BYND - NASDAQ

Good afternoon, and welcome to the Beyond Meat Fourth Quarter and Full Year 2024 Conference Call. All participants are in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Paul Sheppard, Vice President, FP&A, and Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone, and thank you for your participation on today's call. Joining me are Ethan Brown, Founder, President, and Chief Executive Officer; and Lubi Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to our fourth quarter and full year 2024 earnings press release filed today after market close. This document is available in the Investor Relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that all the information presented today is unaudited and that during the course of this call, management may make forward-looking statements within the meaning of the Federal Securities Laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in our earnings release along with the comments on this call are made only as of today and will not be updated as actual events unfold. We refer you to today's press release, our quarterly reports on Form 10-Q for the quarter ended September 28, 2024, and our annual report on Form 10-K for the fiscal year ended December 31, 2024 to be filed with the SEC, along with other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today's call, management may reference adjusted EBITDA, adjusted loss from operations, and adjusted net loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. And with that, I would now like to turn the call over to Ethan Brown.

Thank you, Paul, and good afternoon, everyone. I'll begin 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 inflection point in Beyond Meat's journey. In the second half of the year, we registered two consecutive quarters of year-over-year net revenue growth following more than two years of declining sales. This encouraging sign comes as a category in our brand continues to endure a significant reset, one driven by broad consumer confusion regarding the value proposition of our product lines among other factors. 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, with the launch of Beyond IV, 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 and at the same time making a statement. 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, our shareholders, the planet, and the rest of life with whom we share it. Needless to say, the key to staying the course and winning is having a sustainable business model. We made great strides in this direction in 2024. Namely, we took out just over $50 million in operating expenses, excluding a $7.5 million settlement and dramatically improved adjusted EBITDA, all while, as stated earlier, delivering two consecutive quarters of year-over-year net revenue growth after nine quarters of decline. For the full year, we generated $326.5 million in net revenues. While this was down 4.9% versus 2023, one can see that the rate of decline slowed substantially versus the previous two years, as we produced growth in the last two quarters of the year, as previously mentioned. Gross margin reached 12.8% 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 was roughly $0.40 or 9% lower than 2023 after adjusting for the impact of certain non-cash charges. And our Q4 COGS per pound achievement of $3.91 represented our best quarterly achievements since Q2 2021. However, relative to our expectations, these COGS gains were somewhat obscured by lower than expected net revenue per pound, reflecting changes in product sales mix, 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 a nearly $100 million year-over-year improvement in adjusted EBITDA, 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 $76.7 million, reflecting a 4% increase year-over-year. The combination of higher pricing, lower promotional spending and reduction in COGS per pound strengthened gross margin to 13.1%, up substantially year-over-year. Operating expenses in the fourth quarter were $47.8 million, a $29.1 million reduction from $76.9 million in the year ago period or approximately $11.5 million 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 2024, we continue to see encouraging momentum, though inconsistent in its distribution. For example, in France, McDonald's launched Veggie McPlant Nuggets in more than 1,500 restaurants, joining McDonald's and seven other European countries offering Beyond products. We are encouraged by this progress as well as broader consumer trends in France, where 68% of the population is reducing meat consumption and 27% regularly incorporates plant-based alternatives according to a 2023 study. Moreover, in France, beginning this month, we launched Beyond Steak in Retail. This expands our presence in this important EU market, where we already sell Beyond Burger, Beyond Mince, Beyond Chicken, Beyond Meatballs and Beyond Sausage. Other areas of recent expansion in Europe include the introduction of Smash Burgers at Tesco, UK and the Plant Burger at Wendy's for a 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 for 2025. These are 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 of 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 our health related products and marketing as we bring new innovation to market this year. Two, improve 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 consolidated 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 and are aggressively reducing programmatic spend in the U.S. and 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. In 2025, we will continue to evaluate options to further improve liquidity and optimize our capital structure, so we're well positioned to achieve our growth plans and unlock long term value. We have no secured debt and our unsecured indenture provides us with significant flexibility to pursue a range of potential transactions. 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 2025, remain highly confident in our ability to lead the category through what has been a challenging correction for a 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 and will now turn the call over to Lubi.

Thank you, Ethan, and good afternoon, everyone. I'll review our financial results for the fourth quarter of 2024 and will then provide our outlook for 2025, followed by some preliminary thoughts on our longer term financial objectives. In the fourth quarter of 2024, net revenues increased 4% to $76.7 million compared to $73.7 million 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 discounts compared to the year ago period, as well as price increases of certain of our products, partially offset by changes in product sales mix and unfavorable changes in foreign currency exchange rates. Breaking this down by channel, U.S. retail net revenues increased 5.7% to $33.9 million in the fourth quarter of 2024 compared to $32.1 million in the year ago period, primarily due to a 10.6% increase in net revenue per pound, partially offset by a 4.5% decrease in volume of products sold. 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 $10.5 million in the fourth quarter of 2024 compared to $10.7 million 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 $13.1 million in the fourth quarter of 2024 compared to $13.3 million in the year ago period, primarily due to a 10.4% decrease in volume of products sold, partially offset by a 9.6% increase in net revenue per pound. The decrease in volume sold primarily reflected lower sales of ground beef and chicken products in the EU, while the increase in net revenue per pound was primarily driven by lower trade discounts and changes in product sales mix, partially offset by unfavorable impact from FX and price decreases of certain products. International foodservice net revenues increased 9.2% to $19.3 million in the fourth quarter of 2024 compared to $17.6 million in the year ago period, primarily due to an 8.9% 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-over-year, primarily reflecting lower trade discounts and price increases of certain products, partially offset by changes in product sales mix and unfavorable impact from FX. Moving down the P&L. Gross profit in the fourth quarter of 2024 was $10 million or gross margin of 13.1% compared to a loss of $83.9 million 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 $77.4 million consisting of $66.9 million in charges associated with our global operations review and $10.5 million from other specific non-cash charges. 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 in cost of goods sold per pound from Q3 to Q4, which remains a key focus area for our team as we look to drive longer term gross margin back to 30% or higher over time. 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 $47.8 million in the fourth quarter of 2024 compared to $76.9 million in the year ago period. Operating expenses in the year ago period included certain non-cash charges totaling $17.6 million associated with the global operations review. Excluding the impact of these non-cash charges, the decrease in operating expenses in the fourth quarter of 2024 was primarily driven by reduced marketing expenses, lower consulting fees and reduced non-production headcount expenses. Below the line, total other expense net was $7 million in the fourth quarter of 2024 compared to total other income net of $5.7 million in the year ago period. The increase in total other expense net was primarily due to higher net realized and unrealized foreign currency transaction losses. Overall, net loss was $44.9 million in the fourth quarter of 2024 compared to $155.1 million in the year ago period. Net loss per common share was $0.65 in the fourth quarter of 2024 compared to $2.40 in the year ago period. Net loss in the year ago period included certain non-cash charges totaling $95 million or the equivalent of $1.47 per common share. Adjusted EBITDA was a loss of $26 million or negative 33.9% of net revenues in the fourth quarter of 2024 compared to an adjusted EBITDA loss of $125.1 million or negative 169.9% of net revenues 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 balanced including restricted cash was $145.6 million and total outstanding debt was $1.1 billion as of December 31, 2024. Net cash used in operating activities was $98.8 million in the year ended December 31, 2024 compared to $107.8 million in the year ago period. Capital expenditures for the full year 2024 totaled $11 million compared to $10.6 million in the year ago period. Including proceeds from the sale of certain fixed assets during the year, net cash used in investing activities was $6.2 million in the year ended December 31, 2024, compared to $9.5 million in the year ago period. Net cash provided by financing activities was $45.8 million in the year ended December 31, 2024, compared to net cash used in financing activities of $0.5 million in the year ago period. As previously communicated, we deployed our at-the-market or ATM program in the fourth quarter of 2024, which generated net proceeds of approximately $46.7 million through the sale of approximately 9.75 million new shares of common stock. 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. We 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 million to $335 million, and gross margin is expected to be approximately 20%. Operating expenses are expected to be in the range of $160 million to $180 million and capital expenditures are expected to be in the range of $15 million to $20 million. For the first quarter of 2025, net revenues are expected to be roughly comparable to Q1 of 2024. Although, we are not providing formal guidance beyond 2025 at this time, as Ethan mentioned, we are currently implementing a broad set of initiatives, which are intended to position the company for sustained EBITDA positive operations on a run rate basis by the end of 2026. 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 opportunities to accelerate our revenue growth, including by focusing on incremental distribution opportunities within our existing portfolio, and we are investing incremental capital to drive further production efficiencies and gross margin expansion. We believe it is critically important to steer our organization towards this long term profitability objective as quickly as possible 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. With that, I'll turn the call back over to the operator to open it up for your questions. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] And your first question today will come from Ben Theurer with Barclays. Please go ahead.

Yeah. Good afternoon, and thanks for taking my question. Ethan and Luby, 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 the consumer perception market dynamics, because it seems you guys were able to increase at least the price points, particularly in retail in the U.S. and volume impact wasn't as significant maybe as in the past. So maybe if you could shed a little bit more light on like the elasticities here and what you've been doing different in terms of your go-to-market strategies, particularly in retail in the U.S.? And then I have a quick follow-up.

Great. No. Thanks. This is Ethan. Good question, and it's very astute to look at that. 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 all this, which we are confident will die down. But it's about providing a very clean and simple product to a consumer that's willing to pay more for it. And that's what we're finding, and that's the continued direction of the brand. So I think that messaging around, look, these are very clean, very simple ingredients, we're going to charge you a little bit more, 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'd have kind of like have maybe adjusted revenues just to see what the impact of China suspension is? And is that temporary or how should we think about this? Because it doesn't seem like -- it doesn't sound so permanent. So just wanted to understand a little bit more on the China suspension comments.

Great. No. 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 distract the team into any near term revenue generation activities that would work against the EBITDA positive goal that we've set. I think this EBITDA positive goal is 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 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 that would distort or conflict with those goals.

And your next question today will come from Kaumil Gajrawala with Jefferies. Please go ahead.

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

I think we're getting much more focused on the health oriented consumer. And it's just such a time of, I wouldn't say, turbulence, but there's just puts and takes all over the place regarding kind of where the category is headed, where the brand is headed. Like, if you look at the consumer's 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 brands. Fortune, change the world brands, things of this nature are showing up on all 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 much truth to it. But it is a very powerful incumbent industry campaign that's kind of gotten picked up by certain pundits and kind of what we call the Carna Bros on Instagram and podcasts that are misinformed. And so our consumer is increasingly that sort of 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 ‘24, in terms of the year, right, in the last two quarters of the year, return to growth across the year, we improved margin by about 14 percentage points, reduced operating expense while we're doing that by about $50 million and then delivered about $100 million 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. And if you look at some of the examples that we gave in my prepared remarks, with retail being up 5.7% that occurred whereas we just talked about in the previous question, 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. And this is 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 before, whether it's the manufactured ice industry, where first people, the incumbent industry said it was contaminated. It's about 135 years ago now, but it's a great case study. It turned out it wasn't, right? It 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, well, electric cars are never going to have the range. Well, turns out they have 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 on my roof. And if I'm sitting on the porch of my farm, I can see huge wind turbines up on the hills where 40 years ago, it was just about getting coal out of those hills, right? So all these things just take time. It's taking a lot more time than we thought. But if you look at the trends and you look at what's going on in animal agriculture, there's some things that are going on in animal 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 livestock industry, prices are going up, right? What's that about? That's not something that's easily containable, right? That's about the bird flu. 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. We're 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 for 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 dieticians, 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 Clean Label Project, we're putting together organizations to help cut through all of this noise. So it's a period of uncertainty, right? But we're doing the right things. We're continuing to innovate and make the products healthier and healthier. We're continuing to surround ourselves with the best minds in science and public opinion around health. And over time, that smaller consumer group now that's buying the products will expand into the general population as we break through the miss, break through a lot of the noise and provide people a 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, but 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 the call out.

It's a terrific paper written by -- I can't remember what to say. It's a VC firm where they compare the growth of the manufactured ice industry to literally to plant-based meat and talk about how there was a very concerted effort by folks who were cutting ice out of lakes and rivers to scare the public away from it, and they said it was contaminated. And it took a long time for that to wear off. It did turn out there was contamination. It turned out that the ice coming from the rivers during the period of industrialization was contaminated, not the ice being made in these machines.

Got it. Interesting. Thank you.

Yeah. Good.

And your next question today will come from Ken Goldman with JPMorgan. Please go ahead.

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 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? Thank you.

Great. Ken, thanks. Appreciate it. 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 of what our team did. They took a very fragmented production network with over 13 different sites, co-packers, and consolidated that into our own internal manufacturing and then one other co-packer. That took an enormous amount of effort and complexity to break all that down, all the logistics work and then to build up into our own facilities. And we're not completely done, but I would hardly say, many times in innovation and in fields like this you talk about repairing the bicycle while you're riding it, right? That was absolutely that effort, right? Now we have the opportunity with a more stable production process to really start to grind away at that. So if, the thought is that we can't sort of get 7 percentage points or 8 percentage points out of that, what now that we're stabilized, we're able to get better overhead absorption. I think we can. And I think I'm very optimistic that we can, in fact, potentially do better because we've stabilized things. And so, now it's about we're making some 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, right? Okay. And then we had to go reverse all that. So there's just in both cases, there was this 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 home. And so I'm looking forward to what the teams can do this year.

Great. Thank you. Yeah. I'm sorry…

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 the U.S. Obviously, those started to kick-in, in Q2 of 2024. So we'll have a full year's 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 particular, we're actually consolidating some of our manufacturing footprint at our facilities in Columbia, Missouri. And then also, when you look at our network of warehouses across the U.S., there's some work to be done there that just rationalizes the footprint as well. And 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, etc. And we feel 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 Cowen. Please go ahead.

Hi Ethan. Hi Lubi.

Hey, there.

Hey, Rob.

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 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 distribution?

Yeah. 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 network, there's some tightness there, and so there's some impact from that. And 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 will continue. But again, I really want to focus if we show 5% growth, great. But if we show terrific improvement in margin and drive the $30 million 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 steam 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 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 are merchandised in the frozen section of the store, right, where historically we've over indexed to refrigerated. 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 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 expanding our presence within the stores, within existing outlets.

I understand. And, Luby, a follow-up. I 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 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 to the point that 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 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 bolstering the balance sheet, right? And so we're following that plan and we feel pretty good about it.

Okay. Thank you.

Sure.

And your next question today will come from Alexia Howard with Bernstein. Please go ahead.

Hi there. Good evening, everyone. Can I ask firstly about the price points? Are you comfortable with your price gaps to animal meat? I know there was a goal at 1 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.

Yeah. So we actually did hit that target in a particular product line with a particular customer in a particular market. And it's been helpful to us in that regard and pretty remarkable. Like, if you think about and this is again why I have such confidence in what we're doing. 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 [indiscernible]. It's just so much more efficient to take protein directly from plants. And the reason that we struggle to get to price parity right now is really about volume, that's it. And so it is still a goal and I think you'll see it a differentiated goal 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 foodservice category. So we'll continue to pursue that where those economics are particularly important. So it does remain a goal. Maybe it's a little more differentiated and sector specific than it was at the onset.

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 in? Is that two years, five years out? Is it something you would participate in? Just curious.

Yeah. Those are all really good questions, guys. So Europe is not homogeneous in regard to its growth rates. There are 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 cultivated and things of that nature, we certainly look at everything. We're agnostic to technology. It's really about the outcome. But I think the trend is actually in the opposite direction is how simple can we make these products, how much can we assure the consumer that the noise they're hearing about being processed is an industry -- 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 Steak as an example. We track that in an air chamber, supplier does it for us. It separates just naturally because the particle size is between different between starch and protein. And we run that protein through heating, cooling and pressure on a machine that makes pasta, right? And then we put that into a mixer, we mix in the flavor, and that's beyond meat, that's it. It’s 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 and it tastes great, 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, solar not working, ice being contaminated, it's all part of a process. And I thought we're going to get through it. I 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 in 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 do regenerative agriculture. Any serious scientist around regenerative beef will tell you that's just a non-starter. Sure, you can have some beef out on the pasture, but you have to have far, far less, right? So that's not going to serve to provide a global protein solution. There are not that many other options, right? And so we will get to where we need to go. It's about educating the consumer, and we're doing that.

Got it. Thank you. I'll pass it on.

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 2020, 50% of customers thought plant-based meat was a healthy alternative. And then by 2022, 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 to see that kind of maybe tick up a little bit given some of the work you've been doing? And then I have a follow-up.

Yeah. Great question. Yeah. So we don't track that from a category perspective as close as we do for our own brand. And we are starting to see a change in that within our own brand. And we've got a lot of help from a lot of really constructive people with this Joy Bauer, who is a top nutritionist in the MBC, all of this, who's a consultant for us and has done a lot of reformulation work with us and or it's the doctors that we use or the Stanford work we've done. I mean there's no brand in the world. I don't think that 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. And so it is with much frustration that I hear these industry lobbyists and they're highly paid and slick folks who care of their water denigrate what we're trying to do. But I'm very confident that over time, that percentage will continue to increase for people like, yeah, 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 versus stuff that's going to fill my arteries and require me to my chest opened up when I'm 60 years old to have my arteries cleaned. Knock yourself out, if that's the outcome you want. But if you want a different outcome, come over to Beyond Meat and have a burger that tastes great, and has a clean source of oil, which is avocado oil, right? And that's the message we've got to get out, and that's the message we are getting out of the steak product. We just launched a couple of new versions of it. American Heart Association certified. Again, if you don't want that, don't have it. But if you're concerned about your health and won't have a great dinner, go ahead and get Beyond Steak can happen. I mean just -- it makes sense. It's a smarter thing to do, it's a smarter thing to do from the environmental perspective, right? Like, think about all the energy that's in the 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 naturally. There's not a lot of synthetic fertilizers being used. We're then harvesting that. We're running through a simple process of heating and cooling the pressure. There are folks out there that want you to think there's a boogeyman in there. There's something dangerous not. What there is really good stuff for the earth and really good stuff for your body. We'll get the consumer understand this someday.

Thank you. for that. And then, Lubi, just a question on that long-term kind of target ultimately getting back to 30% on gross margin. Can you 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 low to mid-single digit type growth, can you still get to that number or just help us get to that on a longer-term basis? Thanks.

Yeah. 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 indexed is, we think there's actually an opportunity to grow our business, right, even in this environment, simply by gaining some market share because we -- at our core, we're an innovation company, we believe our products are second to none, and we believe we have a right to win in some of these areas, even if we 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 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 additional savings in 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, a difficult measure for sure 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 El Segundo, there is some excess space that we may look to sublease. 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 be a little bit lower. So we won't be investing quite as much in commercialization. And then there are some non-recurring fees like consulting fees, as an example, which we would expect to be lower on a go-forward basis. And then, of course, we're just tightening our belts across the board and making sure that we're running very tight budgets. So combining all those things together and hopefully being able to drive the top line growth, expand the gross margins and drive incremental savings in operating expenses, we think is going to get us to where we need to be.

And just to add to that, very thorough answer. If you look at the goal we set to become EBITDA positive by the end of ’26, and that we're not suggesting any kind of outsized growth. This really is going to come from just continuing to trim the P&L and continue to reduce operating expense in a way that's responsible. And that's, I think, what you'll see over '25 and '26 to get us there, just becoming more and more efficient. The other comment just on, does the category need to grow for us to grow at a healthy clip and that will be the answer was spot on. If you go in the supermarket today, it's a category and 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 between fresh and frozen and things of that nature. And so our goal, right, is to go back to large brand blocks, and I'm increasingly agnostic about where 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 are working with retailers. And when you see a retailer, I'll take Myer as an example, where they do a really nice job of displaying the products all in the same place, it's a clear brand block. You tend to see pretty good momentum there, right? And so that's one of the tools we have toolkit here to continue to drive growth, even if the category doesn't respond and grow along with us, we also, as Lubi, I mean, our products are second and not 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 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 has a ton of innovation recently.

Thank you very much.

This 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 towards this goal and took some tough decisions over the last several months to bring operating expense down even further, and we'll continue to do that. And get the operating base to fit the near-term revenue and hit our goal of being sustainable Thanks, everybody.