BEYOND MEAT, INC.
The following discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from those discussed
in the forward-looking statements as a result of various factors, including
those set forth in Part I, Item 1A, "Risk Factors," and "Note Regarding
Forward-Looking
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Statements" included elsewhere in this report. The following discussion and
analysis of our financial condition and results of operations should be read in
conjunction with our audited consolidated financial statements and related notes
included elsewhere in this report, as well as the information presented under
"Selected Financial Data."
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this document generally discusses 2021 and 2020 items and
year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and
year-to-year comparisons between 2020 and 2019 that are not included in this
document can be found in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II, Item 7 of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2020 .
Overview
Beyond Meat is a leading plant-based meat company offering a portfolio of revolutionary plant-based meats. We build meat directly from plants, an innovation that enables consumers to experience the taste, texture and other sensory attributes of popular animal-based meat products while enjoying the nutritional and environmental benefits of eating our plant-based meat products. Our brand commitment, "Eat What You Love," represents a strong belief that there is a better way to feed our future and that the positive choices we all make, no matter how small, can have a great impact on our personal health and the health of our planet. By shifting from animal-based meat to plant-based protein, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare. The success of our breakthrough innovation model and products has allowed us to appeal to a broad range of consumers, including those who typically eat animal-based meats, positioning us to compete directly in the$1.4 trillion global meat industry. We sell a range of plant-based meat products across the three main meat platforms of beef, pork and poultry. As ofDecember 2021 , our products were available at approximately 130,000 retail and foodservice outlets in more than 90 countries worldwide, across mainstream grocery, mass merchandiser, club store, convenience store and natural retailer channels, direct-to-consumer, and various food-away-from-home channels, including restaurants, foodservice outlets and schools. Our research and development and administrative offices are located inEl Segundo, California . Our primary production facilities for our woven protein and dry blends are located inColumbia, Missouri . We lease manufacturing facilities consisting of approximately 26,000 square feet under a lease expiringJune 30, 2022 and approximately 64,000 square feet under a lease expiringJuly 31, 2025 , the latter of which is subject to automatic extensions for two consecutive three-year periods in accordance with the terms of the lease unless we provide notice terminating the lease at least one year before its expiration date. We own a manufacturing facility consisting of approximately 86,000 square feet on approximately 19.34 acres of land inDevault, Pennsylvania , which is used primarily for finished goods production. We own a manufacturing facility consisting of approximately 48,000 square feet in Enschede,the Netherlands , where we produce our woven protein and dry blend flavor systems for shipment to local co-manufacturers, including one of our distributors who built a co-manufacturing facility inthe Netherlands used for production of our finished goods. We lease a manufacturing facility consisting of approximately 43,000 square feet in Jiaxing,China , where we produce our woven protein and house end-to-end production. Renovations in the leased facility were substantially completed and trial production began in the first quarter of 2021. In the second quarter of 2021, several commercial trials of certain of our manufacturing processes were completed. Following the successful qualification of extrusion production capabilities in the third quarter of 2021 and the completion of International Food Safety System Certification (FSSC) 22000 and ISA Halal certification in the fourth quarter of 2021, the facility completed commercialization of end-to-end production at the end of 2021. In the fourth quarter of 2021, we also leased a 12,100 square foot facility inShanghai, China , which will be used as a local research and development facility to support our local manufacturing operations. Design and construction work is underway, with estimated completion in the second quarter of 2022. 60 --------------------------------------------------------------------------------
In the third quarter of 2021, we completed the purchase of a 142,000 square foot
facility on approximately 12.90 acres of land in
Also in the third quarter of 2021, we assumed an operating lease for a building consisting of approximately 64,000 square feet inCommerce, California to house our commercialization center which will facilitate the trial and scale up of new products for both our woven protein and finished goods. The commercialization center is expected to improve our speed to market for new products, reduce overall network costs by freeing up production lines from trials and improve collaboration of technical resources. The lease expires inAugust 2033 , subject to an option to extend the lease term for an additional 60 months. Design and construction work is underway, with estimated completion in 2022. In addition to leasing our corporate headquarters and other general office space inEl Segundo, California , we lease approximately 30,000 square feet for our Manhattan Beach Project Innovation Center inEl Segundo, California under a lease expiringJanuary 31, 2026 . In 2021, we leased approximately an additional 10,200 square feet of adjacent lab space under pursuant to an amendment to our Manhattan Beach Project Innovation Center lease. Our right to use the additional 10,200 square feet of adjacent lab space was for an initial term throughJanuary 31, 2022 , and may continue on a month-to-month basis thereafter. OnJanuary 14, 2021 , we entered into a 12-year lease with two 5-year extension options to house our corporate headquarters, lab and innovation space inEl Segundo, California . The leased premises are to be built out by the landlord and delivered to us in three phases over a 26-month period. Once the premises are delivered to us in their entirety, we will lease approximately 281,110 rentable square feet under the lease. Design and construction work at the premises is underway, with occupancy of a portion of the premises likely to occur in the third quarter of 2022. See Note 11 , Commitments and Contingencies, to the Notes to Consolidated Financial Statements included elsewhere in this report. OnJanuary 25, 2021 , we entered intoThe PLANeT Partnership, LLC ("TPP"), a joint venture with PepsiCo, Inc., to develop, produce and market innovative snack and beverage products made from plant-based protein. We believeTPP will allow us to reach more consumers by entering new product categories and distribution channels, increasing accessibility to plant-based protein around the world. OnMarch 5, 2021 , we issued$1.0 billion aggregate principal amount of our 0% Convertible Senior Notes due 2027 (the "Convertible Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. OnMarch 12, 2021 , the initial purchasers of the Convertible Notes exercised their option to purchase an additional$150.0 million aggregate principal amount of the Company's 0% Convertible Senior Notes due 2027 (the "Additional Notes", and together with the Convertible Notes, the "Notes"), and such Additional Notes were issued onMarch 16, 2021 . The initial conversion price of the Notes is$206.00 per share of common stock, which represents a premium of approximately 47.5% over the closing price of the Company's common stock onMarch 2, 2021 . The Notes will mature onMarch 15, 2027 , unless earlier repurchased, redeemed or converted. The Notes were issued pursuant to, and are governed by, an indenture, dated as ofMarch 5, 2021 (the "Indenture"), between us andU.S. Bank National Association , as trustee. We used$84.0 million of the net proceeds from the sale of the Notes to fund the cost of entering into capped call transactions, described below and intend to use the remainder of the net proceeds for general corporate purposes and working capital. The proceeds from the issuance of the Notes were approximately$1.0 billion , net of capped call transaction costs of$84.0 million and debt issuance costs totaling$23.6 million . See Note 8 , Debt, to the Notes to Consolidated Financial Statements elsewhere in this report. OnMarch 2, 2021 , in connection with the pricing of the offering of the Convertible Notes, we entered into capped call transactions (the "Base Capped Call Transactions") with the option counterparties and used$73.0 million in net proceeds from the sale of the Convertible Notes to fund the cost of the Base Capped Call Transactions. OnMarch 12, 2021 , in connection with the Additional Notes, we entered into capped call transactions (the "Additional Capped Call Transactions") with the option counterparties and used$11.0 million in net proceeds from the sale of the Additional Notes to fund the cost of the Additional Capped Call Transactions. 61 -------------------------------------------------------------------------------- The Base Capped Call Transactions and the Additional Capped Call Transactions (collectively, the "Capped Call Transactions") cover, subject to customary adjustments, the aggregate number of shares of our common stock that will initially underlie the Notes, and are expected generally to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is$279.32 , which represents a premium of 100% over the last reported sale price of the Company's common stock onMarch 2, 2021 . The aggregate$84.0 million paid for the Capped Call Transactions was recorded as a reduction to "Additional paid-in capital" ("APIC"). Net revenues increased to$464.7 million in 2021 from$406.8 million in 2020 and$297.9 million in 2019, representing a 25% compound annual growth rate over a two-year period, compared to a 115% compound growth rate over a two-year period in 2020. We have generated losses since inception. Net loss in 2021, 2020 and 2019 was$182.1 million ,$52.8 million and$12.4 million , respectively, as we pursued our long-term goal of future growth of our business, investing in innovation, people, infrastructure, product scaling and establishing strategic partnerships in theU.S. , EU andChina . We operate on a fiscal calendar year, and each interim quarter is comprised of one 5-week period and two 4-week periods, with each week ending on a Saturday. Our fiscal year always begins onJanuary 1 and ends onDecember 31 . As a result, our first and fourth fiscal quarters may have more or fewer days included than a traditional 91-day fiscal quarter.
Impact of COVID-19 on Our Business
The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business. In response to the COVID-19 pandemic, governments and other authorities around the world implemented significant measures intended to control the spread of the virus, including social distancing measures, business closures or restrictions on operations, quarantines and travel bans. While some of these restrictions were lifted or eased in many jurisdictions as the rates of COVID-19 infections have decreased or stabilized and as various COVID-19 vaccines have become more widely available, a resurgence of COVID-19 and the impact of variants of the virus that causes COVID-19 in some markets has slowed the reopening process. OnNovember 4, 2021 , theU.S. Department of Labor's Occupational Safety and Health Administration (OSHA) issued a COVID-19 Vaccination and Testing Emergency Temporary Standard requiring all employers with 100 or more employees to ensure that their employees are fully vaccinated or test for COVID-19 on at least a weekly basis. TheOSHA rule also requires that these employers provide paid-time for employees to get vaccinated, and ensure all unvaccinated workers wear a face mask in the workplace. While theU.S. Supreme Court stayed theOSHA rule inJanuary 2022 , it is not currently possible to predict with any certainty whether the stay will be lifted, the exact impact the new regulation would have on our company, suppliers and customers. Some employers, including the Company, already have implemented requirements for workers regarding vaccination status, testing and/or other measures in response to COVID-19. The Company has required compliance with its COVID-19 vaccination policy sinceOctober 31, 2021 for allCalifornia based employees, andDecember 31, 2021 for all otherU.S. based employees, subject to any special exceptions or other approved reasonable accommodations. EffectiveJanuary 26, 2022 ,OSHA has withdrawn this as an enforceable emergency temporary standard but has not withdrawn the emergency standard as a proposed rule. We have established a cross-functional task force that meets regularly and continually monitors and tracks relevant data, including guidance from local, national and international health agencies. This task force works closely with our senior leadership and is instrumental in making critical, timely decisions and is committed to continuing to communicate to our employees as more information is available to share. While our manufacturing facilities and our Manhattan Beach Project Innovation Center remained operational, beginning inMarch 2020 employees at our corporate headquarters began working remotely. Beginning inJuly 2021 , our corporate employees returned to work and were provided a flexible working 62 -------------------------------------------------------------------------------- schedule of working in the office or remotely depending on job responsibilities, company need and performance. Beginning inOctober 2021 , we began requiring headquarters-based employees to return to working in the office. At all of our facilities, we follow current guidelines from local departments of public health and have implemented comprehensive preventative hygienic measures to support the health and safety of our employees. In addition, we strongly encourage face coverings while indoors and have implemented a mandatory vaccine policy absent approved accommodations and regular testing. At our manufacturing facilities, we have implemented a series of physical distancing and hygienic practices to further support the health and safety of our manufacturing employees. Travel and field marketing activities have resumed with instructions to adhere to COVID-19-related guidelines. Illness prevention policies have been updated company-wide to state that no employee may be onsite when experiencing any symptom of illness. Employees must remain home when sick and may not return onsite until symptom-free. If employees test positive for COVID-19, they must quarantine for five days and until they are no longer symptomatic, and must also test negative prior to returning to work. The COVID-19 pandemic had a mixed impact on our quarterly foodservice channel net revenues in 2021, which declined in the first quarter of 2021 and recovered in the remaining three quarters of 2021 as compared to the same periods in the prior year. Overall, for the year endedDecember 31, 2021 , foodservice channel net revenues were$139.9 million compared to$106.2 million in the prior year, a 31.7% increase. Despite the improvement in 2021 in the foodservice channel compared to the same period a year ago, we recognize that our anticipation of continued steady recovery in the foodservice channel is based on the assumption that COVID-19 infection rates both in theU.S. and abroad will be reasonably contained. The impacts of the ongoing COVID-19 pandemic also continue to result in delays in tests or launches of our products among our foodservice customers and negatively impact the rate of our growth. Excluding our sales to large QSR customers, our foodservice channel has broad exposure to certain outlets that we believe have been disproportionately affected by COVID-19. These include, among others: amusement parks; academic institutions; hospitality; corporate catering services; movie theaters; sports arenas; and bars and pubs, locations that are frequently characterized by large gatherings of people in close proximity to each other, or those that may be adversely affected by reduced business or leisure travel, or reduced attendance at corporate offices. While we saw some improvement in demand in our foodservice business in 2021, the environment remains highly uncertain given the ongoing pandemic and the resurgence of COVID-19 and the appearance of variants. Our retail channel net revenues in 2021 increased in the first quarter of 2021 but the rate of increase slowed down in the second and third quarters of 2021, and declined in the fourth quarter of 2021 as compared to the same periods in the prior year. Overall, for the year endedDecember 31, 2021 , retail channel net revenues were$324.8 million compared to$300.6 million in the prior year, an 8.1% increase. In the prior year, we experienced a meaningful increase in retail demand as consumers shifted toward more at-home consumption as a result of the pandemic. But in 2021, retail channel net revenues were impacted by a general slowdown of growth in theU.S. plant-based meat category, higher trade discounts and, to a lesser extent, increased competition. For the year endedDecember 31, 2021 , our retail and foodservice channels accounted for approximately 69.9% and 30.1% of our net revenues, respectively. For the year endedDecember 31, 2020 , our retail and foodservice channels accounted for approximately 73.9% and 26.1% of our net revenues, respectively. For the year endedDecember 31, 2021 , ourU.S. and international channels accounted for approximately 68.8% and 31.2% of our net revenues, respectively. For the year endedDecember 31, 2020 , ourU.S. and international channels accounted for approximately 79.9% and 20.1% of our net revenues, respectively. The change in mix of our distribution channels has been significant since the start of the COVID-19 pandemic, which is likely to continue to cause fluctuation in our financial results pending its duration, magnitude and effects. In 2021, net revenues from the international channels, both retail and foodservice, significantly improved from the prior year. International net revenues increased 76.9% in 2021 as compared to 2020 primarily due to an increase in the number of distribution outlets that sell our products and due to the favorable comparison to the prior year when international foodservice net revenues were significantly impacted by COVID-19. In 2021, 63 --------------------------------------------------------------------------------U.S. foodservice channel net revenues improved but were more than offset by the decline inU.S. retail channel net revenues, resulting in a 1.6% decline inU.S. net revenues. AtDecember 31, 2021 , our inventory balances increased 99% compared to the levels atDecember 31, 2020 , primarily due to increases in raw materials including the growth in flavorings and packaging to support expansion in the number of products we offer, increases in work-in-process and finished goods inventories. The increase in finished goods inventory includes the effect of capitalized higher direct labor and production overhead costs.
Our net revenues, gross profit, gross margin, earnings and cash flows may be adversely impacted in 2022 by the following:
•changes in our product mix including the launch of new products, which may carry lower margin profiles relative to existing products due in part to early cost of production inefficiencies;
•weak demand in the retail channel, primarily in the
•price reductions, primarily in the retail channel in
•increased unit cost of goods sold due to lower production volumes in response to weaker demand, which would adversely impact coverage of fixed production costs within our manufacturing facilities;
•increased unit cost of goods due to inflation, higher transportation and supply chain costs;
•increased promotional programs and trade discounts to our retail and foodservice customers and shifts in product and channel mix resulting in negative impacts on our gross margins;
•potential disruption to our supply chain and the supply chain more generally caused by distribution and other logistical issues; and
•labor needs at the Company as well as in the supply chain and at customers.
In addition to the above, it is challenging to estimate the extent of the adverse impact of the COVID-19 pandemic on our results of operations due to continued uncertainty regarding the duration, magnitude and effects of the COVID-19 pandemic. While the ultimate health and economic impact of COVID-19 continues to be highly uncertain, our business operations and results of operations, including our net revenues, gross profit, gross margin, earnings and cash flows, may be adversely impacted in 2022, including as a result of: •variability of demand in the foodservice channel due to the ongoing impact of COVID-19, including the resurgence of COVID-19 and the appearance of variants of the virus, despite the resumption of customer traffic in some foodservice establishments;
•potential disruption or closure of our facilities or those of our suppliers or co-manufacturers due to employee contraction of COVID-19;
•the timing and success of strategic partnership launches and resumption of any expansion plans for our product lines for those QSR customers who are in trial or test phase;
•reduced consumer confidence and consumer spending, including spending to purchase our products; and negative trends in consumer purchasing patterns due to consumers' disposable income, credit availability, debt levels and inflation;
•reduced confidence by our foodservice partners due to the resurgence of COVID-19, as well as reimplementation of safety measures in certain jurisdictions and its potential impact on customer demand levels;
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--------------------------------------------------------------------------------•further foodservice customer closures (including re-closures in connection with resurgences of COVID-19) or further reduced operations;
•our ability to introduce new foodservice products as QSR and other partners look to simplify menu offerings as a result of the pandemic;
•uncertainty in the length of recovery time for the
•disruptions in our ability to expand to new international locations.
Future events and effects related to COVID-19 cannot be determined with precision and actual results could significantly differ from estimates or forecasts.
Environmental, Social and Governance
As a disruptive leader in the food industry, we have established ourselves as a
leading producer of plant-based meat products that deliver a reduced
environmental footprint and mitigate the social and welfare issues inherent to
the production and consumption of animal protein. In order to continue that work
and position ourselves as a leader in the integration of environmental and
social change, we have committed to developing a comprehensive environmental,
social and governance ("ESG") program. As part of the development of our ESG
program, we have completed a materiality analysis and are working on leveraging
that analysis to create comprehensive ESG goals that will assist us with our
commitment to ensuring responsible and sustainable business practices within our
organization.
Components of Our Results of Operations and Trends and Other Factors Affecting Our Business
Net Revenues We generate net revenues primarily from sales of our products to our customers across mainstream grocery, mass merchandiser, club store, convenience store and natural retailer channels, direct-to-consumer, and various food-away-from-home channels, including restaurants, foodservice outlets and schools, mainly inthe United States .
We present our net revenues by geography and distribution channel as follows:
Distribution Channel DescriptionU.S. Retail Net revenues from retail sales to the U.S. market(1)U.S. Foodservice Net revenues from restaurant
and foodservice sales to the
market
International Retail Net revenues from retail sales to international markets,
including Canada
International Foodservice Net revenues from restaurant and foodservice sales to
international markets, including Canada
____________
(1) Includes net revenues from direct-to-consumer sales.
The following factors and trends in our business have driven net revenue growth over prior periods and are expected to be key drivers of our net revenue growth over time, subject to the duration, magnitude and effects of COVID-19 and other challenges as discussed above: •increased penetration across our retail channel, including mainstream grocery, mass merchandiser, club store, convenience store and natural retailer channels, and our foodservice channel, including increased desire by foodservice establishments, including large FSR and/or global QSR customers, to add plant-based products to their menus and to highlight these offerings;
•the strength and breadth of our partnerships with global QSR restaurants and retail and foodservice customers;
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•distribution expansion, increased sales velocity, household penetration, repeat
purchases, buying rates (amount spent per buyer) and purchase frequency across
our channels;
•increased international sales of our products across geographies, markets and
channels as we continue to expand the breadth and depth of our international
distribution and grow our numbers of international customers;
•our ability to accurately forecast demand for our products and manage our inventory;
•our operational effectiveness and ability to fulfill orders in full and on time;
•our continued innovation and product commercialization, including enhancing existing products and introducing new products, such as Beyond Meatballs, Beyond Breakfast Sausage Patties and Beyond Breakfast Sausage Links, the recent launches of the latest iteration of our Beyond Burger and Beyond Chicken Tenders across our plant-based platforms that appeal to a broad range of consumers, specifically those who typically eat animal-based meat; •enhanced marketing efforts as we continue to build our brand, amplify our value proposition around taste, health and sustainability, serve as a best-in-class partner to strategic and other QSR customers to support product development and category management, and drive consumer adoption of our products, including, for example, our billboard campaign, food truck tours in selected cities, our first Reddit AMA, our presence onTikTok , our NBA Twitter campaign during the NBA finals, mobile pop-ups in selectU.S. cities to give consumers an exclusive first taste of our latest innovative products ahead of in-store availability, increased social media and digital activity to build consumer awareness and excitement, shopper marketing programs to incentivize consumer trial, and a robust Spotify podcast campaign around the launch of the latest iteration of our Beyond Burger;
•overall market trends, including growing consumer awareness and demand for nutritious, convenient and high protein plant-based foods; and
•increased production levels as we invest in production infrastructure and scale production to meet demand for our products across our distribution channels both domestically and internationally. In addition to the factors and trends above, we expect the following to positively impact net revenues going forward, subject to the ultimate duration, magnitude and effects of the COVID-19 pandemic and other challenges discussed above: •expansion of our own internal production facilities domestically and abroad to produce our woven proteins, blends of flavor systems and binding systems, and finished goods, while forming additional strategic relationships with co-manufacturers; and
•localized production and third-party partnerships to increase the availability and speed with which we can get our products to customers internationally.
As we seek to continue to grow our net revenues, we face several challenges.
The extent of COVID-19's effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any additional resurgences), impact of variants of the virus that causes COVID-19, the wide distribution and public acceptance of the various COVID-19 vaccines and their efficacy against COVID-19 and variants of the virus, labor needs at the Company as well as in the supply chain and at customers, compliance with government or employer COVID-19 vaccine mandates and the resulting impact on available labor, and the level of social and economic restrictions imposed onthe United States and abroad in an effort to curb the spread of the virus, and the impact on consumer behavior, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. For example, the impact of COVID-19 on any of our suppliers, co-manufacturers, distributors or transportation or logistics providers may negatively affect the price and availability of our ingredients and/or 66 -------------------------------------------------------------------------------- packaging materials and impact our supply chain. Labor shortages at retail and foodservice customers may impact our ability to launch new products or planned promotions, or may have other negative effects on customer demand. Additionally, if we are forced to scale back hours of production or close our production facilities or our Manhattan Beach Project Innovation Center in response to the pandemic, we expect our business, financial condition and results of operations would be materially adversely affected. In addition, our growth strategy to expand our operations internationally may be impeded. The uncertainty created by COVID-19 significantly increases the difficulty in forecasting operating results and strategic planning. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business, results of operations, financial condition or liquidity. However, the pandemic has had, and we expect may continue to have, a material adverse impact on our business, results of operations, financial condition and cash flows and may adversely impact the trading price of our common stock. Future events and effects related to the COVID-19 pandemic cannot be determined with precision and actual results could significantly differ from estimates or forecasts. We routinely offer sales discounts and promotions through various programs to customers and consumers. These programs include rebates, temporary on-shelf price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities. We anticipate that we will need to continue to offer more trade and promotion discounts to both our retail and foodservice customers to drive increased consumer trial, in response to COVID-19 and in response to increased competition. The expense associated with these discounts and promotions is estimated and recorded as a reduction in total gross revenues in order to arrive at reported net revenues. At the end of each accounting period, we recognize a liability for estimated sales discounts that have been incurred but not paid which totaled$3.6 million as ofDecember 31, 2021 andDecember 31, 2020 . We expect to face increasing competition across all channels, especially as additional plant-based protein product brands continue to enter the marketplace. In response, we anticipate providing heavier discounting and promotions on some of our products. Although these actions are intended to build brand awareness and increase consumer trials of our products, they have had and are likely to continue to have a negative impact on our net revenues, gross profit, gross margin and profitability, impacting period-over-period results. In addition, because we do not have any purchase commitments from our distributors or customers, the amount of net revenues we recognize will vary from period to period depending on the volume, timing and the channels through which our products are sold, and the impact of customer orders ahead of holidays, causing variability in our results. Similarly, the timing of retail shelf resets are not within our control, and to the extent that retail customers change the timing of such events, variability of our results may also increase. Lower customer orders ahead of holidays, shifts in customer shelf reset activity and changes in the order patterns of one or more of our large retail customers could cause a significant fluctuation in our quarterly results and could have a disproportionate effect on our results of operations for the entire fiscal year. Our financial performance also depends on our operational effectiveness and ability to fulfill orders in full and on time. For example, in the third quarter of 2021 we experienced challenges in operations that led to unfulfilled orders, primarily due to severe weather resulting in the temporary loss of potable water in onePennsylvania facility and water damage to inventory in another. Further, we may not be able to recapture missed opportunities in later periods, for example if the opportunity related to a significant grilling holiday likeMemorial Day weekend, theFourth of July , orLabor Day weekend. Missed opportunities may also result in missing subsequent additional opportunities. Internal and external operational issues therefore may impact the amount and variability of our results. Seasonality Generally, we expect to experience greater demand for certain of our products during the summer grilling season. In 2021,U.S. retail channel net revenues during the second quarter were 21% higher than the first quarter. In 2020, the impact of COVID-19 amplified this seasonal impact withU.S. retail channel net revenues increasing 80% compared to the first quarter of 2020. We continue to see additional seasonality effects, 67 -------------------------------------------------------------------------------- especially within our retail channel, with revenue contribution from this channel tending to be greater in the second and third quarters of the year. along with increased levels of purchasing by customers ahead of holidays, the impact of customer shelf reset activity and the timing of product restocking by our retail customers. In an environment of uncertainty from the impact of COVID-19, we are unable to assess the ultimate impact on the demand for our products as a result of seasonality.
Gross Profit
Gross profit consists of our net revenues less cost of goods sold. Our cost of goods sold primarily consists of the cost of raw materials and ingredients for our products, co-manufacturing fees, direct and indirect labor and certain supply costs, in-bound and internal shipping and handling costs incurred in manufacturing our products, warehouse storage fees, plant and equipment overhead, depreciation and amortization expense, as well as the cost of packaging our products. In anticipation of future growth, we have had to very quickly scale production and expand our sources of supply for our core protein inputs such as pea protein. We intend to continue to increase our production capabilities at our in-house manufacturing facilities inColumbia, Missouri ,Devault, Pennsylvania ,the Netherlands andChina , while expanding our co-manufacturing capacity and exploring additional production facilities domestically and abroad. As a result of expansion initiatives, we expect our cost of goods sold in absolute dollars to increase as a result of anticipated growth of our sales volume. Subject to the ultimate duration, magnitude and effects of COVID-19, we continue to expect that gross profit improvements will be delivered primarily through improved volume leverage and throughput, greater internalization and geographic localization of our manufacturing footprint and finished goods, materials and packaging input cost reductions, tolling fee efficiencies, end-to-end production processes across a greater proportion of our manufacturing network, scale-driven efficiencies in procurement and fixed cost absorption, diversification of our core protein ingredients, product and process innovations and reformulations, cost-down initiatives through ingredient and process innovation and improved supply chain logistics and distribution costs. We are also working to improve gross margin through ingredient cost savings achieved through scale of purchasing and through negotiating lower tolling fees. We intend to pass some of these cost savings on to the consumer as we pursue our goal to achieve price parity with animal protein in at least one of our product categories by the end of 2024. Margin improvement may, however, continue to be negatively impacted by our focus on investing heavily in our business, establishing infrastructure in theU.S. , EU andChina , growing our customer base, volume deleveraging, aggressive pricing strategies and increased discounting, our product and customer mix, expanding into new geographies and markets, enhancing our production infrastructure, enhancing our product offerings and increasing consumer engagement by applying increasing pressure on the three key levers of taste, health and cost that we believe are critical for mass adoption. Margin improvement may also be negatively impacted by the impact of inflation, increasing labor costs, material costs and transportation costs.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, bonuses, share-based compensation, scale-up expenses, and depreciation and amortization expense on research and development assets. Future research and development expenses will include expenses associated with our newCommerce, California commercialization center. Design and construction work is underway, with estimated completion in 2022. Our research and development efforts are focused on enhancements to our product formulations and production processes in addition to the development of new products. We expect to continue to invest substantial amounts in research and development, as research and development and innovation are core elements of our business strategy, and we believe they represent a critical competitive advantage for us. We believe that we need to continue to rapidly innovate in order to continue to capture a larger market share of consumers who typically eat animal-based 68 -------------------------------------------------------------------------------- meats. Over time and subject to the duration, magnitude and effects of the COVID-19 pandemic, we expect these expenses to increase in absolute dollars, but to decrease as a percentage of net revenues as we continue to scale production volume.
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses consist primarily of selling, marketing and administrative expenses, including personnel and related expenses, share-based compensation, outbound shipping and handling costs, non-manufacturing lease expense, depreciation and amortization expense on non-manufacturing assets and other non-production operating expenses. Marketing and selling expenses include share-based compensation awards to brand ambassadors, advertising costs, costs associated with consumer promotions, product samples and sales aids incurred to acquire new customers, retain existing customers and build our brand awareness. Administrative expenses include expenses related to management, accounting, legal, IT and other office functions.
We expect SG&A expenses in absolute dollars to increase as we increase our domestic and international expansion efforts, expand our marketing efforts, and incur greater outbound shipping and handling costs as our revenues increase.
As we continue to grow, including internationally, we expect to expand our sales and marketing force to address additional opportunities. Over time, our administrative expenses are generally expected to increase with increased personnel to support various functions, including among others, operations and supply chain, accounting, finance, legal, IT and compliance-related functions.
Restructuring Expenses
InMay 2017 , management approved a plan to terminate an exclusive supply agreement with one of our co-manufacturers. For a discussion of these expenses, see Note 3 , Restructuring, and Note 11 , Commitments and Contingencies, to the Notes to Consolidated Financial Statements, included elsewhere in this report. Results of Operations The following table sets forth selected items in our statements of operations for the periods presented: Year Ended December 31, (in thousands) 2021 2020 2019 Net revenues$ 464,700 $ 406,785 $ 297,897 Cost of goods sold 347,419 284,510 198,141 Gross profit 117,281 122,275 99,756 Research and development expenses
66,946 31,535 20,650
Selling, general and administrative expenses 209,474 133,655 74,726 Restructuring expenses 15,794 6,430 4,869 Total operating expenses 292,214 171,620 100,245 Loss from operations$ (174,933) $ (49,345) $ (489) 69
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The following table presents selected items in our statements of operations as a percentage of net revenues for the respective periods presented:
Year Ended December 31,
2021 2020 2019
Net revenues 100.0 % 100.0 % 100.0 %
Cost of goods sold 74.8 69.9 66.5
Gross profit 25.2 30.1 33.5
Research and development expenses 14.4 7.7 6.9
Selling, general and administrative expenses 45.1 32.9 25.1
Restructuring expenses 3.4 1.6 1.6
Total operating expenses 62.9 42.2 33.7
Loss from operations (37.7) % (12.1) % (0.2) %
Year Ended
Net Revenues
Year Ended December 31, Change
(in thousands) 2021 2020 Amount %
U.S. :
Retail $ 243,360 $ 264,111 $ (20,751) (7.9) %
Foodservice 76,475 60,763 15,712 25.9 %
U.S. net revenues 319,835 324,874 (5,039) (1.6) %
International:
Retail $ 81,483 $ 36,472 $ 45,011 123.4 %
Foodservice 63,382 45,439 17,943 39.5 %
International net revenues 144,865 81,911 62,954 76.9 %
Net revenues $ 464,700 $ 406,785 $ 57,915 14.2 %
Net revenues in the year ended December 31, 2021 increased by $57.9 million , or
14.2%, as compared to the prior year primarily due to an increase in volume
sold, partially offset by lower net price per pound. Growth in net revenues was
primarily due to increased foodservice channel sales, reflecting favorable
comparison to the prior year as foodservice channels experienced a significant
reduction in demand in 2020 due to the COVID-19 pandemic, and distribution gains
in 2021 in the international foodservice channel. Retail channel sales increased
primarily due to growth in demand in international markets, partially offset by
weaker U.S. retail channel sales due to a deceleration in the growth of the
plant-based meat category, higher trade discounts and, to a lesser extent,
increased competition.
Net revenues from U.S. retail sales in the year ended December 31, 2021
decreased $20.8 million , or 7.9%, primarily due to decreases in sales of Beyond
Burger, Beyond Sausage, Beyond Beef and Beyond Beef Crumble, partially offset by
increased sales of Beyond Breakfast Sausage and Beyond Meatball. The
introduction of Beyond Chicken Tenders in the fourth quarter of 2021 also
contributed to U.S. retail channel sales in the year ended December 31, 2021 .
Net revenues from U.S. foodservice sales in the year ended December 31, 2021
increased $15.7 million , or 25.9%, primarily due to increased sales of Beyond
Burger, new chicken products, Beyond Beef and Beyond
70
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Sausage, partially offset by decreased sales of Beyond Breakfast Sausage and
Beyond Beef Crumble. Our products were available at approximately 34,000 U.S.
retail outlets and 38,000 U.S. foodservice outlets as of December 2021 .
Net revenues from international retail sales in the year ended December 31, 2021
increased $45.0 million , or 123.4%, due to increased sales of all of our
products, primarily Beyond Burger, Beyond Sausage, Beyond Beef and Beyond
Meatballs, and to a lesser extent, due to increases in sales of Beyond Breakfast
Sausage, Beyond Beef Crumble, Beyond Chicken Tenders and Beyond Pork. Net
revenues from international foodservice sales in the year ended December 31,
2021 increased $17.9 million , or 39.5%, primarily due to increased sales of
Beyond Burger, Beyond Beef Crumble and Beyond Chicken Tenders, partially offset
by decreased sales of Beyond Beef. Our products were available at approximately
58,000 international retail and foodservice outlets as of December 2021 .
The following table presents volume of our products sold in pounds:
Year Ended December 31, Change
(in thousands) 2021 2020 Amount %
U.S. :
Retail 44,568 45,706 (1,138) (2.5) %
Foodservice 13,047 10,860 2,187 20.1 %
International:
Retail 14,120 6,684 7,436 111.3 %
Foodservice 12,848 9,281 3,567 38.4 %
Volume of products sold 84,583 72,531 12,052 16.6 %
Cost of Goods Sold
Year Ended December 31, Change
(in thousands) 2021 2020 Amount %
Cost of goods sold $ 347,419 $ 284,510 $ 62,909 22.1 %
Cost of goods sold increased by $62.9 million , or 22.1%, in 2021 as compared to
the prior year, primarily due to increased pounds sold and increased cost per
pound. The increased cost per pound was driven by increases in manufacturing
costs including depreciation and higher logistics costs partially offset by
reduced material costs. Cost of goods sold in 2021 included $12.5 million in
write off of excess and obsolete inventories and $0.8 million in write down of
inventory to lower of cost or net realizable value. Cost of goods sold in 2020
included $10.8 million in write off of excess and obsolete inventories related
to the impact of COVID-19 including product repacking activities to repurpose
certain foodservice inventory, and charges and write offs associated with
foodservice products determined to be unsalable and $0 in write down of
inventory to lower of cost or net realizable value.
Gross Profit and Gross Margin
Year Ended December 31, Change
(in thousands) 2021 2020 Amount %
Gross profit $ 117,281 $ 122,275 $ (4,994) (4.1) %
Gross margin 25.2 % 30.1 % N/A N/A
71
-------------------------------------------------------------------------------- Gross profit in 2021 was$117.3 million , or 25.2% of net revenues, as compared to gross profit of$122.3 million , or 30.1% of net revenues, in the prior year, a decline of$5.0 million . Gross profit per pound and gross margin declined primarily due to decreased revenue per pound due to changes in product mix and higher trade discounts, combined with increased manufacturing costs per pound including depreciation and higher logistics costs partially offset by reduced materials costs. As disclosed in Note 2 , Summary of Significant Accounting Policies-Shipping and Handling Costs, in the Notes to Consolidated Financial Statements included elsewhere in this report, we include outbound shipping and handling costs within SG&A expenses. As a result, our gross profit and gross margin may not be comparable to other entities that present all shipping and handling costs as a component of cost of goods sold.
Research and Development Expenses
Year Ended December 31, Change
(in thousands) 2021 2020 Amount %
Research and development expenses $ 66,946 $ 31,535 $ 35,411 112.3 %
Research and development expenses increased $35.4 million , or 112.3%, in 2021,
as compared to the prior year. Research and development expenses increased
primarily due to $19.2 million in higher scale-up expenses and a 38% increase in
headcount compared to the prior year.
SG&A Expenses
Year Ended December 31, Change
(in thousands) 2021 2020 Amount %
Selling, general and administrative
expenses $ 209,474 $ 133,655 $ 75,819 56.7 %
SG&A expenses increased by $75.8 million , or 56.7%, in 2021, as compared to the
prior year. The increase was primarily due to $31.2 million in higher salaries
and related expenses resulting from a higher headcount; $23.7 million in higher
marketing programs-related expenses including advertising costs incurred to
raise awareness of our products both domestically and internationally; $14.1
million in higher professional services fees related to recently established
consulting agreements; $7.2 million in higher outbound freight costs; $2.7
million in higher general insurance costs; $1.6 million in higher share-based
compensation expense; and $1.3 million in higher bad debt expense, partially
offset by $4.1 million in absence of product donations and $2.1 million in lower
legal fees.
Restructuring Expenses
As a result of the termination in May 2017 of an exclusive supply agreement with
one of our co- manufacturers due to non-performance under the agreement, we
recorded restructuring expenses of $15.8 million and $6.4 million in 2021 and
2020, respectively, primarily related to legal and other expenses associated
with the dispute. As of December 31, 2021 and 2020, there were $2.7 million and
$0.8 million , respectively, in accrued unpaid liabilities associated with this
contract termination representing legal fees. We continue to incur legal fees in
connection with our ongoing efforts to resolve this dispute. See Note 3 ,
Restructuring, and Note 11 , Commitments and Contingencies, to the Notes to
Consolidated Financial Statements, included elsewhere in this report.
Loss from Operations
Loss from operations in 2021 was$174.9 million compared to loss from operations of$49.3 million in the prior year. In addition to the decline in gross profit, the increase in loss from operations was also driven by 72 --------------------------------------------------------------------------------
growth in overall headcount levels primarily to support our expanded manufacturing and supply chain operations, innovation and marketing capabilities, increased production trial and commercialization activities, increased investments in marketing activities, higher restructuring expenses primarily reflecting increased legal costs, higher outbound freight costs included in our selling expenses and expansion in our international operations.
Total Other Expense, Net
Total other expense, net in the year endedDecember 31, 2021 of$4.1 million consisted primarily of$3.6 million in interest expense from amortization of debt issuance costs,$1.0 million in loss on extinguishment of debt and$0.2 million in foreign currency transaction losses, partially offset by$0.2 million in interest income and$1.1 million in subsidies received from theJiaxing Economic Development Zone Finance Bureau related to our investment in our subsidiary,Beyond Meat (Jiaxing) Food Co., Ltd. ("BYND JX"). Total other expense, net in the year endedDecember 31, 2020 consisted primarily of$2.6 million in interest expense on our debt balances,$1.5 million in loss on extinguishment of debt and$0.2 million in foreign currency transaction losses, partially offset by$0.8 million in interest income. Other, net was a net expense of$0.5 million in 2021 and$0.8 million in 2020. Other, net in 2021 and 2020 included$1.0 million and$1.5 million , respectively, in loss on extinguishment of our refinanced credit arrangements, partially offset by interest income from invested cash balances. Interest income decreased to$0.2 million in the year endedDecember 31, 2021 from$0.8 million in the prior year. Income Tax Expense
For 2021 and 2020, we recorded income tax expense of
Net Loss
Net loss was$182.1 million in 2021 compared to a net loss of$52.8 million in the prior year. This increase in net loss was driven by the year-over-year decrease in gross profit and increase in operating expenses. During 2020, net loss included$14.1 million in costs attributable to COVID-19 including$6.6 million in product repacking costs,$4.8 million in inventory write-offs and charges associated with foodservice products determined to be unsalable and$2.7 million in product donation costs related to our COVID-19 relief efforts, and$1.5 million of debt extinguishment costs associated with our refinanced credit arrangements. Non-GAAP Financial Measures We use the non-GAAP financial measures set forth below in assessing our operating performance and in our financial communications. Management believes these non-GAAP financial measures provide useful additional information to investors about current trends in our operations and are useful for period-over-period comparisons of operations. In addition, management uses these non-GAAP financial measures to assess operating performance and for business planning purposes. Management also believes these measures are widely used by investors, securities analysts, rating agencies and other parties in evaluating companies in our industry as a measure of our operational performance. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. "Adjusted EBITDA" is defined as net loss adjusted to exclude, when applicable, income tax (benefit) expense, interest expense, depreciation and amortization expense, restructuring expenses, share-based compensation expense, expenses attributable to COVID-19, remeasurement of our warrant liability, and Other, net, including interest income, loss on extinguishment of debt and foreign currency transaction gains and losses. 73 --------------------------------------------------------------------------------
"Adjusted EBITDA as a % of net revenues" is defined as Adjusted EBITDA divided by net revenues.
There are a number of limitations related to the use of Adjusted EBITDA and Adjusted EBITDA as a % of net revenues rather than their most directly comparable GAAP measures. Some of these limitations are:
•Adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future increasing our cash requirements;
•Adjusted EBITDA does not reflect interest expense, or the cash required to service our debt, which reduces cash available to us;
•Adjusted EBITDA does not reflect income tax payments that reduce cash available to us;
•Adjusted EBITDA does not reflect restructuring expenses that reduce cash available to us;
•Adjusted EBITDA does not reflect expenses attributable to COVID-19 that reduce cash available to us;
•Adjusted EBITDA does not reflect share-based compensation expense and therefore does not include all of our compensation costs;
•Adjusted EBITDA does not reflect Other, net, including interest income, loss on extinguishment of debt and foreign currency transaction gains and losses, that may increase or decrease cash available to us; and
•other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
The following table presents the reconciliation of Adjusted EBITDA to its most comparable GAAP measure, net loss, as reported (unaudited):
Year Ended December 31,
(in thousands) 2021 2020 2019
Net loss, as reported $ (182,105) $ (52,752) $ (12,443)
Income tax expense 60 72 9
Interest expense 3,648 2,576 3,071
Depreciation and amortization expense 21,663 13,299 8,106
Restructuring expenses(1) 15,794 6,430 4,869
Share-based compensation expense 27,698 27,279 12,807
Expenses attributable to COVID-19(2) - 14,137 -
Remeasurement of warrant liability - - 12,503
Other, net(3) 487 759 (3,629)
Adjusted EBITDA $ (112,755) $ 11,800 $ 25,293
Net loss as a % of net revenues (39.2) % (13.0) % (4.2) %
Adjusted EBITDA as a % of net revenues (24.3) % 2.9 % 8.5 %
_____________
(1)Primarily comprised of legal and other expenses associated with the dispute
with a co-manufacturer with whom an exclusive supply agreement was terminated in
May 2017.See Note 3 , Restructuring, and Note 11 , Commitments and
Contingencies, to the Notes to Consolidated Financial Statements, included
elsewhere in this report.
74
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(2)In 2020, comprised of $14.1 million in costs attributable to COVID-19
consisting of $6.6 million in product repacking costs, $4.8 million in inventory
write-offs and charges associated with foodservice products determined to be
unsalable and $2.7 million in product donation costs related to our COVID-19
relief efforts.
(3)Includes $1.0 million in loss on extinguishment of debt associated with
termination of the Company's credit facility in the year ended December 31, 2021
and $1.5 million in loss on extinguishment of debt associated with the Company's
refinanced credit arrangements in the year ended December 31, 2020 .
75
--------------------------------------------------------------------------------Liquidity and Capital Resources
Convertible Senior Notes
OnMarch 5, 2021 , we issued$1.0 billion aggregate principal amount of our 0% Convertible Senior Notes due 2027 (the "Convertible Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The initial purchasers of the Convertible Notes exercised their option to purchase an additional$150.0 million aggregate principal amount of our 0% Convertible Senior Notes due 2027 (the "Additional Notes", and together with the Convertible Notes, the "Notes"), and such Additional Notes were issued onMarch 16, 2021 . The initial conversion price of the Notes is$206.00 per share of common stock, which represents a premium of approximately 47.5% over the closing price of the Company's common stock onMarch 2, 2021 . The Notes will mature onMarch 15, 2027 , unless earlier repurchased, redeemed or converted. The Notes were issued pursuant to, and are governed by, an indenture, dated as ofMarch 5, 2021 (the "Indenture"), between us andU.S. Bank National Association , as trustee (the Trustee"). We used$84.0 million of the net proceeds from the sale of the Notes to fund the cost of entering into capped call transactions, described below. The proceeds from the issuance of the Notes were approximately$1.0 billion , net of capped call transaction costs of$84.0 million and debt issuance costs totaling$23.6 million . See Note 8 , Debt, to the Notes to Consolidated Financial Statements included elsewhere in this report.
Capped Call Transactions
OnMarch 2, 2021 , in connection with the pricing of the offering of the Convertible Notes, we entered into capped call transactions (the "Base Capped Call Transactions") with the option counterparties and used$73.0 million in net proceeds from the sale of the Convertible Notes to fund the cost of the Base Capped Call Transactions. OnMarch 12, 2021 , in connection with the Additional Notes, we entered into capped call transactions (the "Additional Capped Call Transactions") with the option counterparties and used$11.0 million of the net proceeds from the sale of the Additional Notes to fund the cost of the Additional Capped Call Transactions. The Base Capped Call Transactions and the Additional Capped Call Transactions (collectively, the "Capped Call Transactions") cover, subject to customary adjustments, the aggregate number of shares of our common stock that will initially underlie the Notes, and are expected generally to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we may make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is$279.32 , which represents a premium of 100% over the last reported sale price of our common stock onMarch 2, 2021 . The aggregate$84.0 million paid for the Capped Call Transactions was recorded as a reduction to APIC. See Note 8 Debt, to the Notes to Consolidated Financial Statements included elsewhere in this report.
Revolving Credit Facility
OnMarch 2, 2021 , we terminated our secured revolving credit agreement, dated as ofApril 21, 2020 (the "Credit Agreement"), among the Company, as borrower, the lenders party thereto andJPMorgan Chase Bank, N.A ., as the administrative agent, and in connection with such termination: (i) all borrowings outstanding under the Credit Agreement were repaid in full by the Company; and (ii) all liens and security interests under the Credit Agreement in favor of the lenders thereunder were released. See Note 8 , Debt, to the Notes to Consolidated Financial Statements included elsewhere in this report.
Liquidity Outlook
In 2022, our cash from operations could be affected by various risks and uncertainties, including, but not limited to, the effects of COVID-19 and other risks detailed in Part I, Item 1A, "Risk Factors" included elsewhere in this report. The pandemic and hostilities inEastern Europe have led to increased disruption and volatility in capital markets and credit markets generally which could adversely affect our liquidity and capital resources in the future. However, based on our current business plan, we believe that our existing cash balances will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months. In the future, we may raise funds by issuing debt or equity securities. Our cash requirements under our 76
-------------------------------------------------------------------------------- significant contractual obligations and commitments are listed below in the section titled "Contractual Obligations and Commitments." Our future capital requirements may vary materially from those currently planned and will depend on many factors, including the impact of the COVID-19 pandemic; the number and characteristics of any additional products or manufacturing processes we develop or acquire to serve new or existing markets; our investment in and build out of our campus headquarters; the expenses associated with our marketing initiatives; our investment in manufacturing and facilities to expand our manufacturing and production capacity; the costs required to fund domestic and international growth; the scope, progress, results and costs of researching and developing future products or improvements to existing products or manufacturing processes; any lawsuits related to our products or commenced against us, including the costs associated with our current litigation with a former co-manufacturer; the expenses needed to attract and retain skilled personnel; the costs associated with being a public company; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property claims, including litigation costs and the outcome of such litigation; and the timing, receipt and amount of sales of, or royalties on, any future approved products, if any. Sources of Liquidity Our primary cash needs are for operating expenses, working capital and capital expenditures to support the growth in our business. Prior to our IPO, we financed our operations through private sales of equity securities and through sales of our products. Since our inception and through our IPO, we raised a total of$199.5 million from the sale of convertible preferred stock, including through sales of convertible notes which were converted into preferred stock, net of costs associated with such financings. In connection with our IPO, we sold an aggregate of 11,068,750 shares of our common stock at a public offering price of$25.00 per share and received approximately$252.4 million in net proceeds. In connection with our Secondary Offering, we sold 250,000 shares of our common stock at a public offering price of$160.00 per share and received approximately$37.4 million in net proceeds. InMarch 2021 , we issued$1.2 billion in aggregate principal amount of Notes as discussed above. As ofDecember 31, 2021 , we had$733.3 million in cash and cash equivalents. Cash Flows In the year endedDecember 31, 2021 , approximately$269.6 million in aggregate expenditures to purchase inventory, purchase property, plant and equipment, invest in joint venture, and approximately$174.3 million in other cash flows from operating, investing and financing activities were funded by net borrowings of$1,017.4 million , after repaying the entire balance of the revolving credit facility. The following table presents the major components of net cash flows used in and provided by operating, investing and financing activities for the periods indicated. Year Ended December 31, (in thousands) 2021 2020 2019 Cash (used in) provided by: Operating activities$ (301,370) $ (39,995) $ (46,995) Investing activities$ (147,479) $ (74,900) $ (26,164) Financing activities$ 1,022,322 $ (1,762) $ 294,876
For the year endedDecember 31, 2021 , we incurred a net loss of$182.1 million , which was the primary reason for net cash used in operating activities of$301.4 million . Net cash outflows from changes in operating assets and liabilities were primarily due to the increase in all three classes of inventory, cash outflows associated with the escrow payments for the Campus Lease (see Note 11 , Commitments and Contingencies, to the Notes to Consolidated Financial Statements included elsewhere in this report), increase in prepaid expenses and other assets and increase in accounts receivable. The net cash outflows were partially offset by 77
-------------------------------------------------------------------------------- an increase in accounts payable and accrued expenses. Net loss for the year endedDecember 31, 2021 , included$60.3 million in non-cash expenses primarily comprised of share-based compensation expense, depreciation and amortization expense, non-cash lease expense, amortization of debt issuance costs, provision for losses on accounts receivable and loss on extinguishment of debt. For the year endedDecember 31, 2020 , we incurred a net loss of$52.8 million , which was the primary reason for net cash used in operating activities of$40.0 million . Net cash used in operating activities also included$32.2 million in net cash outflows from changes in our operating assets and liabilities, primarily due to increase in inventory, and prepaid expenses and other current assets, partially offset by an increase in accounts payable and a decrease in accounts receivable. Increase in inventories, primarily due to the increase in raw materials inventory resulting from pea protein isolate received pursuant to agreed-upon delivery schedules to meet our anticipated product demand, negatively impacted cash flows from operations because due to the impact of COVID-19 the anticipated sales and the resulting cash inflows did not materialize as expected. Net loss for the year endedDecember 31, 2020 , included$44.9 million in non-cash expenses primarily comprised of share-based compensation expense, depreciation and amortization expense, non-cash lease expense and loss on extinguishment of debt. For the year endedDecember 31, 2019 , we incurred a net loss of$12.4 million . The primary reason for net cash used in operating activities of$47.0 million was the$68.2 million in net cash outflows from changes in our operating assets and liabilities, primarily due to increases in inventory to meet growth in anticipated sales and to accommodate longer lead times for international shipments and increases in accounts receivable, partially offset by$33.7 million in non-cash expenses primarily comprised of share-based compensation expense, change in warrant liability and depreciation and amortization expense.
Depreciation and amortization expense was
Net cash used in investing activities primarily relates to capital expenditures to support our growth and investment in property, plant and equipment.
For the year endedDecember 31, 2021 , net cash used in investing activities was$147.5 million and consisted of$136.0 million in cash outflows for purchases of property, plant and equipment, primarily driven by continued investments in production equipment and facilities related to our capacity expansion initiatives and international expansion,$11.0 million for investment inTPP and security deposits. For the year endedDecember 31, 2020 , net cash used in investing activities was$74.9 million and consisted of$57.7 million in cash outflows for purchases of property, plant and equipment, primarily driven by continued investments in production equipment and facilities related to our capacity expansion initiatives and international expansion, including the acquisition of a manufacturing facility inEurope located in Enschede,the Netherlands ,$15.5 million for the acquisition of assets from a former co-manufacturer,$2.3 million in cash outflows related to property, plant and equipment purchased for sale to co-manufacturers, and security deposits, partially offset by proceeds from sale of assets held for sale. For the year endedDecember 31, 2019 , net cash used in investing activities was$26.2 million and consisted of$23.8 million in cash outflows for purchases of property, plant and equipment, primarily for manufacturing facility improvements and manufacturing equipment,$2.1 million in cash outflows related to property, plant and equipment purchased for sale to co-manufacturers, and security deposits, partially offset by proceeds from sale of assets held for sale. 78 --------------------------------------------------------------------------------
Net Cash Provided by Financing Activities
For the year endedDecember 31, 2021 , net cash provided by financing activities was$1.0 billion primarily from the proceeds of the Notes of$1.1 billion net of purchased capped call transaction amounts and$8.1 million in proceeds from stock option exercises, partially offset by repayment of revolving credit facility of$25.0 million , debt issuance costs of$23.6 million associated with the Notes,$3.1 million in payments of minimum withholding taxes on net share settlement of equity awards and payments under finance lease obligations. For the year endedDecember 31, 2020 , net cash used by financing activities was$1.8 million primarily due to$31.0 million in extinguishment of prior credit facilities, debt issuance costs of$1.2 million associated with the then new revolving credit facility and debt extinguishment costs of$1.2 million associated with our refinanced credit arrangements, partially offset by$25.0 million in net proceeds to us from our revolving credit facility. Cash flows from financing activities included$9.0 million in proceeds from stock option exercises, partially offset by$2.3 million in payments of minimum withholding taxes on net share settlement of equity awards, and$70,000 in payments of finance lease obligations. For the year endedDecember 31, 2019 , net cash provided by financing activities was$294.9 million primarily as a result of$254.9 million in net proceeds from our IPO, net of issuance costs,$37.4 million in net proceeds to us from the Secondary Offering, net of issuance costs, and$2.7 million in proceeds from stock option exercises, partially offset by$55,000 in payments toward finance lease obligations.
Contractual Obligations and Commitments
Convertible Senior Notes
OnMarch 5, 2021 , we issued$1.0 billion aggregate principal amount of Convertible Notes and onMarch 16, 2021 , we issued$150.0 million aggregate principal amount of Additional Notes. The proceeds from the issuance of the Notes were approximately$1.0 billion , net of capped call transaction costs of$84.0 million and debt issuance costs totaling$23.6 million . See Note 8 , Debt, to the Notes to Consolidated Financial Statements included elsewhere in this report. Leases
See Note 4 , Leases, to the Notes to Consolidated Financial Statements included elsewhere in this report.
OnJanuary 14, 2021 , we entered into a Lease (the "Campus Lease") withHC Hornet Way, LLC , aDelaware limited liability company (the "Landlord"), to house our headquarters offices, lab and innovation space inEl Segundo, California . The initial term of the Campus Lease is 12 years, with two renewal options, each for a period of five years. Under the terms of the Campus Lease, we will lease an aggregate of approximately 281,110 rentable square feet in a portion of a building located at888 Douglas Street ,El Segundo, California (the "Premises"), to be built out by Landlord and delivered to the Company in three phases over a 26-month period. Aggregate payments towards base rent for the Premises over the term of the lease will be approximately$159.3 million . In 2021, we paid$0.2 million in payments towards common area maintenance, parking, and insurance. No such payments were made in 2020 or 2019. Although we are involved in the design of the tenant improvements of the Premises, we do not have title or possession of the assets during construction. In addition, we do not have the ability to control the leased Premises until each phase of the tenant improvements is complete. As ofDecember 31, 2021 , the tenant improvements associated with Phase 1-A had not been completed, and the underlying asset had not been delivered to us. Accordingly, there was no lease commencement during the quarter endedDecember 31, 2021 . Therefore, we have not recognized an asset or a liability for the Campus Lease in our consolidated balance sheet as ofDecember 31, 2021 . We contributed$59.2 million in payments to a construction escrow account during the year endedDecember 31, 2021 . These payments are recorded in "Prepaid lease costs, non-current" in our consolidated balance sheet as ofDecember 31, 2021 , which will ultimately be recorded as a component 79
-------------------------------------------------------------------------------- of a right-of-use asset upon lease commencement. We expect to fund an estimated$71 million of additional funds to the construction escrow account in 2022 as the Landlord continues to build out the Premises and anticipate that Phase-1A will be completed and the lease commencement date is expected to occur during the third quarter of 2022. Concurrent with the our execution of the Campus Lease, as a security deposit, we delivered to Landlord a letter of credit in the amount of$12.5 million which amount will decrease to: (i)$6.3 million on the fifth (5th) anniversary of the Rent Commencement Date; (ii)$3.1 million on the eighth (8th) anniversary of the Rent Commencement Date; and (iii)$0 in the event we receive certain credit ratings; provided we are not then in default of our obligations under the Campus Lease. Upon termination of the revolving credit facility, the letter of credit continued in effect, unsecured.
On
During Phase 1, we have agreed to invest$10.0 million in the JXEDZ through an intercompany investment in BYND JX and BYND JX has agreed to lease a facility in the JXEDZ for a minimum of two years. In connection with such agreement, BYND JX entered into a factory leasing contract with an affiliate of the JX Committee, pursuant to which BYND JX has agreed to lease and renovate a facility in the JXEDZ for a minimum of two years. In the year endedDecember 31, 2021 , we received$1.1 million in subsidies related to our investment in BYND JX from theJiaxing Economic Development Zone Finance Bureau . No such subsidies were received in the year endedDecember 31, 2020 . In the event that we and BYND JX determine, in our sole discretion, to proceed with the Phase 2 development in the JXEDZ, BYND JX has agreed in the first stage of Phase 2 to increase its registered capital by$30.0 million and to acquire the land use right to a state-owned land plot in the JXEDZ to conduct development and construction of a new production facility. Following the first stage of Phase 2, we and BYND JX may determine, in our sole discretion, to permit BYND JX to obtain a second state-owned land plot in the JXEDZ in order to construct an additional facility thereon. See Note 11 , Commitments and Contingencies, to the Notes to Consolidated Financial Statements included elsewhere in this report.
Investment in
OnJanuary 25, 2021 , we entered intoThe PLANeT Partnership, LLC ("TPP"), a joint venture with PepsiCo, Inc., to develop, produce and market innovative snack and beverage products made from plant-based protein. We believeTPP will allow us to reach more consumers by entering new product categories and distribution channels, increasing accessibility to plant-based protein around the world. For the year endedDecember 31, 2021 , we contributed our share of the investment inTPP ,$11.0 million , and recognized our share of the net losses inTPP in the amount of$3.0 million . No such amounts were recognized in 2020 or 2019. See Note 2 , Summary of Significant Accounting Policies, elsewhere in this report. We have committed to invest inTPP an additional$16.5 million in 2022. Purchase Commitments We have a multi-year sales agreement with Roquette for the supply of pea protein which expires onDecember 31, 2022 . The plant-based protein sourced under the supply agreement is secured on a purchase order basis regularly, per specified minimum monthly and semi-annual quantities, throughout the term. We are not required to purchase plant based protein in amounts in excess of such specified minimum quantities; however the Company has the option to increase such minimum quantities for delivery. The total annual amount purchased each year by us must be at least the minimum amount specified in the agreement, which totals in the 80 -------------------------------------------------------------------------------- aggregate$154.1 million over the term of the agreement. We also have the right to be indemnified by Roquette in certain circumstances. Subsequent to the year endedDecember 31, 2021 , onFebruary 8, 2022 , we amended our supply agreement for pea protein with Puris to extend the term throughDecember 31, 2022 . We obtain protein under the Puris Agreement on a purchase order basis and have the right to cancel purchase orders if we provide timely written notice. The amount purchased in each quarter of 2022 is mutually agreed upon by us and Puris prior to each quarter and becomes a binding quarterly commitment upon such agreement. We also have the right to be indemnified by Puris and must indemnify Puris in certain circumstances. As ofDecember 31, 2021 , we had committed to purchase pea protein inventory totaling$52.9 million in 2022, which excludes the pea protein supply agreement signed with Puris subsequent to the year end. See Note 14 , Subsequent Event, to the Notes to Consolidated Financial Statements included elsewhere in this report. In addition, as ofDecember 31, 2021 , we had approximately$51.4 million in purchase order commitments for capital expenditures primarily to purchase machinery and equipment. Payments for these purchases will be due within twelve months ofDecember 31, 2021 . The following table summarizes our significant contractual obligations as ofDecember 31, 2021 : Payments Due by Period Less Than More Than (in thousands) Total One Year 1-3 Years 3-5 Years Five Years
Operating lease obligations(1)(2)
646 194 328 124 -
Convertible debt(4) 1,150,000 - - - 1,150,000
Purchase commitments-inventory(5) 52,929 52,929 - - -
Purchase commitments-assets(6) 51,391 51,391 - - -
Estimated additional funding-Campus
Lease(7) $ 71,000 $ 71,000 $ - $ - $ -
The PLANeT Partnership(8) $ 16,500 $ 16,500 $ - $ - $ -
Total $ 1,375,630 $ 197,562 $ 9,159 $ 5,925 $ 1,162,984
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(1)Includes lease payments for our Manhattan Beach Project Innovation Center and
corporate offices in El Segundo, California , our manufacturing facilities in
Columbia, Missouri , our commercialization center under renovation in Commerce,
California , and all other operating lease obligations.
(2)Excludes obligations under Campus Lease. See Note 11 , Commitments and
Contingencies, to the Notes to Consolidated Financial Statements included
elsewhere in this report.
(3)Consists of payments under various financing leases for certain equipment.
(4)Includes principal amount under our Notes issued March 2021. See Note 8 ,
Debt, to the Notes to Consolidated Financial Statements included elsewhere in
this report.
(5)Consists of commitments to purchase pea protein inventory. Excludes pea
protein supply agreement entered into subsequent to the year ended December 31,
2021. See Note 14 , Subsequent Event, to the Notes to Consolidated Financial
Statements included elsewhere in this report.
(6)Consists of commitments to purchase property, plant and equipment.
(7)Consists of estimated amount of additional funds to fund the construction
escrow account for the Campus Lease.
(8)Consists of estimated 2022 investment in TPP .
Segment Information
We have one operating segment and one reportable segment, as our CODM, who is
our Chief Executive Officer, reviews financial information on an aggregate basis
for purposes of allocating resources and evaluating financial performance.
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--------------------------------------------------------------------------------Critical Accounting Policies and Estimates
In preparing our financial statements in accordance with GAAP, we are required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs and expenses, and disclosure of contingent assets and liabilities that are reported in the financial statements and accompanying disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates and assumptions. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain. Therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates and assumptions. See Note 2. Summary of Significant Accounting Policies, to the Notes to Consolidated Financial Statements included elsewhere in this report for information about these critical accounting policies as well as a description of our other accounting policies.
Revenue Recognition
While our revenue recognition does not involve significant judgment, it represents an important accounting policy. Our revenues are generated through sales of our products to distributors or customers. Revenue is recognized at the point in which the performance obligation under the terms of a contract with the customer have been satisfied and control has transferred. The Company's performance obligation is typically defined as the accepted purchase order, the direct-to-consumer order, or the contract, with the customer which requires the Company to deliver the requested products at agreed upon prices at the time and location of the customer's choice. The Company generally does not offer warranties or a right to return on the products it sells except in the instance of a product recall or other limited circumstances. Revenue is measured as the amount of consideration the Company expects to receive in exchange for fulfilling the performance obligation. Sales and other taxes the Company collects concurrent with the sale of products are excluded from revenue. The Company's normal payment terms vary by the type and location of its customers and the products offered. The time between invoicing and when payment is due is not significant. None of the Company's customer contracts as ofDecember 31, 2021 contains a significant financing component. The Company routinely offers sales discounts and promotions through various programs to its customers and consumers. These programs include rebates, temporary on-shelf price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized. At the end of each accounting period, the Company recognizes a liability for estimated sales discounts that have been incurred but not paid. The offsetting charge is recorded as a reduction of revenues in the same period when the expense is incurred. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material.
Capped Call Transactions
In connection with the pricing of the offering of the Convertible Notes, onMarch 2, 2021 andMarch 12, 2021 , the Company entered into capped call transactions with the option counterparties. See Note 8 Debt, to the Notes to Consolidated Financial Statements included elsewhere in this report. Capped call transactions cover the aggregate number of shares of the Company's common stock that will initially underlie the Notes, and generally reduce potential dilution to the Company's common stock upon any conversion of Notes and/or offset any cash payments the Company may make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the capped call transactions. The Company determined that the freestanding capped call option contracts qualify as equity under the accounting guidance on indexation and equity classification, and recognized the contract by recording an entry to APIC in stockholders' equity in its consolidated balance sheet. The Company also determined that the capped call option contracts meet 82 -------------------------------------------------------------------------------- the definition of a derivative under Accounting Standards Codification ("ASC") Topic 815, "Derivatives and Hedging" ("ASC 815"), but are not required to be accounted for as a derivative as they meet the scope exception outlined in ASC 815. Instead the capped call options are recorded in APIC and not remeasured.
Emerging Growth Company Status
EffectiveDecember 31, 2020 , we lost our EGC status and are now categorized as a Large Accelerated Filer based upon the current market capitalization of the Company according to Rule 12b-2 of the Exchange Act. As a result, we must comply with all financial disclosure and governance requirements applicable to Large Accelerated Filers.
Recently Adopted Accounting Pronouncements
Please refer to Note 2 , Summary of Significant Accounting Policies, to the
Notes to Consolidated Financial Statements included elsewhere in this report for
a discussion of recently adopted accounting pronouncements and new accounting
pronouncements that may impact us.
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