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," of our 2021 10-K and Part II, Item 1A , "Risk Factors" and "Note Regarding Forward-Looking Statements" included in this report and those discussed in other documents we file from time to time with theSEC . The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this quarterly report and our audited consolidated financial statements and notes thereto included in our 2021 10-K. Our historical results are not necessarily indicative of the results to be expected for any future periods and our operating results for the three months endedApril 2, 2022 are not necessarily indicative of the results to be expected for the fiscal year endingDecember 31, 2022 or for any other interim period or for any other future year or period. OverviewBeyond 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 ofMarch 2022 , our products were available at approximately 135,000 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. The condensed consolidated financial statements for the period endedApril 2, 2022 include the accounts of the Company and its foreign subsidiaries,Beyond Meat EU B.V. ,BYND JX and Beyond Meat Canada Inc. All inter-company balances and transactions have been eliminated. 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. For the first quarter endedApril 2, 2022 , our retail and foodservice channels accounted for approximately 77.1% and 22.9% of our net revenues, respectively. For the first quarter endedApril 3, 2021 , our retail and foodservice channels accounted for approximately 74.9% and 25.1% of our net revenues, respectively. For the first quarter endedApril 2, 2022 , ourU.S. and international channels accounted for approximately 76.5% and 23.5% of our net revenues, respectively. For the first quarter endedApril 3, 2021 , ourU.S. and international channels accounted for approximately 74.5% and 25.5% of our net revenues, respectively. 26 -------------------------------------------------------------------------------- In the first quarter of 2022, net revenues from the international channels, both retail and foodservice, decreased from the prior year. Despite increased pounds of product sold, international net revenues decreased 6.9% in the first quarter of 2022 as compared to the same period in the prior year primarily due to decreased revenue per pound driven by increased trade discounts, recent pricing actions, mix to lower priced SKUs and a softening in the Euro vs theU.S. dollar. In the first quarter of 2022,U.S. foodservice channel net revenues declined but were more than offset by the increase inU.S. retail channel net revenues, resulting in a 4.0% increase inU.S. net revenues. AtApril 2, 2022 , our inventory balances increased 17.3% compared to the levels atDecember 31, 2021 , primarily due to increases in finished goods and work-in-process inventories and to a lesser extent due to increases in raw materials and packaging inventory. The increase in finished goods inventory includes the effect of capitalized higher direct labor and production overhead costs.
In addition to the impact of COVID-19 on our business discussed below under "Impact of COVID-19 on Our Business," 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 (especially Beyond Meat Jerky), 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 due to slower category growth and increased competitive activity;
•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, raw materials, energy, labor 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.
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.
The COVID-19 pandemic continues to impact the global economy. 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. In response to COVID-19, we have taken, and continue to take
measures to support the health and safety of our employees as well as the
communities in which we operate.
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, spread and intensity of the COVID-19
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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;
•potential shortages in raw materials caused by the conflict in
•the timing and success of strategic QSR 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;
•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 ESG program. As
part of the development of our ESG program, we have conducted a materiality
analysis to determine which ESG issues are relevant to our business ("ESG
Materiality Analysis"). The ESG Materiality Analysis was not designed to
identify material issues for the purposes of financial reporting, or as defined
by the securities laws of the United States . The environmental impacts of our
products, climate change management, the safety and quality of the products we
produce and how we manage our supply chain were all identified as highly
relevant as a result of the ESG Materiality Analysis. We continue to work on
leveraging the ESG Materiality 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, and various food-away-from-home channels, including restaurants, foodservice outlets and schools, mainly inthe United States . 28 -------------------------------------------------------------------------------- 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. marketU.S. Foodservice Net revenues from restaurant and foodservice sales to the U.S. market International Retail Net revenues from retail sales to international markets, includingCanada International Foodservice Net revenues from restaurant and foodservice sales to international markets, includingCanada 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 largeFull Service Restaurant 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;
•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, Beyond Breakfast Sausage Links, the latest iteration of our Beyond Burger and the recent launches of Beyond Chicken Tenders and Beyond Meat Jerky, 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
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--------------------------------------------------------------------------------•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 widespread 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 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 contra asset to "Accounts receivable" for estimated sales discounts that have been incurred but not paid which totaled$4.3 million and$3.6 million as ofApril 2, 2022 andDecember 31, 2021 , respectively. 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 margins 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
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unfulfilled orders, primarily due to severe weather resulting in the temporary
loss of potable water in one Pennsylvania 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 like
Memorial Day weekend, the Fourth of July , or Labor 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 with U.S. retail channel net
revenues increasing 80% compared to the first quarter of 2020. We continue to
see additional seasonality effects, 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, direct and indirect labor and certain supply costs, co-manufacturing fees, 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 in 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, including launching new products with manufacturing that may initially be inefficient, establishing infrastructure in theU.S. ,EU andChina , investing in personnel, partnerships and product pipeline, investing in our headquarters campus and commercialization center and expanding our Manhattan Beach Project Innovation Center, 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, improving our innovation capabilities, enhancing our product offerings 31 -------------------------------------------------------------------------------- and increasing consumer engagement to apply 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, materials 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. We are beginning to incur research and development expenses associated with our newCommerce, California commercialization center. Design work is underway, with operations expected to commence before the end of 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 meats. Over time and subject to the duration, magnitude and effects of the COVID-19 pandemic and other factors impacting our business, 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. 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, consulting fees and other non-production operating expenses. Marketing and selling expenses include advertising costs, share-based compensation awards to brand ambassadors, 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 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 in absolute dollars with increased personnel to support various functions, including among others, operations and supply chain, accounting, finance, legal, IT and compliance-related functions, but to decrease as a percentage of net revenues.
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 10 , Commitments and Contingencies, to the Notes to Unaudited Condensed Consolidated Financial Statements, included elsewhere in this report. 32
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Results of Operations
The following table sets forth selected items in our condensed consolidated statements of operations for the respective periods presented:
Three Months Ended
April 2, April 3,
(in thousands) 2022 2021
Net revenues $ 109,455 $ 108,164
Cost of goods sold 109,265 75,456
Gross profit 190 32,708
Research and development expenses 19,678 15,925
Selling, general and administrative expenses 75,114
38,954
Restructuring expenses 3,026 2,474
Total operating expenses 97,818 57,353
Loss from operations $ (97,628) $ (24,645)
The following table presents selected items in our condensed consolidated
statements of operations as a percentage of net revenues for the respective
periods presented:
Three Months Ended
April 2, April 3,
2022 2021
Net revenues 100.0 % 100.0 %
Cost of goods sold 99.8 69.8
Gross profit 0.2 30.2
Research and development expenses 18.0 14.7
Selling, general and administrative expenses 68.6 36.0
Restructuring expenses 2.8 2.3
Total operating expenses 89.4 53.0
Loss from operations (89.2) % (22.8) %
Three Months Ended
Net Revenues Net revenues increased by$1.3 million , or 1.2%, in the three months endedApril 2, 2022 , as compared to the prior-year period primarily due to an increase in volume sold, partially offset by lower net price per pound resulting from increased trade discounts, pricing reductions, and to a lesser extent, changes in product sales mix, and changes in foreign exchange rates. Growth in net revenues was primarily due to increased retail sales, as a result of contribution from new product introductions. The increase in retail net revenues was partially offset by a decline in foodservice net revenues. 33 --------------------------------------------------------------------------------
The following table presents our net revenues by channel in the three months
ended
Three Months Ended Change
April 2, April 3,
(in thousands) 2022 2021 Amount %
U.S. :
Retail $ 68,260 $ 63,826 $ 4,434 6.9 %
Foodservice 15,493 16,742 (1,249) (7.5) %
U.S. net revenues 83,753 80,568 3,185 4.0 %
International:
Retail 16,137 17,199 (1,062) (6.2) %
Foodservice 9,565 10,397 (832) (8.0) %
International net revenues 25,702 27,596 (1,894) (6.9) %
Net revenues $ 109,455 $ 108,164 $ 1,291 1.2 %
Net revenues from U.S. retail sales in the three months ended April 2, 2022
increased $4.4 million , or 6.9%, primarily due to the introduction of Beyond
Meat Jerky in the first quarter of 2022, which contributed $10.7 million in net
revenues, and the recently introduced chicken products including Beyond Chicken
Tenders. Increases in sales of Beyond Breakfast Sausage and Beyond Meatballs
also contributed to the increase in net revenues. These increases were partially
offset by declines in sales primarily of Beyond Sausage and Beyond Beef.
Net revenues from U.S. foodservice sales in the three months ended April 2, 2022
decreased $1.2 million , or 7.5%, primarily due to decreases in sales of Beyond
Breakfast Sausage, driven by the discontinuation of distribution at a certain
customer, and decreases in sales of Beyond Beef Crumble, partially offset by
increases in sales of Beyond Burger, Beyond Sausage and Beyond Beef, and from
the recently introduced chicken products including Beyond Chicken Tenders. Our
products were available at approximately 35,000 U.S. retail outlets and 39,000
U.S. foodservice outlets as of March 2022 .
Net revenues from international retail sales in the three months ended April 2,
2022 decreased $1.1 million , or 6.2%, primarily due to decreases in sales of
Beyond Burger and Beyond Beef Crumble, partially offset by increases in sales of
Beyond Beef, Beyond Meatballs, Beyond Breakfast Sausage and Beyond Sausage, and
from the recently introduced chicken products including Beyond Chicken Tenders.
Our products were available at approximately 31,000 international retail outlets
as of March 2022 .
Net revenues from international foodservice sales in the three months ended
April 2, 2022 decreased $0.8 million , or 8.0%, primarily due to decreases in
sales of Beyond Beef Crumble and Beyond Beef, partially offset by increases in
sales of Beyond Burger, Beyond Meatballs, Beyond Breakfast Sausage, Beyond Pork,
and Beyond Sausage, and from the recently introduced chicken products including
Beyond Chicken Tenders. Our products were available at approximately 30,000
international foodservice outlets as of March 2022 .
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The following table presents consolidated volume of our products sold in pounds
for the periods presented:
Three Months Ended Change
April 2, April 3,
(in thousands) 2022 2021 Amount %
U.S.:
Retail 12,453 11,128 1,325 11.9 %
Foodservice 2,752 2,882 (130) (4.5) %
International:
Retail 3,530 2,959 571 19.3 %
Foodservice 2,581 2,003 578 28.9 %
Volume of products sold 21,316 18,972 2,344 12.4 %
Cost of Goods Sold
Three Months Ended Change
April 2, April 3,
(in thousands) 2022 2021 Amount %
Cost of goods sold $ 109,265 $ 75,456 $ 33,809 44.8 %
Cost of goods sold increased by $33.8 million , or 44.8%, to $109.3 million , in
the three months ended April 2, 2022 as compared to the prior-year period. Cost
of goods sold in the three months ended April 2, 2022 increased to 99.8% from
69.8% of net revenues in the prior-year period. The increase in cost of goods
sold was primarily due to the introduction of Beyond Meat Jerky in the three
months ended April 2, 2022 , which has a high initial cost due to its complex
manufacturing process. In addition, higher manufacturing costs including
depreciation, higher volume of products sold and higher logistics costs also
contributed to the increase in cost of goods sold, partially offset by reduced
direct materials costs and lower inventory reserves. Manufacturing costs
associated with Beyond Meat Jerky are expected to significantly moderate
beginning in the second half of 2022 with process optimization.
Gross Profit and Gross Margin
Three Months Ended Change
April 2, April 3,
(in thousands) 2022 2021 Amount %
Gross profit $190 $32,708 $(32,518) (99.4)%
Gross margin 0.2% 30.2% (3,000) bps N/A
Gross profit in the three months ended April 2, 2022 was $0.2 million as
compared to gross profit of $32.7 million in the prior-year period, a decline of
$32.5 million . Gross margin in the three months ended April 2, 2022 declined to
0.2% from 30.2% in the prior-year period. The three months ended April 2, 2022
included the launch of Beyond Meat Jerky, which reduced gross margin by an
estimated 940 basis points compared to the year-ago period. In addition to the
reduction in gross margin resulting from Beyond Meat Jerky, gross margin was
also negatively impacted by reduced net revenue per pound due to increased trade
discounts, changes in price and sales mix, increased manufacturing costs per
pound including depreciation, and higher logistics costs, partially offset by
decreased direct materials costs per pound and lower inventory reserves.
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.
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Three Months Ended Change
April 2, April 3,
(in thousands) 2022 2021
Amount %
Research and development expenses
Research and development expenses increased$3.8 million , or 23.6%, in the three months endedApril 2, 2022 , as compared to the prior-year period. Research and development expenses increased to 18.0% of net revenues in the three months endedApril 2, 2022 from 14.7% of net revenues in the prior-year period primarily due to higher headcount and higher scale-up expenses compared to the prior-year period. SG&A Expenses Three Months Ended Change April 2, April 3, (in thousands) 2022 2021 Amount %
Selling, general and administrative expenses
SG&A expenses increased$36.2 million , or 92.8%, in the three months endedApril 2, 2022 to 68.6% of net revenues in the three months endedApril 2, 2022 , from 36.0% of net revenues in the prior-year period. The increase in SG&A expenses was primarily due to$9.9 million increase in advertising costs,$8.1 million in higher salaries and related expenses resulting from higher headcount,$7.4 million in increased marketing costs,$2.7 million in higher outbound freight costs,$2.5 million in higher consulting fees,$2.3 million in product donations,$1.9 million in higher share-based compensation expense, and$0.9 million in higher postage and delivery charges,$0.7 million in higher travel-related costs,$0.6 million in higher general insurance costs, partially offset by$0.3 million in lower commissions and$0.3 million in lower legal fees.
Restructuring Expenses
As a result of the termination inMay 2017 of an exclusive supply agreement with one of our co- manufacturers due to non-performance under the agreement, we recorded restructuring expenses of$3.0 million and$2.5 million in the three months endedApril 2, 2022 andApril 3, 2021 , respectively. The restructuring expenses were primarily related to legal and other expenses associated with the dispute. As ofApril 2, 2022 andDecember 31, 2021 , there were$1.3 million and$2.7 million , respectively, in accrued and unpaid restructuring expenses. We continue to incur legal fees and other costs in connection with our ongoing efforts to resolve this dispute. See Note 3 , Restructuring, and Note 10 , Commitments and Contingencies to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Loss from Operations
Loss from operations in the three months endedApril 2, 2022 was$97.6 million compared to$24.6 million in the prior-year period. The increase in loss from operations in the three months endedApril 2, 2022 was primarily driven by lower gross profit, higher advertising costs, higher marketing-related expenses, growth in overall headcount levels primarily to support increased innovation capabilities and international growth, increased production trial activities, higher share-based compensation expense and higher freight costs included in our selling expenses compared to the prior-year period.
Total Other Expense, net
Total other expense, net in the three months endedApril 2, 2022 of$2.1 million consisted primarily of$1.0 million in interest expense. Total other expense, net in the three months endedApril 3, 2021 of$2.2 million consisted of$1.0 million in costs associated with early extinguishment of our revolving credit 36 --------------------------------------------------------------------------------
facility,
Net Loss Net loss was$100.5 million in the three months endedApril 2, 2022 , compared to$27.3 million in the prior-year period. Net loss during the three months endedApril 2, 2022 was primarily due to lower gross profit and higher operating expenses discussed above compared to the prior-year period.
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 expense, interest expense, depreciation and amortization expense, restructuring expenses, share-based compensation expense, expenses attributable to COVID-19, and Other, net, including interest income, loss on extinguishment of debt and foreign currency transaction gains and losses.
"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 measure. 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.
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--------------------------------------------------------------------------------The following table presents the reconciliation of Adjusted EBITDA to its most comparable GAAP measure, net loss, as reported (unaudited):
Three Months Ended
April 2, April 3,
(in thousands) 2022 2021
Net loss, as reported $ (100,458) $ (27,266)
Income tax expense 10 48
Interest expense 1,025 629
Depreciation and amortization expense 7,091 4,326
Restructuring expenses(1) 3,026 2,474
Share-based compensation expense 9,292 7,376
Other, net(2) 1,124 1,570
Adjusted EBITDA $ (78,890) $ (10,843)
Net loss as a % of net revenues (91.8) % (25.2) %
Adjusted EBITDA as a % of net revenues (72.1) % (10.0) %
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(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
April 3, 2021 .
Liquidity and Capital Resources
Convertible Senior Notes
For a discussion about the Notes, see Note 7 , Debt, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Liquidity 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," of our 2021 10-K and Part II, Item 1A, "Risk Factors" and "Note Regarding Forward-Looking Statements" 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 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 and expanding ourManhattan Beach Project Innovation Center; 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 38 -------------------------------------------------------------------------------- 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 planned 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 ofApril 2, 2022 , we had$547.9 million in cash and cash equivalents.
Cash Flows
In the three months ended
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.
Three Months Ended
April 2, April 3,
(in thousands) 2022 2021
Cash (used in) provided by:
Operating activities $ (165,210) $ (30,657)
Investing activities $ (21,499) $ (23,381)
Financing activities $ 331 $ 1,019,913 In the three months endedApril 2, 2022 , we incurred a net loss of$100.5 million which was the primary reason for net cash used in operating activities of$165.2 million . Net cash outflows from changes in our operating assets and liabilities was$84.2 million , primarily due to the increase in finished goods inventory, prepaid lease costs related to our campus headquarters and innovation facility and accounts receivable. The cash outflows were partially offset by the increase in accrued expenses and other current liabilities. Net loss in the three months endedApril 2, 2022 included$19.5 million in non-cash expenses primarily comprised of share-based compensation expense and depreciation and amortization expense. In the three months endedApril 3, 2021 , we incurred a net loss of$27.3 million which was the primary reason for net cash used in operating activities of$30.7 million . Net cash outflows from changes in our operating assets and liabilities was$17.6 million , primarily due to the increase in finished goods inventory. The cash outflows from the increase in inventory was partially offset by the increase in accrued expenses and other current liabilities. Net loss in the three months endedApril 3, 2021 included$14.2 million in non-cash expenses primarily comprised of share-based compensation expense and depreciation and amortization expense.
Depreciation and amortization expense was
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--------------------------------------------------------------------------------Net cash used in investing activities primarily relates to capital expenditures to support our growth and investment in property, plant and equipment.
In the three months endedApril 2, 2022 , net cash used in investing activities was$21.5 million and consisted of 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. In the three months endedApril 3, 2021 , net cash used in investing activities was$23.4 million and consisted of$23.4 million in cash outflows for purchases of property, plant and equipment, primarily driven by growth in capital production equipment purchases related to our capacity expansion initiatives and international expansion.
Net Cash Provided by Financing Activities
In the three months endedApril 2, 2022 , net cash provided by financing activities was$0.3 million primarily from the$0.8 million in proceeds from stock option exercises, partially offset by$0.4 million in payments of minimum withholding taxes on net share settlement of equity awards, and payments under finance lease obligations. In the three months endedApril 3, 2021 , net cash provided by financing activities was$1,019.9 million primarily from the proceeds of the Notes of$1,066.1 million and$2.9 million in proceeds from stock option exercises, partially offset by repayment of revolving credit facility of$25.0 million , debt issuance costs of$23.2 million associated with the Notes and$0.8 million in payments of minimum withholding taxes on net share settlement of equity awards, and payments under finance lease obligations.
Contractual Obligations and Commitments
There have been no significant changes during the three months endedApril 2, 2022 to the contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in the 2021 10-K, other than the following:
Investment in the
OnJanuary 25, 2021 , we entered intoTPP , 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. We recognized our share of the net losses inTPP in the amount of$0.7 million and$0.4 million for the three months endedApril 2, 2022 andApril 3, 2021 , respectively.
Purchase Commitments
As ofApril 2, 2022 , we had committed to purchase pea protein inventory totaling$34.6 million in 2022. In addition, as ofApril 2, 2022 , we had approximately$57.1 million in purchase order commitments for capital expenditures primarily to purchase machinery and equipment. Payments for these purchases will be due within twelve months.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements or any holdings in variable interest entities.
Critical Accounting Policies
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.
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-------------------------------------------------------------------------------- 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. There have been no material changes in our critical accounting policies during the three months endedApril 2, 2022 , as compared to those disclosed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" in the 2021 10-K other than as described in Note 2 , Summary of Significant Accounting Policies, to the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Recent Accounting Pronouncements
Please refer to Note 2 , Summary of Significant Accounting Policies, to the Notes to Unaudited Condensed 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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