Business context and reporting period
Beyond Meat, Inc. develops and sells plant-based meat products. This unaudited Form 10-Q covers the quarter ended July 1, 2023, and the six months then ended; comparisons are with the periods ended July 2, 2022. Amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q2 2023 | Six months 2023 |
|---|---|---|
| Net revenue | $102.1 million | $194.4 million |
| Gross profit (margin) | $2.3 million (2.2%) | $8.5 million (4.4%) |
| Operating loss | $53.8 million | $111.5 million |
| Net loss | $53.5 million | $112.5 million |
| Net loss per share | $(0.83) | $(1.76) |
| Adjusted EBITDA, non-GAAP | $(40.8) million | $(86.6) million |
- For the six months, operating cash flow was negative $88.3 million; investing cash flow was negative $8.1 million, including $7.1 million of property and equipment purchases and $3.3 million invested in the joint venture.
- At July 1, cash and cash equivalents were $210.8 million, plus $15.2 million of restricted cash. Cash, cash equivalents and restricted cash declined $96.7 million during the first half.
- Current assets were $497.4 million and current liabilities $54.6 million. Stockholders’ deficit was $299.1 million.
- Convertible notes had $1.15 billion principal outstanding, carry 0% interest and mature in 2027; their net carrying value was $1.136 billion. Operating lease liabilities totaled $80.2 million.
Changes versus prior comparable periods
- Q2 revenue fell 30.5% year over year; first-half revenue fell 24.2%. Product volume declined 23.9% in Q2 and 17.1% in the first half, while net revenue per pound fell 8.6% in both periods.
- U.S. retail revenue fell 38.5% in Q2 and U.S. foodservice fell 45.4%. International foodservice was nearly flat in Q2, but grew 30.5% for the first half, supported by higher volume, including sales to large QSR customers.
- Gross margin improved from negative 4.2% to 2.2% in Q2 and from negative 2.3% to 4.4% for the first half. Operating and net losses narrowed, alongside lower R&D and SG&A spending.
- Improvement in reported gross profit included a material accounting-estimate effect: extending certain equipment useful lives reduced depreciation by $5.6 million in Q2 and $11.2 million in the first half, increasing gross margin by 5.0 and 5.3 percentage points, respectively.
- First-half cash used in operations improved from $235.7 million to $88.3 million year over year; capital spending also decreased substantially.
Outlook, commentary and risks
- Management said existing cash and anticipated operating cash flows should fund operations and foreseeable requirements for at least 12 months, but noted uncertainty around demand, cost reductions, working capital and capital needs.
- Management now considers its previously stated goal of cash-flow-positive operations in the second half of 2023 unlikely, citing greater-than-expected consumer and category headwinds. No revised date or quantified revenue outlook is provided in the filing text.
- The company identified weak plant-based meat demand, inflation, price premiums versus animal protein, competition, discounting, reduced capacity utilization and input costs as pressures on sales and profitability. Management expects more muted seasonality to continue into Q3 2023.
- A $200 million at-the-market equity program was available, with no shares sold as of July 1. Any issuance could dilute shareholders.
- The company continued restructuring Beyond Meat Jerky arrangements and intended to take over distribution in Q4 2023; management said this was intended to support margin expansion. The transition could also reduce distribution reach and revenue.
- Significant commitments include $75.8 million of potential co-manufacturing fees over the contract term, pea-protein purchases of $2.7 million for the remainder of 2023, $10.9 million in 2024 and $17.1 million in 2025, and approximately $17.0 million in capital-expenditure purchase orders due within 12 months.
- Legal matters include securities and derivative shareholder suits, consumer class actions concerning protein and ingredient labeling, and French proceedings over product naming and the Caped Steer trademark. The company says these cases are at preliminary stages or otherwise unresolved; it cannot estimate potential losses beyond recorded accruals.
- A temperature-controlled warehouse vendor experienced a cybersecurity incident in April 2023; the full operational impact was not known at filing. The company also faces risks from supply-chain disruption, foreign exchange, and regulations affecting plant-based product names, particularly the pending EU court process concerning France’s naming restrictions.
Important facts for investors to verify
- Whether demand and sales volumes stabilize, especially in U.S. retail and foodservice, and whether international foodservice growth continues.
- How much gross-margin improvement is sustainable apart from the $11.2 million first-half depreciation benefit from the useful-life estimate change.
- Actual cash burn, working-capital trends and progress toward cash-flow-positive operations, given management’s revised assessment of the 2023 target.
- Capacity utilization, inventory quality and reserves, co-manufacturing fees, and the execution and economics of the Jerky distribution transition.
- Future use of the ATM program and potential dilution, alongside the company’s ability to meet lease, purchase and debt obligations.
- Developments and potential financial impacts from litigation, product-labeling claims, French/EU naming rules and the warehouse-vendor cyber incident.