Q1 2025 Beyond Meat Inc Earnings Call
Speaker Change: Good afternoon and welcome to the Beyond Meat First Quarter 2025 conference call.
Speaker Change: 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.
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To withdraw your question, please press star then to.
Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to Paul Sheppard, Vice President F.P. and A and Investor Relations. Please go ahead, sir.
Speaker Change: 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.
Speaker Change: Before we begin, please note that all the information presented today is unordered 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 that 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 reports on phone 10Q for the quarter ended March 29th, 2025, to be filed with the SEC.
Speaker Change: and our annual report on Form 10K for the fiscal year ended December 31, 2024, along with the other fileness with the SEC.
Speaker Change: 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.
Speaker Change: Please also note that on today's call, management may reference adjusted EBITDA, adjusted the loss from operations and adjusted net loss, which are non-GAAP financial measures.
Speaker Change: Please refer to today's press release for a reconciliation of these non-GAAP financial measures to their most comfortable GAAP measures .
Speaker Change: And with that, I would now like to turn the call over to Ethan Brown. Thank you, Paul, and good afternoon everyone.
Ethan Brown: The first quarter of 2025 was clearly a disappointing one for us and a deviation from the previous two quarters in which we drove year-over-year revenue and gross margin growth.
Ethan Brown: Significantly reduced operating expenses and achieved large improvements in net income and adjusted EBITDA.
Ethan Brown: In Q1 2025, we experienced worsening, category, and macroeconomic conditions that impacted our top-line recovery and reverberated throughout our P&L.
Ethan Brown: Before going through what I believe is a very strong response to this interruption in our recovery, I'll provide some color around our results, including calling out at a high level, some extraordinary and more transient drags on our performance.
Ethan Brown: First, as we discussed in our previous earnings call, certain large retail customers in the United States elected to transition plant-based meat from the refrigerator to the frozen aisle within their stores.
Ethan Brown: In more than one retailer, this transition led to an interruption and availability of some of our core products throughout Q1 2025.
Ethan Brown: As category and macroeconomic headwinds more generally slowed velocities toward the latter half of the quarter It became harder to overcome the value, volume implications of these distribution gaps It became harder to overcome the value and macroeconomic headwinds more generally slowed
Ethan Brown: Looking forward across the balance of the year, however, we expect to build back much, though not all, of this and other lost distribution.
Ethan Brown: These gains provide the opportunity, all things being equal for better retail performance and subsequent quarters.
Moving from net revenues to gross margin
Ethan Brown: As I've shared previously, we've been consolidating our production network for a variety of reasons, including the right sizing of our manufacturing footprint to current revenues.
Bye.
Ethan Brown: Through these measures and the commencement of increased internal production at our devolved pencil-manual facility, we expect to see strong, year-over-year improvements in our production efficiency and costs.
Ethan Brown: Our Q1 results do not yet reflect these improvements for four primary reasons.
Ethan Brown: One, lower than anticipated sales volumes led to lower levels of overhead absorption.
Ethan Brown: 2. The change in product mix, in part reflecting the interruption and retail distribution of certain core items. And the larger percentage of sales coming from product with higher direct labor and utilities increased the baseline cost of goods produced.
Ethan Brown: 3. We saw some delays and lower than planned line throughput as we scaled new capacity in our development of ultimates of any facility.
Ethan Brown: These startup factors led to extended production over time, and more changeovers than would be typical.
Ethan Brown: Fourth, we recorded a particularly large inventory provision in this quarter, as we sought to dispose of certain inventories for strategic reasons.
Ethan Brown: This inclusion in our COGS, which is a non-cash impact, created a strong negative drag on margin for the quarter, but should benefit a real inventory carrying costs going forward.
Moving out of margin.
in the absence of further worsening category and macroeconomic trends.
Ethan Brown: We expect overall volume, as well as the volume of our core products to improve as we gain back retail distribution and benefit from seasonality, putting us in a better position to actually realize the plan benefits of a more efficient and appropriate sized production footprint.
Turning to our operating expenses.
Ethan Brown: I want to commend the team on managing tighter budgets, even as we need to be more aggressive, a subject I will touch upon in a moment.
Ethan Brown: Through our total operating expenses came in at $55.1 million, which still represents a $2 million year of re-reduction.
Ethan Brown: It's important to distinguish between ongoing up-ex and extraordinary or transient expenses, which for the quarter totaled 7 million.
Ethan Brown: These non-routine charges include legal arbitration expenses relating to a previously disclosed contractual dispute, but a former co-manufacturer.
Ethan Brown: Additional incremental non-cast charge is arising from decisions to increase inventory provisions for certain items.
Ethan Brown: and Expenses related to the suspension of our operational activities in China.
Ethan Brown: In addition to these aforementioned charges, I would also note that our op-axing Q1 includes severance payments related to our February reduction in force.
Ethan Brown: By setting aside these more transient costs, one can more clearly see evidence of progress with the Spector Baseline Operating Expenses.
Ethan Brown: Though this additional color provides greater visibility beyond the aggregate results, what is more important is what we're going to do to get back on track.
Ethan Brown: We take this deviation from our recovery extremely seriously and we're using it as an opportunity to strengthen our organization.
Ethan Brown: Whatever our top line turns out to be in this current environment of uncertainty, our overarching goal remains the same.
EBITDA positive on a run rate basis by year end, 2026.
Ethan Brown: To ensure that we achieve it, we are focusing additional internal and external resources on further driving our operational expenses down while optimizing our portfolio and manufacturing toward margin objectives.
Ethan Brown: We will also continue and deepen our efforts to recast our value proposition with consumers through the development, sale, and marketing of clean and simple plant-based proteins that taste great and support health and wellness goals.
I'll now turn to the second part of our recovery.
Ethan Brown: To be exceedingly clear, while Beyond Meat can always, and will always seek to improve our products, we believe the central issue impeding our returns to stain growth is perception, a more accurately misperception.
Ethan Brown: Beyond Meat is of course a protein product which, depending on the specific offerings, can enjoy certifications from the American Heart Association, the American Diabetes Association, and the Clean Label Project among other organizations.
Ethan Brown: Convenient products such as Beyond Steak deliver high levels of protein using simple and recognizable ingredients made through a process that is clean and efficient and absent cholesterol, drugs such as antibiotics and hormones, and of course lacking the threat of zoonotic diseases.
Speaker Change: We should be a central part of satisfying consumer interest for protein. Yet for reasons I will touch on momentarily, we need to reestablish ourselves within their decision set.
Speaker Change: Regarding taste, we regularly see our products on positive media and consumer reviews, including our flagship product, Beyond Burger, which recently won its seventh first place position in seven years in a largest survey of its kind, one answered by millions of consumers.
Speaker Change: We will continue to hit on these themes of taste and health and simple and clean ingredients that we expand our portfolio.
Speaker Change: For example, after years of resourcing development, last week we announced the arrival of Beyond Chicken Pieces nationwide at Kroger.
Speaker Change: Though this product has its roots dating back to Beyond Meat's beginning 16 years ago, over the last several years we put considerable effort into Beyond Chicken Pieces, Taste, Texture, Ingredients, and Nutrition before reintroducing it.
Speaker Change: With a simple and clean, ingredient deck, including avocado oil, and 21 grams of protein, the product is versatile, convenient, and one of my personal favorites.
Speaker Change: This reality vacillates press and clean and simple plant protein products notwithstanding in the main, beyond value proposition remains obscured, in doubt, and misinformation.
Speaker Change: If we look inward, our highest priority is driving operating and margin improvements.
Speaker Change: Externally, our highest priority is on dispelling misinformation and empowering the consumer to make informed decisions around our products.
Speaker Change: To this end, I would encourage you to watch a short film we put together that is gaining traction on YouTube called Planting Change.
Speaker Change: Planting Change, which is just shy of 10 minutes, which has over 2 million views in its short time online, explores the origin of misinformation regarding our products.
Speaker Change: is a glimpse of the relentless research on health and nutrition.
Speaker Change: Discusses the process we use to deliver protein from the field to the center of the plate and features some of our farmers talking about what growing for Beyond means for their livelihood, for their families, and for their communities.
Speaker Change: Looking forward, we are fast-following, planting change with the launch of our latest marketing campaign, real people, real results.
Speaker Change: Real People Rear Results is a social first 30-day challenge that follows six people of various ages and backgrounds as a shift to a healthy plant-based diet that includes Beyond Meat
https://www.kenhub.com
Speaker Change: The program was designed by Dr. Matthew Letterman, co-author of Forks Over Nights Plan, and the Whole Foods Diet.
Speaker Change: along with Dr. Aluna Polding, and in just 30 days participants saw real, positive changes to their health, while enjoying a plant-based diet that included delicious meals with the Beyond Burger, Beyond Meat and Beyond Steak, among other Beyond Products.
Speaker Change: From lower total cholesterol, lower LDL cholesterol, to weight loss, better sleep, higher energy levels, and lower information, real people, real result participants reported exciting benefits of a plant-based diet that includes our products.
Speaker Change: The Social Campaign launched on Instagram and Facebook, TikTok and YouTube, and we were amplifying it digitally across connected TV, Google Performance Max and Digital Out of Home in the coming weeks.
Speaker Change: The next six weeks a new participant video drops each week documenting their personal journey.
Speaker Change: More generally, stay tuned as we will be announcing more under the Real People Rear Results campaign and is accompanying 30-day challenge program across the balance of the year.
Speaker Change: We have successfully closed on a financing facility providing up to $100 million in new senior secured debt from unprocessed foods LLC, a wholly owned subsidiary of a hymns of foundation, a nonprofit organization focused on advocating for plant-based diets.
Speaker Change: This facility provides us with an option for additional liquidity, as we advance our strategic priorities and invest opportunistically in driving growth.
Speaker Change: We are pleased to welcome a new investor who deeply understands our industry and is a mission aligned with our point of face ethos.
on the Outer in the Call, over to Lubi.
Lubbe Kutua: Thank you Ethan, and good afternoon everyone. I'll begin by reviewing our financial results in a bit more detail before providing some brief comments on our outlook.
Lubbe Kutua: In the first quarter of 2025, never revenues decreased 9.1% to 68.7 million, compared to 75.6 million in the year ago period.
Lubbe Kutua: The decrease in net revenues was primarily driven by an 11.2% decrease in volume of product sold, partially offset by a 2.4% increase in net revenue per pound.
Lubbe Kutua: The decrease in volume of product sold was primarily driven by weak category demand in our U.S. retail and food service channels, pricey elasticity effects resulting from 2024 pricing actions and some loss of distribution in our U.S. channels.
Lubbe Kutua: The increase in net revenue per pound was primarily driven by lower trade discounts and list price changes, partially offset by changes in product sales mix and unfavorable changes in foreign currency exchange rates.
Lubbe Kutua: Breaking this down by channel, US retail channel net revenues decreased 15.4% to 31.4 million dollars compared to $37.1 million dollars in the year of O'Pirates.
Lubbe Kutua: The decrease in net revenues was primarily driven by a 23.2% decrease in volume of product sold, partially offset by a 10% increase in net revenue per pound.
Lubbe Kutua: This year of a year decrease in volume represents a reversal from the more positive momentum we observed in the third and fourth quarters of last year.
Lubbe Kutua: Consumption data suggests that consumer takeaway in U.S. retail progressively weakened in the first quarter of 2025, which we believe contributed to meaningfully weaker shipments than we had expected.
Lubbe Kutua: Although it is too early to tell and difficult to quantify, we believe broader macroeconomic concerns and reduced consumer confidence are negatively impacting our and other categories in general.
Lubbe Kutua: In addition to this more general softness in our category, we were also impacted by the tapping of certain items in the year-go period that did not repeat this quarter.
These included approximately 1.6 million in ingredient sales.
Lubbe Kutua: Some level of fort buying by customers in anticipation of price increases which we began implementing in the second quarter of last year and to a lesser extent, sales of Beyond Meat Turkey which we were in the process of discontinuing a year ago.
Lubbe Kutua: Furthermore, as I noted earlier, we experienced some loss of distribution as certain retailers transitioned our product from refrigerated to frozen aisles, although we expect to regain some portion of these losses beginning in the second quarter of 2025.
Lubbe Kutua: And finally, we did experience some temporary disruptions in supply of a few of our products as we ramped up production on a new manufacturing line at our default Pennsylvania facility as part of our in-sourcing initiative.
Lubbe Kutua: The 10% increase in never-revenue per pound in US retail was primarily driven by reduced trade discounts and the effects of our 2024 pricing actions partially offset by changes in product sales mix.
Lubbe Kutua: The impacts of volume and mix are worth calling out as they impacted not just our top line results, but also our gross margin performance which I'll elaborate on momentarily.
Lubbe Kutua: Turning to food service, the US Food Service Net Revenues decreased 23.5% to 9.4 million in the quarter of 2025, compared to 12.3 million in the year-go periods.
Lubbe Kutua: The decrease in net revenues was primarily driven by a 22% decrease in volume of product sold and a 2% decrease in net revenue per pound, primarily reflecting higher trade discounts and changes in product sales mix versus a year ago.
Lubbe Kutua: The decrease in volume of product sold was primarily driven by weak category demand, reduced burger sales to a QSR customer, and some impact from distribution losses.
Lubbe Kutua: Although we anticipate broader headwinds in this channel will persist in the near term, we're optimistic that efforts to build out our U.S. Food Service team over the last several months, which are largely complete now, will begin to pay dividends soon.
Lubbe Kutua: An International Retail Channel that revenues increased 0.8% to $12.7 million in the first quarter of 2025 compared to $12.6 million in the year-go period.
Lubbe Kutua: The increase in net revenues was primarily driven by a 10.3% increase in net revenue per pound, partially offset by an 8.6% decrease in volume of product sold.
Lubbe Kutua: The increase in that revenue per pound was primarily driven by changes in product sales mix and lower trade discounts partially offset by unfavorable changes in foreign currency exchange rates and price decreases of certain of our products.
Lubbe Kutua: The decrease in volume of product sold was primarily due to reduced sales of the company's ground beef products in the EU, as a packaging transition led to some disruption and limited loss of distribution for those items.
Lubbe Kutua: International Food Service Channel Met Revenue increased 12.1% to 15.3 million in the first quarter of 2025 compared to 13.6 million in the year's old period.
Lubbe Kutua: The increase in net revenues was primarily driven by a 13.5% increase in volume of product partially offset by a 1.2% decrease in that revenue per pound.
Lubbe Kutua: The increase in volume of product sold was primarily due to increased sales of chicken products to a large QSR customer, while the decrease in that revenue per pound was largely driven by changes in product sales mix and the impact of effects partially offset by lower trade discounts.
Lubbe Kutua: Moving down the PNL, Gross Profit in the first quarter of 2025 was a loss of 1.1 million or gross margin of negative 1.5 percent compared to gross profit of 3.7 million or gross margin of 4.9 percent in the year of all period.
Lubbe Kutua: Gross Profit and Gross Margin included approximately 5.2 million of extraordinary charges related to specific strategic inventory reduction initiatives and expenses related to the suspension of our operational activities in China.
Lubbe Kutua: As I mentioned earlier, our underlying gross margin performance this quarter, which fell short of our expectations, also reflected the impact of lower sales volume, certain fixed costs were spread over fewer pounds sold.
Lubbe Kutua: We also saw higher labor costs related to the installation and ramp-up of a new production line, and a tilt in our production mix towards certain products that are more labor-intensive and incur a higher variable overhead expenses, including utilities.
Lubbe Kutua: This reflects changes in our sales mix more broadly, as our lower-cost core products have born the front of softer shipments in recent periods.
Lubbe Kutua: This underscores the importance we are placing on our efforts to stabilize and ultimately restore growth within our core set of products, given the significance of gross margin expansion as a lever that supports our longer term objective of achieving sustainable operations.
Lubbe Kutua: Operating expenses were 55.1 million in the first quarter of 2025, compared to 57.1 million in the year-go period.
Lubbe Kutua: Related to a contractual dispute with a four-hour co-manufacturer, 1.3 million and non-cash charges arising from specific strategic decisions to increase inventory provision for certain inventory items.
Lubbe Kutua: and 1.2 million in expenses related to the suspension of our operational activities in China.
Lubbe Kutua: Below the line, total other income net was 3.3 million in the first quarter of 2025, compared to total expense net of 0.9 million in the year ago period, given by an increase in net realized and unrealized foreign currency transaction gains.
Lubbe Kutua: Overall, net loss was $52.9 million in the first quarter of 2025, compared to $54.4 million in the year of old period.
Lubbe Kutua: Net loss per common share was 69 cents in the first quarter of 2025, compared to 84 cents in the year-goal period.
Lubbe Kutua: Adjusted EBITDA was a loss of 42.3 million, or a negative 61.6% of net revenues in the first quarter of 2025.
Lubbe Kutua: Compared to an adjusted EBITDA loss of $32.9 million, or a negative 43.5% of net revenues in the year go period.
Lubbe Kutua: Turning to balance sheet and cash flow highlights, our cash and cash equivalence balance, including a restrictive cash was $115.8 million and total outstanding debt was $1.1 billion as of March 29th, 2025.
Netcash used in operating activities was 26.1 million.
Three months ended March 29th, 2025.
Compared to $31.8 million in the year of O'Pirates.
Lubbe Kutua: and Capitol expenditures were 4.5 million in the three months ended March 29th, 2025, compared to 1.2 million in the year of old period.
Lubbe Kutua: As it relates to our balance sheet, and as Ethan mentioned, we are pleased to announce that we have closed on a financing facility providing up to 100 million in new senior secured debt.
Lubbe Kutua: Any drawdowns would accrue interest of 12% prior to the initial maturity date of February 7, 2030, and 17.5% following that date in each case payable in kind.
Lubbe Kutua: The initial maturity date may be extended with the consent of both parties.
Lubbe Kutua: Furthermore, as part of the transaction, unprocessed foods will receive warrants in proportion to the amount drawn down on the facility.
Lubbe Kutua: of the 30-day VWOP period beginning May 8, 2025, with a minimum and maximum exercise price of $2 and $3.75 cents respectively.
Lubbe Kutua: Complete terms are disclosed in a report on form 8K filed with the SEC.
Lubbe Kutua: Although we have no near-term debt maturities in line with our strategic priorities for 2025, we continue to focus on strengthening our balance sheet for the long term, including evaluating potential transactions to address our existing convertible notes prior to maturity in 2027.
Lubbe Kutua: In this regard, we will provide further updates as and when appropriate.
Finally, a brief word on our outlook.
Lubbe Kutua: As with many other companies, we are experiencing an elevated level of uncertainty in our operating environment as a result of the uncertain and volatile macroeconomic conditions which could have unforeseen impacts on our actual realized results.
Lubbe Kutua: In light of this uncertainty, we believe it is prudent to withdraw our previous full-year guidance, and we are limiting our revised outlook to our second quarter in that revenue expectations only.
Lubbe Kutua: Specifically, in the second quarter of 2025, we expect net revenues to be in the range of 80 to 85 million, reflecting up among other things, the anticipated impact of ongoing softness and demand in our category and the consumer sector more generally.
Lubbe Kutua: 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 one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question is from Ben Theurer with Barclays. Please go ahead.
Ben Thurrer: Hey, good morning and well, good afternoon and thank you very much for taking my question.
With all the struggle, particularly in the U.S. market.
What potential initiatives do you take?
Ben Thurrer: to boost somehow or to at least stop the decline in volumes. What are you thinking about in terms of like just...
on the top line in the U.S.
Speaker Change: and then my second question would be probably more Salehubi. Can you share any more details as to the financing agreement? I've had 100 million in terms of like expected interest to explain how should we think about this.
Speaker Change: Maturities. Any more details you can share that might not be just readily available. Thank you.
Speaker Change: A great question. Good to hear from you all. I'll take the first and then hand it to Lubi.
Lubbe Kutua: So I think it's in a couple different buckets that I think about this, and one is easier than the other, and the first really is around distribution.
Lubbe Kutua: and so as I explained in my prepare remarks, two large retailers, one very large.
Lubbe Kutua: As they were doing their resets for a pretty sustained period, which encompassed all of Q1, right? And then they're going to be putting them into the frozen...
in the coming months.
Lubbe Kutua: And so talking to our sales team, our sales leader, they feel good about the distribution they're gaining back across the balance of the year in the U.S. retail.
Lubbe Kutua: And I think about 70% of our clients or so could be explained in the first quarter by that distribution gap. So seeing it come back, then the challenge becomes velocity.
and that's The Harder Challenge.
Lubbe Kutua: But we did see toward the end of last year in stores where we had not lost distribution, so where there was comps that were, you know, same stores.
Lubbe Kutua: We were starting to see, particularly with Beyond Four lineup, a slightly positive trend on velocity. Now that has not occurred in the first quarter, as I think we see some consumer slowdown in general.
Lubbe Kutua: But that second bucket is really the one that we need to focus on, not from a blocking and tackling of distribution but on how do we get back into the consumer decision set on our products? And I think we did the hard work over the last two years.
Lubbe Kutua: of trying to clear up some of this misinformation. If you think about where we were...
Lubbe Kutua: Two years ago it was kind of the height of this intense misinformation campaign where there's something wrong with the ingredients, there's the process and so on and so forth and we still have some of that but you can feel it waning a little bit and it's more of the truth starting to come out.
Lubbe Kutua: In the meat industry, but also by the pharmaceutical industry who didn't want to lose sales from selling antibiotics to livestock. So we kind of made it through that really intense pressure cooker. And now I think it's about, you know, we did the stamp study with all these things, I was talking about a lot.
But naturally about making that digestible.
Lubbe Kutua: for the consumer, no pun intended. And what I mean by that is, how do we put that next stop?
Lubbe Kutua: Social media, how do we get folks to understand that in a relatable way? And that's what this Real People Results program is about, and to see the first batch of these folks go through the program.
Lubbe Kutua: And it's, again, being work administered by a terrific doctor, Dr. Leaderman, he was one of the main doctors behind the Forks of a NICE plan.
Lubbe Kutua: as well as the Whole Foods Diet with Whole Foods at the store.
Lubbe Kutua: To see him use our products and plant-based eating in general to transform people's health outcomes, whether it's the energy levels, the cholesterol levels, there's good weight loss occurring, things of that nature.
Lubbe Kutua: is impactful and powerful, and so if we can continue to clear that message up
Lubbe Kutua: and get into the decision that, as I mentioned, that study I mentioned was from Cargo and it shows that very significant increase.
Among U.S. Consumers in Protein
Lubbe Kutua: to chip away at the misconception and drive a more positive perception around our brand, and we're doing that.
Lubbe Kutua: Two parts, one, restore this distribution, two, make sure we get the narrative narrative.
Lubbe Kutua: in front of the consumer, and I think we're doing so. So I view this really as an aberration versus a trend. I think if you look at our Q2, Q3, and Q4 results, what I hope you'll see is the impact of some of that increased distribution.
Okay...
Ben Thurrer: Ben, I'll address your second question which was around the the the financing and I think I provided some of the detail in my prepared remarks. But, um...
Ben Thurrer: You know, happy to sort of cover those again. So, you know, the initial term of the facility is for 0.75 years, just under five years, with some options to extend.
Ben Thurrer: As I mentioned in my prepared remarks, it is a delayed draw, facility, and any drawdowns in the initial period would accrue interest at 12%, that's through the maturity date of February 7th, 2030.
Ben Thurrer: And then they would accrue interest at 17.5% following that date. And as I mentioned on the call, it would be payable in kind interest initially. So I think that...
Ben Thurrer: Pretty much covers the key terms of that financing, but happy to address if there are further questions.
Speaker Change: No, no, just maybe a real quick follow-up on that. How do you think about what you've stated about in the press release that you continue to look into overall trying to...
Speaker Change: I mean, I know there are some easy end-to-sold women all my kind of stuff. So, from what else is terribly in consideration of the company to kind of like support the cash needs that you might have.
Speaker Change: You were a little bit hard to hear on that question, Ben, but I think you were asking about what else can we do to support our hard-catching set it?
Correct. Correct. Yes.
Speaker Change: Yeah, so, you know, obviously, you know, having access to this capital is certainly beneficial, you know, for the business, but I would say that that doesn't change any of the sort of...
Speaker Change: He initiatives that we are pursuing in support of this EBITDA positive goal of our youth.
Ethan Brown: In order for us to get there, and I think we discussed this on the last earnings call, you know, we have to stabilize the top line or sort of get to the question that you would ask Ethan, we have to expand gross margin and we have to, you know, kind of maintain, you know, pretty tight and we have to do that.
Ethan Brown: The Operating Expense, Expenditures, and look for further opportunities to reduce that. We really have to do all three of those things, and if we can achieve that, then obviously, the rate of...
Ethan Brown: Cash consumption of the business will be reduced, but obviously having some flexibility with this with this capital is also very beneficial to us.
Ethan Brown: Yeah, I think this way I can just add to that and get to other questions as well, but I want to overemphasize this point that
Ethan Brown: What's most important of the business, and this is obvious, but just so it's understood.
Ethan Brown: He is not necessarily driving some sort of spectacular croat at this time like what we're really focused on right is making sure that our expense space fits into whatever revenue is going to occur this year and then second that the margin gets to where it needs to be. Let's begin.
Ethan Brown: If you look at the factors that impacted the gross margin in the first quarter, which we went over on a pair of remarks, but happy to talk about as well, a lot of these should not persist.
Ethan Brown: And so we ended the consolidation of the network, got into the Pennsylvania facility, new line that we set up, it was slower than we expected, the volumes going through there.
Ethan Brown: All of those things that you get two and three, particularly Q2 and Q3, particularly with the seasonality benefit and how that benefits our core. We expect to see much better progress on margin and hopefully return to some of the trends you were seeing in Q3 and Q4 last year.
Speaker Change: Paul, I'll leave it to you. Good luck with that. Thank you very much, Ethan. Thank you.
Speaker Change: The next question is from Peter Saleh with BTIG. Please go ahead.
Peter Sala: Great, thanks for taking the question. Lubi, I think you mentioned on your prepared remarks. You're working on building out the food service team.
Peter Sala: If I heard you correctly, can you just elaborate a little bit on that in the U.S.? What is going to be the focus there? How is this strategy going to be different than prior years and just give us a little bit more detail on that? Thank you Thank you.
I can cover that.
Peter Sala: So, I shift on the call before getting onto this.
Peter Sala: with the head of that department. And I think the way to think about the U.S. Food Services, we've had a particularly tough...
Peter Sala: Ron at it recently, and the kind of distribution gains that I was talking about in retail.
Peter Sala: While it's not as cut and dry, it's not like summer coming back and things of that nature. That team is now more fully built out and we expect to see improvement in the US food service performance. Now it depends. That's one of the first places you start to see consumer concerns. So if that category continues to struggle with the Chipotle, McDonald's, etc. Let's go to Europe .
Peter Sala: I can't guarantee it, but we are starting to pick up more wins, and I think it has to do with...
Peter Sala: We've done better historically in the non-com space, universities, hospitals, things like that.
Peter Sala: We now really started to focus on that commercial space again and I don't think you should expect us to pick up up.
Peter Sala: You know, a massive name, QSR in the U.S. right now, but we're focusing more on...
Peter Sala: That smaller national account, and we are making some progress there, and I think you'll hear some fun stuff for encouraging news, rather as we progress through the year. But not kind of massive names, but maybe it's here down from that places that you would recognize.
Thank you very much.
Thank you.
Speaker Change: The next question is from Robert Moskow with TD Cowan. Please go ahead.
Robert Moskow: Hey, thanks. Lubi, your 2025 outlook, your pulling guidance for the year, but the reasoning was a little vague. You talked about elevated uncertainty in the operating environment.
Robert Moskow: So, does that have anything to do with tariffs and things that we've heard from other CPG companies? Or is it really just kind of like...
Speaker Change: Hey, the demand here in the US is hard to predict right now. Is there anything specific you're seeing with retailer changes that you don't want to opine on? I'm trying to dig a little deeper into what the verbiage means.
Speaker Change: Yeah, about Louis-Can-Can-Frog additional commentary, but the main point is, you see the uncertainty that is unfolding right now in consumer spending.
Speaker Change: and those are rippled for some companies, you cover a lot of the sector, you look at J.J. and Acts, you look at the stuff I just mentioned with Paul A and that.
Speaker Change: Donald, et cetera, but for us that can be significant, right? So we just don't know and there's no lurking concern other than that and I really want this team focused entirely on reaching profitability versus chasing a number arbitrarily.
Speaker Change: So I've been behind that, you know, but we'll have to just take a quarter by quarter right now. And the main point here is to get the C.B.A. positive gold done and stabilize the business. I mean, over time, and you and I have talked about this a lot, I have zeroed out.
Speaker Change: that this business is going to be the very large business we've expected it to be, but trying to drive...
You know, an upside right now in this environment.
Speaker Change: at the expense of stabilizing and reaching, you know, EBITDA and profitability, obviously not a good idea and so to really around let's take some of that pressure off, let's make sure we get the internal stuff right, let's make sure we get the margins right, and let's reach this EBITDA positive goal in a run rate basically.
and by the end of FOYSICS.
Go ahead, Louie.
Louie: I was just going to say, you know, to add to that. So, you know, it's obviously there's a lot of...
Louie: Discussions around tariffs and how that may impact various sectors in the broader macroeconomic environment. It's obviously still pretty early days, but I would say, we've obviously been focused on it as well, and we've done some analysis to try to understand what the implications might be. There's no guarantees, but I think at this point, we think the direct impact on our business is relatively minimal.
Louie: But, you know, nonetheless, I think that is causing, right, some discomfort across the the suit more generally.
Louie: and what we've seen in the past is a skittish consumer does not help our category. Back in I believe it was 2022 and sort of inflation was peaking across various portions of the grocery store.
Louie: We saw a lot of trading down or whatever you want to call it from the plant-based meat category into an animal protein and remember that still a vast majority of our consumers are flexitarians.
Louie: So, you know, all of our consumer surveys indicate that people who are purchasing our products are also purchasing animal protein. And so, I think, you know, there's definitely some correlation just between when you have
You know, fairly large.
Louie: The Clines and Volumes and some portions of our business. And as you know, that can be a pretty meaningful swing factor for our P&L, down the gross profit. And so, you know, we're just kind of weighing all of those factors together. I think it would be difficult for us.
Louie: to provide any sort of long-term outlook that's almost a year out with any high degree of certainty. And so we believe it's more prudent to look much closer in.
Okay, and just in SGNA, you mentioned some one-time expenses.
Louie: in First Quarter, some are legal expenses. So, can you give us kind of like a real run rate S-GNA for second, third, and fourth quarter? I guess is it 7 million less than what we have in First Quarter? Is that the right way to look at it?
Louie: Yeah, so what we reported in our Q1 results, you're correct, there was about a slightly over 7 million of extraordinary items in there. I think our legal expenses were elevated relative to what I would sort of characterize as normal course business, right? Part of that was related to this arbitration that we talked about.
Louie: about, and then there was some strategic decisions around inventory provisions, specifically as it relates to donations and as well as our China. So all of those combined. Now, we will...
Continue to see some impact, a low of B.
Louie: You know, split between COGS and ABACS from the shutdown of our operations in China.
Louie: I would say, you know, we currently expect to see a little bit of...
Louie: in terms of the legal expenses and then obviously the strategic decisions that impacted the donations that we called out in the press release. We wouldn't expect that to repeat, but unless there was similar type of strategic decisions.
John . Okay, thank you.
Speaker Change: The next question is from Kaumil Gajrawala with Jeffries. Please go ahead.
https://www.youtube.com or www.facebook.com
Speaker Change: Hey guys, I guess we'll put a follow up to Rob's question in what we're hearing across.
Speaker Change: You know, a lot of the rest of CPG, but to maybe drill down on one of the things we're also hearing is on is on destocking maybe a little bit more on hard goods that on food, but I'm curious if that's also something that you are.
Speaker Change: You're seeing and you're dealing with. And then with the second question on, would be some of the, you know, it sounds like kind of one-times to you just mentioned. Are there any additional things that are similar to that? We should be aware of for the coming couple quarters.
Speaker Change: I think on the D-stock, and we've heard some of that from our team, but we can't quantify it, but there was some discussion around that. More so it was, I think, in that latter.
Speaker Change: Part of the quarter is a general slowdown and consumer behavior but we did hear that as well but don't have a firm hold on the percent contribution.
Speaker Change: have access to the scanner data, and certainly what we saw was a progressive weakening in the category takeaway data.
in the first quarter. And so, when you have those types of trends, obviously the risk of...
Speaker Change: You know, inventories starting to build within the retail channel, um, does...
Speaker Change: Increase a little bit, so but I would say at this point we're not...
Speaker Change: Hearing like that broadly as a potential risk but you know certainly when you have an environment that's that's softening that that could potentially be a factor your second question in terms of
Speaker Change: The sort of one-time items. The only thing that, you know, at this point, I think that's really worth noting is that China, you know, the costs related to the suspension of our activities in China, that will, the way we're treating those expenses from an accounting perspective, excuse me, is we are, you know, taking accelerated depreciation on those expenses through the end of 2026. And so each quarter, we will call that out. Thank you very much, thank you very much.
Speaker Change: each quarter there will be some impact related to that decision. [inaudible]
Okay, got it. Thank you.
Thank you.
This concludes the question and answer session.
Speaker Change: I would now like to turn the conference back over to Ethan Brown for any closing remarks.
Speaker Change: I appreciate the good questions. I think we're, as I've said, just very focused this year on trying to make sure we're positioning the business for the EBITDA positive goal in the latter part of 2026, or run rate basis, and whatever the top line is, that's what we've got to go deliver, and I think we're making the right move to do that, so look forward to reporting out in August . Thanks.