Q4 2024 Beyond Meat Inc Earnings Call
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Speaker Change: Good afternoon and welcome to the Beyond Meat fourth quarter and full year 2024 conference call. All participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. And to withdraw your question, please press star and then 2.
Speaker Change: Please note that 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, sir.
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Paul Sheppard: Thank you. Hello everyone and thank you for your participation on today's call.
Speaker Change: Joining me are Ethan Brown, Founder, President and Chief Executive Officer, and Lubi Kutua, Chief Financial Officer and Treasurer.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: We refer you to today's press release, our quarterly report on Form 10-Q, for the quarter ended September 28th, 2024.
Speaker Change: and our annual report on Form 10-K for the fiscal year ended December 31st, 2024 to be filed with the SEC, along with other filings with the SEC, for a detailed discussion of the risks.
Speaker Change: that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
Speaker Change: Please also note that on today's call, management may reference adjusted EBITDA, adjusted loss from operations, and adjusted net loss, which are non-GAF financial measures.
Speaker Change: 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.
Speaker Change: Please refer to today's press release for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures.
Ethan Brown: And with that, I would now like to turn the call over to Ethan Brown.
Thank you, Paul, and good afternoon, everyone.
Ethan Brown: I'll begin my remarks by highlighting milestones achieved in the full year 2024, briefly summarize our Q4 performance, and then turn to our strategic focus for 2025.
Ethan Brown: I believe the past year reflects an important inflection point in Beyond Meat's journey.
Ethan Brown: In the second half of the year, we registered two consecutive quarters of year-over-year net revenue growth following more than two years of declining sales.
Ethan Brown: This encouraging sign comes as a category in our brand continues to endure a significant reset One driven by broad consumer confusion regarding the value proposition of our product lines among other factors
Ethan Brown: I am proud that the team took this ambiguity, much of it engineered by incumbent industry interests, head-on and vigorously went on the offensive, leaving no stone unturned from product design and emphasis to marketing and partnerships.
Ethan Brown: I've often summarized the team's response with such commentary as iron sharpens iron and the toughest winds make the strongest branches. And I'm truly grateful that they took considerable adversity and used it to make our products even better.
Ethan Brown: Specifically, with the launch of BEYOND 4, the Sun Sausage line, and the recent extension of our award-winning BEYOND State platform, all of which enjoy various accreditations from the American Heart Association, American Diabetes Association, and Clean Label Project.
Ethan Brown: Beyond Meat is making eating delicious, plant-based, center-of-the-plate protein even healthier and at the same time making a statement.
no matter the level of misinformation and misdirection.
Ethan Brown: All of which do a serious disservice to the consumer who may otherwise make positive changes in their diets, lives, and health.
Ethan Brown: We will stay the course, continue to innovate and perfect our craft, and ultimately prevail for the benefit of the consumer, our shareholders, the planet, and the rest of life with whom we share it.
Ethan Brown: Needless to say, the key to staying the course and winning is having a sustainable business model.
We made great strides in this direction in 2024.
Ethan Brown: Namely, we took out just over $50 million in operating expenses.
Ethan Brown: excluding a $7.5 million settlement, and dramatically improved adjusted EBITDA, all while, as stated earlier, delivering two consecutive quarters of year-over-year net revenue growth after nine quarters of decline.
Ethan Brown: For the full year, we generated $326.5 million in net revenues.
Ethan Brown: While this was down 4.9% versus 2023, one can see that the rate of decline slowed substantially versus the previous two years as we produced growth in the last two quarters of the year, as previously mentioned.
Thank you. Thank you.
Ethan Brown: Gross margin reached 12.8% for the full year and while lower than our expectations, it reflects strong progress across COG.
Ethan Brown: Specifically, a full-year 2024 COGS per pound of $4.07 was roughly 40 cents, or 9% lower, than 2023 after adjusting for the impact of certain non-CAS charges.
Ethan Brown: And our Q4 COGS per pound achievement of $3.91 represented our best quarterly achievement since Q2 2021.
Ethan Brown: However, relative to our expectations, these COGS gains were somewhat obscured by lower than expected net revenue per pound, reflecting changes in product sales mix.
Ethan Brown: A slower build of the U.S. price increase than anticipated and unfavorable changes in foreign currency exchange rates.
Ethan Brown: We achieve these improvements in net revenues and gross margin while significantly reducing expenses.
Ethan Brown: The combination of these factors drove a nearly $100 million dollar year-over-year improvement in adjusted EBITDA after adjusting for the impact of certain non-CAST charges.
Ethan Brown: Now turning more specifically to the fourth quarter, I'll briefly mention a few key highlights.
Ethan Brown: We generated net revenues of $76.7 million, reflecting a 4% increase year-over-year.
Ethan Brown: The combination of higher pricing, lower promotional spending, and reduction in COGS per pound strengthen gross margin to 13.1 percent, up substantially year over year.
Ethan Brown: Operating expenses in the fourth quarter were $47.8 million dollars, a $29.1 million dollar reduction from $76.9 million in the year-ago period, or approximately $11.5 million after adjusting for the impact of certain non-cast charges.
Ethan Brown: The net effect of these outcomes was a meaningful reduction in adjusted net loss year over year.
Ethan Brown: I applaud our team for these large strides toward sustainable operations and know they share in my enthusiasm for continued progress to this end in 2025.
Ethan Brown: Globally, in the fourth quarter of 2024, we continue to see encouraging momentum, though inconsistent in its distribution. For example, in France, McDonald's launched Veggie McPlant Nuggets in more than 1,500 restaurants, joining McDonald's in seven other European countries offering Beyond products.
Ethan Brown: We are encouraged by this progress, as well as broader consumer trends in France, where 68% of the population is reducing meat consumption, and 27% regularly incorporates plant-based alternatives, according to a 2023 study.
Ethan Brown: Moreover, in France, beginning this month, we launch Beyond Steak in retail.
Ethan Brown: This expands our presence in this important EU market where we already sell beyond burger, beyond mince, beyond chicken, beyond meatballs, and beyond sausage.
Ethan Brown: Other areas of recent expansion in Europe include the introduction of Smashburgers at Tesco UK and the Plant Burger at Wendy's for a limited time in the country of Georgia.
Ethan Brown: Looking forward, having cut operating expenses, expanded gross margin, and made substantial progress in adjusted EBITDA across 2024, we now look ahead to 2025 with a clear governing objective.
Ethan Brown: Position the business to achieve run rate EBITDA positive operations by year end 2026.
Ethan Brown: We expect to do so by tapping four key goals for 2025.
These are as follows.
Thank you.
1. Deliver comparable year-over-year top-line net revenues.
Ethan Brown: Though we welcome substantial growth in 2025, it is more important that the team understand the premium importance of achieving EBITDA positive operations and active discipline when considering near-term growth opportunities that may conflict with this governing objective.
Ethan Brown: Accordingly, we are targeting roughly comparable net revenues with, as I note below, considerably less operating expenses and higher gross margin.
Ethan Brown: Moreover, we expect to regain, as well as increase, distribution in certain channels that should help with margin-accretive top-line performance.
Ethan Brown: Finally, with respect to top-line performance, we will continue to lean into and expand our health-related products and marketing as we bring new innovation to market this year.
Ethan Brown: 2. Improve gross margin to approximately 20% on a path to longer term gross margin exceeding 30%.
Ethan Brown: Having nearly completed the consolidation of our production network, the focus for the year is stabilizing and then optimizing our internal production processes while making targeted investments in equipment, automation, and consolidated lines to further expand gross margin.
Ethan Brown: We believe that these measures, together with select pricing actions and the restoration of distribution at certain channels that are important to overall mix,
will support further gross margin expansion.
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three
Speaker Change: further reduce operating expenses over the two-year period 2025 and 2026.
Speaker Change: As implied by our guidance, we are pursuing further meaningful reductions in operating expenses this year.
Speaker Change: To this end, yesterday we initiated an additional reduction in force, have identified an aggressively reducing programmatic spend in the U.S., and are suspending our operational activities in China.
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Speaker Change: As I hope is clear, we deeply value our employees and making this necessary adjustment to our operating base is not done lightly.
Speaker Change: We are fortunate to have a tremendously talented, dedicated, and resilient team at BEYOND.
Speaker Change: and parting with folks who have done so much for BEYOND, our customers, consumers, shareholders and mission over the years is difficult.
We are truly and deeply grateful for their many contributions.
for Strengthen Our Balance Sheet.
Speaker Change: In 2025, we will continue to evaluate options to further improve liquidity and optimize our capital structure so we're well positioned to achieve our growth plans and unlock long-term value.
Speaker Change: We have no secure debt and our unsecured indenture provides us with significant flexibility to pursue a range of potential transactions.
For more information, visit www.fema.gov
Speaker Change: In closing, we look back at 2024 as a key year of transition for Beyond Meat.
Speaker Change: From this vantage point, we eagerly look forward to executing our four speeded priorities for 2025.
Speaker Change: remain highly confident in our ability to lead the category through what has been a challenging correction.
Speaker Change: born of manufactured ambiguity, and believe unequivocally in the inevitable and central role that plant-based meat will play in our global future.
Lubi: I look forward to taking your questions later and will now turn the call over to Lubi.
Lubi: Thank you, Ethan, and good afternoon, everyone. I'll review our financial results for the fourth quarter of 2024, and we'll then provide our outlook for 2025, followed by some preliminary thoughts on our longer-term financial objectives.
Lubi: In the fourth quarter of 2024, net revenues increased 4% to $76.7 million, compared to $73.7 million in the year-ago period.
Lubi: The increase in net revenues was primarily driven by a 6.3% increase in net revenue per pound, partially offset by a 2.1% decrease in volume of products sold.
Lubi: The increase in net revenue per pound was primarily driven by lower trade discounts compared to the year ago period, as well as price increases of certain of our products partially offset by changes in product sales mix and unfavorable changes in foreign currency exchange rates.
Lubi: Breaking this down by channel, U.S. retail net revenues increased 5.7% to $33.9 million.
Lubi: in the fourth quarter of 2024 compared to $32.1 million in the year-ago period, primarily due to a 10.6% increase in net revenue per pound, partially offset by a 4.5% decrease in volume of products sold.
Lubi: Net revenue per pound benefited from lower trade discounts, price increases of certain products, and changes in product sales mix, while the decrease in volume sold primarily reflected soft category demand and price elasticity effects.
Lubi: These results in U.S. retail, which comprises almost half of our total net revenues, were encouraging given that they represented a second consecutive quarter of year-over-year growth despite a macro environment that remained challenged.
Lubi: In 2025, we hope to continue these positive, albeit moderate, trends in this important channel by pursuing incremental distribution opportunities among some of our existing items and expanding our product assortment in segments where we have historically under-indexed.
For more information visit www.FEMA.gov
Lubi: Turning to food service, U.S. food service net revenues decreased 2.1% to $10.5 million in the fourth quarter of 2024, compared to $10.7 million in the year-ago period.
Lubi: The year-over-year decrease was primarily driven by an 11% decrease in volume of products sold, mainly reflecting lower burger sales to a large QSR customer.
Lubi: The decrease in volume sold, however, was partially offset by a 10% increase in net revenue per pound, primarily driven by price increases of certain products and lower trade discounts, but partially offset by changes in product sales mix.
Lubi: In our international channels, international retail net revenues decreased 1.7% to $13.1 million in the fourth quarter of 2024, compared to $13.3 million in the year-ago period, primarily due to a 10.4% decrease in volume of products sold, partially offset by a 9.6% increase in net revenue per pound.
Lubi: The decrease in volume sold primarily reflected lower sales of ground beef and chicken products in the EU, while the increase in net revenue per pound was primarily driven by lower trade discounts and changes in product sales mix.
Lubi: partially offset by unfavorable impact from FX and price decreases of certain products.
Lubi: International food service net revenues increased 9.2 percent to 19.3 million in the fourth quarter of 2024 compared to 17.6 million in the year-ago period primarily due to an 8.9 percent increase in volume of products sold.
Lubi: This increase in volume mainly reflected increased sales of chicken products to a large QSR customer in the EU.
Lubi: Net revenue per pound in international food service was up slightly year over year, primarily reflecting lower trade discounts and price increases of certain products, partially offset by changes in product sales mix and unfavorable impact from FX.
Lubi: Moving down the P&L, gross profit in the fourth quarter of 2024 was $10 million, or a gross margin of 13.1%, compared to a loss of $83.9 million, or a gross margin of negative 113.8% in the year-ago period.
Lubi: Recall that gross profit and gross margin in the year-ago period included certain non-cash charges totaling $77.4 million, consisting of $66.9 million in charges associated with our Global Operations Review and $10.5 million from other specific non-cash charges.
Lubi: Although gross profit and gross margin improved meaningfully year over year, both were below our expectations largely due to lower than expected net revenue per pound, reflecting high international food service sales and unfavorable changes in FX.
Lubi: We were nonetheless pleased with the continued sequential improvement in cost of goods sold per pound from Q3 to Q4, which remains a key focus area for our team as we look to drive longer-term gross margin back to 30% or higher over time.
Lubi: On a year-over-year basis, the decrease in cost of goods sold per pound primarily reflected lower inventory provisions, lower manufacturing costs, including depreciation, and lower materials costs, partially offset by higher logistics costs.
Lubi: Turning to OPEX, operating expenses were $47.8 million in the fourth quarter of 2024 compared to $76.9 million in the year ago period.
Lubi: Operating expenses in the year-ago period included certain non-cash charges totaling $17.6 million associated with the Global Operations Review.
Lubi: Excluding the impact of these non-cash charges, the decrease in operating expenses in the fourth quarter of 2024 was primarily driven by reduced marketing expenses, lower consulting fees, and reduced non-production headcount expenses.
Lubi: Below the line, total other expense net was $7 million in the fourth quarter of 2024 compared to total other income net of $5.7 million in the year-ago period. The increase in total other expense net was primarily due to higher net realized and unrealized foreign currency transaction losses.
Lubi: Overall, net loss was $44.9 million in the fourth quarter of 2024, compared to $155.1 million in the year-ago period.
Lubi: Net loss per common share was $0.65 in the fourth quarter of 2024, compared to $2.40 in the year-ago period.
Lubi: Net loss in the year-ago period included certain non-cash charges totaling $95 million, or the equivalent of $1.47 per common share.
Lubi: Adjusted EBITDA was a loss of $26 million or negative 33.9% of net revenues in the fourth quarter of 2024 compared to an adjusted EBITDA loss of $125.1 million.
Lubi: or negative 169.9% of net revenues in the year-ago period, which included the impact of certain non-cash charges.
Lubi: Turning now to the balance sheet and cash flow. Our cash and cash equivalents balance, including restricted cash, was $145.6 million, and total outstanding debt was $1.1 billion as of December 31st, 2024.
Lubi: Net cash used in operating activities was $98.8 million in the year ended December 31st, 2024, compared to $107.8 million in the year ago period.
Lubi: Capital expenditures for the full year 2024 totaled $11 million compared to $10.6 million in the year-ago period.
Lubi: including proceeds from the sale of certain fixed assets during the year net cash used in investing activities was 6.2 million dollars in the year and the December 31st 2024 compared to 9.5 million dollars in the year ago period
Lubi: Net cash provided by financing activities was $45.8 million in the year ended December 31st, 2024, compared to net cash used in financing activities of half a million dollars in the year-ago period.
Lubi: As previously communicated, we deployed our at-the-market, or ATM, program in the fourth quarter of 2024, which generated net proceeds of approximately $46.7 million through the sale of approximately 9.75 million new shares of common stock.
Lubi: The proceeds raised through the ATM are intended to help us continue to invest in our business, grow revenues, and reduce costs.
Lubi: As discussed on prior earnings calls, we continue to evaluate alternatives to improve our liquidity and address our capital structure to achieve our growth plans. We will provide further updates if and when appropriate, but do not plan to comment on this further during our call today.
Lubi: Finally, I'll provide some comments on our outlook for 2025. For the full year 2025, we expect net revenues to be in the range of $320 to $335 million and gross margin is expected to be approximately 20%.
Lubi: Operating expenses are expected to be in the range of $160 to $180 million and capital expenditures are expected to be in the range of $15 to $20 million.
Lubi: So the first quarter of 2025, net revenues are expected to be roughly comparable to Q1 of 2024.
Ethan Brown: Although we are not providing formal guidance beyond 2025 at this time, as Ethan mentioned, we are currently implementing a broad set of initiatives which are intended to position the company for sustained EBITDA positive operations on a run rate basis by the end of 2026.
Ethan Brown: The reduction in force we announced today, as well as our decision to suspend our operational activities in China, are two measures among the larger set of initiatives we are pursuing in service of this 2026 objective.
Ethan Brown: Beyond operating expense reductions, we are also pursuing opportunities to accelerate our revenue growth, including by focusing on incremental distribution opportunities within our existing portfolio. And we are investing incremental capital to drive further production efficiencies and gross margin expansion.
Ethan Brown: We believe it is critically important to steer our organization towards this long-term profitability objective as quickly as possible.
Ethan Brown: to ensure that Beyond Meat remains a leader in the plant-based meat category for the foreseeable future and is well positioned to benefit from the eventual upturn in the sector, which we continue to believe remains on the horizon.
Ethan Brown: With that, I'll turn the call back over to the operator to open it up for your questions. Thank you.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Ethan Brown: If at any time your question has been addressed and you would like to withdraw your question, please press star and then two
Ethan Brown: At this time, we will pause momentarily to assemble our roster.
Ethan Brown: And your first question today will come from Ben Sawyer with Barclays. Please go ahead.
Ben Sawyer: Good afternoon and thanks for taking my question, Ethan and Lubi. How are you doing?
Good. Hi, Ben.
Ben Sawyer: Good stuff. So, two quick ones on my side. So, number one, just wanted to understand a little bit about the consumer perception market dynamics, because it seems you guys were able to increase at least the price points, particularly in retail in the U.S., and volume impact wasn't as significant maybe as in the past. So, maybe if you could shed a little bit more light on like the elasticities here and what you've been doing different in terms of like your go-to market strategies.
Ben Sawyer: particularly in retail in the U.S., and then I have a quick follow-up.
Ben Sawyer: Great, no thanks. This is Ethan. Good question and it's very astute to look at that.
You know, if you...
Ben Sawyer: If you think about what we saw in U.S. retail, we're up 5.7%, and volume is only down 4.5%. I mean, that's a pretty good outcome. And that's, you know, on top of all the noise, which continues to impact Vector around, you know, ingredients and process.
all of which we are confident will die down.
Ben Sawyer: But it's about providing a very clean and simple product to a consumer that's willing to pay more for it. And that's what we're finding, and that's the continued direction of the brand. So I think that messaging around, look, these are very clean, very simple ingredients. We're going to charge you a little bit more.
Ben Sawyer: seems to be working and we were pleased to see the elasticity.
Speaker Change: Okay, got it. And then my follow-up is just real quick to clarify on the guidance that called it more or less flat on the top line.
Speaker Change: I assume that obviously accounts for the China suspension of operations.
Speaker Change: So I just want to make sure if you could maybe help us understand a little bit the size of China within your international piece, so just that we'd have kind of like have maybe adjusted revenues just to see what the impact of China's suspension is. And is that temporary or how should we think about this? Because it doesn't seem like, doesn't sound so permanent. So I just want to understand.
Speaker Change: and a little bit more on the China suspension comments. Great. Thanks. So we don't break out by that specific geography, the performance, but what I will say is that the overall conservatism in our guidance
Speaker Change: is really driven by my desire to to not distract the team into any near-term revenue generation activities that would work against the EBITDA positive goal that we've set.
Speaker Change: I think this EBITDA positive goal is a very important milestone, obviously, for the company and our willingness to put it out there publicly.
Speaker Change: It is the next step in the evolution of Beyond Meat, and I want everybody entirely focused on that. And so the revenue guidance that we're providing is really focusing more on that than anything else.
Speaker Change: to optimize for margin, optimize for EBITDA, and stay away from things that would distort or conflict with those goals.
Speaker Change: And your next question today will come from Gamil Gajrawalla with Jefferies. Please go ahead.
Hey guys, good afternoon. Can you maybe talk about your...
Gamil Gajrawalla: You're kind of core consumer, if the consumer's evolved in who they are, maybe demographics, maybe income level or anything like that, as you sort of roll out new products, new marketing, you're sort of evolving your message. Can you talk about, have you observed any changes in who your core customer is?
Speaker Change: You know, I think we're getting much more focused on the health-oriented consumer and, you know, it's just such a time of
Speaker Change: I wouldn't say turbulence, but there's just puts and takes all over the place regarding kind of where the category is headed, where the brand is headed, like if you look at
Speaker Change: The consumer's interest in what we're doing it remains extremely high, you know, if you look at Time magazine I think we were you know awarded one of the world's best brands
Newsweek, I think the world's most trusted brands.
Speaker Change: Fortune, you know, change-the-world brand, you know, things of this nature are showing up on all these lists, including Independence Top 100, climate change, so you know, there's still a very strong interest in what we're doing, but there's also a very strong countercurrent, which is this narrative.
Speaker Change: around being highly processed and full of questionable ingredients, which is a manufactured narrative. It's not one that's actually
has science behind it or much truth to it.
Speaker Change: But it is a very powerful incumbent industry campaign that's gotten picked up by
Speaker Change: certain pundits and kind of what we call the carna bros on on Instagram and Podcasts that are misinformed and so it dark consumers increasingly that sort of more educated
Speaker Change: Someone who can see through that noise, and they are the ones that are carrying us back to growth.
Speaker Change: And if you look at it, you know, if you look at 24, in terms of the year, right, in the last two quarters of the year, return to growth, you know, across the year we improved margin by about 14 percentage points.
Speaker Change: produced operating expense where we're doing that by about 50 million and then delivered about a hundred million dollar improvement in adjusted EBITDA. So all these actions are taking the business toward a sustainable operation and we're focused on that for very obvious reasons, but
Speaker Change: One of the reasons, right, is that we continue to see a very strong long-term trend toward what we're doing and if you look at
Speaker Change: You know, some of the examples that we gave in my prepared remarks, you know, with retail being up 5.7%, that occurred where, as we just talked about in the previous question,
Speaker Change: where the decline in volume sold is slowing pretty significantly. You look at international food service, that's another really nice bright spot where we're up about 9% in dollar sales, but also up about 9% in volume.
and this is...
Speaker Change: particularly on the back of something that's pretty special that's happening with a certain customer in a certain market. I can't promise that these trends will persist, but nor can I promise that the areas where we underperform will persist. If you look at U.S. food service and international retail, there's just a lot of things moving up and down as people try to figure out this category.
Speaker Change: But I am very certain that the category and the brand will, over time, fulfill the promise of the brand.
Speaker Change: You know, I've used examples before, whether it's the manufactured ice industry, you know, where at first people, you know, the incumbent industry said it was contaminated. It's about 135 years ago now, but it's a great case study. Turned out it wasn't, right? Turned out that we all now use, you know, artificial or manufactured ice.
Speaker Change: You probably used some today to cool your drink or cool something in your house.
Speaker Change: If you look at electric cars, people are saying electric cars are never going to have the range. Well, it turns out they range enough. If you look at solar and wind, they'll never scale.
Speaker Change: Well, it turns out they did. I've got soil on my roof, I'm sitting on the porch of my farm, I can see huge wind turbines up on the hills where, you know, 40 years ago it was just about getting coal out of those hills, right? So all these things just take time. It's taking a lot more time than we thought.
Speaker Change: But if you look at the trends, and you look at what's going on in animal agriculture...
Speaker Change: There's some things that are going on in America which are existential threats, right? If you look at the beef prices today they're starting to rise. What's that about?
Speaker Change: In part, that's about drought, right? So that's not something that a government or industry can solve, right? If you look at the avian livestock industry, prices are going up, right? What's that about? That's not something that's easily containable, right? That's about the bird flu.
Speaker Change: So all these things are going to worsen with a warming climate, and Miami's going to do what it does, right? We're going to continue to innovate, we're going to continue to offer clean, simple ingredients to consumers who are willing to look through a lot of the noise.
Speaker Change: and do something that's better for their family and better for themselves. We're also putting facts out there, because at some point serious people need to step forward and deal with these problems.
Speaker Change: and we're there to help, right? And so whether it's the doctors that we're putting together, the nutritionists, the dieticians, to help consumers see the benefits of eating plant-based meat and to not believe all the noise, right?
Speaker Change: We're putting together this data to show that, right? And then you're looking at our partnerships with the American Heart Association, the American Diabetes Association, the Clean Label Project. We're putting together organizations to help cut through all of this noise. So it's a period of uncertainty, right? But we're doing the right things. We're continuing to innovate and make the products healthier and healthier. We're continuing to surround ourselves with the best minds.
in science and in public opinion around health.
Speaker Change: and over time that smaller consumer group now that's buying their products
Speaker Change: will expand into the general population as we break through the mist, break through a lot of the noise, and provide people with great tasting food.
Speaker Change: That's really good for them. So my view is that this consumer base will continue to evolve into a much broader base, but it's just taking time.
Speaker Change: Okay, got it. Lots of follow-up questions on that ICE comment, but we can chat about that in the follow-up later. Thank you for all that.
There's a terrific paper written by, um...
Speaker Change: I can't remember, I'd say it's a VC firm where they compare...
the growth of the manufactured ice industry to plant-based meat.
Speaker Change: and talk about how there was a very concerted effort by folks who were cutting ice out of lakes and rivers to scare the public away from it, and they said it was contaminated. And it took a long time for that to wear off. It did turn out there was contamination.
Speaker Change: It turned out that the ice coming from the rivers during the period of industrialization was contaminated, not the ice being made in these machines.
Right.
Got it. Interesting. Thank you.
Speaker Change: And your next question today will come from Ken Goldman with J.P. Morgan. Please go ahead.
Hi, thank you.
Ken Goldman: I wanted to just dig in a little bit more, if we could, on the outlook for the gross margin in 2025. You did give some reasons, you know, distribution gains that could help mix, reasons for it to increase to this degree, but it's quite a...
Speaker Change: an uptick in terms of basis points that you're looking for versus 2024. Obviously, you know, margins in general are more of a priority for you. I'm just trying to get a little bit better sense of what the major drivers are and which ones you have the most.
Speaker Change: in margin. You know, the increase that we're projecting for 2025, right, does not exceed that. So what happened over the last year is really remarkable in terms of what our team did.
They took a very fragmented
Production Network.
with over 13 different sites, co-packers.
Speaker Change: and consolidated that into her own internal manufacturing and then one other co-packer.
Speaker Change: That took an enormous amount of effort and complexity to break all that down, all the logistics work, and then to build up into our own facilities. And we're not completely done.
Speaker Change: But I would hardly say, you know, many times in innovation and fields like this, you talk about repairing the bicycle while you're riding it, right? That was absolutely that effort, right? Now we have the opportunity with a more stable production process to really start to grind away at that.
Speaker Change: So if you know the thought is that we can't sort of get seven or eight percentage points out of that What now that we're stabilized we're able to get better overhead absorption
Speaker Change: You know, I think we can. And I think, you know, I'm very optimistic that we can, in fact, potentially do better.
Speaker Change: Because we've stabilized things and so you know now it's about we're making some incremental investment in our facilities to
Increased automation.
We're doing another RFP for materials and ingredients.
Speaker Change: So all of these things allow us maybe to take a breath and to now focus on optimizing, you know,
Speaker Change: Three or four years ago, we were scrambling to build out this network, right? Okay, and then we had to go reverse all that. So there's a, just in both cases, there was this kind of, you know, fixing the bicycle or riding it. Now it's in the shop. We have an opportunity to really drill down on how to make this thing hum. And so I'm looking forward to what the teams can do this year.
Thank you. Thank you.
Speaker Change: I'll just add to that, I think Ethan covered most of the factors, I would just say in 2025 we do expect to have
basically a full year's worth of the
Speaker Change: benefit from the price increases, right, that we took in in the U.S. Obviously those started to kick in in Q2 of 2024, so we'll have a full year's
Speaker Change: worth of those. There will be some select price increases in 2025, not nearly as broad, you know, in US retail as we had in 2024.
but there should be some impact from that.
Speaker Change: And then, you know, Ethan mentioned in his prepared remarks that we are nearly complete with our network consolidation. There's still a little bit more work to be done in 2025, and we do expect to benefit from that. And in particular, we're actually consolidating some of our manufacturing footprint at our facilities in Columbia, Missouri. And then also...
Improvement in Gross Margin.
Very clear. Thank you both.
Yes, sure.
Speaker Change: And your next question today will come from Robert Moscow with TD Cowan. Please go ahead.
Speaker Change: Hi, Ethan. Hi, Lubi. A couple of questions. Hi there. Just wondering about the forecast. You know, you're up six percent or so in sales in second half, but the guidance is for, I guess, flat in first quarter.
You know
Speaker Change: Sounds like you have a little bit of momentum Are you seeing something in first quarter where that momentum kind of takes a step back a bit?
Speaker Change: or are you just being a little conservative? And then I had a question about these new customers that you're talking about. I guess you said.
Speaker Change: regaining or or getting into some channels that you're not normally in what's your visibility into that and and when will you know with when whether or not you got that that distribution
Yeah, I think, um...
Speaker Change: You know, we did lose some distribution as we were being switched from fresh to frozen in a major customer that we're going to be regaining, but it won't be regaining until the second quarter. So there's a couple things like that that, you know, we don't want to come out and be too bullish on the first.
Speaker Change: Across the balance of the year, we do think that the positive trends that we're seeing will continue. But again, I really want to focus...
Speaker Change: If we show 5% growth, great, but if we show a terrific improvement in margin and drive...
Speaker Change: the $30 million out of the OPEX, the high end of the range. Those things would be more important to this business over the long run, so I'm just trying to focus steam on that.
Speaker Change: And then Rob, so maybe to answer the second part of your question regarding distribution, I think...
Speaker Change: The comments you were referring to was what I mentioned in my prepared remarks.
It's not really about picking up new customers.
Speaker Change: section of the store right where historically we've over indexed to to refrigerated but there's opportunities
Speaker Change: We believe, you know, to expand some distribution, right, in the frozen isle. Now, as far as, you know, how much visibility we have into that, some of it is...
Speaker Change: You know, we feel pretty confident about and, you know, we believe those are coming. Others, you know, we have to work on, right?
Speaker Change: and look to gain that incremental distribution throughout the year. But the main point is that the distribution gains we're talking about is not necessarily picking up a whole bunch of new customers.
Speaker Change: It's more about expanding our presence within the stores, within the existing outlets.
Speaker Change: I understand and Lubi a follow-up you know we I think we're all kind of waiting for an update on on the more profound announcement on recapitalization you've been talking about it for a while and I think you know the comments are kind of
purposefully.
Speaker Change: There's not a lot of material things you can say, but isn't it fair to say that the convertible, it matures in two years. Is that kind of the time frame that you have before you do have to do something much more profound?
Speaker Change: I mean we certainly would have to do something within within two years.
Speaker Change: But, you know, to the point that I made in my prepared remarks, look, we're continuing to evaluate, you know, alternatives, right? But it's...
Speaker Change: At this point, we can't really say a whole lot about where we stand on those particular efforts. But I think we said it during the last earnings call, right? That we said we intended to put a little bit more liquidity on the balance sheet through our ATM program in Q4. And we did. And we said we're going to, in 2025, focus on the...
Speaker Change: bolstering the balance sheet. And so we're following that plan and we feel pretty good about it.
Okay, thank you. Sure.
Speaker Change: And your next question today will come from Alexia Howard with Bernstein. Please go ahead.
Hi there, good evening everyone.
Alexia Howard: Can I ask firstly about the price points? Are you comfortable with your price gaps to animal meat? I know there was a goal at one point of getting to price parity or below on a major product. Are you generally comfortable with where you are now? And then I have a follow-up.
Alexia Howard: Yeah, so we actually did hit that target in a particular product line with a particular customer in a particular market and it's been helpful to us in that regard and pretty remarkable like if you think about and this is again why I have such confidence in what we're doing.
Alexia Howard: We do that on maybe one or two lines, against an industry that has too many lines to count, globally. And we're already producing, and that gets back to a very simple observation made many, many years ago by people like Francis LePay. It's just so much more efficient.
Speaker Change: to take protein directly from plants, and our reason that we struggle to get to price parity right now is really about volume. That's it. And so it is still a goal, and I think you'll see it a differentiated goal, where as we push
Speaker Change: to provide, you know, very clean, very simple, very healthy ingredients to the consumer.
Speaker Change: That's going to have some burden on that goal, but there are...
Speaker Change: other products that lend themselves more to reaching it, primarily in the food service category.
Speaker Change: So we'll continue to pursue that where those economics are particularly important. So it does remain a goal. Maybe it's a little more differentiated and sector-specific than it was at the onset.
Speaker Change: Great, and then as a follow-up, can I ask about the relative growth rates of the markets in Europe versus the US?
Speaker Change: Is Europe growing faster because the consumer demand is there? And as I think about the US, is there any catalyst that could accelerate the growth of the market from here, or are we in a steady state now? I'm thinking about hybrid products with cultivated fats. I mean, how close are those kinds of ideas?
Speaker Change: Ian, is that 2 years, 5 years out? Is it something you would participate in? Just curious.
Yeah, those are all really good questions, guys.
Speaker Change: So, Europe is not homogeneous in regard to its growth rates, you know, there's some markets that are better than others, and there's also some headwinds in some of the European markets that are starting to look a little bit like the U.S., you know, in terms of the processed argument. The ag lobby is not as strong there, certainly not as significant or strong, and there's still a lot of good pockets of growth in Europe.
Speaker Change: But it gets back to the consumer there, you know, particularly being motivated around climate. They're just seeing the world differently and much more willing to lean in. On the question of cultivated and things of that nature, we certainly look at everything. We're agnostic to technology. It's really about the outcome.
Speaker Change: But I think the trend is actually in the opposite direction, is, you know, how simple can we make these products? How much can we assure the consumer that the noise they're hearing about being processed is an industry?
Speaker Change: incumbent industry trying to protect itself, right? You know, we make our products on a machine that's used to make pasta, right? We take protein from plants that are grown in a variety of places, including in the upper Midwest by farmers that are now making more money than they used to make growing corn and wheat.
and we extract that protein.
using Beyond State as an example.
Speaker Change: We tracked that in an air chamber, Spire does it for us.
Speaker Change: It separates just naturally because the particle size is different between starch and protein. And we run that protein through heating, cooling, and pressure on a machine that makes pasta. And then we put that into a mixer, we mix in the flavor, and that's beyond me. That's it. Simple.
Speaker Change: So I think the catalyst for the growth of this category is the truth.
Speaker Change: How many people can we get to understand that our product is simple, it's clean?
It's really good for you, and it tastes great.
Speaker Change: Those are the things that are going to move this category forward, and it will happen. As I mentioned, all this noise around electric cars not working, solar not working, ice being contaminated.
Speaker Change: You know, it's all part of a process, and I thought we were going to get through it. I thought we'd beat it, but we went through it, and we're going through that, and what they call the trough, I think we're coming out of the trough where we're starting to go up what they call the slope of enlightenment in innovation literature.
Speaker Change: And what will bring the consumer back is a fundamental understanding that this is a very simple and clean product. It tastes great and it's really good for you.
Speaker Change: Any serious scientist around regenerative beef will tell you that's just a non-starter. Sure, you can have some beef out on the pasture, but you have to have far, far less, right? So that's not going to serve to provide a global protein solution.
Speaker Change: There are not that many other options, right? And so we will get to where we need to go It's about educating the consumer and we're doing that
Got it. Thank you. I'll pass it on.
Thank you. Thank you.
Speaker Change: And your next question today will come from Peter Saleh with BTIG. Please go ahead.
Great. Thanks for taking the question.
Speaker Change: these topics have been touched upon but I didn't want to ask maybe in a different way
Speaker Change: Ethan, you know, a little over a year ago, you had mentioned that in 2020, 50% of customers thought plant-based meat was a healthy alternative.
Speaker Change: And then by 2022, I think that number had declined to about 38% and had continued to decline. I'm curious if you guys are still tracking that and have we bottomed on that?
Speaker Change: are we bottomed and starting to see that kind of maybe tick up a little bit given some of the work you've been doing and then I have a follow-up.
You have a great question.
Speaker Change: Yeah, so we don't track that from a category perspective as close as we do for our own brand.
Speaker Change: and we are starting to see a change in that within our own brands. And we've had a lot of help from a lot of really constructive people, whether it's Joy Bauer, who's a top nutritionist in NBC, all of this, who's a consultant for us and has done a lot of reformulation work with us, or it's the doctors that we use or the Stanford work we've done. I mean, there's no brand in the world, I don't think, that's worked harder on, you know, really...
Speaker Change: bringing into the core of our product the concern for human health. I mean we have worked so hard to make sure, and mind you like my parents eat this product, my children eat it, I eat it, but it is extraordinarily important to me that this product furthers human health.
Speaker Change: And so it is with much frustration that I hear these industry lobbyists and they're highly paid.
Speaker Change: and SLCC folks who care their water denigrate what we're trying to do. But I'm very confident over time that percentage will continue to increase where people are like, yeah, you know, Beyond Meat makes sense.
Speaker Change: It's I can have a burger and I can have 75% less saturated fat I can have fat from avocado oil versus stuff that's going to Fill my arteries and require me to have my chest opened up when I'm you know 60 years old to have it have my arteries cleaned I mean knock yourself out if that's the outcome you want, but if you want a different outcome
Come over to Beyond Meat.
and have a burger.
That tastes great.
Speaker Change: and has a clean source of oil, which is avocado oil.
Speaker Change: And that's the message we've got to get out, and that's the message we are getting out. The steak product, we just launched a couple new versions of it.
Speaker Change: American Heart Association certified. Again, if you don't want that, don't have it. But if you're concerned about your health and want to have a great dinner...
Speaker Change: Go ahead and get beyond stake and have it. It makes sense. It's a smarter thing to do. It's a smarter thing to do from the environmental perspective, right?
Speaker Change: Think about all the energy that's in a plant. That's coming from the sun. It's creating the raw materials of life.
Speaker Change: through photosynthesis. We're just taking that protein directly from the plant, right? We're taking the nitrogen out of the air, it's going back into the soil, it's helping the soil regenerate naturally. There's not a lot of synthetic fertilizers being used. We're then harvesting that, we're running through a simple process of heating, cooling, and pressure. There are folks out there that want you to think there's a boogeyman in there, there's something dangerous. There's not.
Speaker Change: What there is really good stuff for the earth and really good stuff your body. We'll get the consumers down that someday
Speaker Change: Thank you for that. And then, Lubi, just a question on that long-term kind of...
Speaker Change: target, ultimately getting back to 30% on gross margin. Can you just help us a little bit, you know, what's embedded in that? I assume you need a, you know, a more meaningful improvement in industry trends. Just curious if, you know, if industry trends stay at, you know, kind of slow to mid-single digit,
Speaker Change: type growth. Can you still get to that number or just just help us get to there to that on a longer-term basis? Thanks.
Speaker Change: Yeah, it's a really good question. I think certainly if industry trends improved, right, we would welcome that and that would be
you know, hugely beneficial.
Speaker Change: But I think, you know, one of the reasons why we are focusing on increasing our presence, like I mentioned a little while ago, in, you know, parts of the
Speaker Change: The store where we have under indexed is we think there's actually an opportunity to grow our business
Speaker Change: right? Even in this environment, simply by gaining some market share. Because, you know, we, you know, at our core, we're an innovation company. We believe our products are second to none, and we believe we have a right to win in some of these areas, even if we, you know, have not.
Speaker Change: played in certain segments of the category in a much more meaningful way historically.
Speaker Change: And so I think there's an opportunity for us to continue to, you know, to grow our top line by capturing, you know,
Speaker Change: incremental market share. But, you know, I think your general comment is correct in that
Speaker Change: for us to get to, you know, the desired outcomes, you know, on EBITDA positive and, you know, eventually position, you know, our business, you know, to be...
Speaker Change: Self-sustaining and ultimately cash flow positive, right? We do need to
Speaker Change: either maintain or accelerate some of the recent positive momentum we've seen in terms of top-line growth.
Speaker Change: We need to expand gross margin, and then we need to drive some additional savings in operating expenses.
Speaker Change: So, you know, I think we've talked a little bit about the sales and gross margin, you know, on the operating expense side. You know, obviously, we've taken some measures, difficult measure for sure, with this reduction in force that we announced.
Speaker Change: and then, you know, also shutting down, you know, or suspending our operations in China. But there's other incremental opportunities that we're looking at as well to reduce our operating expenses, including, you know, I think we've discussed this before on previous calls.
that our facility, our headquarters facility here in...
Speaker Change: in El Segundo. There's some excess space that we may, you know, look to to sublease.
Speaker Change: If you looked at 2024 and certainly prior to that, quite a bit of dollars were invested in commercialization activities, particularly some work that we were doing with large QSR customers. I think we'd expect...
Speaker Change: That level of activity, at least in the near term, to be a little bit lower so we won't be investing quite as much in commercialization.
Speaker Change: And then there's some non-recurring fees, like consulting fees, as an example, which we would expect to be lower on a go-forward basis.
Speaker Change: And then, of course, we're just tightening our belts across the board and making sure that we're running very tight budgets. So combining all those things together, and hopefully being able to drive the top-line growth, expand the gross margins, and drive incremental savings in operating expenses, we think is going to get us to where we need to be. And just to add to that.
Very thorough answer.
Speaker Change: You know, if you look at the goal we set to become EBITDA positive by the end of 26,
Speaker Change: and you know that we're not suggesting any kind of outsized growth. This really is going to come from just continuing to trim the P&L and continuing to reduce operating expense in a way that's responsible. And that's, I think, what you'll see over 2025 and 2026 to get us there, just becoming more and more efficient.
Speaker Change: The other comment just on, you know, does the category need to grow for us to grow at a healthy clip?
Speaker Change: I thought Lubi's answer was spot on. If you go in a supermarket today, it's a category in transition. You've got certain products in certain places.
Speaker Change: And it's often actually hard to find some of our key products, right? Because there's so much change going on in the supermarket, between fresh and frozen and things of that nature.
Speaker Change: And so, you know, our goal, right, is to go back to large brand blocks. I'm increasingly agnostic about whether they're fresh or frozen, but what I do want to see is a consumer be able to easily identify in the store where they can buy our products, and we're working with retailers.
Speaker Change: a retailer, I'll take Meijer as an example, where they do a really nice job of displaying.
Speaker Change: the products all in the same place, it's a clear brand block.
Speaker Change: You tend to see pretty good momentum there, right? And so that's one of the tools we have in our toolkit here to continue to drive growth even if the category doesn't respond and grow along with us. We also, as Lubi said, I mean our products are second to none in my view. We've got a terrific innovation team.
Speaker Change: We continue to make them cleaner, simpler, and we can go after some of that low-hanging fruit and intend to. It's not my dream to do that, necessarily. We have a much bigger...
Lubi: goal in view, but for right now, in terms of just stabilizing, hitting this EBITDA positive goal, there's some revenue we can go get through just taking our brand, our approach, into a category that hasn't had a ton of innovation recently.
Thanks for watching!
Thank you very much.
Lubi: 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: I appreciate the very thoughtful questions and, you know, we continue to drive the business toward this goal and, you know, took some tough decisions over the last several months to bring operating expense down even further and we'll continue to do that.
Lubi: Get the operating base to fit the near-term revenue and hit our goal of being sustainable. Thanks, everybody.
Lubi: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.