As Beyond Meat’s Q1 Earnings Exceed Expectations, It Plans for a $200 Million Equity Offering

As Beyond Meat confronts dwindling sales and depleting cash reserves, it has laid out plans for an equity offering with the potential to generate up to $200 million. The funds gathered from this initiative will be utilized for general corporate expenses and to bolster working capital.

This equity offering follows the release of Beyond Meat’s 2023 first-quarter results, which exceeded Wall Street’s projections. The plant-based meat producer, currently navigating a course of revival, is setting its sights on achieving positive cash flow by the latter half of 2023. This goal was relayed by CEO Ethan Brown during the company’s recent earnings announcement.

“I think we’re finally going to get this business back to being a pretty decent margin and seeing growth again, in the second half of the year,” Brown sid, during the Q1 earnings call.

Quarterly revenue earnings

The company has faced a steady decline in its liquid assets over the past two years, with its cash and short-term investments falling to $258.6 million from around $310 million at the end of the preceding year. In response to the eroding consumer purchasing power, a drop it says is a result of inflation, the company has opted to slash prices, an action that has impacted profitability. But that move brought a silver lining, particularly in its international food services sector, where revenues have seen a two-fold increase despite the slump in retail sales.

Beyond Meat’s first-quarter revenue stood at $92.2 million, surpassing the average estimate of $90.7 million projected by Bloomberg analysts. The company also reported a loss of $45.8 million, a figure marginally better than the anticipated loss of $48 million.

According to Arun Sundaram, an analyst at CFRA, the quarter has presented a mixed bag of results. He pointed out to Reuters that “overall, the quarter produced mixed results.” While the company has been successful in reducing operating losses and slowing the rate of cash burn, it continues to grapple with a weak demand domestically, especially in the retail sector, due to inflationary forces and increasing competition.

The company’s domestic revenue, at $58.8 million, fell short of market expectations, whereas international revenue, amounting to $33.4 million, exceeded estimates. As a result of reassessing the value of its considerable fixed assets, Beyond Meat has adjusted its gross margin outlook for the year, while maintaining its revenue projection for 2023 in the range of $375 million to $415 million. This led to a surge in the company’s shares, rising as much as 11 percent in extended trading.

Over the past year, the meat substitute industry has faced a fair share of challenges, with sales of refrigerated and frozen meat alternatives falling by 19 percent and 6.3 percent, respectively, according to data from the market data tracker, Circana.

Beyond Meat has tightened its belt, trimming operational costs and undertaking layoffs. The company has also scaled back its parental leave benefits. Beyond Meat’s total operating expenses in the first quarter dropped to $63.9 million from $97.8 million in the same period last year. The company reported a net loss of $59 million, or 92 cents per share, which was narrower than analysts’ projections. Although the company’s net revenue for the first quarter fell 15.7 percent to $92.2 million, it still managed to surpass expectations of $90.8 million.

However, the company sees frozen SKUs as an area of opportunity with Brown commenting that the category “continues to be a growth area for our brand with sequential and year over year dollars and units both up significantly.”

Strategic partnerships

Strategic partnerships with fast-food chains like McDonald’s have contributed significantly to Beyond Meat’s recovery. The recent launch of the Double McPlant burger featuring Beyond Meat’s patties in McDonald’s U.K. and Ireland outlets led to a near doubling of sales in the international foodservice segment.

The company’s CFO, Lubi Kutua, pointed out during a post-earnings call that the focus on increasing the distribution of newly launched products in the U.S. and introducing new products in international markets is expected to drive revenue growth in the latter part of the year.

Brown hinted at new products that he said would come to market later this year and that would be even closer to the animal meat experience, describing “a new generation of our burger platform in foodservice and in the retail frozen section…both offerings contain strong advances in sensory profile, particularly around delivery of animalic and serum-like notes to give a convincing yet neutral beef flavor. It’s been a long time in the making, but we are receiving very positive reviews from early customer tests.”

Beyond Meat’s equity offering, managed by Goldman Sachs, arrives at a pivotal moment as the company strives to rejuvenate its business and reverse the declining sales and profitability trend. The funds raised through this equity offering are expected to bolster the company’s turnaround plan, underpinning investments in product innovation, marketing, and operational efficiency.