Beyond Meat, Inc.

Good afternoon and welcome to the Beyond Meat first quarter 2025 conference call. All participants are in a 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 star then one on a 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 Shepherd, Vice President, FP&A, and Investor Relations. Please go ahead, sir.

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 of and Luby Couture, Chief Financial Officer and Treasurer. By now, everyone should have access to our first quarter 2025 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 that differ materially from those described in these forward-looking statements. Forward-looking statements in our earnings release, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. We refer you to today's press release, our quarterly report on Form 10-Q for the quarter ended March 29, 2025, to be filed with the SEC, and our annual report on Form 10-K for the fiscal year ended December 31, 2024, along with other filings with the SEC, for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management may reference adjusted EBITDA, adjusted loss from 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 measures. And with that, I would now like to turn the call over to Ethan Brown.

Thank you, Paul, and good afternoon, everyone. The first quarter of 2025 was clearly a disappointing one for us in a deviation from the previous two quarters in which we drove year-over-year revenue and gross margin growth. significantly reduced operating expenses, and achieved large improvements in net income and adjusted EBITDA. In Q1 2025, we experienced worsening category and macroeconomic conditions that impacted our top-line recovery and reverberated throughout our P&L. Before going through what I believe is a very strong response to this interruption in our recovery, I'll provide some color around our results, including calling out at a high level some extraordinary and more transient drags on our performance. First, as we discussed in our previous earnings call, certain large retail customers in the United States elected to transition plant-based meat from the refrigerated to the frozen aisle within their stores. In more than one retailer, this transition led to an interruption in availability of some of our core products throughout Q1 2025. As category and macroeconomic headwinds more generally slowed velocities toward the latter half of the quarter, it became harder to overcome the volume implications of these distribution gaps. Looking forward across the balance of the year, however, we expect to build back much, though not all, of this and other loss distribution. These gains provide the opportunity, all things being equal, for better retail performance in subsequent quarters. Moving from net revenues to gross margin, as I've shared previously, we've been consolidating our production network for a variety of reasons, including the right sizing of our manufacturing footprint to current revenues. Through these measures and the commencement of increased internal production at our DeVault, Pennsylvania facility, we expect to see strong year-over-year improvements in our production efficiency and costs. Our Q1 results do not yet reflect these improvements for four primary reasons. One, lower than anticipated sales volumes led to lower levels of overhead absorption. Two, the change in product mix, in part reflecting the interruption in retail distribution of certain core items, and a larger percentage of sales coming from products with higher direct labor and utilities, increased the baseline cost of goods produced. Three, we saw some delays and lower than planned line throughput as we scaled new capacity in our DeVault Pennsylvania facility. These startup factors led to extended production, overtime, and more changeovers than would be typical. Fourth, we recorded a particularly large inventory provision this quarter, as we sought to dispose of certain inventories for strategic reasons. This inclusion in our COGS, which is a non-cash impact, created a strong negative drag on margin for the quarter, but should benefit a real inventory carrying cost going forward. Moving now to margin, In the absence of further worsening category and macroeconomic trends, we expect overall volume as well as the volume of our core products to improve as we gain back retail distribution and benefit from seasonality, putting us in a better position to actually realize the planned benefits of a more efficient and appropriately sized production footprint. Turning to our operating expenses, I want to commend the team on managing tighter budgets even as we need to be more aggressive a subject I will touch upon in a moment. Though our total operating expenses came in at $55.1 million, which still represents a $2 million year-over-year reduction, it's important to distinguish between ongoing OPEX and extraordinary or transient expenses, which for the quarter totaled $7 million. These non-routine charges include legal arbitration expenses relating to a previously disclosed contractual dispute with a former co-manufacturer additional incremental non-cast charges arising from decisions to increase inventory provisions for certain items, and expenses related to the suspension or operational activities in China. In addition to these aforementioned charges, I would also note that our OPEX and Q1 include severance payments related to our February reduction in force. By setting aside these more transient costs, one can more clearly see evidence of progress with respect to our baseline operating expenses. Though this additional color provides greater visibility beyond the aggregate results, what is more important is what we're going to do to get back on track. We take this deviation from a recovery extremely seriously and we're using it as an opportunity to strengthen our organization. Whatever our top line turns out to be in this current environment of uncertainty, our overarching goal remains the same. EBITDA positive on a run rate basis by year end 2026. To ensure that we achieve it, we are focusing additional internal and external resources on further driving our operational expenses down while optimizing our portfolio and manufacturing toward margin objectives. We will also continue and deepen our efforts to recast our value proposition with consumers through the development, sale, and marketing of clean and simple plant-based proteins that taste great and support health and wellness goals. I'll now turn to the second part of our recovery. To be exceedingly clear, while Beyond Meat can always and will always seek to improve our products, we believe the central issue impeding our return to sustained growth is perception, or more accurately, misperception. According to a recent trend report, the consumer's interest in protein is only growing, with 61% of surveyed consumers reporting increasing their protein intake in 2024 up from 48% in 2019. Beyond Meat is, of course, a protein product, which, depending on the specific offerings, enjoys certifications from the American Heart Association, the American Diabetes Association, and the Clean Label Project, among other organizations. Convenient products such as Beyond Steak deliver high levels of protein using simple and recognizable ingredients made through a process that is clean and efficient and absent cholesterol, drugs such as antibiotics and hormones, and of course, lacking the threat of zoonotic diseases. We should be a central part of satisfying consumer interest for protein, yet for reasons I will touch on momentarily, we need to reestablish ourselves within their decision set. Regarding taste, we regularly see our products earn positive media and consumer reviews, including our flagship product, the Beyond Burger, which recently won its seventh first place position in seven years, In the largest survey of its kind, one answered by millions of consumers. I find this win to be important given that in Beyond Four, the fourth and current iteration of the Beyond Burger, we drove significant nutritional gains, yet clearly still satisfy consumers' taste buds. We will continue to hit on these themes of taste and health and simple and clean ingredients as we expand our portfolio. For example, after years of research and development, last week we announced the arrival of Beyond Chicken Pieces nationwide at Kroger. Though this product has its roots dating back to Beyond Meat's beginning 16 years ago, over the last several years we put considerable effort into Beyond Chicken Pieces' taste, texture, ingredients, and nutrition before reintroducing it. With a simple and clean ingredient deck, including avocado oil, and 21 grams of protein, the product is versatile, convenient, and one of my personal favorites. This reality of accolades, press, and clean and simple plant protein products notwithstanding, in the main, Beyond's value proposition remains obscured in doubt and misinformation. If we look inward, our highest priority is driving operating and margin improvements. Externally, our highest priority is on dispelling misinformation and empowering the consumer to make informed decisions around our products. To this end, I would encourage you to watch a short film we put together that is gaining traction on YouTube called Planting Change. Planting Change, which is just shy of 10 minutes and which has over 2 million views in its short time online, explores the origin of misinformation regarding our products, gives a glimpse of the relentless research on health and nutrition, discusses the process we use to deliver protein from the field to the center of the plate, and features some of our farmers talking about what growing for Beyond means for their livelihood, for their families, and for their communities. Looking forward, we are fast planting change with the launch of our latest marketing campaign, Real People, Real Results. Real People, Real Results is a social first 30-day challenge that follows six people of various ages and backgrounds as they shift to a healthy plant-based diet that includes Beyond Meat. The program was designed by Dr. Matthew Lederman, co-author of Forks Over Knives Plan and the Whole Foods Diet, along with Dr. Aluna Pulde. And in just 30 days, participants saw real positive changes to their health while enjoying a plant-based diet that included delicious meals with the Beyond Burger, Beyond Beef and Beyond Steak, among other Beyond products. From lower total cholesterol, lower LDL cholesterol, to weight loss, better sleep, higher energy levels, and lower information, Real People, Real Result participants reported exciting benefits of a plant-based diet that includes our products. The social campaign launched on Instagram and Facebook, TikTok and YouTube, and we are amplifying it digitally. across Connected TV, Google Performance Max, and Digital Out of Home in the coming weeks. For the next six weeks, a new participant video drops each week documenting their personal journey. More generally, stay tuned as we'll be announcing more under the Real People, Real Results campaign and its accompanying 30-day challenge program across the balance of the year. Finally, with respect to strengthening our balance sheet, as we announced today, We have successfully closed on a financing facility providing up to $100 million in new senior secured debt from Unprocessed Foods, LLC, a wholly owned subsidiary of Ahimsa Foundation, a nonprofit organization focused on advocating for plant-based diets. This facility provides us with an option for additional liquidity as we advance our strategic priorities and invest opportunistically in driving growth. We are pleased to welcome a new investor who deeply understands our industry and is mission aligned with our plant-based ethos. I'll now turn the call over to Lubbe.