Prepared remarks
Thank you, everyone, and welcome to the Beyond Meat, Inc. 2025 Fourth Quarter Conference Call. (Operator provided instructions.) Please note this event is being recorded. It is now my pleasure to turn today's conference over to Raphael Gross, partner of ICR, Inc. Please go ahead.
Thank you. Hello, everyone, and thank you for participating in 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 2025 earnings press release filed today after market close. This document is available on the Investor Relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note 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 report on Form 10-Q for the quarter ended September 27, 2025, and our annual report on Form 10-K for the fiscal year ended December 31, 2025, 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 today. Please 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'd now like to turn the call over to Ethan Brown.
Thank you, Raph, and hello, everyone. We entered a challenging year for our brand with an equally challenging quarter. We used this period, however, to accomplish a series of foundational building blocks for the company. First, we retired the majority of our 2027 convertible debt notes, and second, we raised significant capital, two measures that fundamentally changed and strengthened our balance sheet. Third, we invested in an enterprise-wide transformation initiative with a focus on rightsizing our operations and expanding our margins. Fourth, and as you will see reflected in our Q4 2025 numbers, we took another hard look at the assets, products and inventories we believe are not needed going forward and took action to disposition them. Fifth, we continue to lead the category in bringing clean plant-based meats to the consumer while hammering away at persistent misinformation promulgated by the incumbent industry. Finally, we laid the groundwork for repositioning Beyond Meat to Beyond the Plant Protein Company so that we can bring the strength of our brand, technology and expertise to adjacent categories. Having touched on the significant actions we took to strengthen our balance sheet through the elimination of approximately $900 million in debt and the addition of approximately $149 million in cash on our previous earnings call, I will forgo further detail here. Instead, I will focus my comments on a quick financial review of Q4 2025 before turning to our transformation work, product narrative and our brand repositioning and entry into adjacent markets. What I hope will be clear from these comments, especially for the investor who desires to drill down a level deeper than headline numbers, is that we are highly focused on reducing baseline operating expense and cash use, increasing conversion efficiency in our production facilities and addressing category headwinds straight on even as we take significant steps to diversify beyond it. Financial results for the fourth quarter 2025 reflect persistent weak demand in the plant-based meat category, resulting in lower volumes, the impact of which ripples throughout our P&L. This negative pressure was coupled with a number of significant nonroutine charges, many of which, though not all, stem from our transformation activities. Sales were $61.6 million, down 19.7% from the year ago period. Lower sales led to lower overhead absorption, which together with higher trade, negatively impacted gross margin. More significant, however, were large nonroutine or unusual items. These include such items as increased provision for inventory obsolescence, partly reflecting the strategic discontinuation of certain lower-profit products and accelerated depreciation related to the cessation of our operational activities in China; the net result was a reported gross margin of 2.3%. Similarly, despite progress in reducing the baseline cost of operating our business, significant nonroutine items, including large noncash charges, increased our reported operating expenses to $134.2 million versus $47.8 million in the year ago period. These included $48.1 million in noncash charges related to the write-down to fair value of certain of the company's long-lived assets; a $38.9 million litigation-related accrual; and higher noncash stock compensation expense of approximately $13.3 million related to our convertible debt exchange transaction. Stripping out these nonroutine items and the impact of the transaction-related change in noncash stock compensation, one can see that the run rate operating expense of our business is down considerably year-over-year. Finally, also reflecting the aforementioned transaction, net income of $409.9 million in the fourth quarter of 2025 compared to a loss of $44.9 million in the year ago period, reflecting a $548.7 million gain on debt restructuring. To summarize, our fourth quarter 2025 results reflect both continuing challenges in the category as well as substantial noise in our reported numbers due to, among other factors, several of our transformation initiatives. I will now turn to this transformation activity, where we are encouraged by the progress of our transformation office led by our interim Chief Transformation Officer, John Boken. As I noted, we've seen further reduction in underlying operating expenses, excluding the nonroutine items and transaction-related stock compensation increase for both the fourth quarter and full year 2025 on a year-over-year basis, and we are pursuing other cost reduction measures going forward. Also setting aside certain nonroutine charges, we believe we are making progress against our goal to sustainably return to healthy gross margins. As previously shared, we've largely completed the consolidation of our production network and continue to improve asset utilization at our manufacturing facilities. Further, we're now in the process of optimizing our new continuous production line at our facility in Columbia, Missouri and are investing in automation. These and other measures are already showing up in a year-over-year improvement in conversion costs across our network, a key component of our COGS reduction initiatives. Further, through our transformation office, we are seeking to reduce material costs through RFP actions, the cultivation of secondary sources and formulation improvements. We are further consolidating our warehouse network and reducing logistics expenses. We are exiting less profitable product lines, and we are making substantial progress on driving down inventory. Finally, we remain very focused on cash management and significantly reduced our baseline cash use in the fourth quarter compared to prior periods, excluding extraordinary items. I'll now turn briefly to our ongoing efforts to dispel the persistent cloud of misinformation regarding our products. As I have noted countless times in these calls, the incumbent industry did a masterful job of seeding doubt in the mind of the consumer. For the time being, we operate in an upside-down world where proteins from peas, lentils, fava beans and brown rice, mixed with avocado oil and a limited number of other clean ingredients, are disingenuously, though broadly, cast as less than healthy. I believe this confusion will ultimately clear. In the interim, we remain focused on innovating around taste and health and helping to communicate the latter via various accreditations and certifications including our now 20-plus certifications from the Clean Label Project. For our latest center-to-plate innovations, such as Beyond Steak Fillet or Beyond Ground Fava, consumers can now order directly from Beyond Test Kitchen, our direct-to-consumer platform. These products—their great taste, simple and clean ingredients and the impressive macronutrient content—are winning accolades from consumers even before they reach retail stores. Beyond Steak Fillet boasts 28 grams of protein, fava beans, wheat gluten and mycelia, and only 1 gram of saturated fat from avocado oil, while boasting 0 cholesterol and only 230 calories. Beyond Ground Fava delivers 27 grams of protein from fava beans and potato, 4 grams of fiber from psyllium husk, has no saturated fat or cholesterol and is only 140 calories. Moreover, Beyond Ground Fava is made from only four ingredients: water, fava protein, potato protein and psyllium husk and performed extremely well in niches such as tacos, Bolognese and protein bowls. Finally, I'll now turn to a key and central communication. Notwithstanding the many changes occurring through our transformation office that I've discussed above, what I noted late last year—that going forward, you should not expect more of the same—I was most of all referring to the broadening of the aperture that you see as we move from Beyond Meat to Beyond The Plant Protein Company. I believe that no company has innovated with plants under more scrutiny than Beyond ever. We're now bringing the results of hard-fought expertise and capabilities, our commitment to health and clean ingredients and our brand to adjacent categories where we believe we can be disruptive and win. Our first foray in this broader delivery of the power of plants to consumers is our exciting new drink platform Beyond Immerse. The Beyond Immerse platform, a clear and slightly carbonated beverage, is designed to provide the consumer with protein, fiber, antioxidants and electrolytes, effectively immersing the body in the nutritional benefits of plants. We launched Beyond Immerse as we now plan to do with all new retail innovation on the Beyond Test Kitchen to early fanfare and excitement, generating over 3 billion media impressions and selling out of our first limited-run inventory quickly. Beyond Immerse is formulated to support muscle health and recovery, gut health, immune function and hydration. Each serving contains 10 or 20 grams of protein, 7 grams of fiber, and only 60 or 100 calories depending on the level of protein. Beyond Immerse is made without added sugar, sugar alcohols, artificial sweeteners or flavors, stabilizers, carrageenan and many other ingredients present in many popular protein drinks. Easier to drink than a thick protein shake and made without whey so it's dairy free, the product is designed for the casual to competitive athlete as well as the busy student or professional who wants protein, fiber, antioxidants and electrolytes at the gym, home, work or on the go. Moreover, we believe it is particularly well suited for GLP-1 users. I personally find it satisfying post-workout at breakfast or late afternoon when I'd like a boost between meals. It's been fun to watch consumers enjoy it. And like all things Beyond, we continue to innovate and iterate based on what we believe is a state-of-the-art science and consumer use and suggestions. Far from stepping away from our mission to change the source of protein at the center of the plate from animals to plants, we reaffirm it and take to these promising adjacencies to introduce our brand to a much larger number of consumers than are currently participating in the plant-based meat category. We do so not to dabble but with a firm and serious belief that our technology, our brand and our commitment to human health and the power of plants allows us to successfully deliver unique and compelling value within the certain segments we've identified. In the end, it is our aspiration that though indirect, this expansion will lead more consumers back to Beyond at the center of the plate as they enjoy our brand, clean ingredients and commitment to their health in less controversial, more convenient products like Beyond Immerse. As such, I close today's comments as I have many others: we remain focused on building tomorrow's global protein company of size and significance. With that, I'll now turn the call over to Lubi.
Thank you, Ethan, and good afternoon, everyone. I'll begin with a review of our fourth quarter financial results before providing some brief comments on our outlook and additional matters regarding some of our recent disclosures. Total company net revenues decreased 19.7% to $61.6 million in the fourth quarter of 2025 from $76.7 million in the year ago period. The decrease was primarily driven by a 22.4% decrease in volume of products sold, partially offset by a 3.5% increase in net revenue per pound. Ongoing softness in volume of products sold primarily reflects weak category demand in many of our key geographies and channels and lower sales of chicken and burger products to QSR customers, both in the U.S. and abroad. Net revenue per pound increased primarily as a result of changes in product sales mix, favorable changes in foreign exchange rates and price increases of certain of our products, partially offset by higher trade discounts. Breaking this down by channel, U.S. retail channel net revenues decreased 6.5% to $31.7 million in the fourth quarter of 2025 compared to $33.9 million in the year ago period. The decrease was primarily volume driven, which again largely reflects weak category demand, while net revenue per pound was flat. Although volume headwinds persist, we are beginning to see some benefit from recently announced distribution gains in the mass channel, which is helping to mitigate the general softness. In U.S. foodservice, net revenues decreased 23.7% to $8 million in the fourth quarter of 2025 compared to $10.5 million in the year ago period. The decrease was primarily driven by a 25.1% decrease in volumes of products sold, partially offset by a slight year-over-year increase in net revenue per pound. Although category dynamics in the foodservice channel also remain weak, much of the decline in our business was due to the lapping of sales of chicken products to a U.S. QSR customer in the year ago period. Turning to International. International retail channel net revenues decreased 32.5% to $8.8 million in the fourth quarter of 2025 compared to $13.1 million in the year ago period. The decrease in net revenues was primarily driven by a 33.5% decrease in volume of products sold, partially offset by a 1.5% increase in net revenue per pound. The decrease in volume of products sold was primarily driven by reduced burger sales in the EU and certain retail channels in Canada. Although our Canadian business generally remains healthy, year-over-year comparisons were negatively impacted in part by stocking activity in the year ago period in anticipation of potential tariffs. Finally, in International Foodservice, net revenues decreased 31.8% to $13.1 million in the fourth quarter of 2025 from $19.3 million in the year ago period. The decrease in net revenues was driven by a 34.1% decrease in volume of products sold, partially offset by a 3.4% increase in net revenue per pound. The decrease in volume of products sold was primarily attributable to reduced sales of our chicken and burger products to certain QSR customers. The increase in net revenue per pound primarily reflected favorable changes in foreign currency exchange rates and changes in product sales mix, partially offset by higher trade discounts. Moving down the P&L. Gross profit in the fourth quarter of 2025 was $1.4 million or gross margin of 2.3% compared to gross profit of $10 million or gross margin of 13.1% in the year ago period. Gross profit and gross margin in the fourth quarter of 2025 included $2.4 million in noncash charges related to SKU rationalization initiatives and $1.5 million in expenses related to the shutdown of our China business. Additionally, gross profit and gross margin in the fourth quarter of 2025 were negatively impacted by increased cost of goods sold per pound, partially offset by increased net revenue per pound. Reduced production volumes in response to weak demand continue to represent a meaningful headwind in terms of fixed cost absorption even as we have been encouraged by improvements in our variable conversion costs. Overall, by cost bucket, the increase in cost of goods sold per pound primarily reflects higher materials costs and increased inventory provision, partially offset by lower manufacturing expenses, including depreciation and lower logistics costs. Operating expenses were $134.2 million in the fourth quarter of 2025 compared to $47.8 million in the year ago period with a significant year-over-year increase on a reported basis, reflecting the inclusion of certain large noncash charges. Specifically, and of note, operating expenses in the fourth quarter of 2025 included $48.1 million in noncash charges related to the loss from write-down of assets held for sale, reflecting certain PP&E assets which were no longer deemed core to our strategic objectives going forward, a $38.9 million litigation-related accrual and $13.3 million in incremental share-based compensation expenses related to the convertible debt exchange. Excluding these and other lesser items, the decrease in operating expenses compared to the year ago period was primarily driven by decreased marketing expenses. Below the line, total other income net was $542.6 million in the fourth quarter of 2025 compared to total other expense net of $7 million in the year ago period. The increase was primarily due to a gain on debt restructuring, resulting from our debt exchange and to a lesser extent, a gain from remeasurement of warrant liability, partially offset by a loss from remeasurement of derivative liability and an increase in interest expense. Net income was $409.9 million in the fourth quarter of 2025 or $0.84 per common share compared to a net loss of $44.9 million in the year ago period or a loss of $0.65 per common share. Adjusted EBITDA was a loss of $69 million in the fourth quarter of 2025 compared to a loss of $26 million in the year ago period, although I would note that adjusted EBITDA in the fourth quarter of 2025 includes the previously mentioned loss from write-down of assets held for sale. Turning to our balance sheet and cash flow highlights. Our cash and cash equivalents balance, including restricted cash, was $217.5 million as of December 31, 2025, and total outstanding carrying value of debt was $415.7 million, which includes the total undiscounted future cash flows of the new 2030 notes in accordance with TDR accounting guidelines. Net cash used in operating activities was $144.9 million in the year ended December 31, 2025, compared to $98.8 million in the year ago period. Capital expenditures totaled $12.3 million in the year ended December 31, 2025, compared to $11 million in the year ago period. Net cash provided by financing activities was $223.4 million in the year ended December 31, 2025, compared to net cash provided by financing activities of $45.8 million in the prior year. In 2025, net cash provided by financing activities included $100 million in draws from our delayed draw term loan facility, partially offset by related debt issuance costs and aggregate net proceeds of approximately $148.7 million from sales of common stock under our ATM program. As a reminder of the key highlights—as a reminder of the key highlights of our Q4 debt exchange, we exchanged over 97% of the $1.15 billion aggregate principal amount of the 2027 convertible notes for approximately $209.7 million in aggregate principal amount of new second lien 2030 convertible notes and approximately 318 million new shares of common stock. This leaves approximately $29.5 million of the 2027 convertible notes outstanding today. In combination with the nearly $150 million in net proceeds we raised from our ATM program in Q4, we believe these actions have meaningfully strengthened our balance sheet and support our continued efforts to execute our business transformation plan. Let me now touch briefly on our outlook. We continue to experience elevated levels of uncertainty and therefore, low visibility within our core category of plant-based meat. Accordingly, we believe it remains prudent to provide only limited and very near-term guidance until we begin to see more clear signs of stabilization within our operating environment. With that context, we are providing the following revenue guidance for the first quarter of 2026. We expect net revenues to be approximately $57 million to $59 million. Finally, I'll close by making a few remarks on some of our recent disclosures regarding the company's internal controls over financial reporting. As part of our fourth quarter and full year 2025 financial close procedures and in addition to a previously identified material weakness related to the account for nonroutine and complex transactions, we identified an additional material weakness related to controls associated with the accounting for inventory provision, including amounts recorded for the provision of excess and obsolete inventory. We are clearly disappointed with these findings and are actively working on plans to remediate the identified deficiencies. In part, while assessing the impact of these material weaknesses in our financial statements, we identified certain errors related to our previously issued interim condensed consolidated financial statements for 2025, which we determined were immaterial to those interim financial statements. We intend to correct those prospectively when we file our quarterly reports in 2026, and we have also furnished as corrected amounts for certain key affected financial measures in today's press release. We want to assure all our stakeholders that we are fully committed to our efforts for remediating the identified issues and strengthening our controls as applicable, and we have already taken measures to advance these objectives. Lastly, as we noted in our earnings release, we are unable to file our annual report on Form 10-K for the fiscal year ended December 31, 2025, within the prescribed deadline as we require additional time to complete our fourth quarter and year-end financial close procedures. We are working diligently to address these matters. However, at this time, we are unable to estimate when the Form 10-K will be filed. As a result, the company will be considered an untimely filer and will no longer be eligible to use Form S-3 registration statements until it regains timely filer status by filing in a timely manner, all reports required to be filed under the Securities Exchange Act of 1934 as amended for a period of 12 calendar months. And with that, I'll turn the call over to the operator to open it up for your questions. Thank you.
Questions and answers
Thank you. We will now begin the question-and-answer session. (Operator provided instructions.) Our first question comes from Ben Theurer with Barclays.
A few questions—so maybe to kick it off a little bit on the outlook for new products and product lines which you've talked a little bit about the beverage opportunities here. And then obviously, you've talked about a pipeline of potential new products under the new branding umbrella. I really want to understand, Ethan, from you, is that to be seen as really pivoting away from the initial mission of Beyond, which was to really look to diversify the portfolio? And we would like to understand where you are in terms of researching and developing those products to get a better understanding in terms of the timeline when we can expect those products to come to market? That would be my first question.
Thank you, Ben. I appreciate it. So I think, first and foremost, no, it is not in any way abandoning the original mission and focus that we have had. It's simply broadening the aperture of our business and meeting the consumer where they are today. If I could just comment a little bit on why we're making this pivot and then get into kind of the timing and focus of the pivot. If I thought that Beyond, in our original value proposition, were struggling during a period when the role of science and public discourse and social media and government was pronounced and effective when our pricing and economic stability and buying power are all favorable and the American political landscape were characterized by a sense of common ground, and Beyond were really suffering, I would be very concerned for our long-term prospects and for the plant-based meat category overall. But none of that is true—this is a very difficult period for the world, it's a difficult period for our country, and I think one of the things that is most significant for our business in terms of what's impacting it is this kind of surround sound of pseudoscientific jargon and positioning and promotion that really overwhelms what is decades and decades of science. I think nothing in our lane is a more obvious representation of this troubling trend than the resurgence of red meat. I've spent over 17 years now seeking and listening to counsel from some of the very best cardiologists in the country at some of our most prestigious institutions, and I can only look at these current trends with a mixture of sadness for the folks that are going to be impacted by it and increased indignation for those that are seeking to profit from it. I was very glad to see the American Heart Association today take a stand; a major newspaper summarized it as new nutrition guidance from the American Heart Association advising getting proteins from plants rather than meat, choosing low-fat or fat-free dairy and using olive, soybean and canola oil instead of beef tallow and butter. So you have an independent institution backed by science that is saying the exact opposite of where our culture is going on diet. But the good news is that this is a pendulum, it's going to swing and it's going to swing back, and I'm very comfortable that Beyond will prosper when it does. But I'm not going to wait around for that. Because of the work we've done, particularly over the last 10 years, to really lead the category and develop extremely clean, healthy products, we're really well positioned to look outside the category and take that technology, take that science, take that brand into segments that are many, many, many times the size of the plant-based meat category. So you have a great brand— for example, we were just named on a Time Magazine list of best brands in the world— you take the science that continues to win awards and accolades for some of the development work we've done around plant-based protein for the center of the plate and you take a massive trend within the consumer that is around protein and fiber and things like that, you say, okay, where can we apply all this? The first one we identified and have been public about is the beverage category. We launched an initial version online earlier and sold out very quickly that initial inventory. What we're doing is, as we did with Beyond Ground Fava, learning from the consumer what they like and don't like and making adjustments. That process is going great. The product that we're going to be launching soon, I think, is going to be one of the best protein drinks on the market. It satisfies so many different needs for the consumer, whether it's protein, fiber, antioxidants, electrolytes, and does so in a really clean way. Fascinating to me as we get into these other categories and I start looking at some of the key competitors in those categories: the really big ready-to-drink protein companies are putting things in their products that we could never put in our products because of the scrutiny we're under and our guidelines around clean ingredients. When you're looking at one of the top ones, they're using sucralose, carrageenan, artificial flavors—things we would never use. So we're going to take that relentless innovation and take that to clean ingredients as we go into those categories. I think the drink category is the one most clearly on the horizon for us and the one I'm willing to speak most publicly about. I think this summer you'll see us be pretty active there.
Okay. Got it. And then this is maybe more for Lubi. If we look at the balance sheet and in connection with the cash flow statement, clearly, throughout the quarter, you got a little bit of relief on where we are on the cash balance. But if we look at just the underlying trends within cash from operations, it continues to be somewhat in that range—$40 million to $50 million-ish negative on a quarterly basis shaping out at about $140 million to $150 million for the year. So what are the things that you can work on, given where the environment is? Your outlook for Q1 clearly points to not necessarily a top-line-driven recovery in 2026. So all that operating leverage continues to be probably a headwind or a lack of operating leverage, put it this way. What are the levers you can pull to further reduce incremental cash burn, given the durations you're facing?
I can just give a quick answer and then turn it to Lubi. One, I think you'll see that we're doing some really interesting things with inventory. So that's going to give us some favorability. And second, I think you just have to back out some of these one-time charges that have been so difficult for us. Once you do that, you see a dramatically slowing use of cash. This quarter, for example, you are down significantly from where we were a year ago if you back out those one-time charges or some of the extraordinary stuff related to the convertible debt exchange. I think you'll only see that continue to be favorable for us going forward.
Yes, Ben, I appreciate the question. I would probably echo a lot of what Ethan just mentioned. We have been focused for a while on our working capital management and in particular ensuring that our stocking levels of inventory are appropriately sized given where the business is. The team has done a really good job in managing the inventory down, but there's more to come in that regard. The other important thing—and again, Ethan mentioned this—is that in the last couple of quarters we have had some fairly large nonordinary course business expenses, right, in the fourth quarter these were related to the debt exchange. We continue to execute our transformation plan for this business, and so from time to time we will see some of these unusual items, all in service of trying to reposition this business more appropriately towards our goals to profitability. But I would expect that in 2026 some of the larger items we saw in recent quarters should not recur. Recall as well that last year in 2025 we unfortunately did have a couple of reductions in force and the associated severance payments that are related to that. Lastly, I would say that we are focused on trying to expand our gross margin. Ethan mentioned that we're standing up our first continuous production line end-to-end, and that's going to give us an opportunity to internalize additional volume that was previously outsourced and increase our internal asset utilization. I think all of those measures taken together should help to reduce that rate of cash consumption.
Next question comes from Kaumil Gajrawala with Jefferies.
I guess first question—congratulations on the financing. Maybe are there things that you can now do that you were prohibited from doing before as you execute the turnaround? Also, in the context of the refinancing and as it relates to the filing and some of the financial disclosure issues, does that change anything related to the transactions that you've done? Is there anything we need to be aware of if for some reason the 10-K comes out even later than planned—things that could happen?
Thanks. I'll take the first one and then pass it on to Lubi. I don't think we're going to be making any outsized investments as a result of the cash we brought on. I think we're just continuing to focus on an EBITDA-positive target and minimizing cash use. But there are some things that we now have the ability to do. If you look at last year, we cut way back, and I think part of the issue with our fourth quarter results on the top line is we didn't market a lot. We were in cash conservation mode as we were doing our debt exchange, which was incredibly expensive. I pulled back considerably on marketing. This year, we won't do that, particularly as we get into some of these exciting categories where marketing is important. On automation and continuous lines and things like that, you will see us make CapEx investments that will allow us to drop down costs out of general sales and operations. If you take a step back and look at our P&L for the quarter, there's a lot of noise in these numbers. For example, in gross margin we had lower volumes affecting fixed overhead absorption but also one-time charges related to SKU rationalization, China shutdown expenses and larger inventory provisions. Those are masking lower conversion costs throughout our plants and lower logistics costs. If you strip out those one-time charges, the company is operating at a much lower expense rate than before. In cash terms, if you take out those one-time charges, cash consumption is lower. So when you put that picture together, what the company really needs is to fix the top line. I've tried for years to do that through the existing category, and I think the headwinds will be here a little longer. It's something we need to address by moving outside the category, and that's why you see us in some of these adjacencies. It may be difficult for people to see if they just look at the headline numbers, but take a step back and you'll see a clearer picture.
Kaumil, I would just add a couple of things. As far as what putting the balance sheet restructuring behind us enables us to do, Ethan covered that well. The raising of additional proceeds from the ATM allows us to spend a little bit more on the marketing front, which we think will be important to stabilize the top line as we start to expand into some of these adjacent categories. I think the other thing is the focus that we are now able to reallocate to the primary business. We had been talking about the debt restructuring for quite some time and that did consume a lot of management focus. It's a relief to put that behind us and really focus on the important steps to turn the business around. Regarding the disclosures around the material weakness and impacts on our financial statements, it doesn't necessarily change anything immediately, but we're very focused on ensuring that we can file our 10-K as quickly as possible notwithstanding the fact that we were not able to do so within the prescribed timeline.
Got it. And then as it relates to the beverage product, what does the supply chain look like for something like that? Can you leverage your current PP&E assets to produce it? Do you use third-party co-packers? It sounds different from the core of what you're doing. How does that impact the practicality of production and scaling?
That's a very good question. Despite our past focus, we actually have a lot of beverage expertise on our Board and in our broader team, so we're not coming into this without experience. The supply chain is pretty similar from an ingredient perspective—we're dealing with protein, fiber, flavor—so it's not a stretch for us. From a production perspective, blending protein and fiber and flavor in a drink is typically easier than forming center-of-plate products. Co-packing is readily available throughout the U.S. and has less arduous terms for scale-up. Often with our center-of-plate products we have to teach a co-packer how to make our products; that's not the case here. I'm excited about our ability to understand the characteristics of plant materials, proteins and fiber and how to optimize their taste for consumers—this is where I believe we'll excel.
Next question comes from John Baumgartner with Mizuho.
Maybe first off, Ethan, just to build on that last line of thinking. Sticking with expectations for the beverage expansion and adjacencies more broadly, can you walk us through how you plan to scale it, how you'll manage distribution, the specific channels you'll enter, how you will allocate budget to enter these categories, and how you think about milestones as you ramp up and the impact on cash burn?
Sure. We're taking a careful, measured approach. You'll see the same pattern we've used before: initially launching direct-to-consumer, getting feedback from consumers, making adjustments, and then moving into regional distribution with an emphasis on natural channels and then into mass. We'll take a step-by-step approach—spend a certain amount, make sure we're on track, then invest more. So far the early indications from the drink are very positive. Distributor interest is speculative at the moment so I don't want to promise anything, but you'll see a measured approach from us. One advantage is that we're not creating entirely new brands; the drink is called Beyond Immerse, and we're relying on the Beyond brand recognition. We can sell additional product to consumers who already buy Beyond, which gives us an advantage relative to a new entrant.
What I would add on potential impact on cash burn is that one of the attractive elements about the beverage category—particularly at scale—is the margin profile. While in limited distribution and smaller production quantities the economics won't look as favorable, if we're successful and begin to scale up the margin profile for that category can be attractive. With the supply chain we have and co-packer agreements, we think the impact on total cash use will not be overly burdensome.
Okay. And then I'm curious about your vision for the Beyond Meat portfolio going forward as you work through this SKU rationalization. Where have you chosen to retrench in terms of product or new products? What have you identified as the foundation for the core going forward? Is it steak? Is it burgers? How should we think about that?
As I mentioned in my comments, we have 20-plus products that are Clean Label Project certified and I focus on those. We are focusing on products that deliver unique value to the consumer and help tell the story around Beyond: clean ingredients and health. We're less interested in areas with less differentiation, such as some breaded items. Beyond Steak Fillet is a good example of the sort of product we're focusing on—high protein, low saturated fat from avocado oil, mycelium and fava beans—products that reinforce the clean ingredient and healthy narrative.
The next question comes from Peter Saleh with BTIG.
Great. Maybe Ethan, the first question was on the beverage lineup. You mentioned initially getting some feedback and then making adjustments. Can you talk about what feedback you got and any adjustments you've made? And who is the target customer for this beverage lineup?
One thing we're learning is that beverages don't have the same single North Star as center-of-plate products; people have different taste preferences. We're trying to find the sweet spot that appeals to a broad group. The 10-gram protein version we put out was broadly popular. The 20-gram version was more polarizing—many people love it while others found it intense. We pulled back some of the flavor intensity and some of the sweetness in the 20-gram. We're on about the sixth or seventh iteration since we launched and the current product is excellent. The holistic package—the protein, fiber, antioxidants, electrolytes, environmental footprint and ease of consumption—works well. I'm personally drinking too many of them and have watched people in our office and at home enjoy them. The target customer ranges from casual to competitive athletes, busy students and professionals, and I think it's also well suited for GLP-1 users who want a satisfying, lower-calorie source of protein and fiber.
Great. And then, Lubi, on gross margin for 2026, is there anything you can provide or share at this point? Should it mirror 2025, be much better, lower—anything on the cadence would be helpful.
Unfortunately, we're not providing guidance for gross margin for the year. One of the reasons we continue to provide only near-term guidance on revenue is that our core category, plant-based meat, remains volatile and volumes remain soft. With such variability on the top line, the impact on margins can be significant. I mentioned in my prepared remarks that lower fixed cost absorption continues to be a headwind on margin. It's extremely difficult for us to forecast gross margin with any degree of certainty when there's so much variability on the top line. We have initiatives aimed at expanding margins, such as the continuous line I mentioned, but ultimately we need to see some stabilization in the top line before we can have greater confidence in where margins will shake out.
This concludes our question-and-answer session. I would like to turn the conference back over to Ethan Brown for any closing remarks.
Thanks, everyone, for the questions. I appreciate all the interest. Looking back over the last year, I want to compliment the team—this transaction that Lubi and his group executed was an enormous undertaking, and there's a lot of work that went into that. As we look forward, we're excited to see what's going to happen as we pivot our brand into areas that are perhaps not as challenged in our core category. We're going to be talking with you guys pretty soon and I think we'll have more information then as to how things are going. Thanks very much.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.