Beyond Meat, Inc.

Thank you, everyone, and welcome to the Beyond Meat, Inc. 2025 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask a question during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. Please note today's call will be recorded, and we will be standing by if you should need any assistance. It is now my pleasure to turn today's conference over to Paul Shepard, Vice President of FP&A and Investor Relations.

Thank you. Hello, everyone, and thank you for your participation in today's call. Joining me are Ethan Brown, Founder, President, and Chief Executive Officer, and Luby Kutur, Chief Financial Officer and Treasurer. By now, everyone should have access to our second quarter 2025 earnings press release filed today after market close. This document is available in the investor relations section of BeyondMeet's website at www.beyondmeet.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 10-Q for the quarter ended June 28, 2025, to be filed with the SEC, and our annual report on Form 10-K, for the fiscal year ended December 31st, 2024, along with other filings for 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 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. We are disappointed with our second quarter results, which reflect ongoing softness in the plant-based meat category, particularly the U.S. retail channel and certain international food service segments. Before diving into details on the quarter, this level of disruption to a recovery requires broader commentary. Though we saw a return to top-line growth in the back half of 2024, the first two quarters of this year indicate the need for a fundamental reset for our brand and category. To stabilize our business and with a goal to achieve EBITDA-positive operations within the second half of 2026, and to realize our much longer-term objective of reshaping global protein markets in support of a healthier and more sustainable future, we are taking significant and immediate actions. Many of these, which I enumerate below, you will recognize as an acceleration of existing priorities. One, we are welcoming John Bocan of Alex Partners as Interim Chief Transformation Officer to lead and support our enterprise-wide transformation activities with a focus on operating expense reduction, gross margin expansion, and broader operational efficiency. Two, we are intensifying expense reduction globally to fit our operating base into the existing near-term opportunity. These measures include a reduction in force that we perform today. Before proceeding, I want to thank each of the impacted teammates and acknowledge their tremendous contributions to our company, mission, and consumers. It is truly with heavy heart that we made these reductions, and my deep appreciation and respect for these teammates and friends extends far beyond any comments I can make today. Three, we are deepening each of our gross market expansion activities, including continuing to optimize our portfolio by exiting certain product lines and reconfiguring others, making additional investments in our facilities around core production lines and select others where we see opportunities to significantly reduce costs, working within our supply chain to reduce raw ingredient prices and logistic costs, and further fitting our production operations into current demand levels so as to realize gross margin recovery even under lower volumes. Four, we are actively pursuing expanded distribution of our core products and expect to bring on new U.S. retail distribution, including in the balance of this year. Five, going forward, we intend to increasingly use BEYOND as the primary brand and admirer. We have been formally using the shortened mark in certain instances for some time now and believe it provides for reduced emphasis on facsimile, a now complicated frame that overshadows the real, high-quality protein offerings we provide to consumers, and a widening of our aperture beyond animal protein replicates so that we have the freedom to, as and when appropriate to do so, meet broader consumer protein needs. Our limited test offering of Beyond Ground on our social channels last week represents an early foray beyond beef, pork, and poultry replications and has been met with considerable enthusiasm, albeit with a very narrow consumer set. In the coming months, we will provide additional details on our increased use of the brand mark beyond, which we implemented on a rolling basis. Six, we are continuing to intently focus on strengthening our balance sheet to address our 2027 convertible note maturity. With this high-level context, a clear and comprehensive action plan in place, including a specially appointed interim chief transformation officer, deeper operating expense reduction, increased focus on gross margin expansion across our core product lines, the implementation of new U.S. retail distribution for core product lines, the kickoff of a rolling brand repositioning, and continued heightened focus on strengthening our balance sheet, I'll now turn to select details from our second quarter of 2025. Net revenue for the quarter came in at $75 million, well below our expectations and down 20% versus the year-ago period, a far cry from the recovery and renewed year-over-year growth we experienced in the second half of last year. The U.S. retail channel represented a large share of the shortfall relative to expectations. I believe at least several factors are afoot. One, broadly, we remain a higher-priced product than the animal protein equivalent. a feature that is particularly detrimental in a prolonged environment of tepid consumer spending. Two, it is clear that the negative narrative surrounding our category and brand is sufficiently ingrained to outlast initial efforts to dispel misinformation. Three, animal meats are, in the true cyclical fashion of consumer trends, having a moment that currently leaves less room for our products and brand. With this macro context setting the stage, More specifically, we saw delays in anticipated new distribution and major promotions at certain large retailers throughout Q2 2025. Further, and related, we continue to experience the impact of dislocations arising from the move of our and other plant-based meat products that many retailers refrigerated to the frozen aisle, negatively affecting our U.S. retail performance this quarter. Certain delays in new U.S. retail distribution meant that these aforementioned gaps played a larger role in our Q2 performance than anticipated. It is important to note that in stores where we have been able to maintain a consistent, consolidated brand presence, we tend to see more incurred in velocity. This point is an important one to consider as we contemplate broader stabilization across U.S. retail. Recall that this has been an enormously disruptive period for our category and brand across U.S. grocery, with instability being the consistent theme for quite some time, from multiple entrants flooding the market only to be delisted, to a general shrinking of shelf space, to a disruptive relocation of the category from refrigerated to frozen aisle in certain large retailers. As we seek to rebuild our presence across this critically important channel, We are prioritizing consolidated offerings at high-impact chains so we might drive results that are similar to some of our higher-performing current retailers. Turning now to International Food Service, we lapped significant promotional activity in the year-ago period and saw some pauses and discontinuation of our burger products in certain markets. These changes impact the level and mix of product volume, which in turn has implications for net revenue per pound and gross margin. We expect these and related impacts to continue to exert pressure in terms of year-over-year performance on our international food service channel for foreseeable quarters. Moving down the income statement, as one would expect, a 20% reduction in top-line revenue exerts negative pressure on gross margin given the reduced volume slowing through our facilities and the impact this has on fixed cost absorption and COGS. This outcome was certainly the case in the second quarter of 2025. and was further exacerbated by aforementioned and broader unfavorable product mix as we saw a higher percentage of sales from certain lower margin products. These factors, coupled with higher trade spent compared to the same year-ago period and an accelerated depreciation charge equal to approximately 2.2 percentage points resulting from the suspension and substantial cessation of our China operations in the quarter, obscured what is otherwise solid improvement on apples-to-apples production costs, a reflection of the vigorous nature of our ongoing manufacturing cost reduction initiatives. Overall, reflecting these factors, gross margin came in at 11.5% in the quarter, down 14.7% a year ago.