Business context and reporting period
Beyond Meat, Inc. filed this Form 10-K for the fiscal year ended December 31, 2020; it is an annual report, not a standalone fourth-quarter filing. The company sells plant-based meat products through retail and foodservice channels. Products were available at approximately 122,000 outlets in more than 80 countries at year-end. COVID-19 sharply shifted sales toward retail and away from foodservice.
Financial performance and position
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Net revenue | $406.8 million | $297.9 million |
| Gross profit / margin | $122.3 million / 30.1% | $99.8 million / 33.5% |
| Operating loss | $49.3 million | $0.5 million |
| Net loss | $52.8 million | $12.4 million |
| Adjusted EBITDA, non-GAAP | $11.8 million / 2.9% of revenue | $25.3 million / 8.5% of revenue |
| Cash used in operating activities | $40.0 million | $47.0 million |
| Cash used in investing activities | $74.9 million | $26.2 million |
Revenue rose 36.6%, while product volume increased 41.2%; lower net price per pound, promotional discounts and a greater mix of lower-priced larger packs partly offset volume growth. Retail revenue increased to $300.6 million from $144.8 million; foodservice revenue fell to $106.2 million from $153.1 million. International revenue declined 16.5% to $81.9 million, primarily due to foodservice weakness.
At December 31, 2020, cash and cash equivalents were $159.1 million, working capital was $243.3 million, total assets were $468.0 million and stockholders’ equity was $367.1 million. Inventory increased 49% year over year to $121.7 million, largely reflecting raw-material deliveries that exceeded demand. Property, plant and equipment, net, increased to $115.3 million from $47.5 million. The company reported $25.0 million in revolving-credit borrowings at year-end; it had no excess availability under the facility then, and paid the balance off on February 25, 2021.
Fourth-quarter 2020 revenue was $101.9 million versus $98.5 million in fourth-quarter 2019. Gross margin fell to 24.9% from 34.0%, and net loss widened to $25.1 million from $0.5 million.
Material changes versus the prior year
- Revenue growth was led by retail expansion, greater sales velocity and new products, but foodservice weakness and discounting pressured price realization and margins.
- Gross margin declined 3.4 percentage points. Management attributed the decrease mainly to lower fixed-cost absorption as production was scaled back, plus higher trade discounts.
- Operating expenses rose to $171.6 million from $100.2 million. SG&A increased 78.9%, including higher share-based compensation, staffing, marketing and legal costs.
- Cost of goods sold included $10.8 million in excess and obsolete inventory write-offs, compared with $6.4 million in 2019. The company identified $14.1 million of COVID-19-related costs, including repacking, inventory charges and product donations.
- Capital investment accelerated: cash purchases of property, plant and equipment were $57.7 million, and the company spent $15.5 million on assets acquired from a former co-manufacturer.
Outlook, risks, contingencies and unusual items
Management expects COVID-19 to continue adversely affecting results, including revenue, gross profit, margins, earnings and cash flows into 2021. It specifically expected foodservice revenue to remain pressured. The filing provides no numerical revenue or earnings guidance. Management described potential margin improvements from higher throughput, manufacturing scale and localization, purchasing efficiencies and lower logistics costs, while noting that discounting, expansion investment and growth initiatives may continue to weigh on margins. Its stated goal was to achieve price parity with animal protein in at least one product category by 2024.
Key risks include pandemic-related demand and operating uncertainty; reliance on a limited number of pea-protein suppliers and co-manufacturers; forecasting, inventory and capacity execution; intense competition and pricing pressure; dependence on the Beyond Burger, which accounted for approximately 58% of 2020 gross revenue; food safety and brand risks; international expansion, including China; and potential restrictions on plant-based product naming and labeling. A multi-year Roquette supply agreement includes $141.9 million of committed pea-protein purchases at year-end, and capital-expenditure purchase commitments were approximately $19.5 million.
The company exceeded the maximum total leverage covenant under its $150 million secured revolving credit agreement for the quarter and year ended December 31, 2020, then repaid the outstanding borrowings in February 2021. The facility is secured by substantially all company assets. A $12.5 million letter of credit was subsequently delivered as security for the new headquarters lease. The 12-year lease covers approximately 281,110 rentable square feet, with stated base rent of approximately $159.3 million over its term.
The Don Lee Farms dispute remains pending; the company said the reasonably possible loss range was not estimable. Don Lee Farms seeks unspecified damages and other relief, and the company is pursuing counterclaims. Related securities class-action litigation was dismissed with prejudice, with the appeal period expired; shareholder derivative cases remained stayed or otherwise pending as described in the filing. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded internal controls were effective as of year-end.
In 2020 the company acquired a Netherlands manufacturing facility, began developing production operations in China, and acquired a former co-manufacturer’s facility for finished goods. In January 2021 it entered a joint venture with PepsiCo to develop plant-based snacks and beverages. It also ceased to qualify as an emerging growth company effective December 31, 2020.
Important facts for investors to verify
- Whether foodservice demand recovers and retail growth persists after the pandemic-driven channel shift; assess quarterly sales and channel mix.
- Whether margins stabilize after the 2020 decline, inventory write-offs, discounting and lower production utilization.
- Progress on facility ramp-ups in the Netherlands and China, capacity utilization, capital spending and returns on these investments.
- Liquidity and covenant position after the February 2021 debt repayment, including the effect of the headquarters letter of credit and lease commitments.
- Execution against the $141.9 million pea-protein purchase commitment and exposure to supplier concentration, inventory and input-cost volatility.
- Developments in the Don Lee Farms litigation and any potential financial or intellectual-property consequences.
- Underlying performance alongside non-GAAP Adjusted EBITDA, including the exclusions used in its calculation.