Beyond Meat, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the supplied text does not provide standalone fourth-quarter financial statements. Amounts below are in U.S. dollars.
Business context
Beyond Meat develops and sells plant-based meat alternatives across beef, pork and poultry categories. At year-end, products were available in approximately 130,000 retail and foodservice outlets in more than 90 countries. The company operates as one reportable segment.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net revenue | $464.7 million | $406.8 million |
| Gross profit / margin | $117.3 million / 25.2% | $122.3 million / 30.1% |
| Operating loss | $174.9 million | $49.3 million |
| Net loss | $182.1 million | $52.8 million |
| Adjusted EBITDA (non-GAAP) | $(112.8) million | $11.8 million |
| Cash used in operating activities | $301.4 million | $40.0 million |
| Cash and cash equivalents at year-end | $733.3 million | $159.1 million |
| Inventory at year-end | $241.9 million | $121.7 million |
Revenue rose 14.2%, while product volume increased 16.6% to 84.6 million pounds; lower net price per pound partly offset volume growth. Cash used in investing activities was $147.5 million, including $136.0 million of property, plant and equipment purchases and an $11.0 million investment in the PepsiCo joint venture. Financing activities provided $1,022.3 million, principally from convertible notes.
At December 31, 2021, total assets were $1.379 billion, current assets $1.052 billion and current liabilities $94.2 million. Convertible notes had $1.150 billion aggregate principal outstanding, recorded net of issuance costs at $1.130 billion. The notes bear 0% regular interest and mature in March 2027. The company said existing cash was expected to fund operations and foreseeable cash needs for at least the next 12 months.
Material changes versus FY2020
- Revenue growth slowed to 14.2% from the prior year’s 36.6%; U.S. revenue declined 1.6%, while international revenue increased 76.9%.
- U.S. retail revenue fell 7.9% to $243.4 million, reflecting slower category growth, heavier trade discounts and, to a lesser extent, competition. International retail revenue rose 123.4% to $81.5 million.
- Foodservice revenue rose 31.7% to $139.9 million as the channel recovered from pandemic disruption, though launches and customer demand remained affected.
- Gross margin fell 4.9 percentage points. Management cited lower revenue per pound from product mix and discounts, plus higher manufacturing and logistics costs.
- Research and development expense increased 112.3% to $66.9 million; selling, general and administrative expense increased 56.7% to $209.5 million. The larger expense base and lower gross profit drove a substantially wider loss.
- Inventory nearly doubled, increasing 99% to $241.9 million. FY2021 cost of goods sold included $12.5 million of excess and obsolete inventory write-offs and $0.8 million of inventory write-downs.
Outlook, risks and unusual items
- No numerical FY2022 revenue or earnings guidance is provided. Management anticipated moderating operating-expense growth in 2022 and continued investment in innovation, capacity and expansion. Its goal is to reach animal-protein price parity in at least one product category by the end of 2024.
- Management cautioned that 2022 revenue, gross profit, margins, earnings and cash flow could be pressured by weak U.S. retail demand, discounting and price reductions, new-product ramp-up costs, lower production volumes and fixed-cost absorption, inflation, freight and supply-chain costs, and continuing COVID-19 uncertainty.
- FY2021 restructuring expense was $15.8 million, primarily legal costs related to the dispute with former co-manufacturer Don Lee Farms. The company reported that the reasonably possible loss range in that litigation was not estimable; trial was scheduled for May 16, 2022.
- A proposed settlement of derivative actions, subject to court approval, includes governance reforms and $515,000 in plaintiffs’ fees and costs, accrued at year-end. The company reported no other payment contemplated under the proposed settlement.
- The $1.150 billion convertible notes carry conversion, repurchase and potential cash-settlement obligations. The company also disclosed substantial lease and investment commitments, including an estimated $71 million of additional 2022 campus-lease construction funding, $51.4 million of capital-expenditure purchase commitments and a $16.5 million 2022 joint-venture investment.
- Key business risks include reliance on a limited number of pea-protein suppliers and distributors, competition and pricing pressure, product concentration (the Beyond Burger generated approximately 55% of 2021 gross revenue), manufacturing and demand-forecasting risks, food safety, international expansion and potential labeling restrictions.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified accounting for the capped-call transactions as a critical audit matter.
Investor verification priorities
- Verify whether U.S. retail demand stabilized after its FY2021 decline and whether discounting is improving sales without further eroding margins.
- Track inventory levels, write-offs, production utilization and cash consumed by operations and capital spending.
- Review the status and cash implications of the Don Lee Farms litigation and court approval of the derivative-action settlement.
- Assess the company’s ability to fund operating losses, facility and lease commitments, and any cash obligations associated with conversion or repurchase of the notes.
- Monitor pea-protein supply arrangements, customer and distributor concentration, and the commercial performance of international operations and new products.