Beyond Meat (BYND 0.95%) stock managed to eke out a gain of 1.7% in Wednesday's volatile after-hours trading, following the plant-based meat substitute maker's release of weaker-than-expected third-quarter 2023 results.
The main reason the stock didn't move much is likely because investors already had a good idea as to what to expect. On Nov. 2, the company released preliminary results for select key numbers, including revenue. Moreover, at that time, the company lowered its 2023 guidance and announced actions to improve its cost structure, which include an approximate 19% reduction in its global non-production workforce.
Beyond Meat's key numbers
| Metric | Q3 2022 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $82.5 million | $75.3 million | (8.7%) |
| Operating income | ($89.7 million) | ($69.6 million) | Loss narrowed 22% |
| Net income | ($101.7 million) | ($70.5 million) | Loss narrowed 31% |
| Earnings per share (EPS) | ($1.60) | ($1.09) | Loss narrowed 32% |
Data source: Beyond Meat.
Wall Street was looking for a loss of $0.85 per share on revenue of $87.9 million. So, Beyond Meat missed both expectations.
In Q3, the company generated cash of $9 million running its operation, an improvement over the year-ago period, when it used cash of $34.6 million. That said, for the first three quarters of 2023, the company had an operating cash flow of negative $79.3 million.
Beyond Meat ended the period with cash and equivalents of $232.8 million and $1.1 billion in outstanding debt.
Revenue breakdown
| Geographic Distribution Channel | Q3 2023 Revenue | Change (YOY) |
|---|---|---|
| U.S. retail | $30.5 million | (34%) |
| U.S. food service | $12.5 million | (22%) |
| U.S. total | $43.1 million | (31%) |
| International retail | $14.2 million | 39% |
| International food service | $18.1 million | 79% |
| International total | $32.3 million | (59%) |
| Total revenue | $75.3 million | (8.7%) |
Data source: Beyond Meat. YOY = year over year.
The decrease in revenue was driven by an 11.6% decrease in net revenue per pound, partially offset by a 3.5% increase in volume of products sold. The company attributed the lower average net revenue per pound to "increased trade discounts, especially in the U.S. retail channel, changes in product sales mix," it said in the release. And the increase in volume was primarily driven by "sales to international retail and foodservice channels, partially offset by a decrease in volume of products sold in U.S. retail and foodservice channels due to weak category demand."
What the CEO had to say
Here's most of what CEO Ethan Brown had to say in the earnings release:
Though we are encouraged by pockets of growth, particularly in the [European Union] where we saw double-digit gains in net revenues on a year-over-year basis, we are disappointed by our overall results as we continue to experience worsening sector-specific [plant-based foods] and broader consumer headwinds.
As we shared last week, we are conducting a review of our global operations for purposes of further and significantly reducing our operating expense base as we seek to accelerate our transition to a sustainable and, ultimately, profitable business. And while we expect current headwinds to persist in the coming quarters, we have confidence in the long-term trajectory of our business.
The "broader consumer headwinds" to which Brown refers include inflation and high interest rates. Indeed, a good number of consumer goods companies are feeling the negative impact of consumers cutting back their spending on discretionary goods. Some consumers are also tightening their spending on necessities, or consumer staples, by purchasing lower-priced items.
2023 guidance lowered
| Metric | Prior Guidance Issued May 2023 | Prior Guidance Issued August 2023 | Current Guidance | Change Implied by Current Guidance (YOY) |
|---|---|---|---|---|
| Revenue | $375 million to $415 million | $360 million to $380 million | $330 million to $340 million | (21%) to (19%) |
| Gross margin | Low-double-digit percentage | Mid- to high-single-digit percentage | About breakeven | Metric was (5.7%) in year-ago period |
| Operating cash flow | Positive in second half of year | Unlikely to be positive in second half of year | Not mentioned in updated guidance | -- |
Data source: Beyond Meat. YOY = year over year.
In 2023, gross margin is expected to improve year over year. However, this is due in large part to a change in accounting estimates for the useful lives of the company's large manufacturing equipment implemented in the first quarter of 2023.
Another disappointing quarter
I'm going to reiterate what I wrote in the prior quarter's earnings article:
I am not optimistic about the potential for this stock to be a long-term winner. Why? There are low barriers to entry to this business, and it doesn't seem to me that most retail consumers and especially fast-food customers care much about brands when buying plant-based meat substitutes. Moreover, giant fast-food companies can exert significant pricing power on their suppliers.
Beyond Meat is a steadily shrinking business. Its planned 19% layoff of its workforce follows a similar layoff -- also of about 19% of the workforce -- in October 2022. Cost-cutting measures can only be taken so far. The only way to have a profitable business over the long term is to profitably grow revenue.
