Earnings Call Transcript
Beyond Meat, Inc. (BYND)
Earnings Call Transcript - BYND Q4 2024
Operator, Operator
Good afternoon, and welcome to the Beyond Meat Fourth Quarter and Full Year 2024 Conference Call. All participants are in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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.
Paul Sheppard, Vice President, FP&A, and Investor Relations
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.
Ethan Brown, CEO
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 in 2025, remain highly confident in our ability to lead the category through what has been a challenging correction for 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.
Lubi Kutua, CFO
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 foreign exchange 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 impacts from foreign exchange. 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 foreign exchange. 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 balance 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.
Operator, Operator
We will now begin the question-and-answer session. And your first question today will come from Ben Theurer with Barclays. Please go ahead.
Ben Theurer, Analyst
Yeah. Good afternoon, and thanks for taking my question. Ethan and Lubi, how are you doing?
Ethan Brown, CEO
Good. Hi, Ben.
Ben Theurer, Analyst
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.
Ethan Brown, CEO
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.
Ben Theurer, Analyst
Okay. I just want to clarify the guidance regarding the top line, which is expected to be relatively flat. I assume this accounts for the suspension of operations in China. Could you help us understand the scale of China in relation to your international operations? It would be helpful to adjust the revenue figures to assess the impact of the suspension. Is this situation temporary, or how should we interpret it? It does not seem to be a permanent issue, so I would appreciate more insight into the comments regarding the China suspension.
Ethan Brown, CEO
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.
Operator, Operator
And your next question today will come from Kaumil Gajrawala with Jefferies. Please go ahead.
Kaumil Gajrawala, Analyst
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?
Ethan Brown, CEO
We are increasingly focused on health-conscious consumers during this time, which isn't exactly turbulent but involves many factors influencing our category and brand direction. Consumer interest in our offerings remains very high, as evidenced by recognitions from notable publications like Time Magazine and Newsweek, stating we are among the world's best and most trusted brands. However, there is a significant counter-narrative regarding processed foods and questionable ingredients, which lacks scientific backing and is largely fueled by a campaign from certain industry incumbents and misinformed influencers. Our consumers are becoming more educated and resilient, capable of seeing through this misinformation and driving our growth. Looking ahead to 2024, we anticipate a return to growth as we recorded strong performance in the last two quarters of this year, improved our margins significantly, reduced operating expenses by about $50 million, and achieved a $100 million increase in adjusted EBITDA. These initiatives are aimed at creating a sustainable business model in light of the strong long-term trend we see in our sector. Retail sales have increased by 5.7%, with a notable slowing in volume decline. International foodservice also shines as we saw a 9% uptick in dollar sales and volume, particularly with a key customer in a specific market. While I can't guarantee that these positive trends will continue or that our underperforming areas will persist, I have confidence that our category and brand will eventually deliver on their potential. History shows that disruption takes time; examples include the manufactured ice industry, electric cars, and renewable energy, which overcame initial skepticism and resistance. Presently, the meat and poultry sectors face challenges such as rising beef prices driven by drought and avian livestock price increases linked to bird flu, issues that are unlikely to be easily resolved. These factors are exacerbated by climate change. We will persist in innovating and providing clean, simple ingredients for consumers who are discerning enough to navigate the surrounding noise. We're also committed to disseminating factual information and collaborating with professionals and organizations like the American Heart Association to help consumers understand the benefits of plant-based diets. Despite current uncertainties, we are dedicated to innovation and enhancing product quality while engaging with top minds in science and health. My belief is that our niche consumer base will gradually expand into a broader audience as we continue to counter misinformation and deliver tasty, healthful options. This evolution may take time, but I am optimistic about the future.
Kaumil Gajrawala, Analyst
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.
Ethan Brown, CEO
It's an excellent article by a venture capital firm that compares the growth of the manufactured ice industry to that of plant-based meat. It discusses how there was a significant effort by those harvesting ice from lakes and rivers to deter the public by claiming it was contaminated. This misconception took a long time to dispel. Eventually, it was revealed that the ice sourced from rivers during the industrial era was indeed contaminated, but not the ice produced by these machines.
Operator, Operator
And your next question today will come from Ken Goldman with JPMorgan. Please go ahead.
Ken Goldman, Analyst
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.
Ethan Brown, CEO
Great. Ken, thanks. Appreciate it. So if you look at the progress we made over the last year, that's kind of a 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 the 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.
Ken Goldman, Analyst
Great. Thank you. Yeah. I'm sorry…
Lubi Kutua, CFO
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 particularly, 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.
Ken Goldman, Analyst
Very clear. Thank you both.
Operator, Operator
And your next question today will come from Robert Moskow with TD Cowen. Please go ahead.
Robert Moskow, Analyst
Hi Ethan. Hi Lubi.
Ethan Brown, CEO
Hey, there.
Lubi Kutua, CFO
Hey, Rob.
Robert Moskow, Analyst
A couple of questions. Hi there. Just wondering about the forecast, you're up 6% or so in sales in the second half, but the guidance is for, I guess, flat in the 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?
Ethan Brown, CEO
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 the 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.
Lubi Kutua, CFO
To address the second part of your question about distribution, the comments I made in my prepared remarks relate to our focus on expanding our presence in areas of the store where we've historically underperformed. This involves various strategies, such as broadening our product assortment; for example, we recently launched two new flavors of Beyond Steak. Additionally, we are concentrating on increasing the distribution of our core products, which are primarily found in the frozen section of the store, where we've traditionally been more focused on refrigerated items. We believe there are opportunities to enhance our distribution in the frozen aisle. In terms of visibility into this process, we feel confident about some aspects and believe we can achieve these goals, while others will require ongoing effort to secure incrementally throughout the year. The key takeaway is that the distribution gains we are pursuing are less about acquiring a large number of new customers and more about enhancing our presence within existing retail locations.
Robert Moskow, Analyst
I understand. And, Lubi, 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?
Lubi Kutua, CFO
We definitely need to take action within the next two years. As I mentioned in my opening remarks, we are actively exploring various options. However, at this stage, we cannot disclose much about our specific efforts. During our last earnings call, we noted our intention to increase liquidity on the balance sheet through our ATM program in Q4, which we successfully implemented. We also stated our plan to strengthen the balance sheet in 2025, and we are adhering to that strategy, feeling optimistic about our progress.
Operator, Operator
And your next question today will come from Alexia Howard with Bernstein. Please go ahead.
Alexia Howard, Analyst
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 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.
Ethan Brown, CEO
We did achieve that target in a specific product line with a particular customer in a certain market, which has been beneficial to us and quite remarkable. I feel confident about our efforts, especially considering we accomplished this with just one or two product lines in an industry that has countless options worldwide. We are already in production, which relates back to a long-standing observation that it's much more efficient to source protein directly from plants. The challenge in reaching price parity now mainly revolves around volume. This goal is still relevant, and you will notice it being somewhat differentiated as we strive to provide clean, simple, and healthy ingredients to consumers, which may impact this objective. However, there are other products that are better suited to achieving this, particularly in the foodservice sector. We will continue to focus on this area where the economic factors are especially crucial. So, it remains a goal, but it may be more sector-specific than it was initially.
Alexia Howard, Analyst
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.
Ethan Brown, CEO
Europe exhibits varied growth rates, with some markets performing better than others. Certain European markets are encountering challenges similar to the U.S., particularly regarding processing debates. The agricultural advocacy there isn't as robust, but there remain significant growth opportunities. Consumer motivation in Europe is increasingly influenced by climate concerns, leading to a more engaged audience. Regarding cultivated products, we evaluate all options and are focused on outcomes rather than specific technologies. The trend is leaning towards simpler products, emphasizing transparency about processing concerns, which is often fueled by traditional industries defending their interests. Our production process uses machinery typically found in pasta making, utilizing plant proteins from farmers, particularly in the Upper Midwest, who are benefiting economically from diversifying beyond corn and wheat. We extract protein naturally, and our production involves straightforward methods that ultimately result in our Beyond Meat products. The growth of this category hinges on educating consumers about our simple and clean products that are appealing and nutritious. As awareness increases, so will market recovery. Despite skepticism surrounding innovations like electric vehicles and solar energy, we believe we're on the upswing of innovation. Consumer understanding of the simplicity and health benefits of our products will drive this growth, despite distractions in the industry. The talk of regenerative agriculture often overlooks the reality that it isn't a comprehensive solution for global protein needs, and our focus remains on educating consumers as we move forward.
Alexia Howard, Analyst
Got it. Thank you. I'll pass it on.
Operator, Operator
And your next question today will come from Peter Saleh with BTIG. Please go ahead.
Peter Saleh, Analyst
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 had a follow-up.
Ethan Brown, CEO
We don't closely track those numbers by category as we do for our brand, but we're beginning to see a positive shift within our own brand. We've received significant support from many constructive individuals, including Joy Bauer, a prominent nutritionist, who has worked with us on reformulating our products, alongside our consulting doctors and the research we've conducted with Stanford. I believe we are one of the brands dedicated to integrating human health into the core of our products. It's very important to me that this product supports human health, as my family and I consume it regularly. I'm frustrated when industry lobbyists, who are well-paid and polished, criticize our efforts. However, I am confident that over time, more people will recognize the benefits of options like Beyond Meat, where you can enjoy a burger with significantly less saturated fat and healthier oils, such as avocado oil. The message is that if you want a better health outcome, you should consider Beyond Meat. We also just launched new versions of our steak product, which is certified by the American Heart Association. If you prioritize health and want a delicious meal, Beyond Steak is a smart choice. It’s not only healthier but also better for the environment, as we're utilizing plant-based energy that comes from the sun and supporting soil regeneration naturally. Despite some misconceptions, what we're providing is beneficial for both the Earth and your health. I believe consumers will come to understand this in time.
Peter Saleh, Analyst
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.
Lubi Kutua, CFO
That's a great question. If industry trends were to improve, we would definitely welcome that as it would be beneficial for us. However, we believe there are still opportunities for growth in our business, especially in areas where we have not fully tapped into yet. We aim to gain market share because we see ourselves as an innovation company, confident in the quality of our products. Even if we've not been heavily involved in some market segments historically, we believe there is an opportunity for us to grow our revenue by capturing additional market share. To achieve our goals of becoming EBITDA positive and eventually cash flow positive, we need to either maintain or boost the recent positive trend in top line growth, increase our gross margins, and find additional savings in operating expenses. We've already talked about sales and gross margins, and on the operating expense side, we've implemented some difficult measures, such as workforce reductions and suspending operations in China. We’re also exploring other ways to decrease operating expenses, including potentially subleasing some excess space in our headquarters in El Segundo. Looking ahead, we anticipate lower investment in commercialization activities, particularly concerning our partnerships with large QSR customers. Additionally, we expect non-recurring expenses like consulting fees to decline as well. Overall, we are tightening our operations and maintaining strict budgets. By focusing on these areas, we believe we can drive revenue growth, expand gross margins, and realize additional savings in operating expenses to reach our targets.
Ethan Brown, CEO
To build on that thorough answer, our goal is to achieve EBITDA positivity by the end of 2026 without expecting significant growth. Instead, we will focus on responsibly trimming our P&L and reducing operating expenses, which will enhance our efficiency over 2025 and 2026. Regarding whether the category needs to grow for us to maintain healthy growth, I agree with the previous points made. Currently, supermarkets are experiencing a transition, and it can be challenging to find some of our key products due to the changing landscape between fresh and frozen items. Our aim is to return to larger brand blocks, and I’m becoming indifferent about their placement in fresh or frozen sections. What’s important is that consumers can easily locate our products in stores, and we are collaborating with retailers to achieve this. For instance, when Myer effectively displays products together, it results in positive momentum. This is one strategy we can utilize to drive growth, even if the overall category does not expand alongside us. Additionally, I believe our products are exceptional, and our innovation team continues to simplify and improve them. We also plan to target some easily achievable opportunities. While stabilizing and achieving our EBITDA positive goal is currently a priority, there are revenue opportunities available by leveraging our brand in an innovatively active category.
Peter Saleh, Analyst
Thank you very much.
Operator, Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Ethan Brown for any closing remarks.
Ethan Brown, CEO
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.
Operator, Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.