El Segundo / CA. (bmi) Beyond Meat Inc., a leader in plant-based meat, provided a business update.
Select Third Quarter 2023 Financial Results
The Company is providing the following select third quarter financial results.
- Net revenues are expected to be approximately USD 75 million.
- Gross profit is expected to be a loss of approximately USD 7 million to USD 8 million.
- The Company is expected to achieve positive free cash flow, defined as cash flows from operating activities less capital expenditures, of approximately USD 7.6 million in the third quarter of 2023. While this milestone reflects ongoing measures the Company is taking to reduce cash consumption, management does not expect to sustain free cash flow positive operations in Q4-2023.
President and CEO Ethan Brown: «We anticipated a modest return to growth in the third quarter of 2023 that did not occur, reflecting further sector-specific and consumer headwinds. Even as we implement measures to address those headwinds that are within our sphere of influence, we intend to pursue a further, sizable reduction of operating expenses to improve our cost structure.»
«We intend to pursue five main actions to improve our cost structure and overall operating performance. One, we are executing an approximate 19 percent reduction in our global non-production workforce, an immediate step in a broader program to reduce expenses; two, we are reviewing our pricing strategy to support gross margin expansion; three, we are continuing to utilize inventory management to reduce working capital; four, we are intensifying focus on channels and geographies that are exhibiting revenue growth; and five, in U.S. retail, we are using our portfolio and marketing to directly counter misinformation about our products and category.»
Relative to its previous expectation of modest year-over-year top-line growth in the third quarter of 2023, the Company believes net revenues in the quarter were primarily impacted by:
- Weaker than expected sales volumes in U.S. retail and U.S. foodservice channels, primarily reflecting ongoing and further demand softness in the plant-based meat category;
- Lower than anticipated promotional effectiveness, which was exacerbated by flat fee promotional programs that did not deliver the anticipated volume lifts; and
- Unfavorable changes in product sales mix, primarily reflecting weaker than expected sales of the Company ‘s core products, namely, Beyond Burger, Beyond Beef, and Beyond Sausage, relative to certain non-core products, including Beyond Steak, Beyond Chicken Tenders, Beyond Popcorn Chicken, and Beyond Chicken Nuggets.
Preliminary results remain subject to the completion of quarter-end accounting procedures and adjustments and are subject to change.
Revision to 2023 Full Year Outlook
As a result of the softer than anticipated third quarter results and the Company ‘s updated expectations for the balance of the year, the Company is revising the following key elements of its 2023 full year outlook.
- Net revenues are now expected to be in the range of USD 330 million to USD 340 million, representing a decrease of approximately 21 percent to 19 percent compared to 2022.
- Gross profit for the full year is now expected to be approximately breakeven.
- The Company continues to expect operating expenses to be USD 245 million or less, before one-time separation costs and non-cash savings related to previously granted, unvested stock-based compensation associated with the Company ‘s reduction in force.
- Capital expenditures are now expected to be in the range of USD 10 million to USD 15 million.
Company is Initiating a Global Operations Review
To further reduce operating expenses, the Company is initiating a review of its global operations, narrowing its commercial focus to certain growth opportunities, and accelerating activities that prioritize gross margin expansion and cash generation. These efforts include the potential exit of select product lines; changes to the Company ‘s pricing architecture within certain channels; accelerated, cash-accretive inventory reduction initiatives; further optimization of the Company ‘s manufacturing capacity and real estate footprint; and a review and potential restructuring of the Company ‘s operations in China.
In addition, the Company is further reducing its current workforce by approximately 65 employees, representing approximately 19 percent of the Company ‘s global non-production workforce (or approximately 8 percent of the Company ‘s total global workforce). In aggregate, in 2024, the reduction in force, combined with the elimination of certain open positions, is expected to result in approximately USD 9.5 million to USD 10.5 million in cash operating expense savings, and an additional approximately USD 1.0 million to USD 2.0 million in non-cash savings related to previously granted, unvested stock-based compensation which would have vested in 2024. The Company currently estimates that it will incur one-time cash charges of approximately USD 2.0 million to USD 2.5 million in connection with the reduction in force, primarily consisting of notice period and severance payments, employee benefits, and related costs. The Company expects that the majority of these charges will be incurred in the fourth quarter of 2023, subject to local law and consultation requirements, which may extend the process beyond the end of 2023 in certain countries. The charges the Company expects to incur are subject to assumptions, including local law requirements, and actual charges may differ from the estimate disclosed above.