Business context and reporting period
Beyond Meat, Inc. develops and sells plant-based meat products through retail and foodservice channels. This unaudited Form 10-Q covers the 13 weeks ended April 2, 2022; the comparable prior-year period ended April 3, 2021. Products were available at approximately 135,000 retail and foodservice outlets in more than 90 countries as of March 2022.
Financial performance and position
| Metric | Q1 2022 | Prior-year period |
|---|---|---|
| Net revenue | $109.5 million | $108.2 million |
| Gross profit / margin | $0.2 million / 0.2% | $32.7 million / 30.2% |
| Operating loss | $97.6 million | $24.6 million |
| Net loss | $100.5 million; $1.58 per share | $27.3 million; $0.43 per share |
| Adjusted EBITDA | $(78.9) million; (72.1)% of revenue | $(10.8) million; (10.0)% of revenue |
| Cash used in operating activities | $165.2 million | $30.7 million |
Cash and cash equivalents were $547.9 million at April 2, 2022, down from $733.3 million at December 31, 2021. Capital expenditures were $21.5 million. Inventory rose 17.3% from year-end to $283.8 million. Stockholders’ equity fell from $132.5 million to $41.0 million.
Convertible senior notes had $1.15 billion principal outstanding, carry a 0% coupon, and mature in 2027; their net carrying amount was $1.13 billion. Current liabilities were $101.0 million and current assets were $917.3 million. Management said existing cash should fund operations and foreseeable cash needs for at least the next 12 months, based on its current business plan.
Material changes versus the prior period
- Revenue grew 1.2%, while pounds sold increased 12.4%; lower net price per pound, discounts, pricing actions, mix, and foreign exchange limited revenue growth.
- U.S. retail revenue increased 6.9% to $68.3 million, including $10.7 million from Beyond Meat Jerky. U.S. foodservice declined 7.5%. International retail and foodservice revenue fell 6.2% and 8.0%, respectively; international revenue overall declined 6.9%.
- Cost of goods sold increased 44.8% to $109.3 million. Management attributed the margin collapse chiefly to Jerky’s initially high production costs, higher manufacturing and logistics costs, and lower revenue per pound. Jerky reduced gross margin by an estimated 940 basis points versus the prior-year period.
- SG&A rose 92.8% to $75.1 million, with increases in advertising, marketing, salaries, freight, consulting, and product donations. R&D increased 23.6% to $19.7 million.
- Operating cash outflow increased substantially, driven by the net loss and working-capital outflows, including inventory, accounts receivable, and $37.0 million of campus construction-escrow payments recorded as prepaid lease costs.
Outlook, commentary, risks, and unusual items
No specific numerical revenue or earnings guidance for 2022 is provided in the filing. Management expected COVID-19-related adverse effects on revenue, margins, earnings, and cash flows to continue into 2022. It also cited weaker retail-category growth, competition, discounting, inflation, higher labor, raw-material, energy and transportation costs, supply-chain uncertainty, and lower production volumes as potential pressures.
Management expected Jerky manufacturing costs to moderate significantly beginning in the second half of 2022 through process optimization. It described cost-down, throughput, procurement, and manufacturing-efficiency efforts and reiterated a goal of achieving price parity with animal protein in at least one product category by the end of 2024. The Commerce, California commercialization center was expected to begin operations before year-end 2022.
Key contingencies include ongoing Don Lee Farms litigation, for which the company said a reasonably possible material loss or range was not estimable; a French Interbev lawsuit seeking, among other relief, EUR 200,000 and changes to product presentation; and a proposed derivative-action settlement involving $515,000 in plaintiffs’ fees and costs and corporate-governance reforms, subject to final court approval. The company also had $34.6 million of 2022 pea-protein purchase commitments and approximately $57.1 million of capital-expenditure purchase-order commitments due within 12 months.
Other notable exposures include pandemic-related demand and operating disruption, geopolitical and supply-chain risks, competition and consumer sensitivity to price, inflation, product-labeling regulation, and the company’s substantial cash burn and indebtedness. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth and higher sales volume can be sustained without heavier discounts, and whether retail weakness or foodservice declines persist.
- Whether Jerky production efficiencies materialize in the second half of 2022 and gross margin recovers from 0.2%.
- How quickly cash is consumed, including inventory and capital spending, and whether the stated 12-month liquidity outlook remains supportable.
- The terms, dilution implications, and repayment or conversion risks of the $1.15 billion 2027 convertible notes.
- Developments and potential financial or marketing impacts from the Don Lee Farms and Interbev cases and final approval of the derivative settlement.
- Whether supply, inflation, labor, COVID-19, and international-market conditions affect costs, demand, and planned expansion.