Thank you. Good afternoon and welcome.

Joining me on today's call are Ethan Brown, Founder President and Chief Executive Officer and Lubi Kutua, Chief Financial Officer and Treasurer. By now everyone should have access to the company's second quarter 2023 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 on today's call 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 today's 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, the company's annual report on Form 10-K for the fiscal year ended December 31, 2022, the company's quarterly report on Form 10-Q for the quarter ended July 1, 2023, 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 reference 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 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 will begin with a summary of our Q2 results. Net revenues in the second quarter came in at $102.1 million, which was down 31% year-over-year and slightly lower than we had forecast.

This decline in net revenue is reflected deeper headwinds than we previously anticipated, combined with the cycling of one of our largest quarters ever, among other factors. The level of mix of our Q2 net revenues coupled with certain transitory items impacted our gross margin, which came in at 2.2%.

These outcomes obscure the very strong progress we're making in positioning the business for sustainable operations and growth. We reduced COGS per pound by 14% or $0.73 year-over-year, reduced operating expenses by 33% or $27.5 million year-over-year and slashed casts consumption down nearly 50% or $45.5 million year-over-year, reflecting a business that is making early strides in implementation journey.

Simply put, as we navigate what is proven to be a more prolonged crossover from early adoption to the mainstream than we anticipated, we are operating with increasing levels of efficiency. We're proceeding I should note as we continue to drive costs out of our organization and products alike.

Our updated and more cautious revenue outlook in the back half of the year will very likely delay our achievement of cash flow positive operations. Nevertheless, I want to stress that we will continue to aggressively internally manage the business toward the achievement of this objective.

The net result should be sharply reduced cash consumption for the balance of 2023 as we move with pace, to complete our cash flow positive milestone. I will now turn briefly to the three central pillars upon which we are driving the business to future sustainable growth.

With respect to the first pillar, that is the use of value streams across our beef, pork and poultry platforms to support operating cost, COGS reductions and margin expansion among other outcomes. We are still in the very early phase of our lean implementation journey.

However, the continued emphasis across the organization on the horizontal flow of value to customers is generating results. Some of the more visible outcomes include progress across COGS, operating expenses, and cash consumption.

With regard to the second pillar, the use of inventory reduction as a key lever towards achieving or cash flow positive objective, we continue to make solid progress and in Q2 reduced inventory by $15.2 million or nearly 7% sequentially. Year-to-date, we have reduced total inventory by nearly $30 million or roughly 12% bucking our historical trend, which typically sees a seasonal increase in inventory, first half of the year.

As we look to the balance of the year, we will continue to aggressively manage inventory levels with a goal of releasing incremental cash. Turning to our third pillar, which centers on near term opportunities to restore top-line growth, even as we nurture long term partnerships.

We are focused on five main levers. One, addressing the broader narrative around the category; two, continue to release new revenue innovations that bring us closer to our north star of being indistinguishable from animal protein; three, investing and resetting the retail fresh plant-based meat section; four implementing pricing learnings for the last 12 months; and five, supporting our largest strategic partners.

Though we recognize that there are broader economic headwinds at play, namely inflation and higher interest rates that are squeezing spending power of the consumer. We're also acutely aware that there's ambiguity and confusion around the health benefits of plant-based meats and that this is weighing on the categories growth.

As a brand and category, we have significantly more work to do to reach the consumer on the health benefits of Beyond Meat and plant-based meats respectively. There is a considerable gap between the strong health potentials of our products a broader counter narrative that is now afoot, and this gap appears to have widened.

In the two-year period 2020 to 2022, the percentage of U.S. consumers who believe that base meats are healthy, up from 50% to 38% according to the Food Marketing Institute, as was the case during the ascent of plant-based milk, this change in perception is not without encouragement from interest groups, who have succeeded in seeding doubt and fear around the ingredients and process used to create our and other plant-based meats.

Nor is it without contribution from well meaning, yet misguided comparisons of our products to kale salads, versus the animal-based meats they are intended to replace, it is in this latter framing that we belong and excel with clear nutritional advantages including no cholesterol, lower levels of saturated fats, the absence of antibiotics, hormones, and other veterinary drugs, the absence of carcinogenic compounds such as head of a sick again means the absence of precursors to TMAO a compound that researchers have associated with heart disease and certain cancers. We are attacking this misinformation, continuing to build a body of research, or work with Stanford School of Medicine, which as you will recall, showed important declines in LDL or bad cholesterol, and the aforementioned TMAO after only eight weeks of replacing animal meats, with Beyond Meat.

And through collaborations such as that with the American Cancer Society, where we are supporting broader studies on plant-based meats and related health outcomes. Our efforts also include third party engagement, such as the American Heart Association's first ever certification of a plant-based meat Beyond Steak, at a heart-healthy food, as well as work with registered dieticians and nutritionists for purposes of educating consumers about the strong health benefits of plant-based meats.

Last week, we launched a campaign long in the making, called There's Goodness Here that shares and celebrates the farming origin of our ingredients and describes our process for turning plants into plant-based meat. The first installment of the campaign features one of our following farmers and connects to consumers the fields where protein has grown, while explaining the clean and simple steps we use to build our plant-based meats.

As you can likely tell, we are proud of our process and ingredients and are confident that the more consumers know, the more they will see the goodness in what we do. Goodness for the Soil, due to the nitrogen fixing nature of lagoons it helps keep fields healthy and productive.

Goodness for the Farmer who can use less fertilizer as a result, witness for the Earth given the much lower greenhouse gas, water, land and energy footprint. And Goodness for the Consumer who can enjoy the dishes they love while reaping the health benefits of our plant-based meat.

In the area of innovation and renovation, a key part of the Beyond Meat rapid and relentless innovation program is to improve each of our pillars of beef, pork and poultry over time, so that one day they are indistinguishable from the animal protein counterparts. This is a goal that we share with consumers, with 53% of all consumers agreeing that plant-based protein products should taste indistinguishable from meat according to recent data from Intel.

The good news is that we continue to make strong strides in this direction, all against the static target. In Q2 alone, we released a series of important iterations within our core platforms of pork and beef.

One, we launched what we internally called sausage free, the refrigerated plant-based meat section, where Beyond Meat remains the number one selling brand according to Spends [ph], latest 12 weeks ending 7/16/23. We are pleased with and point to early feedback on a renovated dinner sausage product is evidence that despite current headwinds steadfastly march forward against our promise of enabling consumers to eat what you love, simultaneously having a positive impact on your health, on the climate, environment and animal welfare.

Earlier this summer, the tasting table posted a review that captures the results of our latest sausage renovation efforts which apparently went beyond the indistinguishable goalpost. The title of which reads, the revamped beyond bratwurst and hot Italian sausage are shockingly better than pork links.

We are pleased that is the number one selling plant-based inner sausage in retail according to SPINS data for the latest 12 week period ending 7/16/23 and have rolled this renovation out to food service as well. Two, we are providing consumers with a sneak peek of our latest beef formula in the form of a soft launch of Beyond Stack Burger at Kroger and select Albertsons as well as new seasons in Northern California.

Like our renovated dinner sausage, this newest iteration of our burger represents the latest in our flavor and texture advances is winning early praise. We further cook this taste and texture innovation to foodservice as the Beyond Smashable burger.

Lastly, even as the Beyond burger is the number one selling plant-based burger across retail according SPINS for the latest 12 week period ending 7/16/23, we are actively working on our next iteration the Beyond Burger 4, where we are incorporating certain elements of the Beyond Steak and Beyond Smashable Burger. Accordingly, we were watching consumer and customer reactions closely and are excited by early results.

In the frozen section, we continue to expand distribution and one of our new innovations Beyond steak, which is the number one selling new plant-based meats item at retail according to SPINS data for the 12-week period ended 7/16/23. Interestingly, recent data from a regional chain show that more than 50% of households bought Beyond Steak, were new to the plant-based meat category, and that two out of three households repurchase Beyond Steak, reinforcing that this is a product that is resonating with consumers.

With our newest renovations and distribution expansions and the balance of our product portfolio across retail, we are increasing our investment in store execution particularly in the U.S. In the turbulence of the last four years with a pandemic changing consumer behaviors high inflation, and the entrance and exit of competitive players in the plant-based meat section, they reset and re grounding, particularly in the refrigerated meat case, is overdue.

We recognize that the ones clearly demarcated plant-based sections of the fresh meat case can be in certain retailers far less defined today. In addition to working with retailers on this issue, we are doubling down on field resources to focus on shelf availability and presentation as we bring new innovations to market.

As you may recall, a little over four years ago, we set a goal that within five years, we will be able to produce and sell at a cost and price respectively that is at parity with animal protein for at least one product in one of three platforms of beef, pork and poultry. I'm pleased to share that we are indeed doing that now with a meaningful product in food service, and expect to be able to report more of the same over the next year.

Getting the last 12 months of pricing exercises, we've learned more about different elasticities across our product lines. These elasticities may support a more varied approach to pricing that will enable us to more aggressively restore margins even as we move toward price parity where it matters most.

We are pleased to see the continuation of the new plant nugget alongside the McPlant Burger in the German market, as well as the McPlant burger across the UK, Ireland, Austria, Netherlands, Portugal in the most recent introduction, Malta. As the McPlant platform takes hold, it is fun to see countries such as Austria build and promote unique McPlant Burger offerings such as Steakhouse Burger and McPlant Fresh, we believe the success of the McPlant platform in the EU speaks to consumer and government recognition that plant-based meats are a powerful tool in addressing climate and broader environmental concerns.

We are investing in team innovation and partnerships in the EU to be able to serve this growing trend. For closing out I want to emphasize how at Beyond Meat, we view the current category trough and how this perspective informs the strategy and tenor behind our response.

Like many innovative disruptions throughout history, what we initially thought was going to be a quicker pace the mainstream adoption has proven to be slower. In my comments today, I emphasize familiar points of focus for us as we navigate the chasm between early adopters and mainstream consumers, continuing to improve products toward our true north, amplify our health message to counter incumbent industry positioning and noise by educating the consumer and lastly collapsing the cost structure of our product lines to improve margins to where it matters most offer products at parity to animal protein.

Continue to pursue each of these levers are focusing on increasing operational efficiency, driving COGS reductions, and sharply limiting cash consumption along our path to cash flow positive operations. Though we believe equally in the force social goods behind our brand, human health, climate, natural resource conservation and animal welfare, one cannot help but notice the urgent intensification of climate dialogue across global leadership and societies.

With what may be the hottest period on record in the last 120,000 years, and the many well-covered heatwave, storms, fires and other extreme weather events across the planet this summer, the abstract notion of climate change is increasingly tangible to the everyday consumer. The greater use of plant-based meat is a powerful tool in our global response, particularly because it targets greenhouse gases, namely nitrous oxide and methane, that are not only highly potent, but also the removal of which can have a more immediate impact on slowing climate change due to their shorter residency and the atmosphere.

We believe the transition to a more plant-based food system is not only inevitable, but gaining urgency that despite current challenges of a nascent category and brand, we are highly confident that Beyond Meat is well positioned to play a leading role. With that, I'll turn it over to Lubi, our Chief Financial Officer and Treasurer, to walk us through second quarter financial results in greater detail, as well as update our outlook for 2023.

Thanks, Ethan. On the surface, Q2 was a disappointing quarter for us as net revenues and gross profits fell short of our expectations.

However, as I will discuss shortly, several factors are indicative of the continued progress we are making in improving the intrinsic operating performance of our business, giving us reason to be optimistic for the long-term. These factors include our underlying gross margin performance when adjusted for certain transitory impacts, our ongoing progress on cost containment and operating expense management, our fifth consecutive quarter of inventory reduction, and the steep reduction of our overall cash consumption year-over-year.

Although the operating environment within our sector is proving more challenging than previously anticipated, we believe the foundational work against which we are making good progress will better position our company to capitalize on the opportunity ahead of us. Let me now dive into our Q2 financial results in a bit more detail.

Beginning with net revenues, volume of products sold declined by 23.9% year-over-year, while net revenue per pound decreased 8.6% year-over-year, resulting in an overall net revenue decline of 30.5% compared to the prior year period. On an absolute basis, the decrease in volume of products sold was primarily driven by the decline in our U.S.

retail channel, and to a lesser extent a decline in U.S. food service.

In U.S. retail the decline in volume primarily reflected weaker than expected demand in the category cycling of significant jerky selling in the year ago period, and to a lesser extent the impact from competition.

U.S. Food Service was similarly impacted by weak overall demand, and a difficult year-over-year comparison, as Q2, 2022 was a particularly strong quarter for U.S.

Food Service, driven by restocking of that channel following its reopening post-COVID. With respect to pricing, the roughly 9% year-over-year decrease in net revenue per pound was primarily attributable to changes in product sales mix, and increased trade discounts, partially offset by reduced sales to discount channels, which suppressed price realization on certain items in the year ago period.

As it relates to product sales mix, relative underperformance of our core products, namely burgers, ground beef and dinner sausage generally has a negative impact on net price realization for our business. As for trade discounts, special promotional programs intended to attract new users to our category drove a meaningful increase year-over-year.

Although these programs showed initial promise they did not scale well at retail, and ultimately did not bring about the desired increase in new category users. We will be refocusing our promotional spending in view of these learnings from these programs.

Moving on to gross margin, our Q2 gross profit was $2.3 million or gross margin of 2.2% of net revenues. Although this represents over 6 points of margin improvement versus the year ago period, including the impact on depreciation expense from the change in our accounting estimate associated with the estimated useful lives of our large manufacturing equipment, it fell short of our previously stated expectation to drive sequential margin improvements throughout the year.

Gross profit and gross margin were positively impacted by lower materials costs, lower inventory reserves, and lower logistics costs per pound, partially offset by higher manufacturing costs excluding depreciation, and as I just discussed, lower net revenues per pound. Total COGS improved by $0.73 per pound year-over-year and we are pleased to see our cost down initiatives yielding savings on materials costs, and the reduction in logistics costs at tests to some of the early results from our network consolidation strategy.

Within manufacturing costs, overall success in reducing tolling fees on a year-over-year basis was partially offset by underutilization fees, which we view as transitory of approximately $800,000 driven by softer demand and some startup delays as we ramp up production lines within a new co-manufacturing site. And COGS in this quarter was negatively impacted by the flow through of higher cost inventory produced in the fourth quarter of last year, when we curtailed production volumes in response to weak demand, resulting in the capitalization of inventory bearing high labor and overhead cost.

Turning to operating expenses. We saw a year-over-year reduction of 33% from $83.5 million in the second quarter of 2022 to $56 million this quarter.

The main drivers of this were reduced nonproduction headcount expenses, primarily as a result of the reduction in force implemented in October 2022, lower legal and consulting fees, decreased production trial expenses, and lower outbound freight costs. This also represented a sequential quarterly reduction of 12%.

We are pleased with our team's continued diligence in keeping costs contained, reflecting early success in our ongoing adoption of lean management principles. Moving further down to the P&L.

In other expense income, we benefited from meaningfully lower realized and unrealized foreign currency losses, as well as higher net interest income year-over-year. In addition, loss from our unconsolidated joint venture TPP was lower year-on-year reflecting very limited economic activity in the JV this quarter, as we continue to transition our jerky business to Beyond Meat.

Overall net loss was therefore, $53.5 million in the second quarter of 2023 or net loss per common share of $0.83, compared to net loss of $97.1 million or $1.53 per common share in the year ago period. Adjusted EBITDA was a loss of $40.8 million, or negative 40% of net revenues in the second quarter of 2023, compared to an adjusted EBITDA loss of $68.8 million, or negative 46.8% of net revenues in the year-ago period.

Now turning to our balance sheet, our cash and cash equivalents balance, including current and non-current restricted cash was $225.9 million, and total debt outstanding was approximately $1.1 billion as of July 1, 2023. Inventory fell to $207.1 million, a reduction of $15.3 million compared to the previous quarter, demonstrating continued progress against our inventory drawdown initiatives.

As I mentioned, this represents our fifth consecutive quarter of inventory reduction, and we remain highly focused on driving further reductions in the balance of the year. Turning to cash flows, Net cash used in operating activities in the second quarter of 2023 was $46.2 million or a $24.3 million decrease compared to the year ago period.

Capital expenditures totaled $1.8 million in Q2 2023, compared to $20.4 million in the year ago period. And our total cash consumed in Q2 amounted to $47.7 million or 49% less than a year ago figure of $93.2 million.

Taken together, these improvements in COGS, operating expenses, inventory, drawdown and cash consumption demonstrate that we continue to make real strides in managing our business more efficiently. However, where we are experiencing greater than expected pressure is on a net revenue growth and its attendant implications for gross margin.

We attribute this at least in part to persistent weakness in the category that transcends Beyond Meat. But as Ethan discussed earlier, we continue to pursue several growth strategies to drive better outcomes on our top-line.

Let me now provide some commentary about our 2023 outlook. As Ethan mentioned, we do anticipate a return to modest year-on-year revenue growth in the second half of 2023, as we cycle notably week comparisons from a year ago, and as we expect to see continued expansion of newer products in the U.S.

distribution, growth and international markets, and continued progress with key strategic accounts internationally. However, greater than expected category headwinds, particularly in the U.S., is resulting in a more cautious outlook for the balance of the year.

And as such, we now expect net revenues for the full year to be in the range of $360 million to $380 million, representing a decrease of approximately 14% to 9% compared to 2022. Gross Margin is now expected to be in the mid to high-single digit range, reflecting both the Q2 outcome as well as the expected impact from reduced revenues.

Operating expenses are expected to be approximately $245 million or less, and capital expenditures are now expected to be in the range of $20 million to $25 million. Finally, with respect to the company's previously stated target of achieving cash flow positive operations within the second half of 2023, we now believe this objective is unlikely to be met in light of the current operating environment, which points to greater category headwinds than previously expected.

Nonetheless, we remain committed to significantly reducing our rate of cash consumption in the second half of the year as compared to the first half. And we will be prudently managing our cost base in the coming quarters to move towards our ultimate north star of cash flow positive operations.

With that, I'll conclude my remarks and turn the call back over to the operator to open it up for your questions. Thank you.

Yes, thank you. Good afternoon, everyone.

Hey, there.

Hi, so maybe it just talking about the updated sales outlook, and maybe specifically in U.S. retail, you alluded to some challenges in scaling, some of the trial and promotion activity in the U.S.

How should we think about that moving forward, and we think about the need to accelerate kind of volume kind of as a pathway to future growth? Where's the pivot from a marketing and product and distribution perspective that that's going to enable that?

Sure, no, thank you for the question. And I'll maybe start and then hand it over to Lubi for some additional detail.

But first and foremost, I want to stress some of the things that we covered in prepared remarks that despite bringing down the forecast somewhat for the balance of the year, we are very excited to be coming out of what we view as a trough in the category and resuming growth in the third and fourth quarter. So I don't want to lose sight of that.

You'll also see an improvement in gross margin, we believe in the third and fourth quarter, particularly as we move further away from higher cost products that we produced during earlier quarters, and can take advantage of some of the lean work we've been doing around cost down on COGS. You also see us continue to make really strong progress on reducing operating expenses down 32%, as I mentioned year-over-year, and then cash down about 50, near 50.

On top of that, you can indeed see an improvement in products, this is a core I think part of the answer that that I'm going to give you on to the how we are thinking about continued growth. First and foremost, if you look at whether it's a state product and all the reviews, it's getting in the fact it's the number one new plant-based meat product in the category, look at the recently renovated dinner sausage, where that also is the number one plant-based sausage in the category.

And then you look at our burgers continues to be the top selling plant-based burger. And we're shifting into both a new formula and texture that we're releasing in food service as the Smashburger we have released and just demoed and trialing and retail something called the Stack Burger, which capture some of those improvements.

So continuing to improve the products continue to operate the business much more efficiently. I think the last piece is attacking ahead on this ambiguity that exists around the health benefits of plant-based meat and particularly Beyond Meat, they are extremely strong and this is something that we've attacked through research and through partnerships, whether it's the American Cancer Society we're doing, or the certification from the American Heart Association, or on our stake, the work with Stanford School of Medicine, all the things I mentioned in my prepared remarks.

But we're now taking it a step further and going to be much more aggressive in our marketing around the goodness within our products. And I think if you were looking at some of our marketing recently, last week, we released, there's goodness here, which is a campaign focused on celebrating the ingredients we use the farmers who grow them, and the process that we use to turn the plant material into meat.

All these things are part of our health message and our health story. So as we look at this second half of the year, that efficiency that keeps continuing throughout the organization, the reduction in cost of our goods, and then the restoration of a message around the entire category.

We view those as key to the resumption of growth. We're also looking at some more tangible things as we offer this forecast but [indiscernible] both in the U.S.

and in Europe, and things of that nature.

Yeah, Adam. I would just add that, I think just given the some of the pressures that we've seen in the broader environment, we are, I think, navigating some challenges that are reducing the overall effectiveness of promotional spending.

And it's an impact that transcends the plant-based meat category. I think others more broadly, in the industry have reported sort of similar phenomenons going on in the areas that they play in.

And so in relation to your question and sort of how we're thinking about this, is we're definitely taking learnings from. We have some targeted promotional programs earlier this year, which were really intended to bring more consumers into the category.

But I think what we're seeing is, for various reasons, some of which Ethan mentioned in his prepared remarks, there are things that are putting a lot of pressure on our category in particular, some of which is related to messaging, which we're starting to I think, be a little bit more vocal about. If you look at our recent campaign that just came out, but certainly, we our goal is to be sharper in terms of how we deploy our promotional spending.

And so, we expect to see some benefits from that in the latter part of this year and as we move forward.

May just to add a little bit to that. I mean, I think that one of the key issues is if the category itself is facing some headwinds.

And so if we look at, if I kind of start on more broadly, and you look at the overall consumer, and some of the diminished outlook the consumer has around their own financial situation and then you look at what consumers are doing in the protein space, including animal protein, where they're trading down among proteins, and also buying less protein. But then you get to our category where we are high priced, and so not going to do particularly well in that environment.

But also, they'll have this kind of ambiguity around health. You can see how potentially pricing is going to be less impactful, given you're not bringing new people into the category, because of those macro conditions, and then some of the category headwinds.

So for us, it's really around restoring the category message and making sure the consumer understands that. And has a reason to come into the category.

At that point, we think some of the promotional activities will probably be more effective.

There was a lot there, a lot of color. I appreciate it.

I'll pass it on.

Sure.

Hey, guys, good afternoon. Just maybe a 1A and 1B on super quick modeling questions.

Just moving -- is there any differential we should think about in terms of the revenues between 3Q and 4Q cadence would be helpful. And then secondly, on the cash burn, it seems like you're saying it should improve in the third and fourth quarters has been running about $50 million a quarter over the past 12 months.

Just anything, you can help us dimension about how much improvement you'd expect there. Thanks very much, guys.

Yeah, just quickly on the cash flow, it's not that we're walking away from that in any way, shape or form. It's just with the top-line coming down somewhat, we wanted to caution that it was going to be unlikely within the timeframe we've specified.

That said, you should see a sharp reduction in consumption across the balance of the year. And certainly internally, it's easy to drive the business toward achieving that goal.

But would rather keep that as an internal goal and give a little more room externally on when we cross over to cash flow positive moving, yeah.

Yeah. So Peter, to your first question around the sort of cadence of revenues in the back half of the year, we're not providing specific guidance by quarter at this time.

However, if you look at historically, the third quarter being typically a little bit stronger than the fourth quarter, just from a seasonal demand perspective, I don't think there would be anything that would deviate significantly from that this year. And then just to your question around cash consumption, and how that evolves in the second half relative to the first half, I think there's, there's several things that we're looking at.

And first and foremost is, we have to deliver on our revenue projections for the balance of the year. And then, you know, in conjunction with that, we also have to deliver on our gross margin targets to ultimately generate gross profit dollars.

And then once we do that, it's about continuing to contain costs from an OpEx perspective. There are some opportunities that we're looking at from a CapEx perspective, where we can potentially defer some CapEx projects that we were anticipating would happen in the back half of this year.

There are things related to our inventory reduction efforts, which we're still very focused on. You put all of those things together, and we do expect that the overall level of cash consumption in the back half of this year will still be -- should be significantly lower than what we saw in the first half.

And so those are the primary things I think that that bridge that that gap.

Great, thank you.

Hi, thank you. I wanted to ask about your strategy for R&D spending.

It's down. But it's still 9% of your sales this quarter, which is meaningfully more than what we see from a typical packaged food company.

And I agree you're not a typical packaged food company. But you talk about the biggest issue facing the category being maybe a misperception of the health benefits.

You've had some recent launches. I hope it's not unfair to say the results are some good, some may be slightly disappointing.

Why not divert some of this R&D spend toward brand building toward category building. If you're -- if that's the biggest issue that you're facing, why not really maybe lean into that a little more.

Thanks, Ken. Appreciate the question.

And so I think the main response I have is that we are certainly emphasizing spend on the category narrative and also reaching out across companies to help us do this. There's a bunch of companies, obviously, in our category, all rising and falling with this narrative.

And so bringing together industry coalitions to address this is an important way to handle it. But we are looking at how do we reallocate funding toward marketing to clean up this messaging because it is just an education issue.

I mean the facts are there. The health benefits of our products are very strong.

We see that in the work we do, not only with universities, but in general, just seeing consumers and how their lives can change. So -- it's a very good question.

I won't comment specifically on how much we're going to allocate toward R&D versus this. But I think the emphasis in your question is the right one.

And then just quickly, how are you doing with meat eaters or flexitarians versus pure vegans lately. What are your data telling you about how the vegans are looking at your product or at your category compared to how they used to?

Are they being affected by the marketing as well?

I think to a lesser extent, I mean there are the folks that I mentioned that would be susceptible to some of the kind of more, let's say, I don't know, the foodies that would compare us to a salad or something of that nature. And we always resist that, right?

I mean our really, our point of relevance is the health benefits relative to animal protein, where those are extremely strong. So we continue to see the consuming family be a mix of basic flexitarians essentially.

And that's where we want to be. I think the main issue with the categories is not bringing in enough new consumers.

That's the number one issue. It's not necessarily the characteristics of the consumer.

It's that overall pie is not growing, and that's what we need to fix together, and we're working on the other companies.

Great. Thank you.

Hi, Ethan, hi Lubi. I was wondering as you start to look ahead to 2024 and beyond.

In your like long-term scenario planning, do you ever consider the possibility of that this business may be a $300 million business instead of $350 million plus or a $250 million business, shrinking into wind is always a tough strategy. But given what you're up against here in terms of consumer perception and what I'm sure are some very good core consumers who care about the environmental impact of what you're doing -- is that a possible strategy?

And would you consider rightsizing the company in that direction ever?

Yeah. I mean disagree pretty rigorously with that future.

If you look at where we're operating, if you look at some of the positive trends that we're seeing, including the fact that we're assuming growth quarter-over-quarter and been through, I think, what is the most difficult period for the business, but take care, for example, and look at our strategics over there. And the progress we're making now in Germany, we're selling both burgers and nuggets and doing so with high acceptance among consumers.

Just I think we've had another launch with McDonald's on Malta. You look at -- and I think I don't think I mentioned this in my prepared remarks, but interestingly enough, and I'll let McDonald's comment on their own outcomes, but a competitor shared that a very large global burger chain that one in five of their signature burgers in Germany is now plant-based.

And so if you look at whether it's those trends or universities or just overall consumption of animal protein in certain European countries, you can see a very, very strong trend in the right direction. Then you come to the U.S.

and while older people aren't necessarily wrapping their minds around these younger people are. And so if you look at how institutions are responding to that, for example, take some of the biggest food providers in the country, Aramark I think it was Aramark committed to increasing their plant-based menus to 50% by 2025.

I think Sodexo was something like 4% across more than 250 universities in the country. So the trend is really -- is here.

There's some distortion in it like many early disruptions. But sort of I mentioned many times at kind of the history is very much on the side of what we're trying to accomplish.

And so even if all of these other things don't get cleared up, which they will, around health, et cetera. You have a common crisis, which is now becoming more and more real for the consumer.

And there is really no way to get at that without fixing food. And so our job as a company is to continue to get much more efficient, continue to drive cost out of our products and be here.

So when folks are ready to make this transition on their terms, we sort of been doing that. But I do not see it going backwards in any shape or form in the direction you just noted.

Yeah, appreciate the clarity. Thank you.

Great. Thanks.

I wanted to ask about the overall category and really what you're seeing. It seems like you're finding some success in some of these international markets, yet your sales in the U.S.

continue to be under a significant amount of pressure. So maybe you can help us understand, are there any learnings that you can take from what you're seeing in international markets and apply them to the U.S.?

What's happening internationally that's not occurring in the U.S. to drive maybe the trend better?

Are the prices lower in international markets like Germany? Or what exactly is the difference that you're seeing better adoption there?

Thanks.

That's a great question. So the answer is this, and it's somewhat nuance, but it's the message and the reason the why is clear, right?

So in Europe, the OI is different than it is here in the United States, particular, right? So consumers are very concerned about climate and the environment in Europe.

Government is concerned that is too concerned about it. And they see for the reasons I mentioned in my prepared remarks, changing food as a key way to adopt and adapt in the time frame that we need to.

And again, this actually has to do with specific -- the nature of this sort of admissions coming from from different sources of greenhouse gas. And so in the case of animal protein in venturous oxide and methane, those are very potent emissions but also have a shorter residency in the atmosphere.

So clear them out, right, you can basically buy time and deal with the climate issue one of the most effective ways. So Europe understands that.

The consumer is getting that young people that are getting in Europe -- and here in the U.S., it's more driven by health, and there's been a decline in the health perception of our category. And so I think we noted there's a food research institute or something in that good marketing institute noted 50% of consumers in 2020 thought that plant-based needs were healthy and now that number is down at 38%.

That's a clear outcome of some competitive marketing we've done against us, and they've done a really good job at it. Done a very impressive job in changing the consumer perception.

We now have to do the heavy work as an industry to pick up. But that's the main difference, right?

There's a clear and compelling why in Europe there was clear in the billing it here that has got a road that's become eroded, and we need to basically reestablish that. That's what we're doing.

Can I just follow up on the number, the 50% going to 38% perception. Has that continued to decline in '23?

I'm not sure if you know. And what do you think it was going to take to kind of bend the curve there on that figure.

Yeah. I don't know second, but my guess is that it's going to start reversing.

And the reason that's going to start reversing is one I think it sort of plays its course. At some point, there's -- that people medical community and others start to push back and say, wait a minute, guys, this is going too far.

This is a very helpful tool to combat diabetes care to use cancer. That's why you see easily stand up to going to certify first day ever, right at the heart of the state works or the scamper work we're doing or the work we're doing about cancer side.

I mean at some point, right, you get -- you strip out the noise and you start to see some of the key proof points. I think there's some additional work is being done outside of our company and in the broader category that also helped that -- so I -- it could continue to worsen, but I got it.

I think you'll start to see a rebound.

Thank you.

Good afternoon, Ethan and Nubi thanks for call and so for clarification. I wanted to dig a little deeper into the food service in the U.S.

And it kind of feels like it was like that area where we expect a lot of growth with some of these announcements back in the past. Yum!, McDonald's and so on.

But it kind of feels like it's not taken off and sounds like a level of these mid-teens somewhere on a revenue basis. So it doesn't really feel like it's delivering.

Well, on the other side, the international piece has done significantly better on food service. So maybe following on some of these questions around consumer trends.

How do these food service channels, why is it so different that the performance of food service international versus food service U.S., that would be much appreciated.

Sure. I think it gets to the consumer again in each market.

So I think if we look at the EU, I think the consumer receptivity and readiness is there. And I think that our studio partners recognize that, and so that's where they're emphasizing.

But I don't think it's a binary issue, right? I think that it's a timing issue.

And my strong view is if you're in the U.S., you'll see a resumption of activity among QSRs. In fact, I think that's something that we feel comfortable about.

So it's very much part of the larger trends we just discussed. There's been a there was prolific growth and excitement around the category.

You go through that and you go through the kind of trough of what they say trough dissolution and then you come back up on the slope of enlightenment. And I think we're kind of in that area where we're coming back out of it.

I wanted to get through this quarter. I'm very glad it's over.

I'm very glad to be in this quarter and for the balance of the year because I do think you'll see some of that resumption of growth, not in any way what we had a few years ago. For the balance of the year, but modest growth, it shows we're coming out of this, and that's what I'm really looking forward to.

Okay. Thank you.

Thank you. Good afternoon.

I sort of want to ask almost the opposite of Ken Goldman's question. I think that the health discussion is interesting and the study numbers are certainly interesting, but at least in the U.S., consumers overwhelmingly say that their primary consideration is taste.

And even price and health benefits or health considerations are far behind. And so how can you continue to develop a better product?

I think that's in so many consumers' minds, kind of the centerpiece the 9%, obviously, in fairness to his point is a lot, but is -- can you give a sense of what may be ahead and how much more quickly product development could advance that might be the difference maker for at least a large percentage of U.S. consumers.

It's a great question. And then Ken's question is fair, and this is also -- I think it's the right balance you guys are trying to strike here and the 1 that we think about all time.

So I would refer to that tasting table review of the dinner sausage, where we've always said our north star is -- should be indistinguie. But I have heard this from others that the new sausage, what we call sausage 3, people enjoy that actually more than the animal protein equivalent.

And our efforts will usually get into the part. So I think we are making strong progress there.

I think if you look at the state product, and you hear that up, it's absolutely delicious. You have such high levels of protein and I think less than a gram or gram or so saturated that so many benefits to it, but anyway.

So all of those things matter when the consumer is willing to come in, right? But if there's a kind of cloud over the sector, right?

Those things matter less. And so price matters less and the improvements making taste nonetheless.

So our number one goal in this area is to lift that cloud and to educate the consumer about the health benefits of the products then I think things like taste will really start to matter again. You need to give the consumer taste is the most important thing to right?

But you need to give the consumer a motivation beyond that, because animal protein tastes good, too, right? So -- we have to deliver on taste and slightly more, but deliver on taste and other attributes.

And for the U.S. consumer, it's taste and health.

Okay, great. Thanks for the questions.

I'll just do a shameless plug for a new burger. You should go out and you should try in food service what is called the Beyond Meat Smashed burger or in retail sort of buying the Beyond Stack that has a new flavor formula and a new texture, which I think, again, got a review said something like early reminiscent something of that nature of animal burger.

So we keep making better not there yet. But again, let's clear on these other issues and that, that will be something that's really pleasing for consumers.

Yeah, go ahead.

Great. Thanks so much.

Just kind of a simple question. I mean it sounds like kind of back half U.S.

retail revenues are expected to grow a little bit. I'm assuming that's clearly volume-based kind of easier compares off of last year's back half.

But is there something unique that just kind of drives that volume because a lot of the conversation these days is what happens when you have student loan payments to kind of circle back a little bit and maybe the consumer is not so strong. And there's not a lot of companies have a lot of conviction in the strength of the consumer.

And you're saying the consumer is still a little tight. We have a premium product at the same time, yes, revenues are going to get better.

I don't know if that's just the kind of points of distribution or why you have that conviction?

Yeah. So it's a good question.

So it's a couple of things. One, it's again, the lower comps we have year-over-year.

Two, it's some increased distribution both in retail and in food service and globally. It's continued strength of our strategic partnerships, particularly in Europe, things of that nature.

So that's really what's driving it versus any sense that the consumer is going to automatically have a better outcome -- outlook coming of that nature. It's more of those tactical things that we know to be present.

Okay. Okay.

Fair enough. And then I guess kind of late in the queue here, but I'll circle back to Ken's question.

There's another question on R&D. I think it was labor, kind of R&D versus advertising and you talked about new Smash burger taste profile.

I just feel like maybe not as much as an analyst, but just a consumer that when you kind of change the taste profile, like should we also be expecting kind of investment community to like see new ads about that, like you walk into the store and it's going to show why it tastes better. Just something for a hook because I do feel like you are kind of on a rolling basis renovating the product, but maybe consumers don't know.

So that's all. Thanks.

Yeah, it's also a very good question. You should expect that.

I think we've been focused right now during a period when a lot of these flowed through on cleaning up this health narrative. So I think a lot of our marketing for the balance of the year is going to hit that theme.

But overall, my vision for this is that it would be very much like the release of any new product, three, four, five, six, seven generate excitement on each of those. So -- but I think right now, we have a broader category issue that we have to hammer home.

And once we can fix that, then we can spend those dollars in a more tactical one.

Fair enough. Thanks, Ethan.

Hey, good afternoon. Thanks for taking the questions.

I had two quick ones. The first, what are you seeing in terms of competitive dynamics across the category?

You mentioned your use of trade discounts in the quarter and as you're seeing the pressures on the category, are you seeing more competitive activity, competitive intensity pick up alongside that? Or how are you expecting that to evolve going forward?

That would be the first question. And the second question is just on the margin side.

there are a bunch of headwinds that you listed impacting the quarter, which of those do you see sticking around versus moderating through the rest of the year or within the high-level buckets as you mentioned, where you see the biggest opportunity for margin expansion. Thanks.

I'll start with the second one on margin. I mean I think 1 of the transitory issues that we don't expect to see again with a flow-through of some highly capitalized inventory last year.

And that was -- I think we did the right thing there where we were slowing production to help us run through inventory for the balance of 23%, but it cost us a little bit this quarter. We had some underutilization things and some other stuff that we don't expect to reoccur at the same level.

So we feel pretty good about the balance of the year, but finally some of this really good COGS were showing up. On the broader category and competitive dynamics.

I think that's only -- I mean there's two ways to look at it. One is, again, like let's get the category message right first, so we can welcome new people into the category again.

And I think doing a lot of continued discounting, whether it's us or a major competitor we're just trading among consumers. So it's less productive.

So I think it's really about restoring the overall category message. But the thing that has happened is there's been a tremendous kind of shake out in the category, which is to our benefit.

We're still standing. We feel very strong.

We feel our product is getting better, our cost starts getting lower. Our operations are getting more efficient.

Our strategic partnerships are moving forward. So we have a lot of confidence about our future even as we're seeing less competitors.

They have a good competitor, a hospital is a very good competitor, and they're doing a lot of good things, but that's good for the category. It's very good for the category.

So.

Great. Thank you very much.

No, we appreciate it, everyone sticking with us through the quarter. We knew this was going to be a tough comp and it didn't materialize exactly what we wanted to.

But I think the good news is we're through to a second half, which we hope will show return to growth and the first in what will be, I think, a good climb out of this and look forward to reporting that next quarter.