Business context and reporting period
Beyond Meat, Inc. designs and sells plant-based meat products. This unaudited Form 10-Q covers the quarter ended July 2, 2022, and the six months then ended; comparisons are with the periods ended July 3, 2021. All financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Net revenue | $147.0 million | $149.4 million | $256.5 million | $257.6 million |
| Gross profit (loss) | $(6.2) million | $47.4 million | $(6.0) million | $80.1 million |
| Gross margin | (4.2)% | 31.7% | (2.3)% | 31.1% |
| Operating loss | $(89.7) million | $(18.6) million | $(187.3) million | $(43.2) million |
| Net loss | $(97.1) million | $(19.7) million | $(197.6) million | $(46.9) million |
| Adjusted EBITDA | $(68.8) million | $(2.2) million | $(147.7) million | $(13.1) million |
Revenue was nearly flat year over year, while pounds sold increased 14.6% in Q2 and 13.7% in the first half. Lower revenue per pound—reflecting pricing actions, discounts, sales mix and foreign exchange—offset volume growth. U.S. revenue increased 1.1% in Q2 and 2.4% in the first half; international revenue declined 7.2% and 7.1%, respectively.
- Cost of goods sold rose 50.1% in Q2 and 47.8% in the first half, exceeding revenue in both periods. Management cited higher manufacturing, materials and logistics costs, depreciation, inventory write-offs and reserves, and lower revenue per pound.
- Q2 SG&A increased 30.5% to $63.0 million; first-half SG&A increased 58.3% to $138.1 million. R&D rose 17.2% in Q2 and 20.6% in the first half.
- Q2 gross loss included an estimated $8.7 million loss on liquidation-channel sales (inventory cost of $10.5 million and revenue of $1.9 million) and an estimated $7.7 million gross loss from Beyond Meat Jerky.
At July 2, cash and cash equivalents were $454.7 million, down from $733.3 million at year-end 2021. Current assets were $819.5 million and current liabilities $109.5 million. First-half operating cash outflow was $235.7 million; investing cash outflow was $42.0 million, including $42.0 million of property and equipment purchases. Management said existing cash should fund operations and foreseeable requirements for at least the next 12 months, based on its current business plan.
Convertible senior notes had $1.15 billion principal outstanding, bear 0% regular interest and mature in 2027; net carrying value was $1.132 billion. Stockholders’ equity turned to a deficit of $47.9 million from positive equity of $132.5 million at December 31, 2021. Inventory was $254.7 million, up 5% from year-end.
Outlook, commentary and material risks
- The filing provides no numerical revenue or earnings guidance. Management cited weaker retail category demand, competition, inflation, premium pricing versus animal protein, lower capacity utilization, discounting and potential inventory markdowns as pressures on 2022 results.
- Management expects SG&A to decrease in the second half from first-half levels as it optimizes non-people costs. On August 3, 2022, the company announced a reduction-in-force of approximately 4% of its global workforce, with expected annualized savings of about $8 million, excluding approximately $1 million of one-time separation costs expected in Q3.
- The company continues to target price parity with animal protein in at least one product category by the end of 2024. Management expects gross-margin improvement to depend on volume and throughput, production efficiencies, lower input and tolling costs, and supply-chain and manufacturing changes.
- Risks highlighted include COVID-19 and supply-chain disruption, inflation and consumer spending pressure, foreign-exchange volatility, demand forecasting and manufacturing underutilization, and the possibility of inventory write-offs or supply-chain termination fees. The company also disclosed substantial purchase and capacity commitments, including $49.3 million of capital expenditure purchase orders and $86.7 million of co-manufacturing fee commitments as of July 2.
- Legal matters include the ongoing Don Lee Farms dispute, new product-labeling and protein-claim lawsuits, and French litigation over use of meat-related terms. The company stated that reasonably possible losses for certain cases were not estimable. It also disclosed $4.3 million of Q2 restructuring expenses, primarily legal costs related to the co-manufacturer dispute.
- Related-party activity with PepsiCo joint venture The Planet Partnership included $15.9 million of Q2 revenue and $26.6 million of first-half revenue; the company recognized $1.4 million and $2.1 million of its share of the venture’s losses in those periods, respectively.
Important facts for investors to verify
- Whether volume growth can be sustained while improving realized revenue per pound and reversing negative gross margins.
- How much of cash use reflects recurring operating needs versus investment, including Campus Lease escrow payments, and whether the stated 12-month liquidity outlook remains achievable.
- Progress on cost reductions and the economics of new products, particularly Jerky, alongside capacity utilization and inventory levels.
- Potential financial and operational effects of litigation, purchase commitments, co-manufacturing minimums, and the Campus Lease build-out.
- Whether revenue from TPP and other customer or distributor concentrations changes materially; two distributors represented approximately 16% and 10% of Q2 gross revenue.