Beyond Meat, Inc. Price & Performance (BYND)

Which are non GAAP financial measures. While we believe these non GAAP financial measures provide useful information for investors, Any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release to their most comparable GAAP measures. And with that, I would now like to turn the call over to Ethan Brown. Thank you, Paul, and good afternoon, everyone. I'll begin 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. I believe the past year reflects an important In the second half of the year, we registered two consecutive quarters year over year net revenue growth following more than two years of declining sales.

This encouraging sign comes as a category and our brand continues to endure a significant reset one driven by broad consumer confusion regarding the value proposition of our product lines, I'm proud 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. I've often summarized the team's response with such commentary as iron sharpens iron and the toughest wins make the strongest branches. And I'm truly grateful that they took considerable adversity and used it to make our products even better. Specifically, [indiscernible] the Sun Sausage line and the recent extension of our award winning Beyond steak platform all of which enjoy various accreditations from the American Heart Association, American Diabetes Association, and Clean Label Project, Beyond Meat is making eating delicious plant based center of the plate protein even healthier. At the same time making statements. No matter the level of misinformation and misdirection, all of which do a serious disservice to the consumer who may otherwise make positive changes in their diets, lives and health We will stay the course continue to innovate and perfect our craft and ultimately prevail for the benefit of the consumer the rest of life with whom we share it. [indiscernible] Needless to say, the key to staying the course and winning having a sustainable business model.

We made great strides in this direction in 2024. Namely, we took out just over $50,000,000 in operating expenses, excluding a $7,500,000 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. For the full year, we generated $326,500,000 in net revenues.

While this was down 4.9% versus 2023, we one can see that the rate of decline slowed substantially versus the previous two years we produced growth in the last 212.8% for the full year and while lower than our expectations, it reflects strong progress across COGS. Specifically, full year 2024 COGS per pound of $4.07 with roughly $0.4 or 9% lower than 2023 after adjusting for the impact of certain non cash charges. In our Q4 COGS per pound achievement of $3.91 represented our best quarterly achievements in Q2 twenty twenty one.

However, relative to our expectations, these COGS gains will somewhat obscured by lower than expected net revenue per pound, a slower build of The U. S. Price increase than anticipated, and unfavorable changes in foreign currency exchange rates. We achieved these improvements in net revenues, and gross margin while significantly reducing expenses. The combination of these factors drove an [indiscernible] after adjusting for the impact of certain non cash charges. Now turning more specifically to the fourth quarter, I'll briefly mention a few key highlights. We generated net revenues of $76,700,000 reflecting a 4% increase year over year. The combination of higher pricing, lower promotional spending reduction in COGS per pound strengthened gross margin to 13.1%, up substantially year over year. Operating expenses in the fourth quarter were $47,800,000 a $29,100,000 reduction from $76,900,000 in the year ago period or approximately $11,500,000 after adjusting for the impact of certain non cash charges The net effect of these outcomes was a meaningful reduction in adjusted net loss year over year.

I applaud our team for these large strides towards sustainable operations and know they share in my enthusiasm for continued progress to this end in 2025. Globally, in the fourth quarter of twenty twenty four, we continue to see encouraging momentum though inconsistent in its distribution. For example, in France, McDonald's launched Veggie McPlans nuggets in more than 1,500 restaurants, joining McDonald's in seven other European countries offering Beyond products.

We are encouraged by this progress well as broader consumer trends in France. 68% of the population is reducing meat consumption and 27% regularly incorporates plant based alternatives according to a 2023 study. Moreover, in France, beginning this month, we launched Beyond in retail This expands our presence in this important EU market where we already sell Beyond Burger Beyond Mints, Beyond Chicken, Beyond Meatballs and Beyond Sausage, Other areas of recent expansion in Europe include the introduction of Smashburger as a Tesco UK, and the plant burger at Wendy's Limited time in the country of Georgia 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. Position the business to achieve run rate EBITDA positive operations by year end 2026. We expect to do so by attacking four key goals These were as follows: one, deliver comparable year over year top line net revenues. Though we welcome substantial growth in 2025, it is more important that the team understand the premium importance achieving EBITDA positive operations and active discipline when considering near term growth opportunities that may conflict with this governing objective.

Accordingly, we are targeting roughly comparable net revenues with as I note below, considerably less operating expenses and higher gross margin. Moreover, we expect to regain as well as increase distribution in certain channels that should help with margin accretive top line performance.

Finally, with respect to top line performance, we will continue to lean into and expand health related products and marketing as we bring new innovation to market this year. Two, improved gross margin to approximately 20% on a path to longer term gross margin exceeding 30% 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 consolidating lines to further expand gross margin.

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. Three, further reduce operating expenses over the two year period 2025 and 2026. As implied by our guidance, we are pursuing further meaningful reductions in operating expenses this year. To this end, yesterday we initiated an additional reduction in force have identified an aggressively reducing programmatic spend in The U. S. Are suspending our operational activities in China. As I hope is clear, we deeply value our employees and making this necessary adjustment to our operating base is not done lightly. We are fortunate to have a tremendously talented, dedicated and resilient team at Beyond.

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 Four, strengthen our balance sheet. 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 We have no secured debt our unsecured indenture provides us with significant flexibility In closing, we look back at 2024 as a key year of transition for Beyond Meat. From this vantage point, we eagerly look forward to executing our four strategic priorities for 2025, remain highly confident in our ability to lead the category through what has been a challenging correction borne in manufactured ambiguity and believe unequivocally in the inevitable and central role that plant based meat will play in our global future. I look forward to taking your questions later. I will now turn the call over to Luby. Thank you, Ethan, and good afternoon, everyone. I'll review our financial results for the fourth quarter of twenty twenty four and will then provide our outlook for 2025 followed by some preliminary thoughts on our longer term financial objectives.

In the fourth quarter of twenty twenty four, net revenues increased 4% to 76,700,000.0 compared to $73,700,000 in the year ago period, 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 The increase in net revenue per pound was primarily driven by lower trade 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. Breaking this down by channel, U. S. Retail net revenues increased 5.7% to $33,900,000 in the fourth quarter of twenty twenty four compared to $32,100,000 in the year [indiscernible] Primarily due to a 10.6% increase in net revenue per pound partially offset by a 4.5% decrease in volume of products sold. 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. 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.

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.

Turning to Foodservice.

U. S. Foodservice net revenues decreased 2.1% to $10,500,000 in the fourth quarter twenty twenty four compared to $10,700,000 in the year ago period 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. 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. In our international channels, international retail net revenues decreased 1.7% to $13,100,000 in the fourth quarter of twenty twenty four compared to $13,300,000 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. The decrease in volumes sold primarily while the increase in net revenue per pound was primarily driven by lower trade discounts and changes in product sales mix, partially offset by unfavorable impact from FX and price decreases of certain products. International Foodservice net revenues in dollars dollars in the fourth quarter of twenty twenty four compared to $17,600,000 in the year ago period, primarily due to an 8.9% increase in volume of products sold, This increase in volume mainly reflected increased sales of chicken products to a large QSR customer in The EU.

Net revenue per pound in international foodservice was up slightly year a 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. Moving down the P and L, gross profit in the fourth quarter of twenty twenty four was $10,000,000 or gross margin of 13.1% compared to a loss of $83,900,000 or gross margin of negative 113.8% in the year ago period, Recall that gross profit and gross margin in the year ago period included certain non cash charges totaling 77,400,000.0 consisting of $66,900,000 in charges associated with our global operations review and $10,500,000 from other specific non cash charges 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 foodservice sales and unfavorable changes in FX, We were nonetheless pleased with the continued sequential improvement 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. 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.

Turning to OpEx, operating expenses were $47,800,000 in the fourth quarter of twenty twenty four, compared to $76,900,000 in the year ago period Operating expenses in the year ago period included certain non cash charges totaling 17,600,000.0 associated with the global operations review Excluding the impact of these non cash charges, the decrease in operating expenses in the fourth quarter of twenty twenty four was primarily driven by reduced marketing expenses lower consulting fees and reduced nonproduction headcount expenses Below the line, total other expense net was $7,000,000 in the fourth quarter of twenty twenty four, compared to total other income net of $5,700,000 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. Overall, net loss was $44,900,000 in the fourth quarter of twenty twenty four compared to $155,100,000 in the year ago period. Net loss per common share was $0.65 in the fourth quarter of twenty twenty four, compared to $2.4 in the year ago period. Net loss in the year ago period included certain non cash charges totaling $95,000,000 or the equivalent of $1.47 per common share. Adjusted EBITDA was a loss of $26,000,000 or negative 33.9% of net revenue in the fourth quarter of twenty twenty four compared to an adjusted EBITDA loss of $125,100,000 or negative 169.9% of net revenue in the year ago period, which included the impact of certain non cash charges.

Turning now to the balance sheet and cash flow. Our cash and cash equivalents balance including restricted cash was 145,600,000.0 and total outstanding debt was 1,100,000,000.0 as of 12/31/2024. Net cash used in operating activities was $98,800,000 in the year ended 12/31/2024, compared to $107,800,000 in the year ago period. Capital expenditures for the full year 2024 totaled $11,000,000 compared to $10,600,000 in the year ago period. Including proceeds from the sale of certain fixed assets during the year, Net cash used in investing activities was $6,200,000 in the year ended 12/31/2024, compared to $9,500,000 in the year ago period. Net cash provided by financing activities was $45,800,000 in the year ended 12/31/2024, compared to net cash used in financing activities of $500,000 in the year ago period. Previously communicated, we deployed our at the market or ATM program in the fourth quarter of twenty twenty four which generated net proceeds of approximately $46,700,000 through the sale of approximately 9,750,000.00 new shares of common stock. The proceeds raised through the ATM are intended to help us continue to invest in our business, grow revenues and reduce costs. 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.

Will provide further updates if and when appropriate, but do not plan to comment on this further during our call today. 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 $320,000,000 to $335,000,000 and gross margin is expected to be approximately 20%. Operating expenses are expected to be in the range of $160,000,000 to $180,000,000 and capital expenditures are expected to be in the range of $15,000,000 to $20,000,000 For the first quarter of twenty twenty five, net revenues are expected to to be roughly comparable to Q1 of twenty twenty four. 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 twenty twenty six. The reduction in force we announced today as well as our decision to suspend our operational activities in China, are two measures among the largest set of initiatives we are pursuing in service of this 2026 objective.

Beyond operating expense reductions, we are also pursuing including by focusing on incremental distribution opportunities within our existing portfolio we are investing incremental capital to drive further production efficient and gross margin expansion. Believe it is critically important to steer our organization towards this long term profit 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. We will now begin the question and answer session.

And your first question today will come from Ben Thoyer with Barclays. Please go ahead. Yes, good afternoon and thanks for taking my question. Ethan Newby, How are you doing? Good. Hi, Ben. Good stuff. So two quick ones on my side. So number one, just wanted to understand a little bit about 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, particularly in retail in The U. S? And then I have a quick follow-up.

Great. Thanks. This is Ethan. Good question and it's very astute to look at that. If you 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 on top of all the noise, which continues to impact Vector around ingredients and process and this, which we are are confident will die down. But it's about providing a very clean and simple product 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 It seems to be working and we were pleased to see the elasticity.

Okay. Got it. And then my follow-up is just real quick to clarify on the guidance that call it more or less flat on the top line. I assume that obviously accounts for the China suspension of operations. 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, such as that we get kind of like have maybe adjusted revenues just to see what what the impact of China suspension is? And is that temporary? Or how should we think about this? Because it doesn't seem like doesn't sound permanent. So just want to understand 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 is really driven by my desire to not destroy revenue generation activities that would work against EBITDA positive goal that we've set. I think this EBITDA positive goal is a a very important milestone obviously for the company and our willingness to put it out there publicly.

It is the next step in the evolution of Beyond Meat and 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 looking to try to optimize for margin, optimize for EBITDA and stay away from things would distort or conflict with those goals.

And your next question today come from Gammil Gajrawalla with Jefferies.

You maybe talk about your kind of core consumer and if it's if the consumers evolved and who they are, maybe demographics, maybe income level or anything like that as you sort of roll out new products, new marketing, your you're sort of evolving your message. Can you talk about have you observed any changes in who your core customer is?

I think we're getting much more focused on the health oriented consumer It's just such a time of I wouldn't say turbulence, but there's just puts and takes all over the place kind of where the category is headed, where the brand is headed. Like if you look at The consumers' interest in what we're doing, it remains extremely high. If you look at Time Magazine, I think we were awarded one of the world's best brands, Newsweek, I think the world's most trusted [indiscernible] [indiscernible] change the world brands, things of this nature showing up on all of these lists, including the independents top 100 climate change. So there's still a very strong interest in what we're doing, but there's also a very strong countercurrent, which is this narrative 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 or much truth to it. But it is a very powerful incumbent industry campaign that's gotten picked up by certain punnents and kind of what we call the Carnebros on Instagram and podcasts that are misinformed. And so our consumers increasingly that more educated someone who can see through that noise and they are the ones that are carrying us back to growth.

And if you look at 2024, Is it terms of the year, right, in the last two quarters of the year, return to growth across the year, we improved margin by over fourteen percentage points.

Reduced operating expense while we're doing that by about $50,000,000 and then delivered about $100,000,000 improvement in adjusted EBITDA. So all these actions are taking the business towards a sustainable operation and we're focused on that for very obvious reasons, but one of the reasons, right, is that we continue to see a very strong long term trend toward what we're doing. If you look at Some of the examples that we gave in my prepared remarks with retail being up 5.7% that occurred where as we just talked about in the previous question, we where the decline in volume sold is slowing pretty significantly. If you look at international foodservice, that's another really nice bright spot where we're up about 9% in dollar sales. But also up about 9% in volume. Particularly on the back of something that's pretty special that's happening with a certain customer in a certain market. And I can't promise that these trends will persist, but nor can I promise that the areas where we underperform will persist? And if you look at U. S. Foodservice and international retail, there's just a lot of things moving up and down as people try to figure out this category.

But I am very certain that the category and the brand will over time fulfill the promise of the brand, right? And that's I've used examples Beyond, whether it's the manufactured ice industry, where first people the incumbent industry said it was contaminated. It's about one hundred and thirty five years ago now, but a great case study. It turned out it wasn't, right? Turned out that we all now use artificial or manufactured ice You probably use some today to cool your drink or cool something in your house. If you look at electric cars, right, people are saying electric cars are never going to have the range. Well, turns out they've range enough, right? And then if you look at solar and wind, they'll never scale. Well, it turns out they did. I got solar in my roof and I'm sitting on the porch of my farm, I can see huge wind turbines up on the hills where forty years ago it's 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. But if you look at the trends, then you look at what's going on in animal agriculture, there's some things that are going on in agriculture, existential threats right?

If you look at the beef prices today, they're starting to rise. What's that about?

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 right? What's that about? That's not something that's easily attainable, right? That's about the bird flu. So all of these things are going to worsen with a warming climate and Miami is going to do what it does, right? We're going to continue to innovate. Going to continue to offer clean, simple ingredients to consumers who are willing to look through a lot of the noise and do something that's better for their family and better themselves. We're also putting facts out there because at some point serious people need to step forward and deal with these problems. And we're there to help. Right? And so whether it's the doctors that we're putting together, the nutritionists, the dietitians to help consumers see the benefits of eating plant based meat and to not believe all the noise, right? 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 label product. We're putting together organizations to help cut through all of this noise. It's a period of uncertainty.

Right? But we're doing the right things, continue to innovate and make the products healthier and healthier. We continue to surround ourselves with the best minds in science and and public opinion around health. And over time, smaller consumer group now that's buying the products will expand into the general population as we break through the mist break through a lot of the noise and provide people great tasting food.

That's really good for them. So my view is that this consumer base will continue to evolve into a much broader base it's just taking time.

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 taking my questions. It's a terrific paper written by Cameron Richardson, it's a VC firm where they compare the The growth of the manufactured edge industry to literally to plant based meat and talk about how there was a very concerted effort by folks who were cutting 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. Turned out that the ice coming from the rivers during a period industrialization was contaminated, not the ice being made in these machines.

Got it. Interesting. Thank you. Thank you. And your next question today will come from Ken Goldman with JPMorgan. Hi, thank you. 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, distribution gains that could help mix reasons for it to increase to this degree. But it's quite a an uptick in terms of basis points that you're looking for versus 2024 Obviously, 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 visibility into at this time if possible.

Great. Ken, thanks. Appreciate it. So So if you look at the progress we made over the last year, that's kind of 14 percentage point increase in margin. 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 very fragmented Production network. With over 13 different sites, co packers. And consolidated that into our own internal manufacturing packer. That took an enormous amount of effort and complexity. To break all that down, all logistics work and then to build up into our own facilities. And we're not completely done. But I would hardly say 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. Now we have the opportunity with a more stable production process to really start to grind away at that. [indiscernible] if the thought is that we can't sort of get seven or eight percentage points out of that Now that we're stabilized, we're able to get better overhead absorption. You don't I think we can. And I think I'm very optimistic that we can and in fact potentially do better because we've stabilized things.

And so now it's about we're making incremental investments in our facilities to increase automation, We're doing another RFP for materials and ingredients. So all of these things allow us maybe to take a breath and to now focus on optimizing Three or four years ago, we were scrambling to build out this network. [indiscernible] Then we had to go reverse all that. So there's a just in both cases, there was kind of fixing the bicycle or riding it.

Now it's in the shop.

We have opportunity to really drill down on how to make this thing so I'm looking forward to what the teams can do this sorry.

Can we go ahead? 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 benefit from the price increases, right, that we took in in The U. S. Obviously, those started to kick in, in Q2 of twenty twenty four. So we'll have full years worth of those. There will be some select price increases in 2025, not nearly as broad. In U. S. Retail as we had in 2024. But there should be some impact from that. And then 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 then particularly, we're actually consolidating some of our manufacturing footprint at our facilities in Columbia, Missouri. When you look at our network of warehouses, across The U. S, there's some work to be done there that just rationalizes the foot so you combine that with what Ethan mentioned in terms of some areas where we are going to invest some incremental CapEx to drive some efficiencies and throughput, etcetera. And we feel pretty pretty comfortable about our ability to drive that incremental improvement in gross margin.

Very clear. Thank you both.

Yes. Sure.

And your next question today will come from Robert Moskow with TD Please go ahead. Hi, Ethan. Hi, Luby. A couple of questions. Hi there. Just wondering about the forecast. You're up 6% or so in sales in second half but the guidance is for, I guess, flat in first quarter.

It 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? Or are you just being a little conservative And then I had a question about these these new customers that you're talking about. I guess you said regaining or getting into some channels that you're not normally in, What's your visibility into that? And when will you know whether or not you got that that distribution?

Yes. I think I wouldn't say the first quarter is really gaming or I don't mean that, but I can try to be conservative. As we consolidate the network, there's some tightness there. And so there's some impact from that. And then then 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 of things like that that we don't want to come out and be too bullish on the first. But across the balance of the year, we do think that the positive trends that we're seeing We'll continue But again, I really want to focus If we show 5% growth, great. But if we show terrific drive the $30,000,000 out of the OpEx it's 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 team on that.

And then Rob, so maybe to answer the second part of your question regarding distribution, I think The comments you were referring to was what I mentioned in my prepared remarks. It's not really about picking up new customers, it's about expanding our presence in different parts of the store that we historically have under indexed. So So that's various things, whether it's expanding the product assortment, right, that we've recently launched two new flavors of the Beyond Steak. As an example, And then also just focusing on expanding distribution for some of our core products, which as an example merchandised in the frozen section of the store, right, where historically we've over indexed to refrigerate it, but there's opportunities we believe to expand some distribution, right, on in the frozen aisle. Now as far as how much visibility we have into that, some of it is we feel pretty confident about and we believe those are coming. Others, it's we have to work on, right? And 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.

It's more about, a expanding our presence within the stores within existing outlets.

I understand. And Luby, a follow-up. Think we're all kind of waiting for an update on the more profound announcement on recapitalization You've been talking about it for a while and I think you the comments are kind of purposefully there's not a lot of material things you can say, but isn't it fair to say that like the convertible It matures in two years. Is that kind of the timeframe that you have before you do have to do something much more profound.

I mean, we certainly would have to do something within two years. But the point that I I made in my prepared remarks, look, we're continuing to evaluate alternatives, right? But it's 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 at 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 then we said we're going to in 2025 focus on on bolstering the balance sheet, right, and so we're following that plan and we feel pretty good about it.

It. And your next question today will come from Alexia Howard with Bernstein.

Hi there. Good evening, everyone. Can I ask quickly about the price points? Are you comfortable with your price gaps 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.

Yes. So we actually did hit that target in the particular product line with a particular customer, 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. We did that on maybe one or two lines against an industry that has too many lines to count, right, globally. And we're already producing and that gets back to a very simple observation made many, many years ago by people like Frances Lapis, just so much more efficient to take protein directly from plants. And the reason that we struggle to get price parity right now is really about volume. That's it. And so it is still a goal. And I you'll see it a differentiated goal whereas we push to provide very clean, very simple, very healthy ingredients to the consumer. That's going to have some burden on that goal. But there are other products that are lend themselves more to reaching it and primarily in the food service category. So we'll continue to pursue that [indiscernible] 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 Great.

And then as a follow-up, can I ask about the relative growth rates of the markets in Europe versus The U? S, Is Europe growing faster because the consumer demand is there? And as I think about The U. S, is there any catalyst that could accelerate the growth of the market from here or are we in steady state now? I'm thinking about hybrid products with cultivated fats, I mean, how close are those kinds of ideas Ian, is that two years, five years out? Is it something you would participate in? Just curious.

Yes, those are all really good questions, guys. So Europe is not homogeneous. In regard to its growth rates. 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. In terms of the process argument. The ag lobby is not as strong there. So it's certainly not as significant or strong and there's still a lot of good pockets of growth in Europe. But it gets back to the consumer there, particularly being motivated around climate. They're just seeing the world differently and much more willing to lean in. On the question of the cultivated and things of that nature, we certainly look at everything everything. We're agnostic to technology. It's really about the outcome. I think the trend is actually in the opposite direction is how simple can we make these products, how much can can we assure the consumer that the noise they're hearing about being processed is is an industry incumbent industry trying to protect itself, right? 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. We track that in an air chamber, Spire does it for us. It separates just naturally because the particle sizes between different between starch and protein. We run that protein through heating, cooling and pressure on a machine that makes pasta. All right. That's it. Simple. And so I think the catalyst for the growth of this category is the truth. How many people can we get to understand that our product is simple, it's clean and it's really good for you. [indiscernible] Right? 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 It's all part of a process and I thought we were going to get through thought we 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 and innovation literature. And what will bring the consumer back is a fundamental understanding that this is a very simple and clean product, tastes great and it's really good for you.

And the more and more consumers understand that, the more you see the market come back. But it's inevitable. I mean, all of this posturing around, we're going to to do regenerative agriculture, any serious scientist around regenerative beef will tell you that's just a nonstarter. Sure. Can have some beef out on the pasture. You have to have far, far less, right? So that's not going to serve [indiscernible] provide a global protein solution.

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 Got it. Thank you. I'll pass it on. And your next question today will come from Peter Saleh with BTIG.

Please go ahead.

Great. Thanks for taking the question. These topics have been touched upon, but I didn't want to ask maybe in a different way. Ethan, about a little over a year ago, you had mentioned that in twenty twenty, fifty percent of customers thought plan based meat was a healthy alternative. And then by twenty twenty two, I think that number had declined to about 38% and has continued to decline. I'm curious if you guys are still tracking that and if have we bottomed on that? Are we bottomed and starting 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.

Yes. Great question. Yes. So we don't track that from a category per [indiscernible] And we are starting to see a change in that within our own Beyond. And we've had a lot of help from a lot of really constructive people with this Joy Bauer, who's a top nutritionist in NBC, all of this, who's consultant for us and has done a lot of reformulation work with us and of course 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 really 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. It is extraordinarily important to me.

That this product furthers human health so it is with much frustration That's I hear these industry lobbyists and they're highly paid and slick folks who care their water denigrate what we're trying to do. [indiscernible] I'm very confident over time, that percentage will continue to increase where people like, yes, Beyond Meat makes sense. It's I can have a burger and I can have 75% less saturated fat. I can have fat from avocado oil. Right, versus stuff that's going to fill my arteries and require me to have my chest opened up when I'm 60 years old to have my arteries cleaned. I mean, 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 and has a clean source of oil, which is avocado oil. [indiscernible] And that's the message we've got to get out and that's the message we are getting the steak product. We just launched a couple of new versions of it. American Hardistuit If you don't want that, don't have it. But if you're concerned about your health and want Go ahead and get Beyond steak and have it.

I mean, it just it makes sense. It's a smarter thing to do. A smarter thing to do from the environmental perspective, right?

Like think about all the energy that's in a plant, right? That's coming from the sun, It's creating the raw materials of life through photosynthesis. We're just taking that protein directly from the plants, right? We're taking the nitrogen out of the air, it's going back into the soil, it's helping the soil regenerate now, synthetic fertilizer being used. We're then harvesting that running through simple process heating, cooling pressure. There are folks out there that want you to think there's boogeyman in there, there's something dangerous, not. What there is is really good stuff for the earth and really good stuff for your body. We'll get the consumer nurse down that someday.

Thank you for that. And then Luby, just a question on that long term kind of target, ultimately getting back to 30% on gross margin. Just help us a little bit? What's embedded in that? I assume you need a more meaningful improvement in industry trends. Just curious if industry trends stay at kind of slow to mid single digit type growth, can you still get to that number or just help us get to there? On a longer term basis.

Thanks.

Yes, it's a really good question. Look, I think certainly if industry trends improved, right, we would welcome that and that would be hugely beneficial. But I think one of the reasons why we are focusing on increasing our presence, like I mentioned a little while ago in parts of the store where we have under index is we think there's actually an opportunity to grow our business right, even in this environment, simply by gaining some market share. We at our core, we're an innovation company. We believe our products are second to none.

We believe we have a right to win in some of these areas even if we have not played in certain segments of the category in a much more meaningful way historically. And so I think there's an opportunity to for us to continue to to grow our top line by capturing incremental market share.

But I think your general comment is correct in that for us to get to the desired outcomes on EBITDA positive and eventually position our business to be self sustaining and ultimately cash flow positive, right, We do need to either maintain or accelerate some of the recent positive momentum we've seen in terms of top line growth We need to expand gross margin and then we need to drive some of [indiscernible] operating expenses. So I think we've talked a little bit about the sales and gross margin. On the operating expense side, obviously, we've taken some measures, difficult measure for sure with with this reduction in force that we announced.

And then also shutting down 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 I think we've discussed this before on previous calls, that our facility, our headquarters facility here in In El Segundo, there is some excess space that we may look to [indiscernible] we if you looked at 2024 and certainly prior to that, quite a bit of dollars were invested in commercialization activities, right? And particularly some work that we were doing with large QSR customers. I think we'd expect that level of activity at least in the near term to to be a little bit lower. So we won't be investing quite as much in commercialization. And then there's some non recurring fees, like consulting fees as an lower on a go forward basis, And then of course, we're just tightening our belts across the board and and making sure that 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, If you look at the goal we set to become EBITDA positive by the end of the year, of 'twenty six, and you know that we're not suggesting any kind of outsized growth This really is going to come from discontinuing to trim the P and L and continue to reduce operating expense in a way that's [indiscernible] And that's I think what what you'll see over '25 and 'twenty six to to get us there just becoming more and more efficient. The other comment just on does a category need to grow for us to to grow at a healthy clip. And I believe the answer was spot on. If you go into supermarket today, it's a category in transition. It's you've got certain products in certain places, 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 fresh and frozen and things of that nature. And so so our goal right is to go back to large brand blocks and I'm I'm increasingly agnostic about whether they're in fresh or frozen. But what I do want to see is the consumer be able to easily identify in the store where they can buy our products and we're working with retailers.

And when you see a retailer, I'll take Meijer as an example, where they do a really nice job of displaying the products all in the same place to clear brand block, 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 Luby said, I mean, our products are second to none in my view. We've got a terrific innovation team. 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 to do that necessarily. We have a much bigger 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.

Thank you very much.

Concludes our question and answer session.

I would like to turn the conference back over to Ethan Brown for any closing remarks.

I appreciate the very thoughtful questions and we continue to drive the business toward toward this goal. And it took some tough tough decisions over the last several months to bring operating expense down even further and continue to do that and get the operating base to fit the near term revenue and hit our goal of being sustainable. Thanks everybody.

The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect.