods, sorry.

Yes. Yeah, no, great question. So, you know, this is an area that I love, and I really think that the way to market particularly our products is around the authentic market integration of the product into people's lives, and particularly people who have captivated the public's imagination. So we use a lot of athletes. They're investors in our company. They are advocates for us. We use a lot of entertainers. And they're making changes in their own lives that are beneficial. And, you know, one example that I absolutely love is Chris Paul, who's a great friend of our brand's. If you look at him in the 2020 All-Star Game, the guy's 35 years old. He's just about to turn 35. Catches a dunk, right? And he's maybe 6'2", right? And so, you know, after the game, he says, you know, I attribute this to shifting over to a plant-based diet. It's given me a lot of, you know, more legs, essentially, right? He doesn't have to ice his knees so many times, et cetera. So you're going to see us keep hammering home on that got milk message, right, that you consume our product. You're going to feel better. It's going to do great things for you. and we're going to have people that are out there in the public eye living proof of that. And so you'll see more and more of us doing that. I think this giveaway campaign, it wasn't just beyond me pulling up in a truck in the middle of the night and dropping off burgers. We partnered with some of the very famous people we work with, whether it's Kyrie Irving, Snoop Dogg, et cetera. I've mentioned many others. This is the way to market. It's a genuine approach, and it works because it's true.

Got it. Appreciate the cover. Best of luck.

Thank you.

Our next question comes from Adam Samuelson with Goldman Sachs.

Yes, thank you. Good afternoon, everyone. I was hoping to first ask about the international business, and I appreciate the new disclosure this quarter, and just trying to think about – More of the sequential performance, the basis of the year-on-years are a little bit distorted, but sequentially it looked like the international business for both retail and food service was growing slower than the domestic U.S. business, which I found interesting because I would have thought there was a greater kind of distribution point gain potential internationally. So city color there are issues around distribution, issues around logistics, Seasonality just helped me think about kind of the international business and the trajectory of that as we move into the second quarter.

So I think the international business, the reason that you're seeing a run rate basis somewhat of a decline just has to do with the really heavy amount of food service. It's represented in about 82% of the businesses with food service now, about 76%. So you're seeing just an outweighed contribution from the food service decline globally. We don't think this is something that's going to persist. We can't predict the future, of course, but you're going to see going forward from us launches internationally in both retail and food service for the balance of the year that we're pretty excited about. So overall, we look to international as continuing to be a very, very strong pillar of our growth.

Okay, that's helpful. And then I guess the second question relates on the capacity side, and clearly coming into the year you had some pretty meaningful aspirations on growth. You had new raw material supply agreements on pea protein isolate. The demand environment is a little different today than it might have been 60 days ago. How do you feel about just from a capacity perspective, are you now maybe a little bit further ahead on the capacity front than you need to be for the time being and willing to absorb that? Or just help us think about that balance as you try to balance growth and capacity.

No, that's great. I mean, my first... The plan of attack on this is this offensive strategy we put together, and that really is around repurposing assets that may have been dedicated to food service over into retail, but keeping them nimble enough that they'll switch back as the situation improves. So we haven't yet encountered that issue. I mean, I'm not suggesting that we're going to be completely unscathed by this. We're not. We did take a hit on the food service side. But overall, if you look at all the different segments we're in and all the different opportunities for growth, both, you know, from a food service perspective all the way to retail, lots of different types of retailers, whether it's club versus regular grocer, and international, you know, with some parts of the world recovering more quickly than others. One thing I'm not worried about is are we going to have excess capacity this year? You know, we've built the appropriate amount of infrastructure, and then we, of course, use commands for some of our processes so we can flex there. So I think we feel pretty good about where we are.

Okay. I appreciate the call. I'll pass it on. Thank you.

Sure. Thank you. Our next question comes from Rob Dickerson with Jefferies.

Great. Thank you so much. I guess, you know, just first question, you know, and maybe it's too direct. I'm not sure. But, you know, it sounds like Q2, you know, you said gross margin should be lower relative to Q1 given volume deleverage, repackaging costs. Sounds like there could also be some, you know, I don't know, pack sizing or pricing effect too, but not as much. You know, when you say volume deleverage, you know, we obviously know there's kind of that month of March, you referenced, you know, the trend in March off of Q1. Obviously, you know, the mix on the U.S. side and the food service channel was higher, would be more of an impact in Q2. So are you kind of saying, you know, or let's say by saying that, that the margin Q2 would be lower, kind of given that volume due leverage, which would be coming from food service, not retail, that Q2 revenue in food service would actually decline year over year, right? And I also ask because, you know, we do talk about year over year all the time and beyond, but for most, you know, emerging growth companies with revenues sub-100 million, we really are watching this sequentially, and revenues technically did decline by a million by Q4 to Q1. So I'm trying to think about what's that sequential impact potentially from Q1 to Q2 on the revenue side. Thanks.

Yeah. So, you know, we specifically will probably stay away from giving guidance. But, you know, as we go into, you know, the second quarter, we're definitely going to have more of an impact on the food service channels specifically versus the first quarter. First quarter was – through, you know, into March, we were, you know, relatively unimpacted. We started to see this impact in the month of March. And as we go into the second quarter, we're going to see more of this impact. So maybe let you make your assumptions off of that. But, you know, we would anticipate the food service impact would be felt more wholly in the second quarter.

Okay, fair enough. And then I guess, you know, more broadly for you, Ethan, you know, I've read a lot recently kind of around alternative protein space. It's highly fragmented still, even though, you know, you are the leader in the refrigerated side. A lot of smaller players, right, potentially, you know, might be entering kind of a more challenging economic backdrop. It would seem like some of those smaller players might not be as well capitalized, right? You said strong balance sheet. You still, you know, you have probably more scale than most in the industry right now. So if you step back, you know, and look forward, you know, let's say, you know, a year from now even, if you kind of go through this tough economic backdrop, how do you think that affects the industry? Like my first question was, hey, yeah, you could be more pressure in food service in the near term. But kind of longer term, you know, it seems like if you have scale and the opportunity now, that you actually could potentially be picking up more share going forward in a category that remains highly competitive.

Yeah, that's exactly what we are pursuing. And, you know, we don't look at this moment as a survive and advance moment. It's really about how do we strengthen our position overall. And we think that relative to higher prices in the protein market today, we can make significant inroads into consumers and help them expand their choice of proteins. And so we look at that both on the animal protein market, more so on the animal protein market than on the plant-based meat side. I think it is – we do have a very significant lead relative to other players in the plant-based meat segment group, and even the number one incumbent in this category – We grew six times their rate in the last 12-week periods. We continue to really advance more quickly than others, and that's by design. We move very quickly. The biggest thing for us right now around growth is how do we provide solutions for the consumer as their other protein sources are rising in price and having supply disruption. That's the biggest focus for us for growth. We think we'd come out of this a much stronger company as a result if we pay attention to what's going on for the consumer.

Very helpful. Thank you so much.

Our next question comes from John Bell.

Thanks for the question. You know, Ethan, on the marketing side, as you've launched in the U.S., you're basically building this category from scratch. And as you go into Europe, you know, a market where you've got some, you know, plant-based competitors already, you know, pretty entrenched in Asia where it's a bit of a different product. How does the market entry strategy differ? I mean, how are you approaching the communications different with consumers, with retailers, you know, sampling, promos, you know, and so on?

Yeah. So, first of all, I wish I was over there now. I mean, it's just been such an exciting time, and I've been watching from afar the launch. We've had some really great advisors around us with a lot of experience in Asia that have been helping us to understand that market and the consumer, and we will be announcing – At some point, a really terrific hire we've made over there who's helping to guide us. There's a ton of experience in the market. So it is. It's entirely, you know, there's a lot of differences, and we've got to be super sensitive to that. And so I think it's also about picking the right partner. You know, Starbucks is a good partner to go with initially. They've done a very good job of translating an American brand into the fabric of that country. And, you know, It's well-received by the Chinese consumer. But you have to be very sensitive even to the palate, right, and making sure that what we're doing resonates from that perspective, from a nutritional perspective, from an ingredient perspective. So we're all in in that part of the world. We aren't taking it lightly. We're going to be investing a lot over there. And we expect to be part of the solution for what is a constrained protein diet. environment over there as well. I mean, you don't have to be a sort of systems analyst to look at what's going on in the world and see that there are opportunities here for us to move more quickly, you know, whether it's the, you know, coronavirus and the impact it's had here on the U.S. meat industry or whether it's the African swine flu and the impact, you know, basically culling, I think, 60% of the Chinese hog population. or more recent, the avian flu occurrences in South Carolina and Ireland, there's an opportunity for the consumer to become aware of a different model of doing this, and we want to be as aggressive as we can to provide the consumer with that additional option. And so we need to do that in the parts of the world where we can be most relevant, and certainly right now China is front and center. Great.

And then just, you know, follow-up. I wanted to come back to the aggressive pricing and the value packs you mentioned at retail. And I guess, you know, for a product still very much in the trial phase, how do you think about getting a consumer to buy, you know, a 10-pack or a 12-pack for their first purchase? I mean, is there anything in the consumer work in terms of trial versus repeat where you're looking to kind of lean into here? Or is it more just the need to call the audible and just move that food service following as quickly as possible and, you know, club gives you the best chance to do that?

Yeah, I think it's – I mean, to me – Something really interesting happened for us. So if you look at our household penetration, so July of 2019, we were about 2%. We're now at about 3.6%. But something interesting is happening along the way. Our buyer rate, which is the amount that each individual is buying, each household is buying, is also increasing substantially, right? So we have a group of consumers. that are not only consistently buying but consistently buying more. And so to the extent we can make some of this available to them, but also if we can get close enough on the product that we're competing against in the beef category itself, I think there's enough – momentum around our brand that we can get people to try it. Now, they probably won't first buy the 10. Maybe they'll buy the two-pack, but we're going to offer more aggressive pricing on that as well this summer. So you'll see both approaches from us. Great. Thanks for the thoughts.

Appreciate it. Our next question comes from Michael Lavery with Piper Sailor.

Thank you. Good afternoon. Good afternoon. Could you give a little bit of color on your retail expectations? You already had really strong momentum there, running up around 200% even before the virus really had an impact. We're seeing a similar pace hold up, but how do you think about what's ahead? Should we expect an acceleration or some upside, just especially as you shift capacity or see shortages of meat, protein? Or is the volume lift likely offset by lower price? How do you think about just the next, the near-term runway there?

Yeah, I think it's going to be a frustrating answer for me to give and probably to be received. We just don't know yet. I mean, there's so many different moving pieces. There's, you know, does food service recover in a reasonable amount of time? Do consumers go for the value pack? Do they go for, you know, more aggressive pricing to the degree that we think that they will? So, you know, there's just so many variables. What I can promise is that we're, you know, the omni meets fine throughout this process, throughout this issue, thankfully, because we have this split between food service and retail, and we'll continue to be fine. But we're doing everything we can to try to be a solution during this period, and hopefully the consumer will gravitate toward that, but we can't make predictions now.

Okay, thanks. And just a follow-up on the margin side, you've obviously got really strong momentum in the first quarter, and recognizing there's plenty of uncertainty still ahead, but Any specific watchouts maybe we should have in mind? Is there a magnitude of an operating leverage hit that maybe we wouldn't expect or an impact from some other costs? It sounds like you don't expect margins to turn negative, but, you know, just would a reasonable thinking be some deceleration in margin momentum, maybe a little less positive?

Yeah, I mean, once again, you know, trying to stay away from guidance, the second quarter we do think is going to be sequentially down versus Q1, and that's driven by probably overall volume and then also some of the volume leverage. We will be looking at increased levels of discounting, and so discounting was pretty low in the first quarter, and so that would be also have an impact. You know, the move to kind of different kind of value pack sizes, those are probably, you know, will phase in over time. So that's not going to be something immediate. And it will probably match our, you know, cost reduction initiatives. But, you know, really just in the very near term, we think, you know, the second quarter would be sequentially kind of down from Q1, the very strong result we had here in Q1. But, you know, we probably couldn't comment farther beyond that.

Thank you. Our next question comes from John Anderson with William Blair. Hi. Good afternoon, everybody.

Thanks for the question. Two quick ones. Putting the second quarter gross margin rate aside for a minute, I'm hoping you can talk about gross margin longer term. You've made so much progress on that line in the last year or so. How are you today thinking about margin rate, again, longer term in the context of your unit productivity that you expect, and also, though, the reinvestment, you know, in price in order to try to achieve, you know, parity.

Yeah, so I think the number one answer in that regard is just around we're going to continue to drive the cost structure down, and that's where we're going to see the most progress. And so you're not going to see us sacrifice a ton of margin. I mean, 38% is amazing, so we think we do have room to give back a little bit there and help ourselves be more competitive. But we don't look at this and say, how do we drive ourselves into a commodity position? We want to very much take advantage of the efficiencies throughout our system. And I wish I could take you guys through it. I mean, there's so much. that we can wring out of this system still. And we have the right people in the organization now to do it, and they're doing it. And I think, again, I'm very proud of this milestone of the COGS we met this time around. But we'll continue to drive that cost structure lower. And, yeah, we will reinvest some of that margin into pricing to allow for more competitive markets. but I don't think you'll see us take a dramatic change from some of the margin that we've discussed in the past. I mean, this was a particularly good outcome. We're not going to try to always meet that for sure. And as I mentioned, this summer we're going to be very aggressive on pricing, so there's another piece of data. But overall, I'm pretty comfortable with the dialogue we've had in the past on margin. I don't expect that to change.

Great. That's helpful. On e-commerce – You talked a little bit about it in your prepared comments. How, you know, there's been a shift up to online. It's been accelerated as a result of the COVID-19 pandemic. You know, how are you positioned online? How do you plan to broaden your reach there and, you know, kind of take advantage of the momentum that you have to make sure you're really available anywhere the consumer wants to go? you know, interact and kind of transact with your brand.

Yeah, so there's a lot of energy in this building around that, particularly because our COO came over from a long career over at Amazon. So, you know, first Amazon Fresh, right? I mean, so we're doing a lot there with that launch. And then we are looking at our own system, but, you know, who knows on that, right? We'll see. But overall, we're trying to change with the consumer. And are we going to become Omaha Steaks? I'm not sure. But we're going to, again, try to reroute every way that we can to make sure that we're getting our product to consumers who want it. And online is obviously a big part of that. But I think you'll see the most, if I had to guess, the most traction right now in the near term out of Amazon Fresh. Okay. Thanks so much.

And I'm not showing any further questions at this time. I'd like to turn the call back to management.

Okay. Well, thank you guys very much for the terrific questions and for following the brand over the last quarter. As I mentioned, we do feel very strongly about this is an opportunity and time for us to be aggressive in offering the consumer expanded protein options. And so I look forward to seeing how we wrap the second quarter here and getting back on the phone and discussing results. Thank you very much. Most importantly, do stay healthy and safe. Thanks. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.