Beyond Meat: Looking At A 2025 Holistic Restructuring Of Its Balance Sheet
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Summary:
- Beyond Meat’s net revenues increased by approximately 8% year-over-year. It also improved gross margins to 17.7% in Q3 2024.
- Despite the improvements, Beyond Meat still reported a $19.8 million adjusted EBITDA loss during the quarter.
- It also slightly reduced its full-year revenue guidance and expects Q4 2024 net revenue to be +2% year-over-year at the guidance midpoint.
- Balance sheet restructuring discussions are continuing, with a 2025 resolution looking probable.
- This would likely give convertible noteholders most of Beyond Meat’s equity.
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Beyond Meat (NASDAQ:BYND) reported Q3 2024 results with improved gross margins and approximately +8% year-over-year net revenue growth. It is making some progress in those areas, but also slightly lowered its revenue guidance for the full year.
Beyond Meat may now end 2024 with around $100 million in unrestricted cash before any proceeds from at-the-market equity offerings. It is also expecting to do a “holistic restructuring” of its balance sheet in 2025.
I had previously noted my belief that convertible noteholders would inevitably end up owning most of Beyond Meat’s equity. However, I had also believed that Beyond Meat could potentially survive for multiple years without restructuring the debt (even if an eventual restructuring was inevitable).
Beyond Meat’s comments suggest that a 2025 debt restructuring is probable. I’ve outlined a scenario below where noteholders end up with 400 million Beyond Meat shares and the value of the shares ends up at $0.63 per share. That would be a positive for noteholders compared to the current market value of the notes, but also more than 85% downside for current shareholders.
This valuation is in-line with my prior calculations, but the timeline for getting there may be accelerated, with Beyond Meat likely restructuring its balance sheet in 2025.
Q3 2024 Results
Beyond Meat reported approximately $81 million in net revenues in Q3 2024, up approximately +8% compared to Q3 2023.
This was driven by increased net revenues per pound of product sold, which was up around +16% year-over-year. Beyond Meat noted that it generated its highest net revenue per pound since Q4 2022, after benefiting from price increases that it took during Q2 2023 as well as reducing its promotional trade discounts.
Beyond Meat’s sales volumes (in terms of pounds of products sold) went down -7% year-over-year in Q3 2024, although that was less of a year-over-year decline than in previous quarters. Beyond Meat believes that demand for its products are relatively price inelastic, allowing it to take some price increases without crashing demand for its products.
The improved net revenues per pound of product sold were combined with some reductions in cost of goods sold. Thus, Beyond Meat’s gross margin improved to 17.7% in Q3 2024, up from 14.7% in Q2 2024. This was Beyond Meat’s best gross margin result since it delivered 21.6% gross margins in Q3 2021.
Despite the improvements in revenues, gross margins and in controlling operating costs, Beyond Meat still has a long way to go. It reported an adjusted EBITDA loss of $19.8 million for Q3 2024 and saw its cash position (including restricted cash) decline by $23.1 million during the quarter.
Including restricted cash, Beyond Meat ended Q3 2024 with $134.9 million in cash.
Guidance And Potential Q4 2024 Results
Beyond Meat slightly reduced its revenue guidance and now expects 2024 net revenues to be $320 million to $330 million. This is a $5 million reduction at the guidance midpoint from its earlier guidance range of $320 million to $340 million. Beyond Meat is thus expected to end up with 2024 net revenues down approximately -5% compared to 2023.
Beyond Meat’s guidance around gross margins and operating expenses remain unchanged, while it reduced its capex guidance by $5 million to a new range of $10 million to $15 million.
The full-year guidance points to Beyond Meat generating approximately $75 million in Q4 2024 net revenues, up +2% compared to Q4 2023. Beyond Meat also seems on track to have another $20 million to $25 million in cash burn, which would leave it with around $110 million to $115 million in cash (including restricted cash) and the end of 2024.
Excluding the $13 million in restricted cash, Beyond Meat would have around $100 million in cash on hand at the end of 2024.
Balance Sheet Restructuring And Valuation
Beyond Meat anticipates issuing shares via its at-the-market equity program to bolster its cash balance by the end of the year. If it issues close to 10 million shares in December, it may end the year with around $150 million in total cash and 75 million outstanding shares. This assumes that Beyond Meat’s share price declines due to the ATM offering, and it realizes gross proceeds of approximately $4 per share.
Beyond Meat notes that it expects some sort of holistic restructuring of its balance sheet in 2025. It has reportedly been in talks with bondholders since mid-2024 and the discussions have taken longer than it expected.
For calculation purposes, I will assume that Beyond Meat’s $1.15 billion in convertible notes gets converted into 400 million Beyond Meat shares in 2025.
This would result in Beyond Meat having 475 million outstanding shares. A total market valuation of $300 million for Beyond Meat would then result in an estimated value of $0.63 per share.
This would be a positive for noteholders given that the notes are currently trading at 16 cents on the dollar. The above scenario would result in noteholders getting shares that are worth around 22 cents for every dollar of note principal. A valuation of $0.63 per share would also be over 85% downside for Beyond Meat’s current shareholders.
A total $300 million valuation for Beyond Meat is probably reasonable post debt-restructuring. Valuations for plant-based food companies have crashed over the last few years.
This $300 million valuation would be around 0.6x Beyond Meat’s 2025 net revenues (assuming mid-single digits growth) plus its projected year-end 2025 cash on hand. Beyond Meat is still expected to have negative free cash flow and negative adjusted EBITDA in 2025.
Conclusion
Beyond Meat’s net revenues and gross margins both improved year-over-year in Q3 2024, but it is still reporting significant adjusted EBITDA losses. It has improved gross margins by increasing prices and reducing promotional activity. Product demand has remained sluggish, though, with pounds of product sold down by -7% in Q3 2024 compared to Q3 2023.
Beyond Meat may end 2024 with around $100 million in unrestricted cash without raising additional funds. It expects to raise money through its ATM equity program, though.
Based on its comments, it also seems probable that Beyond Meat will restructure its debt in 2025. I expect convertible noteholders to end up with most of Beyond Meat’s equity in such a scenario. This may result in positive returns for noteholders from the current 16 cents on the dollar value. Existing shareholders will likely see their shares drop steeply in value though, as I estimate Beyond’s value at around $0.63 per share post-restructuring in the scenario I outlined above.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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