Beyond Meat, Inc.

Good day and welcome to the Beyond Needs conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Start key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask questions, you may press Start and 1 on your touch-tone phone. To withdraw your question, please press Please note this event is being recorded. I would now like to turn the conference over to Lubbock Tua. 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 filed today after the market closed. 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 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, 2021, the company's quarterly report on Form 10-Q for the quarter ended July 2nd, 2022 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 also note that on today's call, management may make reference to adjusted EBITDA, which is a non-GAAP financial measure. While we believe this non-GAAP financial measure provides 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 adjusted EBITDA to its most comparable gap measure. And with that, I would now like to turn the call over to Ethan Brown.

Thank you, Luby, and good afternoon, everyone. We have a clear view of our vast long-term opportunity and its ever-increasing global importance and a strong confidence in the leadership position of our brand. In fact, in Q2 2022, we recorded our second largest quarter ever of net revenues, even as consumers traded down among proteins in the context of very significant inflationary pressures. We simultaneously, however, recognize that progress for us and for the sector is taking longer than expected. We now expect, reflecting this inflationary pressure on consumer spending, specifically how this impacts higher cost proteins and foods, a delay, and post-COVID resumption of growth. Accordingly, we are taking a number of steps to reduce cash consumption to position the company for sustainable growth while we apply our near-term focus on the following key drivers. One, executing against a planned series of high-value market initiatives for strategic and food service partners, and two, strengthening our retail business through, among other measures, bolstering support for our core lines while bringing to market, among other new products that will expand our portfolio, one of our best innovations ever, a delicious and convincing strip of steak. Cost-related actions underway include, one, significant reductions in general operating expenses. For this quarter, we reduced OpEx by approximately 14 million, or 15%, on a sequential basis. Further intensifying reduction in production costs to drive continued sequential progress on manufacturing costs so as to recover healthy margins and reach pricing goals. Three, realigning organizational structures across North America, the EU, and China to increase regional focus, efficiency, and speed. Four, continued focus on managing down inventory levels. And five, And an action that I will now turn to, yesterday we instituted a reduction in force of approximately 40 positions. Given the high value of our team members, and again, the tremendous opportunity that lays ahead, the reduction in force is a difficult measure. Beyond Meat is a team of tremendously dedicated, passionate, and talented individuals who have come together in service to our mission, our customers, our consumers, and our shareholders. I am proud of what our team has built and are building, and the resilience that our company has shown over the past two years, as well as now, as we face, like others, challenging macroeconomic conditions. We are committed to treating those employees affected by this reduction in force with the utmost respect and providing assistance to help them in their transitions. The second quarter of 2022 saw a sequential contraction in U.S. household penetration of plant-based meat for the first time in over four years, according to numerated data, even as the number of brands and SKUs expanded by roughly 60 and 70 percent, respectively, over the past two years. As consumers are expressly seeking value, we believe that high inflation and the sector's premium pricing relative to animal protein is largely if not fully determining. Despite intense competitive pricing in the category by existing and new entrants on the one hand and rising animal protein prices on the other, the category remains a premium one relative to animal meats. As such, it is subject to the same trading down behaviors that one sees during inflationary periods. Enumerated data for the 12 weeks ended June 26, 2022 shows that the primary drivers of volume leakage for our own U.S. business were indeed shifts to animal protein, as well as to private label. This dynamic, shrinking consumer buying power in grocery stores that favors lower cost proteins and products, exerted greater than anticipated pressure on category growth, and in turn, our own growth. Turning to gross margin, although we made sequential progress on manufacturing conversion costs, this was obscured by the sale of certain inventory items to the liquidation channel. as well as increased inventory reserves for the same, the combination of which accounted for nearly 10 points of gross margin, pushing our gross margin down to negative 4.2%. Looking forward, though we do expect growth for the balance of the year, we need to continue to temper expectations given the clear precedent for consumers to trade down among proteins in grocery stores when buying power shrinks in inflationary periods. As I noted earlier, we've indeed begun to see this trading down materialize and expect to continue for the time being. As such, we are issuing revised lower guidance for the full year 2022. Before closing, I want to reiterate my enthusiasm for our brand and our long-term growth prospects. When research firm Brand Keys surveyed American consumers regarding the world's most innovative companies, Apple, Tesla, and Amazon took number one spots, respectively, across technology, transportation, and consumer goods. And Beyond Meat took the number one spot in food, according to a report released last month. I share this to note that despite the current economic environment, the long-term opportunity ahead of us remains, as I began, vast and substantial. We are grateful for the commitment of our partners, including some of the world's most valuable QSR companies, namely McDonald's and Yum! Brands, and one of the globe's largest CPG companies, PepsiCo, with whom we share the Planet Partnership joint venture. We note that the McPlant Burger, co-developed with Beyond Meat, is now a core menu item at McDonald's in the UK, and that in July, McDonald's initiated a 270-store test of the McPlant Burger in Victoria, Australia. In Austria, following the nationwide limited-time offer of a second McPlant build, the McPlant Steakhouse, McDonald's just started a nationwide limited-time offer of a third McPlant build, the McPlant Tasty, which is inspired by McDonald's popular Big Tasty Burger. Also during the quarter, the limited time test in the Plant Burger in the San Francisco Bay and Dallas-Fort Worth areas concluded as planned. Turning to Yum!, we have launched or tested five Beyond innovations thus far. This year's Beyond Fried Chicken LTO at KFC nationwide and Beyond Italian Sausage Crumbles at Pizza Hut in Canada, which is now a permanent menu placement. Last year's Beyond Pepperoni test in the US and the permanent addition of Beyond Beef Crumbles and Beyond Pork Crumbles at Pizza Delivery in the UK. These ongoing tests are a natural progression of our partnership with our strategic QSR partners, take time as well as iteration across product attributes, pricing, and other considerations, and we are encouraged by the multiple introductions that we're seeing with both McDonald's and Yum! globally as we innovate together. Finally, we are thankful for consumers who continue to make Beyond Meat the number one brand in our retail category of refrigerated plant-based meats, according to SPINS data, and we are planning aggressive steps across the balance of the year to further engage the consumer in grocery. I've said many times that I believe the rise of plant-based meats to a prominent role in the global diet is inevitable. The benefits of such a transition include driven by the unique effectiveness of plant-based meats in addressing climate and conserving natural resources are powerful. As the Boston Consulting Group recently reported, the climate return for plant-based meats measured in terms of carbon equivalent emissions avoided per dollar invested is unrivaled, significantly besting climate returns per dollar invested in green technologies across a host of sectors, including transportation and electricity. In closing, it is our foundational belief that we can usher in the mainstream transition to plant-based meats by driving ever more intently toward products that are indistinguishable in taste from, are clearly understood by the consumer to deliver health benefits relative to, and are at price parity or below that of their animal protein equivalents. We are focused intently on increasing efficiency in operations and production while driving execution of our highest value growth initiatives across North America, the EU, and China, and we confidently expect to emerge from today's economic conditions leaner, stronger, and very well poised to deliver on the promise of our brand. With that, I will turn it over to Phil to walk us through our second quarter financial results in greater detail and our outlook for the full year 2022.