Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Beyond Meat Inc (BYND, Financial) exceeded its Q2 revenue objective with net revenues of $93.2 million, surpassing the guidance range of $85 million to $90 million.
- Gross margin improved significantly to 14.7%, the best quarterly performance since Q3 2021.
- Operating expenses were reduced by $8.4 million year-over-year, demonstrating effective cost management.
- Cash consumption fell to $15.5 million in Q2, marking a 67% reduction year-over-year.
- The launch of Beyond IV, featuring products certified by the American Heart Association and the American Diabetes Association, highlights the company's commitment to health and wellness.
Negative Points
- Net revenues decreased by 8.8% compared to the same period last year, indicating ongoing challenges in sales growth.
- The volume of products sold decreased by 14%, reflecting demand softness in the plant-based meat category.
- US foodservice channel net revenues decreased by 18.9%, impacted by ongoing demand softness and distribution losses.
- International retail channel net revenues decreased by 12.1%, driven by weakness in the EU chicken portfolio and unfavorable foreign currency changes.
- Despite improvements, the company is still not projecting to achieve cash flow positive operations in the near term.
Q & A Highlights
Q: Can you update us on how much of your portfolio has seen the Beyond 4.0 upgrade and the new pricing already, and how much is still yet to come over the next couple of months and/or quarters?
A: Ethan Brown, President, Chief Executive Officer, Director: The Beyond Burger, Beyond Beef, and Beyond Dinner Sausage have all undergone the new formula upgrade. The Sun Sausage also features even lower saturated fat levels. We expect to continue migrating the portfolio in this direction. The price increase has been phased in since April, and we are pleased with the elasticity and consumer reception so far.
Q: What are your initial thoughts on the third quarter now as we start getting into easier comps from last year?
A: Lubi Kutua, Chief Financial Officer, Treasurer: We expect sequential improvement in gross margins in the second half of the year. While we are not providing specific guidance for Q3, we typically generate more revenue in the second and third quarters. Operating expenses are expected to be lower in the second half compared to the first half.
Q: Can you help us think about the improvement in gross margins in the second half and how much we should be thinking is due to price increases versus actual reductions in unit costs?
A: Ethan Brown, President, Chief Executive Officer, Director: The price increase began in April and May, so we expect fuller distribution in Q3 and Q4. Significant progress on cost of goods is also expected due to internalization of our network, better overhead absorption, and logistics savings. Lean management practices are also contributing to cost reductions.
Q: How are retailers in the US responding to the weak plant-based category? Are they reducing shelf space or is there a shakeout of smaller players?
A: Ethan Brown, President, Chief Executive Officer, Director: Retailers are responding in various ways, including staying the course, shifting product placements, and exerting pressure on lower-performing players. Beyond Meat and Impossible Foods are emerging as the main players, which could benefit us.
Q: How much was the price increase that you mentioned in April, and how did it influence Q2?
A: Lubi Kutua, Chief Financial Officer, Treasurer: We did not specify the exact blended amount of the price increase. Most of the increase in net revenue per pound in Q2 was driven by a reduction in trade spend and mix benefits rather than just pricing alone. The full impact of the price increase will be more evident in Q3 and Q4.
Q: Can you speak about your market share trends in Europe, particularly in the retail and foodservice channels?
A: Ethan Brown, President, Chief Executive Officer, Director: The European market is highly fragmented, making it difficult to draw definitive conclusions. However, we are seeing positive trends with strategic partners and are bullish on markets like Germany. Our focus is on expanding distribution rather than just market share gains.
Q: How do you see the health of your competitors in the US, and what are they doing as you reduce discounts and raise prices?
A: Ethan Brown, President, Chief Executive Officer, Director: We don't see significant counter-moves from competitors yet. Everyone is trying to move towards sustainable and profitable operations, so we don't anticipate any aggressive pricing reactions.
Q: What else can you do to encourage trial or drive trial in this environment?
A: Ethan Brown, President, Chief Executive Officer, Director: We are seeing increasing support from registered dietitians, nutritionists, and doctors who are advocating for our products due to their health benefits. This earned media and engagement with the health community are effective in driving trial and consumer acceptance.
Q: How confident are you that the taste and texture of your products are where you want them to be?
A: Ethan Brown, President, Chief Executive Officer, Director: We wouldn't launch a product that didn't represent an improvement in taste and texture. The new protein blend and use of avocado oil have addressed off-flavors and improved the sensory experience. While not everyone needs to like the product, enough people do, and the health benefits are a significant selling point.
Q: Why are you not taking price increases internationally, and what factors are influencing this decision?
A: Ethan Brown, President, Chief Executive Officer, Director: We are focusing on pricing elements with large strategic partners in Europe. Two years ago, we adjusted our pricing to be more competitive in the EU market. Our primary focus is on expanding distribution rather than immediate price increases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
