Total net revenue was $75.6 million, an 18% decline from the previous year but above the $70 million to $75 million guidance range.
Gross margin increased to 4.9%, up from the previous three quarters but down from 6.7% in Q1 2023.
Operating expenses were reduced by $6.8 million year-over-year, contributing to a decreased loss from operations to $53.5 million.
Adjusted loss from operations was $46 million after excluding a $7.5 million accrual for a consumer class action settlement.
Inventory decreased significantly from the previous year, and cash consumption was reduced compared to the same period in 2023.
Strategic Priorities and Updates
Beyond Meat is focusing on becoming leaner, with positive gross margin despite lower revenue, reduced operating expenses, inventory, and cash consumption.
The launch of Beyond Burger IV and Beyond Beef IV represents significant product innovation, with distribution expected to be complete by Memorial Day.
Beyond IV products have received various health and nutritional recognitions, highlighting the company’s focus on health benefits.
A marketing campaign for Beyond IV will emphasize the health benefits of the new product lines.
Financial Details and Outlook
Net revenues decreased by 18% due to a 16.1% decrease in the volume of products sold and a 2.3% decrease in net revenue per pound.
Gross profit was $3.7 million, with a gross margin of 4.9%, reflecting higher manufacturing costs and higher materials costs.
Operating expenses decreased primarily due to reduced headcount expenses, marketing, and selling expenses, partially offset by increased general and administrative expenses.
Net loss improved to $54.4 million, or $0.84 per common share, from a net loss of $59 million, or $0.92 per common share, in the year-ago period.
Adjusted EBITDA loss of $32.9 million represents the smallest adjusted EBITDA loss since Q2 2021.
Cash and cash equivalents balance was $173.5 million, with total debt outstanding at $1.1 billion.
2024 full-year net revenue guidance reaffirmed at $350 million to $345 million, with expectations for gross margin improvement in the second half of the year.
Question and Answer
Sales Outlook Confidence and Market Dynamics
Question
What factors contribute to the company’s confidence in reiterating full-year guidance despite recent pricing increases and volume fluctuations?
Answer
The company’s confidence is driven by the introduction of the Beyond IV product, which addresses the primary consumer concern of health benefits in the plant-based meat category.
The product has received endorsements from reputable health organizations and positive reviews, positioning it as a healthier alternative.
The impact of recent price increases, which began in April and May, is still being assessed, but the company is optimistic about the response due to the introduction of a new premium product.
New Product Cadence and Price Points
Question
How should we consider the timing of new product introductions and the potential movement of price points as part of the company’s strategy?
Answer
The full benefit of new product introductions and pricing changes will not be realized in the current quarter, but a meaningful increase in net revenue per pound is expected.
The company expects the new product and differentiated pricing approach to be accretive to margins globally.
International Performance and Factors
Question
What factors contributed to the softer performance in the international market, particularly in Europe, which has traditionally been a strong market for the company?
Answer
The decline in international sales was primarily driven by lapping a year-ago period with significant chicken product sell-ins and slower sales in the UK and Canada due to recessionary factors impacting consumer spending.
Phasing of Pricing and Gross Margins
Question
Can you provide more details on the phasing of pricing and gross margins between the first and second half of the year, and the expected contributions from pricing uplift and unit cost reductions?
Answer
The company anticipates significant benefits from both pricing increases and the consolidation of its production network, leading to improved gross margins.
The company expects a sequential improvement in gross margins in the second quarter, with further incremental improvements in the second half as the full impact of price increases is realized.
Customer and Competitor Reactions to Pricing
Question
How are customers and competitors reacting to the company’s pricing increases, and how is the company factoring in price elasticity into its guidance?
Answer
It is too early to determine the full customer reaction, but initial discussions with retailers have been positive, particularly due to the introduction of a new premium product line.
The company anticipates competitors, including its largest competitor, to follow a similar pricing strategy as they also work towards profitability.
The company believes its guidance incorporates appropriate conservatism regarding price elasticity, based on extensive consumer studies and consultations with external consultants.
Gross Margin and EBITDA Outlook for Q2
Question
What is the company’s expectation for gross margin and EBITDA in the second quarter, and how does this align with current analyst consensus?
Answer
The company expects a significant sequential improvement in gross margin in the second quarter, driven by fixed cost absorption, price increases, and reduced trade spend.
While the company does not provide specific EBITDA guidance by quarter, it believes the current analyst consensus for negative $25 million is not unreasonable, considering the top-line guidance.
SKU Rationalization and Target Consumers
Question
Can you provide an update on SKU rationalization efforts and whether there have been any changes in the target consumer profile for Beyond Meat products?
Answer
The company continues to focus on SKU rationalization, particularly with the exit of the jerky product line, and will emphasize the Beyond IV platform while not announcing any major SKU reductions at this time.
The target consumer profile remains consistent, with a focus on appealing to both health-conscious and taste-seeking consumers.
The emphasis on health benefits is a response to misinformation campaigns rather than a shift in target audience, and the company remains committed to delivering products that excel in both health and taste.
Category Growth and Competitive Landscape
Question
How does the company view the current state of the plant-based meat category and its potential for growth, and how is Beyond Meat positioning itself within the competitive landscape?
Answer
The company is optimistic about the potential for category growth, driven by the introduction of innovative products like Beyond IV and the increasing adoption of plant-based options by major QSRs, as evidenced by McDonald’s recent promotion featuring the Beyond McPlant.
Beyond Meat is focused on maintaining its leadership position by executing on fundamental strategies such as cost reduction, pricing optimization, and product innovation.
Cash Burn and Balance Sheet
Question
What is the company’s outlook on cash burn and the potential need for additional financing, and what factors would influence the decision to raise more capital?
Answer
The company anticipates a continued reduction in cash consumption throughout the year, with the first quarter being an exception due to inventory build-up.
The company remains focused on bolstering its balance sheet and will consider a combination of debt and equity options to achieve this goal.
Marketing and Communication Strategies for Beyond IV
Question
How does the company plan to effectively communicate the health benefits of Beyond IV to consumers and drive a step-change in perception?
Answer
The company will utilize a multi-faceted marketing campaign to highlight the health benefits of Beyond IV, including featuring endorsements from reputable health organizations on packaging and point-of-sale materials.
The campaign will emphasize the product’s positive attributes and counter misinformation surrounding plant-based meat options.
Balance Sheet Strengthening and Taste Comparisons
Question
Is the company still considering a combination of debt and equity to bolster its balance sheet, and can you provide insights on taste comparisons between Beyond Meat products and competitors, addressing anecdotal feedback?
Answer
The company confirms its previous statement regarding considering a combination of debt and equity to strengthen the balance sheet.
The company acknowledges the competition’s quality and emphasizes that ground meat products without seasoning may have similar taste profiles, but the company’s products excel in taste testing and are developed with a focus on delivering the best possible experience for consumers.
