Beyond Meat, Inc.

Welcome to the BeyondMeet 2024 first quarter conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Paul Shepard, Vice President, FP&A, and Investor Relations. Please go ahead.

Thank you. Hello, everyone, and thank you for your participation on today's call. Joining me are Ethan Brown, Founder, President, and Chief Executive Officer, and Luby Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to our first quarter 2024 earnings press release filed today after market close. This document is available in the investor relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all the information presented today is unaudited and that during the course of this call, management may make forward-looking statements within the meaning of the federal securities 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 our earnings release, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. We refer you to today's press release our quarterly report on Form 10Q for the quarter ended March 30th, 2024 to be filed with the SEC, and our annual report on Form 10K for the fiscal year ended December 31st, 2023, along with other filings for the SEC for a detailed discussion of the risks that could cause actual results that differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management may reference adjusted EBITDA, adjusted last-term operations, and adjusted net loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measure. And with that, I would now like to turn the call over to Ethan Brown. Thank you, Paul, and good afternoon, everyone.

I'll begin with a brief overview of our Q1 2024 performance, afterwards I'll provide updates on the five priorities I outlined on our previous earnings call and how we are building toward our goal of sustainable operations and return to growth. Total net revenue was above the top end of our $70 to $75 million guidance range at $75.6 million, an 18% decline from Q1 in the previous year. Gross margin was 4.9%, higher than each of the three previous quarters, but a reduction from 6.7% in Q1 2023. While we are pleased to return a positive gross profit and gross margin this to, among other factors, trade discounts running a bit higher than planned, transitional and startup costs related to bringing production in-house as we continue to consolidate our network, and incremental accelerated depreciation of certain fixed asset disposals. As this positive swing in margin occurred prior to the enactment of our price increases, the first trounce of which began rolling out last month, and prior to completion of our network consolidation work, as well as being impacted by the aforementioned We are optimistic regarding margin improvement across the balance of the year. Operating expenses in Q1 were $57.1 million, a $6.8 million reduction year-over-year. This operating expense total includes a $7.5 million accrual for a consumer class action settlement. This reduction in operating expense helped reduce our loss from operations to $53.5 million in Q1 24 compared to $57.7 million in the year-ago period. Adjusted loss from operations was $46 million, reflecting the exclusion of the $7.5 million accrual for the consumer class action settlement. We will continue to drive efficiencies throughout the organization in support of further operating expense reductions throughout 2024. Turning to our balance sheet and cash flow, inventory fell to 122.5 million, down by 7.8 million from Q4 2023, and down by almost 100 million from Q1 2023. And our cash consumption of 32.5 million Q1 2024 was down significantly from 49 million in the same period in 2023. I should note that while inventories fell, the first quarter does represent a period of inventory build as we prepare for higher demand during our peak selling quarters. This build, which included inventories for the Beyond Burger 4 and Beyond Beef 4 launch, meant that we parked more cash in finished goods inventory this quarter than we did in Q4 2023. Coming off of this first quarter of the year and looking across 2024, we will remain focused on driving further reductions in cash consumption. With that brief overview, I will now run more fully through the progress we're making against each of our five priorities for 2024, while Luby will follow in more detail on our overall financial performance in Q1 2024. First, getting leaner. The first quarter of 2024 provides a clear proof point that our operations continue to get leaner and more efficient. We realized a positive gross margin despite a lower revenue base by reducing operating expenses, inventory and cash consumption, relative to the same period in 2023. Our continued emphasis on leaning out our operations also entails tightening our focus with regard to product portfolio, markets, consumer targets, claims, and messaging, which leads me to our second priority, Beyond 4. In February, we unveiled Beyond Burger 4 and Beyond Beef 4, and across April, these products began rolling out in grocery stores nationwide, including Walmart and Kroger. Through this fourth-generation project, which we expect will be fully distributed by Memorial Day, we took a leap forward on a continuous improvement journey, that is, a rapid and relentless innovation program. As you will recall, we iterate our product lines across organoleptic properties in a framework referred to as FAAT for flavor, aroma, appearance, and texture, while driving improvements in nutrition, cost, and other considerations. In the Beyond4 platform, as discussed previously, we place considerable emphasis on unlocking further health gains. To this end, we work intensely with eating medical and nutrition experts as we build this next generation. Together with this network, our team, in my view, delivered a home run, an improved sensory experience with a nutritional build so impressive that it goes to market with a host of important validations. These include becoming the first plant-based meat brand to be recognized by the American Diabetes Association Evidence-Based Nutritional Guidelines for its Better Choices for Life program. Being featured in a collection of heart-healthy recipes certified by the American Heart Association's HeartCheck program, as well as an upcoming American Heart Association and Beyond Meat cookbook. as well as taste, simplicity, and transparency. And finally, becoming the first plant-based meat products to be clean label project certified. As has been the case with other disruptive innovations in history, innovations that are today commonplace everyday items, one of the biggest challenges our brand has faced is orchestrated misinformation regarding our product lines. As Beyond Burger 4 and Beyond Beef 4 approaches full distribution, We will launch our 2024 marketing program, which highlights their strongly validated helpfulness. Built with protein from yellow peas, red lentils, brown rice, and fava beans, together with heart-healthy avocado oil, Beyond Burger 4 and Beyond Beef 4 provides consumers with 21 grams of clean protein with only 2 grams of saturated fat per serving. As the Beyond 4 platform rolls out to more stores, we are pleased dieticians. I won't consume our time today with a lengthy review of what has been a very gratifying initial introduction, but will instead share perhaps one of my favorite headlines thus far. This from Good Housekeeping, which simply states, our registered dieticians can't stop talking about Beyond Meat's newest launch. This headline is particularly important to me as it represents our promise that we build plant-based meats that are not only delicious, but serve an important role in human health. This and other similar reviews are also where they're quantified as roughly 160 million Americans who have some type of cardiovascular disease, the 97 million Americans who are pre-diabetic, or the 38 million Americans who are diabetic, or the 25 million Americans who have high cholesterol. We believe, as do the nutritionists, institutions, and dieticians standing behind Beyond Four, that we offer consumers a delicious yet powerful choice that can help them and their loved ones live healthier lives. The aforementioned 2024 marketing campaign, which we are rolling out imminently, will bring this message to life across a variety of media throughout the summer rolling season and beyond. Moving on from products, I should note that we announced a newly renovated and expanded line of three different Beyond Crumbles, original, feisty, and Italian style. These tasty bite-sized crumbles go from frozen to finished in just a few minutes and provide a delicious and healthy protein option throughout the day. Beyond Crumbles have 12 grams of protein per serving, less than 1 gram of saturated fat, and no cholesterol. These are intended to join Beyond Steak and the Frozen Isle. And as with Beyond Steak, the Beyond Crumble lineup has been certified by the American Heart Association's Heart Check Program and the American Diabetes Association's Better Choices for Life Program. Moving forward, we expect to be introducing yet another delicious product set to this heart-healthy lineup later this year. I'll turn now to our third priority, implementing changes to our US trade and pricing programs beginning in Q2, which we believe will meaningfully impact gross margin. Our overarching goal is to restore margins to previous levels achieved in 2019 and 2020 over time. As we report, we've just passed through the second major tranche and majority of our pricing actions for the year. These measures reflect a series of tiered pricing and fresh product offerings, and the introduction of Beyond Four and its more premium ingredients, among other factors. Fourth, we are nearing completion old. Finally, fifth, we are investing in our European business and related strategic partners. We continue to make progress with our quick service restaurant business in Europe and the UK, even as the quarter's year-over-year numbers were impacted by the lapping of product loading and promotional activities in the year-ago period that did not repeat in Q1 2024, a consumption trend toward value items in a certain geography reflecting broader macroeconomic conditions. Additionally, in Q1, McDonald's expanded availability of the plant burger across the Baltic countries of Latvia, Lithuania, and Estonia. In Europe, more broadly, we launched Beyond Steak for food service in the Netherlands and at retail in Belgium, as well as expanded availability of the Beyond Burger at co-op stores across the UK. Further, we are excited that we will soon be expanding in the EU and other international markets. To conclude, we believe that 2024 is a pivotal year for change and progress for Beyond Meat. We began the year making solid strides along our 2024 strategy and, correspondingly, our path to sustainable operations and a return to growth. We believe that our determination to sharply reduce our operating expenses and cash use, consolidate our production network, implement pricing changes to help restore margins, and launch our most significant renovation to date, Beyond 4, for purposes of reinforcing as well as raising the bar on the health benefits of our plant-based meats amidst sustained misinformation campaigns are beginning to pay off. We expect to continue to harvest benefits from these actions across the balance of the year and beyond. These powerful measures and their early dividends, coupled with our initiative to bolster our balance sheet this year, infuse us with cautious optimism as we look forward. And with that, I'll turn the call over to Lubbe to walk us through our Q1 financial results in greater detail, as well as provide our outlook for 2024.