Earnings Call Transcript - BYND Q2 2024

Operator, Operator

Good afternoon, and welcome to the Beyond Meat 2024 Second Quarter Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Paul Sheppard, Vice President, FP&A, and Investor Relations. Please go ahead.

Paul Sheppard, Vice President, FP&A, and Investor Relations

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 Lubi Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to our second quarter 2024 earnings press release filed today after market close. This document is available in the Investor Relations section of Beyond Meat's website. 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 reports on Form 10-Q for the quarter ended June 29, 2024, to be filed with the SEC and our annual report on Form 10-K for the fiscal year ended December 31, 2023, 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.

Ethan Brown, CEO

Thank you, Paul, and good afternoon, everyone. I am pleased to report a strong quarter of progress against our 2024 plan, including exceeding our Q2 revenue objective, continued reduction in operating expenses and cash consumption, and our best quarterly gross margin since Q3 2021. Today, I'll provide more detail around this progress in the context of each of our five key objectives for 2024, including the launch of Beyond IV as a defining pillar for Beyond Meat's center-of-the-plate role in the global health and wellness trend. But first, a brief overview of our second quarter financial results. Net revenues of $93.2 million exceeded the top end of our $85 million to $90 million guidance range but still reflected an 8.8% decline from the year-ago period. As discussed on prior calls, during the second quarter 2024, we scaled back on promotional trade discounts and together with the initial appearance of price increases on certain products in the US, this resulted in a 6.1% increase in our net revenue per pound compared to the year-ago period, including a 20.5% increase in our US retail channel net revenue per pound. Gross margin rose to 14.7%, substantially higher than the 2.2% outcome in the same quarter last year and the 4.9% level achieved in the first quarter of this year. Importantly, we expect to see further gross margin progress across the balance of the year, reflecting the combined impact of more fully distributed pricing adjustments, continued moderation of promotional spending, and ongoing COGS improvements as we consolidate our network and continue on our lean management journey. Operating expenses in the second quarter fell to $47.6 million as we continued to pursue efficiencies throughout the organization, marking a $8.4 million reduction year-over-year, a $2 million reduction compared to the first quarter of this year after adjusting for the $7.5 million class-action settlement we disclosed last quarter. Lastly, our cash consumption fell to $15.5 million in the second quarter, a 67% and 52% reduction on a year-over-year, quarter-over-quarter basis respectively. We continue to aggressively manage cash use across the business and remain highly focused on working toward cash flow positive and ultimately profitable operations. With that, let me delve into our five priorities for 2024, including our clear and enhanced positioning around health, on the back of the Beyond IV launch. First, getting leaner. Q2 provides a very clear proof point that our operations are making progress toward getting leaner and more efficient. This quarter, compared with the year ago period, we realized $11.4 million more in gross profit despite lower revenue and $8.4 million less in operating expenses. Furthermore, inventory and cash consumption were both down on a year-over-year and sequential basis. Throughout the first half of 2024, we realized a reduction in operating expenses of $22.6 million, excluding the $7.5 million class action settlement accrued in Q1 2024. As reflected in our updated guidance, we are targeting a reduction in operating expenses in the remainder of 2024 compared to the equivalent period in 2023. In support of lean management implementation, continue to narrow our focus on specific products, markets, consumers, and messages. This brings us to our second priority, the Beyond IV rollout. We officially kicked off the launch and accompanying campaigns for Beyond IV during the week leading up to Memorial Day. An exciting moment for the company, one that marks the culmination of multi-year innovation for our core platforms of Beyond Burger, Beyond Beef, and Beyond Dinner Sausage. Beyond IV represents a clear manifestation of our company's product strategy. As I have often shared, despite compelling data on the health benefits of our products from peer-reviewed research such as the Stanford School of Medicine's SWAP-MEAT study, a sustained misinformation campaign championed by members of the incumbent animal protein industry, as well as the pharmaceutical industry, has substantially and negatively impacted consumer perception of our products and the plant-based meat industry as a whole. In response, we have intensified our innovation roadmap's emphasis on health. The team has made remarkable progress with regards to this objective, so much so that over the longer run, I believe it will be arguable whether Beyond Meat is, at its core, a plant-based meat company that delivers health and wellness or a health and wellness company that makes plant-based meat. The Beyond IV portfolio so successfully captures our health commitment that, as I previously noted, is worth repeating, our fourth generation Beyond Burger, Beyond Beef, and Beyond Dinner Sausage are recipe certified by the American Heart Association's Heart-Check program and are included in the American Diabetes Association's Better Choices for Life program. Reflecting the widespread corrosiveness of the false and misleading attack, I do not expect consumer perception to shift quickly and certainly not overnight. However, I do believe it will change and this change is being aided by the increasing number of highly credible doctors, registered dietitians, and nutritionists who are coming out in strong support of our Beyond IV products. This support stems from the Beyond IV portfolio's clean ingredients and nutritional profile. For those who are newer to our story, these attributes are worth highlighting. Beyond IV Burger and Beef products use protein sourced from yellow peas, brown rice, red lentils and fava beans, and fat from avocado oil to deliver 21 grams of clean protein with just 2 grams of saturated fat. By comparison, that's 75% less saturated fat than equivalently sized 80/20 beef burger. Turning to Beyond IV Dinner Sausage, we see a similar story with protein from yellow peas and brown rice, fat from avocado oil, delivering 75% less saturated fat than equivalently sized pork sausage. These strong nutritional gains are occurring within products that are also winning praise from consumers for improved taste. As I reflect on these outcomes, I'm immensely proud of and grateful for our team, from our truly tireless innovators to our adaptive production crews who routinely rise to the engineering challenges of a fast-moving company. Before moving on from our product strategy, I will briefly touch on the recent launch of an entirely new line, Beyond Sun Sausage. Beyond Sun Sausage is not intended to replicate beef, pork, or poultry, but rather is intended to be its own delicious, satisfying protein option, delivered in the context of nutritious and clean ingredients. The concept, which is receiving high praise from consumers and registered dietitians for taste and nutrition, and bears the emblem of the American Heart Association's Heart-Check Program, and the American Diabetes Association's Better Choices for Life program, is a confident step for Beyond Meat in the plant-based meat category outside of the confines of particular animal species, instead simply focusing on taste, mouthfeel, nutrition, and ingredients. The platform is built on the same protein blend from yellow peas, brown rice, red lentils, and fava beans mixed with avocado oil, delivering 12 grams of protein and only 1 gram of saturated fat and is offered in three delicious bold flavors, Cajun featuring diced red peppers and dried onions, Pineapple Jalapeno featuring dried pineapple and diced jalapenos, and Pesto featuring a blend of basil, oregano, and rosemary spices. I've watched consumer and nutrition community feedback with great interest and was pleased to read what is my favorite comment in quite some time. Short and to the point, I believe this consumer post sums up our brand, people, and culture in seven words, writing, you guys keep getting better and better. As we moved into summer grilling season with Memorial Day, we launched our Serve Love marketing campaign around our Beyond IV platform to heighten consumer awareness of the health benefits of Beyond IV products across a variety of media. We centered on Serve Love as this messaging communicates what we genuinely believe to be true, that serving Beyond IV products to family, friends, or yourself is an act of love due first and foremost the product's strong health credentials as well as attendant goodness for the world, whether that be climate, environment, or animal welfare. With our fourth generation Beyond Burger, Beyond Beef, and Beyond Dinner Sausage including a collection of heart-healthy recipes certified by the American Heart Association's Heart-Check Recipe Program and the product's relevance to cardiovascular health, the image for the campaign is two hands forming a heart shape around our burger. Further, as part of the campaign, we unveiled our first ever cookbook, Serve Love, collection of heart healthy Beyond Meat recipes certified by the American Heart Association's Heart-Check Program. The cookbook is available for free download via the Beyond Meat website, and helps to make nutritious plant-based meals more accessible to all. Now turning to our third priority, making progress to our US trade and pricing programs in support of improved gross margin. For Q2, net revenue per pound in the US retail channel is up 20.5% as compared to the year ago period and up 11.7% sequentially as compared to the first quarter of this year. The impact of pricing changes on the US foodservice channel net revenue per pound was more muted as we saw some higher trade expenses related to some of our larger customers in this channel. Nevertheless, we expect our US pricing actions to provide a tailwind to our net revenues per pound in both channels through the balance of the year. Looking now at cost of goods sold and gross margin, we have substantially completed the consolidation of our production network, which is our fourth priority. This consolidation is enabling us to benefit from better asset utilization and inventory management, which we expect to continue freeing up working capital, aiding overhead absorption, and generating production and logistics efficiencies, while also providing for better management of logistics and quality control. We believe these pricing, trade, and ultimately COGS initiatives represent meaningful steps toward restoring gross margin. Fifth, we are maintaining our investment focus in Europe by serving our strategic customers in this important plant-based meat market. In May, McDonald's Germany kicked off its famous meals promotion with a campaign that featured two celebrity favorite meals built around the McPlant Burger and McPlant Nuggets. Elsewhere in Europe, we launched Beyond Steak, Beyond Smash, and Beyond Burger Jalapeno for foodservice in the Netherlands and Beyond Steak at retail in Belgium while expanding availability of the Beyond Burger at Co-op stores across the UK. We are also beginning our expansion into the significant plant-based meat refrigerated category in Germany, having successfully reformulated our products to achieve refrigerated shelf life requirements in that and other European markets. Before wrapping up, I want to call attention to the return of a true fan favorite. Beyond The Original Orange Chicken, which we partnered with Panda Express to provide to consumers in a series of LTOs over the past few years, was the number one most requested dish on Panda Express's social channels and became the subject of a petition signed by over 7,000 consumers. Listening to this demand from the consumer, beginning last month, Panda Express brought back Beyond The Original Orange Chicken across hundreds of participating locations across the country for another LTO. If you have the chance to stop by and try the dish, your taste buds will not be disappointed. As with each of our QSR customers, including McDonald's, Starbucks UK, Pizza Hut UK, and A&W Canada, we are grateful for our partnership with Panda Express. With that, I'll close by saying we are encouraged by many of the results we see this quarter, results that demonstrate clear progress against our 2024 plan and our longer-term goal of profitable operations. I look forward to taking your questions later. We'll now turn the call over to Lubi to walk us through our Q2 financial results in greater detail as well as update our outlook for 2024.

Lubi Kutua, CFO

Thank you, Ethan, and good afternoon everyone. I'll begin by reviewing our second quarter financial results before providing an update on our 2024 outlook. Net revenues decreased 8.8% to $93.2 million in the second quarter of 2024, compared to $102.1 million in the year-ago period. We were, however, pleased to see net revenues come in above our guidance range for the quarter, and we note that the rate of decline was much lower than the 18% year-on-year decline we saw in the first quarter of 2024. This decrease in net revenues for the second quarter was primarily driven by a 14% decrease in volume of products sold, partially offset by a 6.1% increase in net revenue per pound. The increase in net revenue per pound was primarily driven by lower trade discounts, pricing changes, and changes in product sales mix, partially offset by unfavorable changes in foreign currency exchange rates. Breaking this down by channel, our US retail channel net revenues decreased 7.5% to $44.9 million in the second quarter of 2024 compared to $48.5 million in the year-ago period. Volume of products sold decreased 23.2%, primarily reflecting ongoing demand softness in the plant-based meat category and the lapping of substantial promotional sales to a club channel customer in the year-ago period. However, we were pleased to see a 20.5% increase in net revenue per pound, primarily resulting from lower trade discounts, changes in product sales mix, and the early impact from recent pricing action. Regarding the latter, although it is still early days, we are encouraged by the initial read on consumer price elasticity, which appeared to be generally in line with our expectations. US foodservice channel net revenues decreased 18.9% to $10.3 million in the second quarter of 2024 compared to $12.8 million in the year-ago period. Volume of products sold decreased 20%, primarily reflecting ongoing demand softness in the plant-based meat category, as well as the impact from certain distribution losses. Volume losses in US foodservice were partially offset by a 1.4% increase in net revenue per pound, primarily resulting from pricing changes and changes in product sales mix partially offset by higher trade discounts. In part, these higher trade discounts represented some trade reconciliations and true-ups for larger customers in this channel. International retail channel net revenues decreased 12.1% to $17.6 million in the second quarter of 2024 compared to $20 million in the year-ago period, primarily due to a 6.9% decrease in net revenue per pound and a 5.5% decrease in volume of products sold. At a high level, the year-on-year decrease in international retail was largely driven by weakness in our EU chicken portfolio which is lapping its year-ago market launch and channel sell-in, unfavorable changes in foreign currency particularly with respect to the Canadian dollar, and softening category demand in some geographic regions. International foodservice channel net revenues decreased 2.5% to $20.4 million in the second quarter of 2024 compared to $20.9 million in the year-ago period, primarily due to a 1.4% decrease in volume of products sold and a 0.9% decrease in net revenue per pound. Overall, the year-over-year decrease was mainly driven by reduced sales to a large QSR customer where we were lapping the launch of an LTO in the year-ago period. Gross profit in the second quarter of 2024 was $13.7 million or gross margin of 14.7% compared to $2.3 million or gross margin of 2.2% in the year-ago period. This represented our best quarterly gross margin performance since the third quarter of 2021, and our lowest quarterly cost of goods sold per pound since the second quarter of 2021, suggesting that we are starting to see the financial benefits from some of the pricing, network consolidation, and other cost reduction initiatives we have been pursuing. This quarter, we saw some abatement of the transitional direct labor costs which began to impact us in the first quarter as we brought more production volume in-house and we are continuing to realize efficiency improvements as we accumulate internal production experience of our finished goods. Also, we are pursuing some rationalization of our US warehousing network, and it's been encouraging to see the realization of year-over-year savings in our transportation and warehousing expenses. At a high level, the decrease in cost of goods sold per pound primarily reflected lower inventory provision, lower manufacturing costs, including depreciation, and lower logistics costs per pound, partially offset by higher materials cost per pound. Operating expenses were $47.6 million in the second quarter of 2024 compared to $56 million in the year-ago period. The decrease in operating expenses was primarily due to reduced marketing expenses and lower non-production headcount expenses, partially offset by an increase in general and administrative expenses. The reduction of operating expenses, combined with the aforementioned improvement in gross profit, drove a $19.8 million year-on-year reduction in our operating loss, an achievement more notable when considering that net revenue was $9 million lower this quarter than in the year-ago period. Net loss was $34.5 million, or $0.53 per common share in the second quarter of 2024, compared to $53.5 million, or $0.83 per common share in the year-ago period. Adjusted EBITDA was a loss of $23 million, or minus 24.7% of net revenues in the second quarter of 2024 compared to an adjusted EBITDA loss of $40.8 million or 40% of net revenues in the year-ago period. Turning to our balance sheet and cash flow highlights. Our cash and cash equivalence balance, including restricted cash, was $158 million, and total outstanding debt was $1.1 billion as of quarter-end on June 29, 2024. Inventory fell to $119.5 million at the end of the second quarter, down by $3 million from Q1 of this year, and by $87.6 million from Q2 of last year. Net cash used in operating activities was $47.8 million in the six months ended June 29th, 2024, compared to $88.3 million in the year-ago period. Capital expenditures totaled $2.5 million in the six months ended June 29, 2024 compared to $7.1 million in the year-ago period. Finally, I'll conclude by commenting on our 2024 full-year outlook which we are updating as follows. Net revenues are now expected to be in the range of $320 million to $340 million. Gross margin is now expected to be in the mid-teens range. Operating expenses excluding the $7.5 million accrual related to the consumer class action settlement recognized in the first quarter of 2024, are expected to be in the range of $180 million to $190 million. And capital expenditures are expected to be in the range of $15 million to $20 million. And with that, I'll turn the call over to the operator to open it up for your questions.

Operator, Operator

The first question is from Ben Theurer with Barclays. Please go ahead.

Ben Theurer, Analyst

Good afternoon, Ethan, Lubi. Thanks for taking my question. So, Ethan, to begin with, maybe as it comes out to the rollout of Beyond 4.0, the platform, and then obviously the associated price increases you've been putting through, and we're seeing that already nicely as you've highlighted on a per-pound basis. Two things around this. One, can you update us on how much of your portfolio has seen this upgrade and the new pricing already and how much is still yet to come over the next couple of months and/or quarters? And then what has consumer perception maybe been just around the product and how is the feel associated with the price point, which obviously is a higher one than prior, that would be like kind of like my first general question, and I have a quick one for Lubi.

Ethan Brown, CEO

Sure, I’ll start by addressing the first question about the percentage of our portfolio that has been upgraded. So far, we have introduced the Beyond Burger, Beyond Beef, and Beyond Dinner Sausage, all featuring the new formula with updated proteins and fat systems. Additionally, we have the Sun Sausage, which contains even lower levels of saturated fat. We plan to continue evolving our portfolio in this direction, but these are the significant changes we’ve made so far. Regarding the price increase, we are generally satisfied, as Lubi mentioned, the elasticity met our expectations. A key point to note is the substantial reduction in promotional spending, which has positively impacted our margins, and we are pleased to see that the portfolio can maintain that. In terms of consumer reception, we have encouraging data. If we exclude the promotional activities, which can skew the year-over-year comparisons, and focus on the base data along with some of our larger accounts, we observe a strong sales velocity for Beyond IV items, particularly beef and burgers, where we have the most data. There is notable growth in significant national grocery chains and stabilization in others, which is encouraging given that we implemented a considerable price increase and reduced promotional activities. This suggests that the product is performing well and that our messaging is effective. Moreover, the feedback from both the medical community and nutrition professionals is very positive. It’s not just about the taste being acceptable; they recognize its health benefits, which reflects well on our research and development and operations teams. They’ve not only enhanced the nutritional profile of these already strong products but also improved their sensory qualities. We’re seeing this reflected in reactions on social media and media coverage. Overall, we’re very pleased with the launch's progress, recognizing it is still early days since we announced it just before Memorial Day. We continue to observe growth with the dinner sausage as well. So, overall, we are very happy with the direction things are going. Now, I'll turn it over to Lubi for the price increase details.

Lubi Kutua, CFO

Yeah, Ben, I think, did you have a second part of the question? Was it specific to the price increase?

Ben Theurer, Analyst

No, the price was actually covered by Ethan. I was wondering if you could provide some insights on your near-term outlook, particularly regarding the third quarter as we begin to face easier comparisons from last year. Is it fair to expect growth and continued margin expansion on a sequential basis, or how should we consider the third quarter in relation to the second quarter, which performed better than your initial expectations?

Lubi Kutua, CFO

Yes, certainly. As Ethan stated in his prepared remarks, we expect to see sequential improvement in our gross margins in the second half of the year, and our guidance supports this expectation. You're right that in recent quarters, we’ve offered some insights for the current quarter. We won’t be doing that for Q3 specifically, but it’s important to consider the seasonality of our business. Typically, we generate a larger portion of our revenues in the second and third quarters. So, when comparing Q3 to Q4, keep that in mind. Additionally, regarding operating expenses, our guidance indicates that we anticipate a lower rate of operating expenses in the second half of the year compared to the first half.

Adam Samuelson, Analyst

Yes, thank you. Good afternoon everyone.

Ethan Brown, CEO

Hey, Adam.

Adam Samuelson, Analyst

So I guess maybe first just thinking about kind of that tension between kind of the price increases and the clear desire to drive gross margins, but also kind of thinking about the unit cost reductions and kind of the ability to drive that on a lower volume base. Can you help us think about the improvement in gross margins in the second half and how much we should be thinking really is increment incremental price increases or the flow through of effectuated price increases and mix versus actual reductions in unit costs from here? I appreciate you're trying to simplify the business, but the volume base is also shrinking, so I'm trying to just balance those two figures. Thank you.

Lubi Kutua, CFO

Sure, I can take that.

Ethan Brown, CEO

I will take it from here. Looking at the timing of our price increases, we started implementing them in select retailers and products in April and expanded them a bit more in May. Therefore, we anticipate a more comprehensive rollout in the third and fourth quarters, which we expect will provide some uplift. Additionally, trade reduction will persist during the second half of the year, which should also contribute positively. However, I want to emphasize the considerable progress we are making in reducing the cost of goods, stemming from various areas. The internalization of our network is a significant factor, as it has reduced tolling fees and underutilization fees that have previously hindered the business. This change is also leading to substantial savings in logistics, as well as improved overhead utilization and absorption. We believe these elements will help lower our cost base across our products for the remainder of the year. Other factors contributing to this include lower inventory reserves and decreased depreciation due to a smaller asset base following last year's write-off. Collectively, these aspects present a positive outlook for our revenue, and we are making significant strides in cost reduction throughout the system. Lastly, on a more philosophical note, we are committed to lean management principles, which have allowed us to enhance efficiency by examining our value streams and the horizontal flow of value within our operations. Consequently, we are achieving cost savings and reductions in areas like materials through our transition to a lean management framework. Lubi, do you have anything to add?

Lubi Kutua, CFO

No, I think you've summarized it well, Ethan. What I would like to add is that in our second quarter results, we started to see some benefits from the recent price increases. As Ethan pointed out, as these price increases influence a larger portion of our overall business, we can expect more benefits. Our net revenue per pound in the US retail sector for Q2 increased by 20.5%. It's important to highlight that this increase was mostly due to a reduction in promotional spending compared to last year, rather than strictly from list price hikes, and there were also gains from mix. Therefore, the impact of pricing hasn’t fully materialized yet. We anticipate more benefits as we progress through the year. Additionally, Ethan mentioned that there are areas within cost of goods sold where we expect to see improvements. There were some temporary high labor costs while we were transitioning production in-house, and we expect that the improvement in gross margins in the second half will come from better pricing as well as enhancements in COGS.

Robert Moskow, Analyst

Hi, thanks. I had a question about how retailers in the US are viewing the plant-based category. I mean, you said yourself that the category still remains weak. But I was wondering, like, how are retailers responding to that? Are they reducing shelf space for the category and reaction? Or is it leading to a shakeout of the smaller players? And could you actually benefit from that as a result? Thanks.

Ethan Brown, CEO

Yeah, thanks, Rob. Appreciate it. So I think the answer is a little bit of both. Just to broaden our context, as I've said many times, we view this, although we thought initially we would escape it, we view this as just part of the process of disruption. There's going to be pushback, there's going to be a lull, there's going to be a shakeout, and that is obviously happening. My job is to strengthen our business throughout that and emerge stronger as a result and I think we're doing that. The retailers are responding to this in a number of different ways. Some are just staying the course, some are shifting products, placements between fresh and frozen, and others are executing pressure on some of the lower performing players. So in that sense, I think we do benefit as beyond and Impossible emerge as the two main players. So I think it's all of the above. But I also just want to caution, I continue to view this over a much longer lens. I think what you're seeing with the Beyond IV portfolio is the main thing that destabilized this category has been the misperception around health. Obviously, there have been some pricing issues and things of that nature, which in a recessionary or difficult economic environment are always more challenging. But we are hammering away at the single most important issue in our view that is required to get the entire category growing again. The early results we're seeing from Beyond IV suggest that we're on to the right strategy. And I have no doubt that as more and more consumers become educated, not only from us, but from nutritionists who are backing in, dieticians, doctors, national health organizations, et cetera, that it'll become, I wouldn't say it's a stubborn few, but it'll become fewer and fewer people that are misled around the tremendous benefits they can bring to themselves and to their families by changing out the protein that's kind of in the plate and using the odd to improve their health. So the ability of our team to create products that not only deliver on taste but really deliver on this health message, I think, can't be overstated. Over time, we'll continue to address price and in some regards if you look at certain products with certain customers in certain regions, we have already achieved an element of price parity. But that right now is not the most important factor to consider. It really is around cleaning the well a bit and making sure that the consumers understand the power of these products to impact the health of their lives and their loved ones.

Ken Goldman, Analyst

Hi, thank you. Ethan, there's a lot of helpful conversation on this call about nutrition and the continued battle against misinformation, and I do appreciate that. I wanted to ask a little bit about how confident you are that the products taste and texture, whichever product you want to talk about, the burger, the sausage, whatever, is where you want it to be, because when I talk to investors and I talk to friends and family about the product and obviously it's a small sample size, I don't want to extrapolate too much, it's still about the taste, where people say, look, I know a hamburger isn't good for me, but I like eating it more than a Beyond Burger, more than your competitor's burgers. The taste isn't quite there, and the texture isn't quite there where they say, I really want to eat this. And food is still about what people want to eat more than what they have. I've asked this question before on the call, I know. So, I just wanted to get a sense of an update of kind of where you are in that, in the stage of the product. Thank you.

Ethan Brown, CEO

Thank you for the question, Ken. We would only launch a product if we believed it would enhance the sensory experience. The transition to this protein blend addressed some of the off flavors, and incorporating avocado significantly improved the flavor and health aspects. We have seen a favorable consumer response, although there will always be some criticism from those who preferred the old formula. Overall, feedback has been positive, and our pre-launch tests showed an improvement in taste. We don't need universal approval; we just need enough people to appreciate it. There's a large market out there, and while not everyone follows the best practices, many are health-conscious and enjoy the taste and health benefits of our product. If faced with a choice between taste and health, I would prioritize health, as there is a misunderstanding about it. Many consumers enjoy the taste of the Beyond Burger, especially with our latest offerings. It's crucial to communicate the significant health benefits it can bring. We know that the typical American diet can lead to health issues, and a dietary shift with Beyond at the center can facilitate a healthier lifestyle. That’s the message I want to convey.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Ethan Brown for any closing remarks.

Ethan Brown, CEO

Thanks, guys. I'll be very brief. I just wanted to emphasize net revenue came in quite a bit higher than we were expecting. Margin is the best it's been since 2021. Cash is way down. Operating expenses are also down. Consolidation networking needs to go really well, continue to implement lean and drive cost out of the business. We're doing this while we're addressing what I think is the main issue around the category is restoring the health halo. Doing that not only on our own marketing but also in association with a lot of very influential organizations and leaders in the health and wellness community. So a lot of really positive stuff going on and a pivotal year for us. I look forward to reporting the balance of the year and sharing with you guys how this strategy continues to unfold. But I appreciate the interest and look back soon.

Operator, Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.