Welcome to the Beyond Meat 2024 First Quarter Conference Call. [Operator Instructions]. 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.

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 first quarter 2024 earnings press release filed today after market close. This document is available in the Investor Relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all the information presented today is unaudited and that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in our earnings release, along with the comments on this call, are made only as of today, and will not be updated as actual events unfold. We refer you to today's press release, our quarterly report on Form 10-Q for the quarter ended March 30, 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 through 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. I'll begin with a brief overview of our Q1 2024 performance, afterwards I'll provide updates on the 5 priorities I outlined on our previous earnings call and how we are building toward our goal of sustainable operations and return to growth. Total net revenue is above the top end of our $70 million to $75 million guidance range at $75.6 million, an 18% decline from Q1 in the previous year. Gross margin was 4.9% higher than each of the 3 previous quarters, but a reduction from 6.7% in Q1 2023. While we are pleased to return to positive gross profit or gross margin this quarter, this fell short of expectations due to, among other factors, trade discounts running a bit higher than planned, transitional and start-up costs related to bringing production in-house as we continue to consolidate our network, and incremental accelerated depreciation of certain fixed asset disposals. As this positive swing in margin occurred prior to the enactment of our price increases, the first tranche of which began rolling out last month, and prior to completion of our network consolidation work as well as being impacted by the aforementioned accelerated appreciation, we are optimistic regarding margin improvement across the balance of the year. Operating expenses in Q1 were $57.1 million, a $6.8 million reduction year-over-year. This operating expense total includes a $7.5 million accrual for consumer class action settlement, which without operating expenses would have been $49.6 million, a reduction of $14.3 million year-over-year. This reduction in operating expense helped reduce our loss from operations to $53.5 million in Q1 '24 compared to $57.7 million in the year ago period. Adjusted loss from operations was $46 million, reflecting the exclusion of the $7.5 million accrual for the consumer class action settlement. We will continue to drive efficiencies throughout the organization to support a further operating expense reductions throughout 2024. Turning to our balance sheet and cash flow. Inventory fell to $122.5 million, down by $7.8 million from Q4 2023 and down by almost $100 million from Q1 2023. And our cash consumption of $32.5 million in Q1 2024 was down significantly from $49 million in the same period in 2023. I should note that while inventories fell, the first quarter does represent a period of inventory build as we prepare for higher demand during our peak selling quarters. This build, which included inventories for the Beyond Burger IV and Beyond Beef IV launch meant that we parked more cash and finished goods inventory this quarter than we did in Q4 2023. Coming off of this first quarter of the year and looking across 2024, we remain focused on driving further reductions in cash consumption. With that brief overview, I will now run more fully through the progress we're making against each of our priorities for 2024, while Lubi will follow with more detail on our overall financial performance in Q1 2024. First, getting leaner. The first quarter of 2024 provides a clear proof point that our operations continue to get leaner and more efficient. We realized a positive gross margin despite a lower revenue base or reducing operating expenses, inventory and cash consumption relative to the same period in 2023. Our continued emphasis on leaning out our operations also entails tightening our focus with regard to product portfolio, markets, consumer targets, claims and messaging, which leads me to our second priority, Beyond IV. In February, we unveiled Beyond Burger IV and Beyond Beef IV and across April, these products began rolling out in grocery stores nationwide, including Walmart and Kroger. Through this fourth generation projects, which we expect to be fully distributed by Memorial Day, we took a leap forward on a continuous improvement journey, that is our rapid and relentless innovation program. As you'll recall, we iterate our product lines across monolectic properties in a framework referred to as FAAT for flavor, aroma, appearance and texture while driving improvements in nutrition, costs and other considerations. In the Beyond IV platform, as discussed previously, we placed considerable emphasis on unlocking further health gains. To this end, we work intensely with leading medical and nutrition experts as we build this next generation. Together with this network, our team, in my view, delivered a home run and improved sensory experience with a nutritional build, so impressive that it goes to market with a host of important validations. These include becoming the first plant-based meat brand to be recognized by the American Diabetes Association evidence-based nutritional guidelines for Better Choices for life program. Being featured in a collection of hard healthy recipes certified by the American Heart Association's Heart-Check program as well as an upcoming American Heart Association and Beyond Meat cookbook. Earning good housekeeping coveted, nutritionist, approved envelope, which assesses food products based on specific nutritional criteria as well as taste, simplicity and transparency. And finally, becoming the first plant-based meat products to be clean label project certified. As has been the case with other disruptive innovations in history, innovations that are today commonplace everyday items. One of the biggest challenges our brand has faced is orchestrated misinformation regarding our product lines. As Beyond Burger IV and Beyond Beef IV approaches full distribution, we will launch our 2024 marketing program, which highlights their strongly validated helpfulness, built with protein from yellow peas, red lentils, brown rice and fava beans, together with heart healthy avocado oil, Beyond Burger IV and Beyond Beef IV provides consumers with 21 grams of clean protein with only 2 grams of saturated fat per serving. As the Beyond IV platform rolls out to more stores, we are pleased with the positive though still anecdotal feedback is receiving from consumers as well as members of the health and wellness community, including nutritionists and dietitians. And won't consume our time today with a lengthy review of what has been a very gratifying initial introduction, but we'll instead share perhaps one of my favorite headlines thus far. This is from good housekeeping, which simply states: our registered dietitians can't stop talking about Beyond Meat's newest launch. This headline is particularly important to me as it represents our promise that we build plant-based meats that are not only delicious, but serve an important role in human health. This and other similar reviews are also important because they help create strong relevance for large swaths of consumers, whether quantified as roughly 160 million Americans who have some type of cardiovascular disease, with 97 million Americans were prediabetic or the 38 million Americans who are diabetic or the 25 million Americans who have high cholesterol. We believe as do the nutritionists, institutions and dietitians standing behind Beyond IV, that we offer consumers a delicious yet powerful choice that can help them and their loved ones with healthier lives. The aforementioned 2024 marketing campaign, which we are rolling out imminently, will bring this message to life across a variety of media throughout the summer rolling season and beyond. Moving on for products. I should note that we announced a newly renovated and expanded line of 3 different Beyond Crumbles, original, feisty and Italian style. These tasty bite size crumbles go from frozen to finish in just a few minutes and provide a delicious and healthy protein options throughout the day. Beyond Crumbles have 12 grams of protein per serving, less than 1 gram of saturated fat and no cholesterol. These are intended to join Beyond Steak in the frozen aisle and as with Beyond Steak, the Beyond Crumble lineup has been certified by the American Heart Association's Heart-Check program and the American Diabetes Association's Better Choices for Life program. Moving forward, we expect to be introducing yet another delicious product set to this heart healthy lineup later this year. I'll turn now to our third priority, implementing changes to our U.S. trade and pricing programs beginning in Q2 which we believe will meaningfully impact gross margin. Our overarching goal is to restore margins to previous levels achieved in 2019 and 2020 over time. As we report, we just passed through the second major tranche and majority of our pricing actions for the year. These measures reflect a series of tiered pricing changes following a thorough analysis regarding elasticities in our frozen and fresh product offerings and the introduction of Beyond IV and it's more premium ingredients, among other factors. Fourth, we are nearing completion of the difficult task of consolidating our production network. Lower decision regarding a degree of consolidation reflects myriad factors depending on the co-manufacturing partner. We expect this comprehensive action to substantially contribute to margin as we emphasize the current production and benefit from better asset utilization, overhead absorption, production and logistics efficiencies while also providing for better management of logistics and quality control. Finally, fifth, we are investing in our European business and related strategic partners. We continue to make progress with our quick service restaurant business in Europe and the U.K., even as the quarter's year-over-year numbers were impacted by the lapping of product load-in and promotional activities in the year ago period that did not repeat in Q1 2024, a consumption trend toward value items in a certain geography, reflecting broader macroeconomic conditions. Looking forward, just today, McDonald's Germany kicked off its famous meals promotional campaigns at all restaurants across Germany. The campaign features 2 celebrity favorite meals built around plant burgers, plant nuggets, exclusively. Additionally, in Q1, McDonald's expanded availability of the plant burger across the Baltic countries of Latvia, Lithuania and Estonia. In Europe, more broadly, we launched Beyond Steak for foodservice in the Netherlands and a retail in Belgium as well as expanded availability of the Beyond Burger at Co-op stores across the U.K. Further, we are excited that we will soon be expanding our presence of retail in Germany given our recent satisfaction of local shelf life requirements and see continued opportunity for further distribution expansion in the EU and other international markets. To conclude, we believe that 2024 is a pivotal year for change in progress for Beyond Meat. We began the year making solid strides along our 2024 strategy and correspondingly, our path to sustainable operations and a return to growth. We believe that our determination to sharply reduce our operating expenses and cash use, consolidate our production network, implement pricing changes to help restore margins and launch from most significant renovation to date Beyond IV for purposes of reinforcing as well as raising the bar on the health benefits of our plant-based needs amidst sustained misinformation campaigns are beginning to pay off. We expect to continue to harvest benefits from these actions across the balance of the year and beyond. These powerful measures and their early dividends, coupled with our initiative to bolster our balance sheet this year, infuse us with cautious optimism as we look forward. And with that, I'll turn the call over to Lubi to walk us through our Q1 financial results in greater detail as well as provide our outlook for 2024.

Thank you, Ethan, and good afternoon, everyone. I'll begin by reviewing our first quarter financial results before providing an update on our 2024 outlook. Net revenues decreased 18% to $75.6 million in the first quarter of 2024 compared to $92.2 million in the year ago period. The decrease in net revenues was driven by a 16.1% decrease in volume of products sold and to a lesser extent, a 2.3% decrease in net revenue per pound. Taking a closer look by channel, net revenues in our U.S. retail and foodservice channels decreased by 16% and 16.2%, respectively, primarily due to a decrease in volume of products sold and reflecting continued macroeconomic and category-specific headwinds. Net revenues in our international retail and foodservice channels decreased by 12% and 28.7%, respectively. Softness in our international retail channel mainly reflected the lapping of large initial pipeline orders in Europe for our chicken innovation launches from a year ago, as well as softer demand in the Canadian market for certain of our beef and pork items. The year-over-year decline in our international foodservice channel primarily reflected the lapping of strong sell-in of burger and chicken items to a large QSR customer in the year ago period as well as generally softer demand in the U.K. With regard to the U.K., recessionary pressures appear to be dampening demand, both in our retail and foodservice channels, although we believe this could be a transitory effect. It's also worth noting that while the EU and Canada remain our 2 largest markets in the international space by some margin, we do have presences in Mexico, Australia and certain parts of Asia among other regions where we did experience some idiosyncrasies that also impacted our first quarter results, albeit to a lesser extent. Turning to gross profit. Gross profit in the first quarter of 2024 was $3.7 million or gross margin of 4.9% compared to $6.2 million or gross margin of 6.7% in the year ago period. The year-over-year change in gross profit and gross margin reflected higher manufacturing costs, including depreciation, higher materials costs and reduced net revenue per pound, partially offset by lower inventory reserves and lower logistics cost per pound. Within manufacturing costs, although we realized solid benefits from our network consolidation efforts, we did also see transitional costs such as temporary labor and increased over time in our own facilities as we brought in substantially higher production volumes in a short period of time. However, we saw encouraging sequential trends within the quarter and expect our meaningful in-sourcing of production volume to pay dividends in terms of reduced costs and improve quality in the coming periods. Operating expenses were $57.1 million in the first quarter of 2024 compared to $63.9 million in the year ago period. The decrease in operating expenses was primarily due to reduced nonproduction head count expenses, lower marketing expenses and reduced selling expenses partially offset by an increase in general and administrative expenses. General and administrative expenses included a $7.5 million accrual for a consumer class action settlement associated with certain lawsuits that originated in 2022. Of the aforementioned settlement amounts and subject to court approvals, we anticipate making a cash payment of approximately $250,000 in 2024 and the remainder in 2025. Overall, loss from operations was $53.5 million in the first quarter of 2024 compared to $57.7 million in the year ago period. Adjusted loss from operations, which excludes the aforementioned class action settlement accrual was $46 million in the first quarter of 2024. Net loss was $54.4 million or $0.84 per common share in the first quarter of 2024 compared to a net loss of $59 million or $0.92 per common share in the year ago period. Adjusted net loss was $46.9 million or $0.72 per common share in the first quarter of 2024. Adjusted EBITDA was a loss of $32.9 million in the first quarter of 2024 compared to an adjusted EBITDA loss of $45.8 million in the year ago period. While we still have a lot of work to do, this represents our smallest adjusted EBITDA loss going back to the second quarter of 2021. Turning now to our balance sheet and cash flow highlights. Our cash and cash equivalents balance, including restricted cash, was $173.5 million, and total debt outstanding was $1.1 billion as of March 30, 2024. Net cash used in operating activities was $32.2 million in the quarter ended March 30, 2024, compared to $42.2 million in the year ago period. Capital expenditures totaled $1.2 million in the quarter ended March 30, 2024, compared to $5.3 million in the year ago period. Finally, I'll conclude my remarks by commenting on our 2024 full year outlook, which we are largely reaffirming as follows: net revenues are expected to be in the range of $350 million to $345 million for the full year; net revenues for the second quarter of 2024 expected to be in the range of $85 million to $90 million; gross margin is expected to be in the mid- to high teens range for the full year 2024 and is expected to be higher in the second half of the year relative to the first half; operating expenses, excluding the $7.5 million consumer class action settlement are expected to be in the range of $170 million to $190 million weighted slightly more towards the first half of the year; lastly, capital expenditures are expected to be in the range of $15 million to $25 million. And with that, I'll turn the call back over to the operator to open it up for your questions. Thank you.

[Operator Instructions]. Your first question comes from Alexia Howard with Bernstein.

So I guess my main question is around the confidence that you have in the sales outlook. It feels as though last quarter, the pricing was down quite a bit and the volumes improved. And this time, obviously, we've seen a big sequential increase on the pricing side, but the volumes have deteriorated. So as you look out, what gives you the confidence to be able to reiterate the full year guidance, what improves over the summer during grilling season and so on.

Thank you for the question. So I think we were rolling out towards the end of the first quarter, some of the most early shipments of the Beyond IV product. So those are hitting stores now, and we expect to be in full distribution by Memorial Day. And so a lot of the focus for us as a company has been on that reset. I've spoken about this many times. If you look at what has led to the deceleration of growth in the entire plant-based meat category. We believe it is a perception around the health benefits of the products, which were quite strong. If you think about 2020, for example, where survey results suggest that they were -- I think it was 50% or more of Americans felt that the plant-based meat was healthy for them, whereas in 2022, that number was down at 38%. And my strong belief is that it declined further in subsequent years. And so we wanted to tackle that directly and try to make our products as unassailable on the health side as they are on the climate and environment and animal welfare side of things. And so over this 3-year period of working with doctors, nutritionists and dietitians, we did that, in my view. And this product that is now reaching full distribution later this month, has been so well received by the not only medical community, but the nutrition and registered dietician community. That we have high confidence that it addresses the #1 issue in the category. And so if you think about the type of endorsements that I went through on the script there, whether it's American Heart Association recipe program, whether it's American Diabetes Association, whether it's the clean label project certification or good housekeeping sealed nutrition, all of these things are a signaling mechanism to the consumer that regardless of the misinformation out there, the orchestrated campaigns to suggest it's some healthy. You can trust that this product has the health benefits that you'd expect it to have. And so that's a very different scenario than the one we were facing a year ago, where there was just so much negative noise that was being drummed up about the category. And although we had studies in the work with Stanford, we did not have this kind of overarching framework of endorsement and support from nutrition and health and wellness community. And if I could -- if you look at some of the earliest reviews of these products, whether it's Good Morning America, saying we've raised the bar on the nutrition of plant-based meats or he would eat this not that. We were featured as one of the best new grocery products at '24. Prevention magazine put us the #1 product for plant-based meat, eating well, I think, had really great review by nutritionist or a registered dietitian around how this is a heart healthy option and particularly relevant people who are struggling with cardiovascular issues, which, by the way, is 160 million Americans, as I mentioned in my prepared remarks, then women's health selecting it as their #1 favorite rather team favorite plant-based meat. So it took a lot of time, a lot of discipline on effort, but we wanted to fix that fundamental perception issue around the category. And so as we roll out in this pivotal year. We've taken all these steps which I went through in my remarks, whether it was bringing operating expense down, continuing to bring our cost of goods down across the balance of this year, whether it's the price increases we're taking. We are stabilizing the business and then rolling out this very significant product. So we think for that reason that we will see some acceleration across the balance of the year. On the pricing that did not go into effect until -- we see April 5th was the first tranche and then May 5th roughly was the second tranche. So that wouldn't have impacted results in the first quarter.

In that case, may I follow up and ask whether you're seeing any preliminary price elasticity as you've introduced those price increases over the last month?

We have -- it's too early to tell. I mean, I think we were pleased with some of the -- some of what we've seen so far, but it's just too early to tell. But it is -- that the picture is somewhat clouded, right? Because it's not only are we introducing new pricing, but we're also introducing a new premium product, right? So there's just different value to the consumer. So we'll wait and see, but we're optimistic.

Your next question comes from Ben Theurer with Barclays.

So first of all, just wanted to follow up a little bit on that -- like the initiatives as you've laid out in order to just focus on the new products, like a little bit of a premiumization getting the right price points. So it felt like that in the quarter, prices were still on average, slightly down. So can you help us understand how we should think about the cadence of the new product flowing into results and how that price points potentially going to move as you have like this more differentiated approach as to pricing. So how should we think about the cadence here for the coming quarters?

Yes. We won't get a full benefit from that in this quarter, although you will see definitely some benefit from it. Because again, it's just reaching full distribution and the pricing went through in those 2 tranches as of May 5. So I think you can expect this quarter to see a meaningful increase in net revenue per pound, in the U.S., and then, of course, we also have some activities elsewhere that are also, I think, going to be accretive to us from a margin perspective globally.

Okay. And then just a quick follow-up as to the performance in International, which used to be the stronger market, but felt a little softer this time just on like a year-over-year basis. Was there anything in particular that you could point us to what happened in the international markets that drove particularly the volume decline?

Yes. I think we remain very bullish about Europe and about some of our other international markets, Canada, et cetera. Two main factors. I'll address retail first. We did sell in quite a bit of a new product in the first quarter of '23 in Europe. That's our chicken product, and we're lapping that in Q1 of '24. And then the second, we do have some exposure to both, obviously, the U.K. is a good and healthy market for us from an overall demand perspective as well as Canada. But in both cases, you see some recessionary factors in place there and consumer trading around looking more for value at the moment. So those 2 issues on the retail side, I think, led to some of the lumpiness in that story. I think on the international foodservice side, somewhat similar in the sense that we were lapping a year ago sell-in of chicken to one of our largest QSRs as well as some additional burger sales loading. And then in 2 of the markets I just mentioned, U.K. and Canada, there's overall slower sales in some of our QSRs, they're not necessarily related to our category. So those 2 factors. And I think some of it is particularly on the QSR side, really can be explained by timing. We did see a pretty decent level of orders at the end of the fourth quarter of '23, and we did see some pretty healthy orders coming in as we started the second quarter here. So had those moves a few weeks, one or the other direction, I think we would have been a little bit different story.

The next question comes from Adam Samuelson with Goldman Sachs.

So Ethan, Lubi, I was hoping to maybe get a little bit more color on the phasing of pricing and gross margins between the first half and the second half? Just trying to think about full year getting to the mid- to high teens when we're at 4% in the first quarter -- 5% in the first quarter, excuse me. And then revenues first half, second half look to be about equally split dollars-wise based on the second quarter guidance. And so as we think about getting to that mid- to high teens for the back half, it would seem to imply the back half gross margins are comfortably north of 20% kind of implied in that outlook. And if that's correct, can you just help us think about the magnitude of kind of pricing uplift that helps push it there versus the magnitude of unit cost reductions in COGS that would improve the gross margins? So it seems like there's anticipated contributions from both.

Yes. Thank you. That's a great question. You're absolutely right. We do see, obviously, some significant benefit from the pricing increase. But I think also, and so much work has gone into this. I do want to pause on it for a minute. The consolidation of our network. And we did this for a number of reasons, in some case, quality, in some case, the cost and things of that nature. But we wanted to begin the year with a lot more of the production under our own roof. And we were able to do that. There were some significant transitory costs in there from a transitioning perspective, whether it was temporary labor, overtime, some logistics, some start-up costs and things of that nature that did bring the overall margin for the quarter down. But if you look at the over absorption we expect to see across the balance of the year as well as the efficiencies of being under 1 or 2 roofs. And then also reduce logistics and things of that nature. You can begin to see quite a significant spread occurring between the price that we're charging and the cost of our production. So we do feel good about it for the balance of the year. The amount of throughput that's flowing through our facilities right now is pretty impressive relative to where it was. So it's a lot of work, but it's the right thing. And if you look at the steps we're taking, I think one of the reasons I'm so optimistic about where we're headed is that business is getting leaner from an operations perspective. If you look, we took $14 million out year-over-year once you adjust for the settlement. We continue to bring down the overall size of the network, and we're going to realize very significant, I think, cost savings on a COGS basis for that raising price, there you're going to get additional margin. The new products that are coming out address very squarely. We could have just proliferated SKUs. We could have just said we're going to launch this product and that product. But we wanted to address the fundamental issue going on with the category as a category leader, and I think we've done that. And by the way, that's opening up some new markets for us as we work with American Heart Association and others to address some of the disease states that are out there. So all of these things, to me, are addressing the fundamental issues around the business and going to allow us this year to have the type of return to growth, whether it happens 12 months from now, 16 months from now, I can't say. But that we've been anticipating. And so net-net, I feel very good about where the business is, and we're going to continue to make these changes across the balance of the year.

Yes. And Adam, I'll just add to that. So I think it's a good question regarding what the margin trajectory looks like for the balance of the year, just given where we finished in Q1. A couple of things I'll say about Q1, and we mentioned this in the prepared remarks. So first off, we have been -- we've talked about this for the last couple of earnings calls sort of phasing out the -- some of the promotional activities that we were doing that were more on the aggressive side. And what I will say is that we were encouraged to see that sequentially as we progress through the quarter, our level of trade spend came down pretty nicely. The other thing and Ethan mentioned this in his prepared remarks is there was some -- we identified some incremental assets in the quarter. We're still really just kind of wrapping up the -- most of the heavy lifting as it relates to our network consolidation efforts. And there were some incremental fixed assets that we identified. And so that drove some higher depreciation costs in Q1. And then lastly, we mentioned this as well that there was some -- just on the direct labor side, right, some temporary labor and overtime and things like that, that drove up our direct labor costs. Most of those or it should be substantially less of a drag in the balance of the year. The other thing, too, is, as pricing will become -- we'll have the benefit of a full quarter's worth of pricing in the back half, right? We'll start to see some of that benefit in Q2 but then it kicks in, in a more meaningful way in the back half. And I'll just remind you that as it relates to price, not only are there -- is there a pricing in terms of what we're doing from a list price perspective, but we've also rolled back promotions. And then all of the various efforts that we have going on in terms of the network consolidation, which should drive much better fixed cost absorption. We're seeing logistics cost savings. I think we're really encouraged to the sequential progress that we saw in the first quarter in terms of our production costs. And so we feel pretty good about our assumptions for the balance of the year. And then you asked the question about the relative magnitude as it relates to pricing versus cost. I think price for sure is a significant component of it, but we are expecting to see some efficiencies from a cost perspective as well.

Our next question comes from Ken Goldman with JPMorgan.

I wanted to follow up on the line of questioning about pricing. A few here, right? One, how are your customers reacting given that you're raising prices as your cost decline and the category is still struggling a little bit? I guess the second one is, how should we think about your competitors' reactions to your raising prices? What are you seeing or thinking you're going to see in the market? And then the third is what's in your guidance? I mean I don't need an exact number, but just are you being conservative enough on price elasticity in the markets where you're taking those meaningful increases. So I know that's a lot. I just wanted to kind of dig in a little bit.

Sure. So I think on the first question, what are we seeing from customers we roll this out, it's just too early to tell. I mean it's just hitting the shelf now. We did have long discussions with a lot of the main retailers we work with around why we're doing this. And with limited exception, most we're accepting. And we're doing this at a time when we're also offering more premium set of products. And so I think that made the discussions a lot easier. From a competitive perspective, we're largely following a lot of price increases and obviously, in retail more generally, but also if you look at our largest competitor, they went through a similar process about a year before us. So I don't anticipate much in terms of kind of strategic interplay from them. I mean they are also trying to do what we're trying to do, which is drive their business toward profitability. So I don't think we're going to see a very strong discounting or something of that nature. But I can't promise that. And then on guidance, just what's in it, [ lateral ] Lubi.

Yes. We do think that we are being appropriately conservative. We did a significant amount of work with an external consultant as we went through this price increase. And we did various studies, consumer studies to try to gauge what elasticity might look like. We are baking into our estimates for the balance of this year and elasticity, that's lower than one, but it's -- we feel like there's some conservatism baked into that.

Okay. And then I appreciate the help with guidance for 2Q sales. Just thinking about the other factors in terms of -- I know there's been questions about the cadence of the gross margin. How do we think about -- where would you like it to be generally, I'll just ask it directly for the gross margin in 2Q? And then EBITDA. The Street's modeling, I think, negative $25 million for adjusted EBITDA. Just how reasonable do you think that is in light of where you're pointing people to for the top line?

Yes. In terms of margin, I would say we would expect to see a pretty decent sequential improvement, obviously, from Q1 to Q2. The Q2 does tend to be our highest volume quarter as well just as we're entering grilling season and things like that. So usually, we will see some benefit from just fixed cost absorption. But then obviously, with the price increases starting to kick in. And as I mentioned, our trade rate has been coming down, we would expect to see a pretty meaningful sequential improvement. And then in the back half, we also would expect to see -- probably -- you wouldn't see the same step as we would expect to see going from Q1 into Q2. But we would expect there would be some incremental improvement versus Q2 in the back half just as a result of the fact that we'll have additional -- that we'll have a full quarter's benefit of the price increases is the main driver in both quarters in Q3 and Q4. And then the question on EBITDA. Could you just remind me what was the question there?

Yes, I'm just trying to figure out a way to ask if the consensus number of negative $25 million is kind of in the ballpark of where you'd like us to be?

Yes. We don't -- I don't want to provide specific guidance by quarter for EBITDA. So I'll leave it at that.

Yes. If I can ask a quick one, Lubi, I'm not take too much time. But the EBITDA guidance for the year, does that include or exclude the $7.5 million accrual, just to be clear.

We didn't guide to EBITDA, but we did guide to operating expenses, and that excludes the $7.5 million.

Your next question comes from Michael Lavery with Piper Sandler.

Just curious if you could update us on sort of the state of the union for SKU rationalization? And how much of that work is done or midstream versus still to come? And obviously, you've given the revenue guidance that wraps it all together. But how do we think about that as a piece of -- one of the moving parts for revenues?

Yes. No, thanks for the question. So obviously, we continue to complete the process of exiting Jerky. In terms of the overall emphasis in SKUs, on SKUs, you'll see us very much lean into the Beyond IV platform this year, including launching a very -- I think, going to be impactful and significant marketing campaign as we roll into more of it. But in terms of announcing any major SKU reductions or things of that nature, we're not in a position to do that.

Okay. That's helpful. And -- just maybe a little bit of a higher level. Can you help us understand maybe if your target consumer has changed at all? And I appreciate there's definitely some health and wellness seeking consumers, but certainly even quite a lot of them prioritize taste. And I'd say, historically, when you talked about targeting mainstream consumers, it would seem like that's an even bigger priority and our survey work always points to that. So I know you've called out some doctor and dietitian support for Beyond IV. But for the consumer who doesn't pay attention or care, is that just not kind of your audience the way it might have been in the past? Or how do we think about just the universe of consumers and how to excite them all?

Yes. No, that's a great question. My emphasis on the health side of things is simply because of the misinformation campaign. We would not make these changes at the expensive taste. And in fact, the team was able to score higher on sensory tests with the Beyond IV platform versus Beyond 3.0. So we do large testing called CLT, Central Location Testing with consumers. And don't move forward unless there's some statistically significant benefit that we see. And so we did gain on the sensory side as well as on the health side. And the reason that I'm so focused on making sure people understand the health benefit is, one, we want to bring back in that very close and early adopter consumer that maybe has been scared away. And so I think these changes are starting to do that. And whether it's the inclusion of premium ingredients. We got red lentils, Fava bean, yellow peas and brown rice, for example, avocado oil, bringing the saturated fat down to just 2 grams. So you're sitting down having a barbecue. You've got either an animal protein, it is 8.5 grams or so of saturated fat or your Beyond, which has 2 grams of hard healthy, avocado oil and saturated fat. And so it's not an either or. We have to satisfy both. And I think that that's the magic of Beyond Meat as we've done that in this case. And in doing that, not only do we bring back some of those consumers that maybe were or kind of discouraged from partaking. But we also do open ourselves up to be a real solution for consumers that whether they're -- I think if you saw the video we did -- we had Dr. Oswald on there talking about between the ages of 12 and 14, that's 2/3 of American youth have early signs of high cholesterol disease or cholesterol disease rather. So whether this is about providing your family and your children with something that's going to benefit them over the long run, whether it's about addressing any concerns you have about your own health. This is a really important solution for that, which is different than just saying this taste just like meat. And so we are going to emphasize that as we move forward, and it opens up, obviously, those much bigger categories that I talked about. And it's necessary because there has been a very sophisticated campaign to suggest that our products aren't healthy. And so we wanted to come back and as I said before iron sharpens iron has become even more clear on the health benefits. I think at some point, the opposition to all of this will overstep themselves and overstate their case. Because at the end of the day, what they're doing is discouraging people from making a choice that could really help them become healthier, right? And at some point, that cynical approach is going to become apparent. And I think the more doctors, nutritionists and registered dietitians that come onboard in support of what we're trying to do to improve human health. I think the more dangerous that tactic is.

Our next question comes from Andrew Strelzik with BMO.

This is Daniel on for Andrew Strelzik. The release mentioned ongoing further slowdown in plant-based meat category trends. How do you juxtapose that with keeping the guidance? What's like the...

Yes, I mean I think this all gets back to you, we've been looking at this, trying to crack this nut for 3 or 4 years now, right? And what's going to bring back growth to the category. And we've done a ton of consumer research and analysis and just lived through it, right. And so I think these products with this Beyond Steak, whether it's -- which was -- again, was the #1 new item in retail last year or the Beyond IV was rolling out now to really strong accolades from the right communities. Or the Beyond Crumble we just launched, we are addressing the fundamental issue with the category. And so we really do believe that, that will change the growth trajectory of the category and of Beyond Meat. Second, if you look at Europe, right? And while there's some lumpiness in the data there, let's not forget that today, McDonald's announced this very significant promotion around their famous meals or famous order program. And the quote from the press release on that, to me, says a lot about where this whole category is moving and where Beyond Meat is moving. And so actually, I think I printed it out, I want to share a little bit of it. It was 2 musicians similar to what they did here in the United States with folks like Travis Scott, et cetera. And a quote in the McDonald's press release was this "Like most people, McDonald's has been with us all our lives". This is the musician speaking. So as a childhood dream come true for us McDonald's asked us, if we wanted to create our own menus and burgers. We both want to give up more -- meat more and more often ourselves. So we wanted to create menus that offer a real great alternative, right? So here is McDonald's promoting the Beyond McPlant and it's called the Beyond McPlant in this press release. Actively and not only having 1 builds, but 2 builds around it as well as serving the Beyond Nuggets for the chicken McNuggets. So there's a lot of noise around the category. It's very early days still, I can point to at least half a dozen [indiscernible] to get to probability so that as this thing turns, we remain the category captain and we're doing that. All the fundamental things we're doing, whether it's leaning out our operating costs, raising our prices to store margin, reducing our cost of goods sold to explore margin, continue to focus on getting the right products to the right consumers. All of these things position us to continue to lead the category.

That's really helpful. One different question just on what your outlook is on cash burn and what that cadence might look like? And kind of what would drive you to raise more cash -- at like, what levels?

Sure. So I'll answer that in a general sense then turn it over to Lubi. Yes. We continue to bring on an overall trajectory cash consumption down. This -- the first quarter of the year is obviously different for us because we end up partnering more cash. I mentioned in my comments and inventory and things of that nature. But quarter-over-quarter, I think you'll continue to see a nice reduction across the balance of the year. Then we are taking steps, as I mentioned, to bolster the balance sheet, and so that should help as well.

Yes. Not really much to add to that. So we don't guide to sort of projected cash burn by quarter or anything like that. But as Ethan said, all of the measures that we're taking to really improve gross margin. And we also said that we -- our operating expenses are expected to be more front loaded than back. Like all of these measures, right, we expect will translate into reduced cash consumption in the latter part of the year. So we would expect the rate of cash consumption in the balance of the year to be lower. But as Ethan also mentioned and we've said before, we're sort of bolstering our balance sheet is still a top priority for us. And so that's something that we still anticipate we will complete this year.

Your next question comes from Peter Saleh with BTIG.

Ethan, I want to ask on the Beyond IV, you give us a list of all the endorsements from the accredited health institutions that back your -- this product. So I'm just curious, how do you really get this word out in mass to really change perception? Is there a way to showcase this at the point of sale or on the packaging or is there any other way to just think outside the box to get this message out to really enact kind of step change going forward here?

Great question. It's something I talk all the time about internally here. And so from the air gain all the way down to what you see in the store. What I want our marketing to be doing is to have each of these emblems present front and center, on product literature to the extent that we can on the product packaging and so you'll see some of that. But whether it's the American Heart Association Recipe certification program, whether it's the American Diabetes or clean label certification, good house keep obviously, those should be front and center for the consumer because it is a signaling mechanism that cuts through the noise. We've worked so hard to formulate the products to achieve those. I want everyone to understand that, right. And so we are launching a very significant campaign in terms of the messaging around the helpfulness of the products, and that will be as we roll into Memorial Day. We have a terrific agency working on that with us. They've done some fabulous work that including this will add this year that I think most people would really say is a great piece of work. And so we're going to be launching that and we expect that to begin to change perception and to beat back some of the false narrative. So I went so hard after this and really wasn't something that was happened overnight. We had a member of our team here to create this ecosystem. And she was able to pull in the right doctors, nutritionists and folks within this community that got so much support and almost ownership, right, over these changes we're making to the product. So there's a lot of pride from that community and what we'll be able to accomplish here and they're going to be vocal on our behalf. And you can see it if we make announcements. You can see people tagging in and suggesting this is great work and things of that nature. So as we move forward, the campaign will be very clear in its messaging around these endorsements that will be very clear in its messaging around what type of health benefits this can drive. And so we're looking forward to it.

So when you say front and center, are you talking about you can use these or will use these or plan on using these emblems on the actual packaging so that consumers see it in the -- down the aisle?

Yes. So some of the packaging has them directly on it and others will have to signal it through point-of-sale materials and advertising and things of that nature, not all of them will be on the pack. But more and more as we go forward, you'll see them on. But for example, the -- I believe the Steak already has the AHA certification on it. ADA is on some of our packaging as well, clean label project is on some of our packaging. So yes, I mean, it will be -- we're going to try to be as overt as possible.

Your next question comes from Robert Moskow with TD Cowen.

I guess 2 quick questions. Lubi, I think on the last call, you said that for -- to bolster the balance sheet, you would look at a combination of possibilities, either debt or equity. Is that still the case? And secondly, to Ethan, we've talked a lot about growing the category. Have you done any internal testing in terms of the taste of your product versus your #1 competitor? Anecdotally, I've heard that some prefer the competitor versus yours, but I'm sure you've done a lot of testing on your own. So how does your product compare with competition? And what are the differences?

I'd be happy to introduce you to a better crowd, Rob.

I would enjoy a better crowd. It's a little slow around here.

I'm just joking. First of all, competitor does a nice job. Great. They're a good company, joy competing with them, so it's not an adversary relationship at all. We do a nice job. We, of course, test that. We're very competitive and all that other stuff. And I think this -- what's interesting is the ground meat in a patty form without seasoning actually taste kind of okay, right. It's not a thing that blows you away. So when we do sensory testing, right, you'd be surprised at how much both products really resemble or at least score at parity with animal protein. And so we do, do a lot of tests relative to our competition. We feel good about the results. We don't move forward if we don't, let me put it that way.

And then, Rob, on your first question regarding the balance sheet. Yes, nothing has really changed since the last time we were on the call. And so yes, we would consider all of those options that you mentioned.

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

Thank you. Not to be repetitive, but just to be clear, we really do believe that we are at the early stages of a terrific and pivotal year for Beyond Meat. The leaning out of our operating expenses, the stabilization of pricing and the lowering of our cost of goods and the improvements we're going to see across margin there, addressing the #1 issue in the category, coming out with products that are not only winning on sensory, but also receiving such accolades from such important institutions around the health benefits. We're doing things you need to do to get through a period that is challenging and resume growth. So I'm excited. I think the team here is excited. We're looking forward to reporting to you through the balance of the year, and we'll be in touch. Thanks.