Beyond Meat, Inc.

Welcome to the Beyond Meat, Inc. 2021 Second Quarter Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the call over to Luby Pitua, VP FP&A and Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome. Joining me on today's call are Ethan Brown, founder, president, and chief executive officer, and Phil Harden, chief financial officer and treasurer. By now, everyone should have access to the company's second 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.beyondmeat.com. Before we begin, please note that all the information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. Please refer to today's press release, the company's annual report on Form 10-K for the fiscal year ended December 31st, 2020. The company's quarterly report on Form 10-Q for the quarter ended July 3rd, 2021, to be filed with the SEC. and other filings of 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 also note that on today's call, management will refer to adjusted EBITDA, adjusted gross profit, and adjusted net loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, 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 or the investor presentation for a reconciliation of adjusted EBITDA, adjusted gross profit, and adjusted net loss to their most comparable GAAP measures. And with that, I would now like to turn the call over to Ethan Brown.

Thank you, Lubbe, and good afternoon, everyone. Before diving into our second quarter business highlights, let me begin by welcoming our new Chief Financial Officer, Phil Harden, to his first Beyond Meat earnings call. Phil officially joined Beyond Meat a little over three weeks ago and is already proving himself to be a valuable addition to our team. Phil brings with him a wealth of finance leadership experience from one of the world's largest e-commerce and technology companies, which not so long ago set out on an ambitious journey to transform the way consumers shop. In many ways, our objectives are just as ambitious, as is the requirement that we maintain a long-term focus while making investments today for tomorrow's growth. And we are fortunate to leverage Phil's deep experience as we embark on this next leg of Beyond Meat's story. I'm personally very pleased to have Phil with us and hope you will join me in welcoming him. For Q2 2021 results, we generated record net revenues of $149 million, which came in toward the top of our guidance range for the quarter and represented a 32% increase year over year. I am proud of this result as we cycled our previous best-ever quarter in terms of sales, one where the defining feature was COVID-induced stockpiling as stay-at-home orders proliferated across the U.S. and globe. In food service, net revenues were up 218% year over year and 61% sequentially, driven by reopenings within the sector. Here in the US, food service net revenues were up 269% year over year, while internationally we saw an increase of 172%. We continue to hold the number one brand position in terms of dollar share according to NPD data for Q2 2021. Sales of Beyond Meat products were up 95% year-over-year in the quarter in NPD tract channels, in line with the overall category during the same period. This year-over-year increase reflects solid gains and signs of recovery among independent operators, including restaurants, bars, and pubs, lodging venues, and small regional QSR chains, among other segments. We continue to expect year-over-year growth within our food service business in the near term, albeit at a more moderate rate as we lap tougher year-ago comps and expect pipeline restocking to subside. In addition, general near-term concerns around rising COVID-19 infection rates could also have a dampening effect on food service demand. We did see a significant reduction in distribution at Dunkin' Brands as they rationalized their menu. We remain engaged with Dunkin' around future innovation and collaborations and are in distribution throughout their western U.S. stores. I should note that our breakfast sausage patty continues to do extremely well in other U.S. venues, such as Pete's and Phil's Coffee, among others. In international food service, the 172% increase in net revenue was driven mainly by broad reopening of economic activity in several markets, and we expect solid year-over-year growth in this portion of our business in the near term, barring a significant recurrence of COVID-19-related dynamics. Finally, oddly, as it relates to food service, we are looking forward with excitement to activity with our large strategic QSRs. As before, I should note that we supply at the request of these partners, and the timing of planned tests and launches could shift based on various considerations, including a resurgence of COVID-19 or other events. Shifting to retail, we saw a year-over-year increase in net revenues of 6%. This moderate increase includes a decline in U.S. retail revenues of 14% as we cycled Q2 2020's record retail revenues, which, as you will recall, were fueled by consumer stockpiling at the onset of the pandemic. This comparison notwithstanding, our key brand metrics of household penetration, buyer rates, purchase frequency, and repeat rates remain robust. We saw continued advancement in our household penetration, which increased 80 basis points sequentially and 120 basis points on a year-over-year basis to 6.2%, according to SPIN's IRI consumer panel data for the 52-week period ended June 27, 2021. And on a year-over-year basis, our buyer rate increased 12%, purchase frequency was up 9%, and our repeat rate increased 5% versus a year ago to 51%. In addition to these strong brand metrics, Beyond Meat's unaided brand awareness in the U.S. increased to its highest level of 26%, according to July 2021 survey data, and remains the highest such level among all major plant-based meat brands by a healthy margin. We continue to hold the number one product position and four of the top six products in our category according to SPNS data for U.S. multi-outlet and natural and specialty champs for the 12-week period and to June 13, 2021. Total distribution points for the Beyond Meat brand, or TDPs, increased 55% year-over-year driven by growth in total outlets, as well as the introduction of new products, including Beyond Meatballs and Beyond Breakfast Sausage Links, according to SPINS data from MULO and Natural Specialty Channels for the same period. This solid increase in TDPs, which we believe bodes well for the long-term growth prospects of our brand, does, however, exert near-term downward pressure on velocity, measured in dollars per TDP to the tune of 35% year-over-year. Overall, looking at consumer takeaway across MULO during the same 12-week period and reflecting the cycling of Q2 2020 stockpiling, sales of Beyond Meat products were down 4% year-over-year, slightly outperforming the category, which was down 4.4%, and contributing to a 10 basis point year-over-year increase in market share for the brand. In international retail, We maintained our strong sales growth momentum with net revenues up 198% year over year as we continue to drive increased distribution both in terms of footprint and average items per outlet. This growth occurred across a backdrop where similar to the US, globally the industry was down as it cycled Q2 2020 stockpiling. We believe our progress internationally will accelerate and broaden as we implement investments including the continued scaling of our EU and China operations that will enable capacity expansion, cost optimization, and increased consumer engagement. During the quarter, we launched Beyond Meatballs in Europe for the first time, beginning with major retailers in the Netherlands and Switzerland, marking the fourth Beyond Meat retail product offering available in Europe today. We also launched meatballs in Australia for the first time, as well as secured distribution of our burger at Woolworths, one of Australia's largest retailers, further demonstrating our commitment to expanding the availability and breadth of our product offerings across all of our key geographic regions. Overall, our distribution footprint in international retail saw strong growth of approximately 5,000 stores or a 21% increase sequentially, driven mainly by expansion in Canada, Germany, Australia, Austria, and the UK. Let me now provide a brief update on some recent product highlights and key strategic initiatives. As you recall, at the end of the first quarter, we announced the launch of the latest iteration of our Beyond Burger, the 3.0. Early feedback on the new burger has been very positive, with the product even earning People Magazine's Best Plant-Based Burger Award and being featured as such on Good Morning America just over a month ago. It remains too early to draw any definitive conclusions about the incrementality of Beyond Burger 3.0 versus 2.0. However, we expect that similar to the transition from 1.0 to 2.0, this new and improved burger will welcome more consumers to our brand. As I alluded to in my remarks about the sequential uptick of our household penetration, we may already be benefiting from the switch. As you know, we believe that tasting is believing, and to that end, We recently launched our biggest product sampling campaign ever in partnership with key retail customers. We will also be activating further sampling opportunities via our food trucks in various cities across the U.S. Just as noteworthy, we recently launched Beyond Chicken Tenders, marking a return under our PULSI platform. As with the Beyond Burger 3.0, Beyond Chicken Tenders are gaining strong recognition, for example, The product won the prestigious 2021 Fabia Award by the National Restaurant Association right out of the gate. Apart from their great taste, Beyond Chicken Tenders boast 40% less saturated fat than a leading food service chicken tender, 14 grams of protein per serving, have no cholesterol, and of course are made with no GMOs, antibiotics, or hormones. Beyond Chicken Tenders are currently available at more than 400 restaurants nationwide, and we intend to expand distribution throughout the balance of the year. Separately under our poultry platform, we announced limited time offerings at two fantastic partners, namely Panda Express here in the U.S. and A&W in Canada. For Panda Express, we co-developed a delicious plant-based take on Panda's signature orange chicken dish, dubbed Beyond the Original Orange Chicken. The offering, which became available at 13 locations in Southern California and New York, is a plant-based version of Panda's most popular menu item and has been met with enthusiastic consumer response, making Beyond the Original Orange Chicken one of Panda's most successful regional launches to date. And in another new product from our poultry platform, at A&W, we launch Beyond Meat Nuggets nationwide across Canada. Beyond Meat and A&W first partnered in 2018 to introduce the Beyond Burger to Canadian consumers, and we are thrilled to be bringing more innovation to market with this important partner. While these LTOs and limited distribution rollouts are just the beginning of our reentering to poultry, we're truly humbled by the overwhelmingly positive feedback our Beyond Chicken products are generating, and we are expanding our production capabilities under this product platform as quickly as possible. I'd like to now turn to our progress in China and the EU. First, in China, we continue to ramp up volume at our manufacturing facility in Yaxing, where we commenced commercial production of finished goods in early April. We are currently validating our extrusion capacity, which will enable full end-to-end production capabilities in China. We look forward to driving growth in this key market as we scale our Yajing operation so as to enable locally produced Beyond Meat products that are tailored to the Chinese palette, are available at a competitive price, and are made from locally sourced inputs. Our Q2 commercial highlights from China include the launch of a plant-based spicy beef wrap at KFC China in over 2,600 stores in 28 cities on a limited time basis, as well as the launch of our new e-commerce platform on JD.com, China's largest online and overall retailer. This new presence on JD.com unlocks distribution in roughly 300 cities throughout China and provides an unrivaled nationwide fulfillment network with same or next day delivery to a population of over 1 billion people. Our JD.com launch marks the first time our Beyond Pork product is widely accessible to consumers across China and we anticipate adding more Beyond Meat products to the platform in the future. Turning to Europe, we have completed the construction phase of our new facility in the Netherlands. We continue to produce proprietary dry blends there, and are in the final stages of validating our highest throughput lines yet. These tests are expected to be completed over the coming weeks, and we will be transferring learnings from these higher volume lines to our production sites in the US and China as part of our global cost down effort. Commercial highlights in the EU include several key retail distribution wins across Germany, the Netherlands, and Switzerland, among others. In addition, in July, following a successful trial last November, Pizza Hut UK added Beyond Meat as a permanent menu item at all Delivery Hut locations across the UK. Foreclosing my remarks, I'd like to revisit the three pillars of our long-term growth, taste, health, and cost. As I've noted, it is my belief that it will be a rare consumer who rejects a product that is truly indistinguishable from, healthier than, and below the price of its animal protein equivalent. We are making sizable investments today to realize this outcome. These investments, which are occurring across the U.S., E.U., and China, are vitally important to accessing the full potential of our total addressable market and establishing Beyond Meat as the global protein company of tomorrow. We are investing in all century aspects of our platforms and products, including flavor, aroma, appearance, and texture, or FAT, F-A-A-T for short, with the goal of collapsing the differences between our products and their animal protein equivalents. These investments generate near-term wins, such as the Beyond Burger 3.0 and our award-winning Beyond Chicken Tenders, among others, while enabling through the application of state-of-the-art equipment and best-in-class scientific and engineering talent future products in the US, EU, and China, alongside our other markets that bring us closer and closer to that true north of an indistinguishable build. And to bring these advances to the consumer, we are investing at a healthy pace in the commercialization of products and platforms for our QSR partners and for retail markets. We continue to invest in the nutrition of our products, as well as educating the consumer around the health benefits of going beyond. Our work with Stanford School of Medicine, a five-year program designed to generate clinically and statistically significant data relating to the health impacts of different protein choices, including our products, is an important part of this initiative. And finally, as I referenced earlier in my remarks, we are actively investing in our global cost down program. Most notably today, we are putting in place infrastructure and equipment to drive scale and efficiency gains and, in the case of EU and China, access local supply chains. Though I am pleased with our Q2 results, particularly the recovery in food service and expansion in international retail as we enjoyed some respite from COVID, it is our progress against these long-term growth pillars of taste, health, and cost that continues to hold our focus. With that, I will turn it over to Phil to walk us through our second quarter financial results in a bit more detail.